Document:

Exhibit 10.8

 

 

TAX RECEIVABLE AGREEMENT (SLP EXCHANGES)

 

among

 

VIRTU FINANCIAL, INC.,

 

and

 

THE PERSONS NAMED HEREIN

 

 

Dated as of [                         ], 2015

 

 

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I DEFINITIONS
    	
2
    
	
 
    	
 
    	
 
    
	
Section 1.01
    	
Definitions
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE II DETERMINATION OF   REALIZED TAX BENEFIT
    	
11
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Basis Adjustment
    	
11
    
	
Section 2.02
    	
Realized Tax Benefit and Realized Tax Detriment
    	
11
    
	
Section 2.03
    	
Procedures, Amendments
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE III TAX BENEFIT   PAYMENTS
    	
13
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Payments
    	
13
    
	
Section 3.02
    	
No Duplicative Payments
    	
14
    
	
Section 3.03
    	
Pro Rata Payments; Coordination of Benefits With Other Tax   Receivable Agreements
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE IV TERMINATION
    	
15
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Termination, Early Termination and Breach of Agreement
    	
15
    
	
Section 4.02
    	
Early Termination Notice
    	
16
    
	
Section 4.03
    	
Payment upon Early Termination
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE V SUBORDINATION AND   LATE PAYMENTS
    	
17
    
	
 
    	
 
    	
 
    
	
Section 5.01
    	
Subordination
    	
17
    
	
Section 5.02
    	
Late Payments by the Corporate Taxpayer
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE VI NO DISPUTES;   CONSISTENCY; COOPERATION
    	
17
    
	
 
    	
 
    	
 
    
	
Section 6.01
    	
Participation in the Corporate Taxpayer’s and OpCo’s Tax   Matters
    	
17
    
	
Section 6.02
    	
Consistency
    	
18
    
	
Section 6.03
    	
Cooperation
    	
18
    
	
 
    	
 
    	
 
    
	
ARTICLE VII MISCELLANEOUS
    	
18
    
	
 
    	
 
    	
 
    
	
Section 7.01
    	
Notices
    	
18
    
	
Section 7.02
    	
Binding Effect; Benefit; Assignment
    	
19
    
	
Section 7.03
    	
Resolution of Disputes
    	
19
    
	
Section 7.04
    	
Counterparts
    	
20
    
	
Section 7.05
    	
Entire Agreement
    	
21
    
	
Section 7.06
    	
Severability
    	
21
    
	
Section 7.07
    	
Amendment
    	
21
    
	
Section 7.08
    	
Governing Law
    	
21
    
	
Section 7.09
    	
Reconciliation
    	
21
    

 

i

 

	
Section 7.10
    	
Withholding
    	
22
    
	
Section 7.11
    	
Admission of the Corporate Taxpayer into a Consolidated   Group; Transfers of Corporate Assets
    	
22
    
	
Section 7.12
    	
Confidentiality
    	
23
    
	
Section 7.13
    	
Change in Law
    	
23
    
	
Section 7.14
    	
Partnership Agreement
    	
23
    

 

ii

 

TAX RECEIVABLE AGREEMENT (SLP EXCHANGES)

 

This TAX RECEIVABLE AGREEMENT (SLP EXCHANGES) (as amended from time to time, this “Agreement”), dated as of [                         ], 2015, is hereby entered into by and among Virtu Financial, Inc., a Delaware corporation (the “Corporate Taxpayer”), each of the undersigned parties hereto identified as “Members,” and each of the successors and assigns thereto.

 

WHEREAS, Virtu Financial LLC, a Delaware limited liability company (“OpCo”), is treated as a partnership for U.S. federal income tax purposes;

 

WHEREAS, the Corporate Taxpayer is classified as an association taxable as a corporation for U.S. federal income tax purposes;

 

WHEREAS, the Members hold common interest units in OpCo (the “Common Units”), and following certain reorganization transactions, the Corporate Taxpayer will be the managing member of OpCo and will hold, directly and/or indirectly, Common Units;

 

WHEREAS, (i) in connection with the IPO (as defined below), each Member shall sell to the Corporate Taxpayer, and the Corporate Taxpayer shall purchase from such Member, a number of Common Units (together with shares of Class C common stock, $0.00001 par value per share, of the Corporate Taxpayer (“Class C Common Stock”)) pursuant to the provisions of the Member Purchase Agreement (as defined below) and (ii) in connection with a future public offering of Class A Common Stock of the Corporate Taxpayer, one or more Members may sell to the Corporate Taxpayer, and the Corporate Taxpayer may purchase from such Member, a number of Common Units (together with shares of Class C Common Stock) pursuant to the provisions of a future purchase agreement by and among the Corporate Taxpayer, OpCo and the relevant sellers;

 

WHEREAS, each Member may exchange Common Units (when exchanged along with shares of Class C common stock) for shares of Class A common stock, $0.00001 par value per share, of the Corporate Taxpayer (the “Class A Common Stock”) pursuant to the provisions of the Exchange Agreement (as defined below);

 

WHEREAS, OpCo and each of its direct and indirect subsidiaries treated as a partnership for U.S. federal income tax purposes will have in effect an election under Section 754 of the Internal Revenue Code of 1986, as amended (the “Code”), for each Taxable Year (as defined below) in which an Exchange (as defined below) occurs, which elections are intended generally to result in an adjustment to the tax basis of the assets owned by OpCo (solely with respect to the Corporate Taxpayer) at the time of an Exchange (such time, the “Exchange Date”) by reason of the Exchange and the receipt of payments under this Agreement;

 

WHEREAS, the income, gain, loss, expense and other Tax (as defined below) items of the Corporate Taxpayer may be affected by (i) the Basis Adjustment (as defined below) and (ii) Imputed Interest (as defined below); and

 

 

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the effect of the Basis Adjustment and Imputed Interest on the actual liability for Taxes of the Corporate Taxpayer.

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01          Definitions.

 

(a)           The following terms shall have the following meanings for the purposes of this Agreement:

 

“Agreed Rate” means LIBOR plus 100 basis points.

 

“Applicable Member” means any Member to whom any portion of a Realized Tax Benefit may be Attributable under this Agreement.

 

“Attributable” means, with respect to any Applicable Member, the portion of any Realized Tax Benefit of the Corporate Taxpayer that is “attributable” to such Applicable Member, which shall be determined by reference to the assets from which arise the depreciation, amortization or other similar deductions for recovery of cost or basis (“Depreciation”) and with respect to increased basis upon a disposition of an asset or Imputed Interest that produce the Realized Tax Benefit, under the following principles:

 

(i)            A portion of any Realized Tax Benefit arising from a deduction to the Corporate Taxpayer with respect to a Taxable Year for Depreciation arising in respect of a Basis Adjustment to a Reference Asset resulting from an Exchange is Attributable to the Applicable Member to the extent that the ratio of all Depreciation for the Taxable Year in respect of Basis Adjustments resulting from all Exchanges by the Applicable Member bears to the aggregate of all Depreciation for the Taxable Year in respect of Basis Adjustments resulting from all Exchanges by the Applicable Members (in each case, other than with respect to the portion of the Basis Adjustment described in clause (ii) below).

 

(ii)           A portion of any Realized Tax Benefit arising from a deduction to the Corporate Taxpayer with respect to a Taxable Year for Depreciation arising in respect of a Basis Adjustment to a Reference Asset resulting from a payment hereunder is Attributable to the Applicable Member that receives such payment.

 

(iii)          A portion of any Realized Tax Benefit arising from the disposition of a Reference Asset is Attributable to the Applicable Member to the extent that the ratio of all Basis Adjustments (to the extent not previously taken into account in the calculation of Realized Tax Benefits) resulting from all Exchanges by the Applicable Member with respect

 

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to such Reference Asset bears to the aggregate of all Basis Adjustments (to the extent not previously taken into account in the calculation of Realized Tax Benefits) with respect to such Reference Asset.

 

(iv)          A portion of any Realized Tax Benefit arising from a deduction to the Corporate Taxpayer with respect to a Taxable Year in respect of Imputed Interest is Attributable to the Applicable Member to the extent corresponding to amounts that such Member is required to include in income in respect of Imputed Interest (without regard to whether such Member is actually subject to tax thereon).

 

(v)           For the avoidance of doubt, in the case of a Basis Adjustment arising under Section 734(b) of the Code with respect to an Exchange, depreciation, amortization or other similar deductions for recovery of cost of basis shall constitute Depreciation only to the extent that such depreciation, amortization or other similar deductions may produce or increase a Realized Tax Benefit (and not to the extent that such depreciation, amortization or other similar deductions may be for the benefit of a Person other than the Corporate Taxpayer), as reasonably determined by the Corporate Taxpayer.

 

(vi)          A portion of any Realized Tax Benefit arising from a carryover or carryback of any Tax item is Attributable to such Member to the extent such carryover or carryback is attributable to or available for use because of the prior use of the Basis Adjustments or Imputed Interest with respect to which a Realized Tax Benefit would be Attributable to such Member pursuant to clauses (i)—(v) above.

 

Portions of any Realized Tax Detriment shall be Attributed to Members under principles similar to those described in clauses (i)—(vi) above.

 

“Basis Adjustment” means the adjustment to the tax basis of a Reference Asset under Sections 732, 755 and 1012 of the Code and the Treasury Regulations promulgated thereunder (in situations where, as a result of one or more Exchanges, OpCo becomes an entity that is disregarded as separate from its owner for U.S. federal income tax purposes) or under Sections 734(b), 743(b) and 755 of the Code and the Treasury Regulations promulgated thereunder (in situations where, following an Exchange, OpCo remains in existence as an entity for U.S. federal income tax purposes) and, in each case, comparable sections of state and local tax laws, as a result of (i) an Exchange, (ii) the applicable Historical Transaction and (iii) the payments made pursuant to the Tax Receivable Agreements.  For the avoidance of doubt, the amount of any Basis Adjustment resulting from an Exchange (other than a Basis Adjustment resulting from a Historical Transaction) of one or more Common Units shall be determined without regard to any Pre-Exchange Transfer of such Common Units and as if any such Pre-Exchange Transfer had not occurred.

 

A “Beneficial Owner” of a security is a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares: (i) voting power, which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security.

 

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“Board” means the board of directors of the Corporate Taxpayer.

 

“Business Day” shall have the meaning ascribed to such term in the LLC Agreement.

 

“Change of Control” means the occurrence of any of the following events:

 

(i)            any Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Securities and Exchange Act of 1934, or any successor provisions thereto, excluding (x) a corporation or other entity owned, directly or indirectly, by the stockholders of the Corporate Taxpayer in substantially the same proportions as their ownership of stock in the Corporate Taxpayer and (y) any Person that would be deemed an SL Member, Temasek Equityholder or Viola Member (as each such term is defined in the LLC Agreement, and assuming for this purpose that such Person owned Units or securities of the Corporate Taxpayer), is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporate Taxpayer representing more than 50% of the combined voting power of the Corporate Taxpayer’s then outstanding voting securities; or

 

(ii)           the following individuals cease for any reason to constitute a majority of the number of directors of the Corporate Taxpayer then serving: individuals who, on the IPO Date, constitute the Board and any new director whose appointment or election by the Board or nomination for election by the Corporate Taxpayer’s shareholders was approved or recommended by a vote of at least a majority of the directors then still in office who either were directors on the IPO Date or whose appointment, election or nomination for election was previously so approved or recommended by the directors referred to in this clause (ii); or

 

(iii)          there is consummated a merger or consolidation of the Corporate Taxpayer with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation, either (x) the Board immediately prior to the merger or consolidation does not constitute at least a majority of the board of directors of the company surviving the merger or, if the surviving company is a Subsidiary, the ultimate parent thereof, or (y) the voting securities of the Corporate Taxpayer immediately prior to such merger or consolidation do not continue to represent or are not converted into more than 50% of the combined voting power of the then outstanding voting securities of the Person resulting from such merger or consolidation or, if the surviving company is a Subsidiary, the ultimate parent thereof; or

 

(iv)          the shareholders of the Corporate Taxpayer approve a plan of complete liquidation or dissolution of the Corporate Taxpayer or there is consummated an agreement or series of related agreements for the sale or other disposition, directly or indirectly, by the Corporate Taxpayer of all or substantially all of the Corporate Taxpayer’s assets, other than such sale or other disposition by the Corporate Taxpayer of all or substantially all of the Corporate Taxpayer’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by shareholders of the Corporate Taxpayer in substantially the same proportions as their ownership of the Corporate Taxpayer immediately prior to such sale.

 

4

 

Notwithstanding the foregoing, except with respect to clause (ii) and clause (iii)(x) above, a “Change of Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the shares of the Corporate Taxpayer immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in, and own substantially all of the shares of, an entity which owns all or substantially all of the assets of the Corporate Taxpayer immediately following such transaction or series of transactions.

 

“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

“Corporate Taxpayer Return” means the federal and/or state and/or local Tax Return, as applicable, of the Corporate Taxpayer filed with respect to Taxes of any Taxable Year.

 

“Cumulative Net Realized Tax Benefit” for a Taxable Year means the cumulative amount of Realized Tax Benefits for all Taxable Years of the Corporate Taxpayer, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period.  The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination.

 

“Default Rate” means LIBOR plus 500 basis points.

 

“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state and local tax law, as applicable, or any other event (including the execution of IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax and shall also include the acquiescence of the Corporate Taxpayer to the amount of any assessed liability for Tax.

 

“Early Termination Date” means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.

 

“Early Termination Rate” means the lesser of (i) 6.5% per annum, compounded annually, and (ii) LIBOR plus 100 basis points.

 

“Exchange” means an acquisition of Common Units or a purchase of Common Units (i) by OpCo or the Corporate Taxpayer, including by way of an exchange of stock of the Corporate Taxpayer for Common Units pursuant to the Exchange Agreement, in each case occurring on or after the date of this Agreementor (ii) pursuant to the Merger (as defined in Tax Receivable Agreement (Mergers). Any reference in this Agreement to Common Units “Exchanged” is intended to denote Common Units subject to an Exchange.

 

“Exchange Agreement” means that certain Exchange Agreement, dated as of the date hereof, by and among the Corporate Taxpayer, OpCo, and the other holders of Common

 

5

 

Units and shares of Class C Common Stock and Class D common stock, $0.00001 par value per share, of the Corporate Taxpayer, from time to time party thereto.

 

“Governmental Authority” has the meaning set forth in the LLC Agreement.

 

“Historical Transaction” means (i) in the case of the SLP/Temasek Blocker, the indirect acquisition of interests in OpCo by the SLP/Temasek Blocker pursuant to the Transaction and Merger Agreement dated as of April 17, 2011 among OpCo and the other parties thereto and (ii) in the case of the Temasek Blocker, the acquisition of interests in OpCo by the Temasek Blocker pursuant to the Equity Redemption and Purchase Agreement dated as of December 7, 2014 among the Temasek Blocker, the Temasek Stockholder, the SLP Stockholder and the other parties thereto.

 

“Hypothetical Tax Liability” means, with respect to any Taxable Year, the liability for Taxes of (i) the Corporate Taxpayer and (ii) without duplication, OpCo, but only with respect to Taxes imposed on OpCo and allocable to the Corporate Taxpayer (or to the other members of the consolidated group of which the Corporate Taxpayer is the parent), in each case using the same methods, elections, conventions and similar practices used on the relevant Corporate Taxpayer Return, but (w) using the Non-Stepped Up Tax Basis (as defined in each of the Tax Receivable Agreements) as reflected on the Exchange Basis Schedule, the Exchange Basis Schedule (as defined in the Tax Receivable Agreement (non-SLP Exchanges)) and the Merger Basis Schedule (as defined in the Tax Receivable Agreement (Mergers)), including amendments thereto for the Taxable Year, (x) without taking into account the use of NOLs, if any, (y) excluding any deduction attributable to Imputed Interest for the Taxable Year, and (z) without taking into account the carryover or carryback of any Tax item (or portions thereof) that is attributable to or (without duplication) available for use because of the prior use of any of the Basis Adjustments, NOLs or Imputed Interest.

 

“Imputed Interest” shall mean any interest imputed under Section 1272, 1274 or 483 or other provision of the Code and any similar provision of state and local tax law with respect to the Corporate Taxpayer’s payment obligations under this Agreement.

 

“IPO” means the initial public offering of Class A Common Stock of the Corporate Taxpayer.

 

“IPO Date” means the closing date of the IPO.

 

“IRS” means the U.S. Internal Revenue Service.

 

“LIBOR” means during any period, an interest rate per annum equal to the one-year LIBOR reported, on the date two days prior to the first day of such period, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBOR01” or by any other publicly available source of such market rate) for London interbank offered rates for United States dollar deposits for such period.

 

“LLC Agreement” means the Second Amended and Restated Limited Liability Company Agreement of OpCo, dated as of the date hereof.

 

6

 

“Market Value” shall mean the closing price of the Class A Common Stock on the applicable Exchange Date on the national securities exchange or interdealer quotation system on which such Class A Common Stock is then traded or listed, as reported by the Wall Street Journal; provided, that if the closing price is not reported by the Wall Street Journal for the applicable Exchange Date, then the Market Value shall mean the closing price of the Class A Common Stock on the Business Day immediately preceding such Exchange Date on the national securities exchange or interdealer quotation system on which such Class A Common Stock is then traded or listed, as reported by the Wall Street Journal; provided, further, that if the Class A Common Stock is not then listed on a national securities exchange or interdealer quotation system, the Market Value shall mean the cash consideration paid for Class A Common Stock, or the fair market value of the other property delivered for Class A Common Stock, as determined by the Board in good faith.

 

“Member Purchase Agreement” means that certain Purchase Agreement, dated as of the date hereof, by and among the Corporate Taxpayer, OpCo, and the other holders of Common Units and shares of Class C Common Stock.

 

“NOLs” shall have the meaning ascribed to such term in the Tax Receivable Agreement (Mergers).

 

“Non-Stepped Up Tax Basis” means, with respect to any Reference Asset at any time, the Tax basis that such asset would have had at such time if no Basis Adjustments had been made.

 

“Other Tax Receivable Agreements” means the Tax Receivable Agreement (non-SLP Exchanges) and the Tax Receivable Agreement (Mergers).

 

“Payment Date” means any date on which a payment is required to be made pursuant to this Agreement.

 

“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

 

“Pre-Exchange Transfer” means any transfer or distribution in respect of one or more Common Units (i) that occurs prior to an Exchange of such Common Units, and (ii) to which Section 743(b) or 734(b) of the Code applies.

 

“Realized Tax Benefit” means, for a Taxable Year, the excess, if any, of the Hypothetical Tax Liability over the actual liability for Taxes of (i) the Corporate Taxpayer and (ii) without duplication, OpCo, but only with respect to Taxes imposed on OpCo and allocable to the Corporate Taxpayer (or to the other members of the consolidated group of which the Corporate Taxpayer is the parent) for such Taxable Year.  If all or a portion of the actual liability for such Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

 

7

 

“Realized Tax Detriment” means, for a Taxable Year, the excess, if any, of the actual liability for Taxes of (i) the Corporate Taxpayer and (ii) without duplication, OpCo, but only with respect to Taxes imposed on OpCo and allocable to the Corporate Taxpayer (or to the other members of the consolidated group of which the Corporate Taxpayer is the parent) for such Taxable Year, over the Hypothetical Tax Liability for such Taxable Year.  If all or a portion of the actual liability for such Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.

 

“Reference Asset” means an asset that is held by OpCo, or by any of its direct or indirect subsidiaries treated as a partnership or disregarded entity for purposes of the applicable Tax, at the time of an Exchange.  A Reference Asset also includes any asset that is “substituted basis property” under Section 7701(a)(42) of the Code with respect to a Reference Asset.

 

“Schedule” means any of the following: (i) an Exchange Basis Schedule, (ii) a Tax Benefit Schedule, or (iii) the Early Termination Schedule.

 

“SLP/Temasek Blocker” means SLP III EW Feeder LLC (f/k/a SLP III EW Feeder Corp.), a Delaware limited liability company.

 

“SLP Stockholder” means SLP III EW Feeder I, L.P., a Delaware limited partnership.

 

“Subsidiaries” shall have the meaning ascribed to such term in the LLC Agreement.

 

“Tax Receivable Agreement (non-SLP Exchanges)” means the Tax Receivable Agreement (non-SLP Exchanges), dated as of the date hereof, by and among the Corporate Taxpayer, and certain members of OpCo as of the date hereof (other than those members that are party to the Tax Receivable Agreement (Mergers), the Corporate Taxpayer, Virtu Sub III and Virtu Sub IV).

 

“Tax Receivable Agreement (Mergers)” means the Tax Receivable Agreement (Mergers), dated as of the date hereof, by and among the Corporate Taxpayer, the SLP/Temasek Blocker, the Temasek Blocker, the SLP Stockholder, and the Temasek Stockholder.

 

“Tax Receivable Agreements” means the Other Tax Receivable Agreements and this Agreement.

 

“Tax Return” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including any information return, claim for refund, amended return and declaration of estimated Tax.

 

“Taxable Year” means a taxable year of the Corporate Taxpayer as defined in Section 441(b) of the Code or comparable section of state or local tax law, as applicable (and, therefore, for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is made), ending on or after the IPO Date.

 

8

 

 

“Taxes” means any and all U.S. federal, state and local taxes, assessments or similar charges that are based on or measured with respect to net income or profits, and any interest related to such Tax.

 

“Taxing Authority” shall mean any domestic, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

 

“Temasek Blocker” means Wilbur Investments LLC, a Delaware limited liability company.

 

“Temasek Stockholder” means Havelock Fund Investments Pte Ltd., a Singapore private limited company.

 

“Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

 

“Valuation Assumptions” shall mean, as of an Early Termination Date, the assumptions that (1) in each Taxable Year ending on or after such Early Termination Date, the Corporate Taxpayer will have taxable income sufficient to fully utilize the deductions arising from the Basis Adjustments and Imputed Interest during such Taxable Year or future Taxable Years (including, for the avoidance of doubt, Basis Adjustments and Imputed Interest that would result from future Tax Benefit Payments that would be paid in accordance with the Valuation Assumptions) in which such deductions would become available, (2) the U.S. federal income tax rates and state and local income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the Early Termination Date, (3) any loss carryovers generated by deductions arising from Basis Adjustments, the NOLs or Imputed Interest that are available as of such Early Termination Date will be utilized by the Corporate Taxpayer on a pro rata basis from the Early Termination Date through the scheduled expiration date of such loss carryovers, (4) any non-amortizable assets will be disposed of on the fifteenth anniversary of the applicable Basis Adjustment; provided, that in the event of a Change of Control, such non-amortizable assets shall be deemed disposed of at the time of sale of the relevant asset (if earlier than such fifteenth anniversary), and (5) if, at the Early Termination Date, there are Common Units that have not been Exchanged, then each such Common Unit shall be deemed to be Exchanged for the Market Value of the number of shares of Class A Common Stock and the amount of cash that would be transferred if the Exchange occurred on the Early Termination Date.

 

(b)           Each of the following terms is defined in the Section set forth opposite such term:

 

	
Term
    	
 
    	
Section
    
	
Agreement
    	
 
    	
Preamble
    
	
Amended   Schedule
    	
 
    	
2.03(b)
    
	
Class A   Common Stock
    	
 
    	
Recitals
    

 

9

 

	
Term
    	
 
    	
Section
    
	
Class C   Common Stock
    	
 
    	
Recitals
    
	
Code
    	
 
    	
Recitals
    
	
Common   Units
    	
 
    	
Recitals
    
	
Corporate   Taxpayer
    	
 
    	
Preamble
    
	
Dispute
    	
 
    	
7.03(a)
    
	
Early   Termination Effective Date
    	
 
    	
4.02
    
	
Early   Termination Notice
    	
 
    	
4.02
    
	
Early   Termination Payment
    	
 
    	
4.03(b)
    
	
Early   Termination Schedule
    	
 
    	
4.02
    
	
e-mail
    	
 
    	
7.01
    
	
Exchange   Basis Schedule
    	
 
    	
2.01
    
	
Exchange   Date
    	
 
    	
Recitals
    
	
Expert
    	
 
    	
7.09
    
	
Interest   Amount
    	
 
    	
3.01(b)
    
	
Material   Objection Notice
    	
 
    	
4.02
    
	
Members
    	
 
    	
Preamble
    
	
Net   Tax Benefit
    	
 
    	
3.01(b)
    
	
Objection   Notice
    	
 
    	
2.03(a)
    
	
OpCo
    	
 
    	
Recitals
    
	
Reconciliation   Dispute
    	
 
    	
7.09
    
	
Reconciliation   Procedures
    	
 
    	
2.03(a)
    
	
Senior   Obligations
    	
 
    	
5.01
    
	
Tax   Benefit Payment
    	
 
    	
3.01(b)
    
	
Tax   Benefit Schedule
    	
 
    	
2.02(a)
    

 

(c)           Other Definitional and Interpretative Provisions.  The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.  References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified.  Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.  “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.  References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder.  References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.  References to any Person include the successors and permitted assigns of that Person.  References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

 

10

 

ARTICLE II

 

DETERMINATION OF REALIZED TAX BENEFIT

 

Section 2.01          Basis Adjustment.  Within 120 calendar days after the filing of the U.S. federal income tax return of the Corporate Taxpayer for each Taxable Year in which any Exchange has been effected by any Member, the Corporate Taxpayer shall deliver to such Member a schedule (the “Exchange Basis Schedule”) that shows, in reasonable detail necessary to perform the calculations required by this Agreement, including with respect to each Exchanging party, (i) the Non-Stepped Up Tax Basis of the Reference Assets as of each applicable Exchange Date, (ii) the Basis Adjustments with respect to the Reference Assets as a result of the Exchanges effected in such Taxable Year, calculated (x) in the aggregate, (y) solely with respect to Exchanges by such Member and (z) in the case of a Basis Adjustment under Section 734(b) of the Code solely with respect to the amount that is available to the Corporate Taxpayer in such Taxable Year, (iii) the period (or periods) over which the Reference Assets are amortizable and/or depreciable and (iv) the period (or periods) over which each Basis Adjustment is amortizable and/or depreciable.

 

Section 2.02          Realized Tax Benefit and Realized Tax Detriment.

 

(a)           Tax Benefit Schedule.  Within 120 calendar days after the filing of the U.S. federal income tax return of the Corporate Taxpayer for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment a portion of which is Attributable to a Member, the Corporate Taxpayer shall provide to such Member a schedule showing, in reasonable detail and, at the request of such Member, with respect to each separate Exchange, the calculation of the Realized Tax Benefit or Realized Tax Detriment and the portion Attributable  to such Member for such Taxable Year (a “Tax Benefit Schedule”).  The Tax Benefit Schedule will become final as provided in Section 2.03(a) and may be amended as provided in Section 2.03(b) (subject to the procedures set forth in Section 2.03(b)).

 

(b)           Applicable Principles.  The Realized Tax Benefit or Realized Tax Detriment for each Taxable Year is intended to measure the decrease or increase in the actual liability for Taxes of the Corporate Taxpayer for such Taxable Year attributable to the Basis Adjustments, the NOLs and Imputed Interest, determined using a “with and without” methodology.  For the avoidance of doubt, the actual liability for Taxes will take into account the deduction of the portion of the Tax Benefit Payment that must be accounted for as interest under the Code based upon the characterization of Tax Benefit Payments as additional consideration payable by the Corporate Taxpayer for the Common Units acquired in an Exchange.  Carryovers or carrybacks of any Tax item attributable to the Basis Adjustment, the NOLs or Imputed Interest shall be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of U.S. state and local income and franchise tax law, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type.  If a carryover or carryback of any Tax item includes a portion that is attributable to the Basis Adjustment, the NOLs or Imputed Interest and another portion that is not, such portions shall be considered to be used in accordance with the “with and without” methodology.  The parties agree that (i) all Tax Benefit Payments attributable to the Basis Adjustments (other than amounts accounted for as interest under the Code) will (A) be treated as subsequent upward purchase

 

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price adjustments that give rise to further Basis Adjustments to Reference Assets for the Corporate Taxpayer and (B) have the effect of creating additional Basis Adjustments to Reference Assets for the Corporate Taxpayer in the year of payment, and (ii) as a result, such additional Basis Adjustments will be incorporated into the current year calculation and into future year calculations, as appropriate.

 

Section 2.03          Procedures, Amendments.

 

(a)           Procedure.  Every time the Corporate Taxpayer delivers to a Member an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.03(b) and any Early Termination Schedule or amended Early Termination Schedule, the Corporate Taxpayer shall also (x) deliver to such Member schedules, valuation reports (if any), and work papers, as determined by the Corporate Taxpayer or requested by such Member, providing reasonable detail regarding the preparation of the Schedule and (y) allow such Member reasonable access at no cost to the appropriate representatives at the Corporate Taxpayer, as determined by the Corporate Taxpayer or requested by such Member, in connection with a review of such Schedule.  Without limiting the application of the preceding sentence, each time the Corporate Taxpayer delivers to a Member a Tax Benefit Schedule, in addition to the Tax Benefit Schedule duly completed, the Corporate Taxpayer shall deliver to such Member the Corporate Taxpayer Return, the reasonably detailed calculation by the Corporate Taxpayer of the Hypothetical Tax Liability, the reasonably detailed calculation by the Corporate Taxpayer of the actual Tax liability, as well as any other work papers as determined by the Corporate Taxpayer or requested by such Member.  An applicable Schedule or amendment thereto shall become final and binding on all parties 30 calendar days from the first date on which the Member has received the applicable Schedule or amendment thereto unless such Member (i) within 30 calendar days after receiving an applicable Schedule or amendment thereto, provides the Corporate Taxpayer with notice of a material objection to such Schedule (“Objection Notice”) made in good faith or (ii) provides a written waiver of such right of any Objection Notice within the period described in clause (i) above, in which case such Schedule or amendment thereto becomes binding on the date the waiver is received by the Corporate Taxpayer.  If the parties, for any reason, are unable to successfully resolve the issues raised in the Objection Notice within 30 calendar days after receipt by the Corporate Taxpayer of an Objection Notice, the Corporate Taxpayer and the applicable Member shall employ the reconciliation procedures as described in Section 7.09 (the “Reconciliation Procedures”).

 

(b)           Amended Schedule.  The applicable Schedule for any Taxable Year may be amended from time to time by the Corporate Taxpayer (i) in connection with a Determination affecting such Schedule, (ii) to correct inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to the applicable Member, (iii) to comply with (A) the Expert’s determination under the Reconciliation Procedures or (B) an Expert’s determination under the reconciliation procedures applicable to the Other Tax Receivable Agreements, (iv) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other tax item to such Taxable Year, (v) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, or (vi) to adjust the Exchange Basis Schedule to take into account payments made pursuant to this Agreement (any such Schedule, an

 

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“Amended Schedule”).  The Corporate Taxpayer shall provide an Amended Schedule to each Member within 30 calendar days of the occurrence of an event referenced in clauses (i) through (vi) of the preceding sentence.

 

ARTICLE III

 

TAX BENEFIT PAYMENTS

 

Section 3.01          Payments.

 

(a)           Within five (5) Business Days after all of the Tax Benefit Schedules (as defined in each of the Tax Receivable Agreements) with respect to a Taxable Year delivered to (i) a Member pursuant to this Agreement and (ii) any Persons who could, under the Other Tax Receivable Agreements, be entitled to Tax Benefit Payments become final in accordance with Section 2.03(a) and Section 2.03(a) of the Other Tax Receivable Agreements, the Corporate Taxpayer shall pay to each Member for such Taxable Year the Tax Benefit Payment in the amount determined pursuant to Section 3.01(b).  Each such Tax Benefit Payment to a Member shall be made by wire transfer of immediately available funds to the bank account previously designated by such Member to the Corporate Taxpayer or as otherwise agreed by the Corporate Taxpayer and such Member.  For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including federal estimated income tax payments.  Notwithstanding anything herein to the contrary, solely at the election of a Member, which shall be made in a written notice to the Corporate Taxpayer in connection with the applicable Exchange, in no event shall the aggregate Tax Benefit Payments in respect of such Exchange (other than amounts accounted for as interest under the Code) exceed 50% of the amount equal to the sum of (A) the cash, excluding any Tax Benefit Payments, and (B) the Market Value of the Class A Shares, received by such Member on such Exchange.

 

(b)           A “Tax Benefit Payment” means, with respect to a Member, an amount, not less than zero, equal to the sum of the amount of the Net Tax Benefit Attributable to such Member and the related Interest Amount.  For the avoidance of doubt, for Tax purposes, the Interest Amount shall not be treated as interest but instead shall be treated as additional consideration for the acquisition of Common Units in Exchanges, unless otherwise required by law.  Subject to Section 3.03(a), the “Net Tax Benefit” for a Taxable Year shall be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year over the sum of (i) the total amount of Tax Benefit Payments previously made under this Section 3.01 (excluding payments attributable to Interest Amounts) and (ii) the total amount of Tax Benefit Payments (as defined in the Other Tax Receivable Agreements) previously made under Section 3.01 of the Other Tax Receivable Agreements (excluding payments attributable to Interest Amounts (as defined in the Other Tax Receivable Agreements)); provided, for the avoidance of doubt, that such Member shall not be required to return any portion of any previously made Tax Benefit Payment.  The “Interest Amount” shall equal the interest on the amount of the Net Tax Benefit Attributable to such Member calculated at the Agreed Rate from the due date (without extensions) for filing the Corporate Taxpayer Return with respect to Taxes for such Taxable Year until the Payment Date of the applicable Tax Benefit Payment.  Notwithstanding the foregoing, unless the Member elects to receive the lump-sum payment pursuant to the following sentence, for each Taxable Year ending on or after the

 

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date of a Change of Control, all Tax Benefit Payments, whether paid with respect to the Common Units that were Exchanged (i) prior to the date of such Change of Control or (ii) on or after the date of such Change of Control, shall be calculated by utilizing Valuation Assumptions (1) and (3), substituting in each case the terms “the closing date of a Change of Control” for an “Early Termination Date.”  In connection with any Change of Control (other than a Change of Control caused solely by the electing Member), at the election of a Member, all obligations hereunder with respect to such Member shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such election and shall include, but not be limited to, (1) the Early Termination Payment to such Member calculated as if an Early Termination Notice had been delivered on the date of such election, (2) any Tax Benefit Payment agreed to by the Corporate Taxpayer and such Member as due and payable but unpaid as of the date of such Member’s election, and (3) any Tax Benefit Payment due for the Taxable Year ending with or including the date of such Member’s election; provided, that procedures similar to the procedures of Section 4.02 shall apply with respect to the determination of the amount payable by the Corporate Taxpayer pursuant to this sentence.  Notwithstanding anything to the contrary in this Agreement, after any lump-sum payment under this Section 3.01(b) or Article IV or Section 3.01(b) or Article IV of the other Tax Receivable Agreements in respect of present or future Tax attributes subject to the Tax Receivable Agreements, the Tax Benefit Payment, Net Tax Benefit and components thereof shall be calculated without taking into account any such attributes or any such lump-sum payment.

 

Section 3.02          No Duplicative Payments.  It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement.  In addition, it is intended that the provisions of this Agreement will not result in a duplicative payment of any amount payable under the Other Tax Receivable Agreements. The provisions of this Agreement shall be construed in the appropriate manner to ensure such intentions are realized.

 

Section 3.03          Pro Rata Payments; Coordination of Benefits With Other Tax Receivable Agreements.

 

(a)           Notwithstanding anything in Section 3.01 to the contrary, to the extent that the aggregate tax benefit of the Corporate Taxpayer’s deduction with respect to the Basis Adjustments, the NOLs and Imputed Interest under the Tax Receivable Agreements (as such terms are defined in each Tax Receivable Agreement) is limited in a particular Taxable Year because the Corporate Taxpayer does not have sufficient taxable income, the limitation on the tax benefit for the Corporate Taxpayer shall be allocated among the Tax Receivable Agreements (and among all parties eligible for payments thereunder) in proportion to the respective amounts of Tax Benefit Payments (as defined in each Tax Receivable Agreement) that would have been determined under the Tax Receivable Agreements (and allocated among such parties) if the Corporate Taxpayer had sufficient taxable income so that there were no such limitation.

 

(b)           If for any reason the Corporate Taxpayer does not fully satisfy its payment obligations to make all Tax Benefit Payments due under the Tax Receivable Agreements in respect of a particular Taxable Year, then the Corporate Taxpayer and the Members agree that (i) the Corporate Taxpayer shall pay the same proportion of each Tax

 

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Benefit Payment due under each of the Tax Receivable Agreements in respect of such Taxable Year, without favoring one obligation over the other, and (ii) no Tax Benefit Payment shall be made in respect of any Taxable Year until all Tax Benefit Payments in respect of prior Taxable Years have been made in full.

 

(c)           The parties hereto agree that the parties to the Other Tax Receivable Agreements are expressly made third party beneficiaries of the provisions of this Section 3.03.

 

ARTICLE IV

 

TERMINATION

 

Section 4.01          Termination, Early Termination and Breach of Agreement.

 

(a)           Unless terminated earlier pursuant to Section 4.01(b) or Section 4.01(c), this Agreement will terminate when there is no further potential for a Tax Benefit Payment pursuant to this Agreement. Tax Benefit Payments under this Agreement are not conditioned on any Member retaining an interest in the Corporate Taxpayer or OpCo (or any successor thereto).

 

(b)           The Corporate Taxpayer may terminate this Agreement with respect to all amounts payable to the Members and with respect to all of the Common Units held (or previously held and exchanged) by all Members at any time by paying to each Member the Early Termination Payment in respect of such Member; provided, however, that this Agreement shall only terminate pursuant to this Section 4.01(b) upon the receipt of the Early Termination Payment by all Members; and provided, further, that the Corporate Taxpayer may withdraw any notice to execute its termination rights under this Section 4.01(b) prior to the time at which any Early Termination Payment has been paid.  Upon payment of the Early Termination Payment by the Corporate Taxpayer in accordance with this Section 4.01(b), neither the Members nor the Corporate Taxpayer shall have any further payment obligations under this Agreement, other than for any (1) Tax Benefit Payment agreed to by the Corporate Taxpayer and a Member as due and payable but unpaid as of the Early Termination Notice and (2) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (2) is included in the Early Termination Payment).  If an Exchange occurs after the Corporate Taxpayer makes the Early Termination Payment pursuant to this Section 4.01(b), the Corporate Taxpayer shall have no obligations under this Agreement with respect to such Exchange. If the Corporate Taxpayer terminates, or proposes to terminate, the Tax Receivable Agreement (non-SLP Exchanges) by making, or proposing to make, the Early Termination Payment to the Members under such agreement, then each Member that is a party to this Agreement shall have the right to cause the Corporate Taxpayer to make an Early Termination Payment to such Member under this Agreement; provided that the procedures of this Article IV shall apply to such Early Termination Payment as if the Corporate Taxpayer had delivered an Early Termination Notice to such electing Members; provided further that a Member may elect to receive an Early Termination Payment pursuant to this sentence notwithstanding the fact that not all Members under this Agreement elect to receive such a payment.

 

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(c)           In the event that the Corporate Taxpayer breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include, but not be limited to, (1) the Early Termination Payment calculated as if an Early Termination Notice had been delivered on the date of a breach, (2) any Tax Benefit Payment agreed to by the Corporate Taxpayer and any Members as due and payable but unpaid as of the date of a breach, and (3) any Tax Benefit Payment due for the Taxable Year ending with or including the date of a breach; provided that procedures similar to the procedures of Section 4.02 shall apply with respect to the determination of the amount payable by the Corporate Taxpayer pursuant to this sentence.  Notwithstanding the foregoing, in the event that the Corporate Taxpayer breaches this Agreement, the Members shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3) above or to seek specific performance of the terms hereof.  The parties agree that the failure to make any payment due pursuant to this Agreement within three months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due. Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of this Agreement if the Corporate Taxpayer fails to make any payment due pursuant to this Agreement when due to the extent the Corporate Taxpayer has insufficient funds to make such payment; provided that the interest provisions of Section 5.02 shall apply to such late payment (unless the Corporate Taxpayer does not have sufficient cash to make such payment as a result of limitations imposed by credit agreements to which the Corporate Taxpayer or its Subsidiaries is a party, in which case Section 5.02 shall apply, but the Default Rate shall be replaced by the Agreed Rate); provided, further, that the Corporate Taxpayer shall promptly (and in any event, within two (2) Business Days), pay all such unpaid payments, together with accrued and unpaid interest thereon, immediately following such time that the Corporate Taxpayer has, and to the extent the Corporate Taxpayer has, sufficient funds to make such payment, and the failure of the Corporate Taxpayer to do so shall constitute a breach of this Agreement.  For the avoidance of doubt, all cash and cash equivalents used or to be used to pay dividends by, or repurchase equity securities of, the Corporate Taxpayer shall be deemed to be funds sufficient and available to pay such unpaid payments, together with any accrued and unpaid interest thereon.

 

Section 4.02          Early Termination Notice.  If the Corporate Taxpayer chooses to exercise its right of early termination under Section 4.01(b) above, the Corporate Taxpayer shall deliver to each Member notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) specifying the Corporate Taxpayer’s intention to exercise such right and showing in reasonable detail the calculation of the Early Termination Payment for such Member.  The Early Termination Schedule shall become final and binding on such Member 30 calendar days from the first date on which such Member has received such Schedule or amendment thereto unless such Member (i) within 30 calendar days after receiving the Early Termination Schedule, provides the Corporate Taxpayer with notice of a material objection to such Schedule made in good faith (“Material Objection

 

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Notice”) or (ii) provides a written waiver of such right of a Material Objection Notice within the period described in clause (i) above, in which case such Schedule becomes binding on the date the waiver is received by the Corporate Taxpayer (such 30 calendar day date as modified, if at all, by clauses (i) or (ii), the “Early Termination Effective Date”).  If the Corporate Taxpayer and such Member, for any reason, are unable to successfully resolve the issues raised in such notice within 30 calendar days after receipt by the Corporate Taxpayer of the Material Objection Notice, the Corporate Taxpayer and such Member shall employ the Reconciliation Procedures.

 

Section 4.03          Payment upon Early Termination.

 

(a)           Within three Business Days after the Early Termination Effective Date, the Corporate Taxpayer shall pay to each Member an amount equal to the Early Termination Payment in respect of such Member.  Such payment shall be made by wire transfer of immediately available funds to a bank account or accounts designated by such Member or as otherwise agreed by the Corporate Taxpayer and such Member.

 

(b)           “Early Termination Payment” in respect of a Member shall equal the present value, discounted at the Early Termination Rate as of the Early Termination Effective Date, of all Tax Benefit Payments in respect of such Member that would be required to be paid by the Corporate Taxpayer beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied.

 

ARTICLE V

SUBORDINATION AND LATE PAYMENTS

 

Section 5.01          Subordination. Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment or Early Termination Payment required to be made by the Corporate Taxpayer to any Member under this Agreement shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of the Corporate Taxpayer and its Subsidiaries (“Senior Obligations”) and shall rank pari passu with all current or future unsecured obligations of the Corporate Taxpayer that are not Senior Obligations.

 

Section 5.02          Late Payments by the Corporate Taxpayer.  The amount of all or any portion of any Tax Benefit Payment or Early Termination Payment not made to the applicable Member when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such Tax Benefit Payment or Early Termination Payment was due and payable.

 

ARTICLE VI

NO DISPUTES; CONSISTENCY; COOPERATION

 

Section 6.01          Participation in the Corporate Taxpayer’s and OpCo’s Tax Matters.  Except as otherwise provided herein, the Corporate Taxpayer shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporate Taxpayer and OpCo, including the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes.  Notwithstanding the foregoing, the

 

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Corporate Taxpayer shall notify a Member of, and keep such Member reasonably informed with respect to, the portion of any audit of the Corporate Taxpayer and OpCo by a Taxing Authority the outcome of which is reasonably expected to affect the rights and obligations of such Member under this Agreement, and shall provide to such Member reasonable opportunity to provide information and other input to the Corporate Taxpayer, OpCo and their respective advisors concerning the conduct of any such portion of such audit; provided, however, that the Corporate Taxpayer and OpCo shall not be required to take any action that is inconsistent with any provision of the LLC Agreement.

 

Section 6.02          Consistency.  The Corporate Taxpayer and the Members agree to report and cause to be reported for all purposes, including federal, state and local Tax purposes and financial reporting purposes, all Tax-related items (including the Basis Adjustments and each Tax Benefit Payment) in a manner consistent with that specified by the Corporate Taxpayer in any Schedule required to be provided by or on behalf of the Corporate Taxpayer under this Agreement unless otherwise required by law. Any dispute as to required Tax or financial reporting shall be subject to Section 7.09.

 

Section 6.03          Cooperation.  Each of the Corporate Taxpayer and each Member shall (a) furnish to the other party in a timely manner such information, documents and other materials as the other party may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the other party and its representatives to provide explanations of documents and materials and such other information as the other party or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter, and the Corporate Taxpayer shall reimburse the applicable Member for any reasonable third-party costs and expenses incurred pursuant to this Section 6.03.

 

ARTICLE VII
 MISCELLANEOUS

 

Section 7.01          Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission and electronic mail (“e-mail”) transmission, so long as a receipt of such e-mail is requested and received) and shall be given to such party as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

If to the Corporate Taxpayer, to:

 

Virtu Financial LLC 
 645 Madison Avenue
 New York, New York  10022
 Attention: Legal Department
 Facsimile No.: (212) 418-0100
 E-mail: legal@virtu.com

 

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With copies (which shall not constitute notice) to:

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY  10019-6064

Facsimile No.:  (212) 757-3990

	
Attention:
    	
 
    	
John C. Kennedy
    
	
 
    	
 
    	
Jeffrey D. Marell
    
	
E-mail:
    	
 
    	
jkennedy@paulweiss.com
    
	
 
    	
 
    	
jmarell@paulweiss.com
    

 

If to the applicable Member, to the address, facsimile number or e-mail address specified for such party on the Member Schedule to the LLC Agreement.

 

All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.

 

Section 7.02          Binding Effect; Benefit; Assignment.

 

(a)           The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.  No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.  The Corporate Taxpayer shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporate Taxpayer, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporate Taxpayer would be required to perform if no such succession had taken place.

 

(b)           A Member may assign any of its rights under this Agreement to any Person as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in form of Exhibit A, agreeing to become a “Member” for all purposes of this Agreement, except as otherwise provided in such joinder; provided, that a Member’s rights under this Agreement shall be assignable by such Member under the procedure in this Section 7.02(b) regardless of whether such Member continues to hold any interests in OpCo or the Corporate Taxpayer or has fully transferred any such interests.

 

Section 7.03          Resolution of Disputes.

 

(a)           Except for Reconciliation Disputes subject to Section 7.09, any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and

 

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enforceability of this arbitration provision) (each a “Dispute”) shall be finally settled by arbitration conducted by a single arbitrator in Delaware in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the Dispute fail to agree on the selection of an arbitrator within ten (10) days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer admitted to the practice of law in the State of Delaware and shall conduct the proceedings in the English language.  Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

 

(b)                                 Notwithstanding the provisions of paragraph (a), the Corporate Taxpayer may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each Member (i) expressly consents to the application of paragraph (c) of this Section 7.03 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the Corporate Taxpayer as agent of such Member for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise such Member of any such service of process, shall be deemed in every respect effective service of process upon such Member in any such action or proceeding.

 

(c)                                  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE CHANCERY COURT OF THE STATE OF DELAWARE OR, IF SUCH COURT DECLINES JURISDICTION, THE COURTS OF THE STATE OF DELAWARE SITTING IN WILMINGTON, DELAWARE, AND OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE SITTING IN WILMINGTON, DELAWARE, AND ANY APPELLATE COURT FROM ANY THEREOF, FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.03, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the fora designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another.

 

(d)                                 The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in the preceding paragraph of this Section 7.03 and such parties agree not to plead or claim the same.

 

Section 7.04                             Counterparts.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no

 

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party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

 

Section 7.05                             Entire Agreement.  This Agreement and the other Reorganization Documents (as such term is defined in the LLC Agreement) constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement.  Except to the extent provided in Section 3.03, nothing in this Agreement shall create any third-party beneficiary rights in favor of any Person or other party hereto.

 

Section 7.06                             Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

 

Section 7.07                             Amendment.  No provision of this Agreement may be amended unless such amendment is approved in writing by the Corporate Taxpayer and by Persons who would be entitled to receive at least two-thirds of the Early Termination Payments payable to all Persons entitled to Early Termination Payments under the Tax Receivable Agreements if the Corporate Taxpayer had exercised its right of early termination on the date of the most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any Persons pursuant to the Tax Receivable Agreements since the date of such most recent Exchange); provided, that no such amendment shall be effective if such amendment will have a disproportionate effect on the payments certain Persons will or may receive under the Tax Receivable Agreements unless all such Persons disproportionately affected consent in writing to such amendment.  No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.  If any amendment is proposed or made to the Tax Receivable Agreement (non-SLP Exchanges), the Members under this Agreement shall have the right to elect that a similar amendment be made to this Agreement.

 

Section 7.08                             Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such State that would result in the application of the laws of any other State.

 

Section 7.09                             Reconciliation.  In the event that the Corporate Taxpayer and a Member are unable to resolve a disagreement with respect to the matters governed by Sections 2.03, 3.01(b), 4.02 and 6.02 within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner or principal in a nationally recognized accounting or law firm, and unless the Corporate Taxpayer and such Member agree otherwise,

 

21

 

the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with the Corporate Taxpayer or such Member or other actual or potential conflict of interest.  If the parties are unable to agree on an Expert within fifteen (15) calendar days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise. The Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within 30 calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within 15 calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution.  Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount shall be paid on the date prescribed by this Agreement and such Tax Return may be filed as prepared by the Corporate Taxpayer, subject to adjustment or amendment upon resolution.  The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne by the Corporate Taxpayer, except as provided in the next sentence.  The Corporate Taxpayer and such Member shall bear their own costs and expenses of such proceeding, unless (i) the Expert substantially adopts such Member’s position, in which case the Corporate Taxpayer shall reimburse such Member for any reasonable out-of-pocket costs and expenses in such proceeding, or (ii) the Expert substantially adopts the Corporate Taxpayer’s position, in which case such Member shall reimburse the Corporate Taxpayer for any reasonable out-of-pocket costs and expenses in such proceeding.  Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.09 shall be decided by the Expert.  The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.09 shall be binding on the Corporate Taxpayer and such Member and may be entered and enforced in any court having jurisdiction.

 

Section 7.10                             Withholding.  The Corporate Taxpayer shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Corporate Taxpayer is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Corporate Taxpayer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the applicable Member.

 

Section 7.11                             Admission of the Corporate Taxpayer into a Consolidated Group; Transfers of Corporate Assets.

 

(a)                                 If the Corporate Taxpayer is or becomes a member of an affiliated or consolidated group of corporations that files a consolidated income tax return pursuant to Sections 1501 et seq. of the Code or any corresponding provisions of state or local law, then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated taxable income of the group as a whole.

 

22

 

(b)                                 If any entity that is obligated to make a Tax Benefit Payment or Early Termination Payment hereunder transfers one or more assets to a corporation (or a Person classified as a corporation for U.S. federal income tax purposes) with which such entity does not file a consolidated tax return pursuant to Section 1501 of the Code, such entity, for purposes of calculating the amount of any Tax Benefit Payment or Early Termination Payment (e.g., calculating the gross income of the entity and determining the Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution.  The consideration deemed to be received by such entity shall be equal to the fair market value of the contributed asset.  For purposes of this Section 7.11, a transfer of a partnership interest shall be treated as a transfer of the transferring partner’s share of each of the assets and liabilities of that partnership.

 

Section 7.12                             Confidentiality.  Section 12.11 (Confidentiality) of the LLC Agreement as of the date of this Agreement shall apply to any information of the Corporate Taxpayer provided to the Members and their assignees pursuant to this Agreement.

 

Section 7.13                             Change in Law.  Notwithstanding anything herein to the contrary, if, in connection with an actual or proposed change in law, a Member reasonably believes that the existence of this Agreement could cause income (other than income arising from receipt of a payment under this Agreement) recognized by such Member (or direct or indirect equity holders in such Member) upon an Exchange to be treated as ordinary income rather than capital gain (or otherwise taxed at ordinary income rates) for U.S. federal income tax purposes or would have other material adverse tax consequences to the Corporate Taxpayer or such Member or any direct or indirect owner of a Member, then at the election of such Member and to the extent specified by such Member, this Agreement (i) shall cease to have further effect with respect to such Member, (ii) shall not apply to an Exchange occurring after a date specified by such Member, or (iii) shall otherwise be amended in a manner determined by such Member; provided, that such amendment shall not result in an increase in payments under this Agreement to such Member at any time as compared to the amounts and times of payments that would have been due to such Member in the absence of such amendment.

 

Section 7.14                             Partnership Agreement.  This Agreement shall be treated as part of the partnership agreement of OpCo as described in Section 761(c) of the Code, and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.

 

[Remainder of Page Intentionally Left Blank]

 

23

 

IN WITNESS WHEREOF, the Corporate Taxpayer and each Member set forth below have duly executed this Agreement as of the date first written above.

 

 

	
 
    	
CORPORATE   TAXPAYER:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
VIRTU   FINANCIAL, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

Signature Page to Tax Receivable Agreement (SLP Exchanges)

 

 

	
 
    	
MEMBERS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SILVER   LAKE PARTNERS III DE (AIV III), L.P.
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Technology Associates III, L.P., its general partner
    
	
 
    	
 
    
	
 
    	
By:   SLTA III (GP), L.L.C., its general partner
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Group, L.L.C., its sole member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Title:   Managing Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SILVER   LAKE TECHNOLOGY ASSOCIATES III, L.P.
    
	
 
    	
 
    
	
 
    	
By:   SLTA III (GP), L.L.C., its general partner
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Group, L.L.C., its sole member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Title:   Managing Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SILVER   LAKE TECHNOLOGY INVESTORS III, L.P.
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Technology Associates III, L.P., its general partner
    
	
 
    	
 
    
	
 
    	
By:   SLTA III (GP), L.L.C., its general partner
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Group, L.L.C., its sole member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Title:   Managing Member
    

 

Signature Page to Tax Receivable Agreement (SLP Exchanges)

 

 

Exhibit A

Form of Joinder

 

This JOINDER (this “Joinder”) to the Tax Receivable Agreement (as defined below), dated as of                    , by and among Virtu Financial, Inc., a Delaware corporation (the “Corporate Taxpayer”), and                       (“Permitted Transferee”).

 

WHEREAS, on                         , Permitted Transferee acquired (the “Acquisition”) [       Common Units and the corresponding shares of Class C Common Stock] [the right to receive any and all payments that may become due and payable under the Tax Receivable Agreement with respect to        Common Units that were previously Exchanged and are described in greater detail in Annex A to this Joinder] (collectively, “Interests” and, together with all other interests hereinafter acquired by the Permitted Transferee from Transferor, the “Acquired Interests”) from                              (“Transferor”); and

 

WHEREAS, Transferor, in connection with the Acquisition, has required Permitted Transferee to execute and deliver this Joinder pursuant to Section 7.02(b) of the Tax Receivable Agreement (SLP Exchanges), dated as of [                         ], 2015, by and among the Corporate Taxpayer and each Member (as defined therein) (the “Tax Receivable Agreement”).

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

 

Section 1.01                             Definitions.  To the extent capitalized words used in this Joinder are not defined in this Joinder, such words shall have the respective meanings set forth in the Tax Receivable Agreement.

 

Section 1.02                             Joinder. Permitted Transferee hereby acknowledges and agrees to become a “Member” (as defined in the Tax Receivable Agreement) for all purposes of the Tax Receivable Agreement.  Permitted Transferee hereby acknowledges the terms of Section 7.02(b) of the Tax Receivable Agreement and agrees to be bound by Section 7.12 of the Tax Receivable Agreement.

 

Section 1.03                             Notice.  Any notice, request, consent, claim, demand, approval, waiver or other communication hereunder to Permitted Transferee shall be delivered or sent to Permitted Transferee at the address set forth on the signature page hereto in accordance with Section 7.01 of the Tax Receivable Agreement.

 

Section 1.04                             Governing Law. This Joinder shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such State that would result in the application of the laws of any other State.

 

 

IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by Permitted Transferee as of the date first above written.

 

 

	
 
    	
[PERMITTED   TRANSFEREE]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address   for notices:Exhibit 10.9

 

THIRD AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

 

of

 

VIRTU FINANCIAL LLC

 

Dated as of [        ], 2015

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I DEFINITIONS AND USAGE
    	
2
    
	
 
    	
 
    	
 
    
	
Section 1.01
    	
Definitions
    	
2
    
	
Section 1.02
    	
Other   Definitional and Interpretative Provisions
    	
19
    
	
 
    	
 
    	
 
    
	
ARTICLE II THE COMPANY
    	
20
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Formation
    	
20
    
	
Section 2.02
    	
Name
    	
21
    
	
Section 2.03
    	
Term
    	
21
    
	
Section 2.04
    	
Registered   Agent and Registered Office
    	
21
    
	
Section 2.05
    	
Purposes
    	
21
    
	
Section 2.06
    	
Powers   of the Company
    	
21
    
	
Section 2.07
    	
Partnership   Tax Status
    	
21
    
	
Section 2.08
    	
Regulation   of Internal Affairs
    	
21
    
	
Section 2.09
    	
Ownership   of Property
    	
21
    
	
Section 2.10
    	
Subsidiaries
    	
21
    
	
 
    	
 
    	
 
    
	
ARTICLE III UNITS; MEMBERS; BOOKS AND   RECORDS; REPORTS
    	
22
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Units;   Admission of Members
    	
22
    
	
Section 3.02
    	
Substitute   Members and Additional Members
    	
23
    
	
Section 3.03
    	
Tax   and Accounting Information
    	
24
    
	
Section 3.04
    	
Books   and Records
    	
26
    
	
 
    	
 
    	
 
    
	
ARTICLE IV PUBCO OWNERSHIP; RESTRICTIONS ON   PUBCO STOCK
    	
26
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Pubco   Ownership
    	
26
    
	
Section 4.02
    	
Restrictions   on Pubco Common Stock
    	
27
    
	
 
    	
 
    	
 
    
	
ARTICLE V CAPITAL CONTRIBUTIONS; CAPITAL   ACCOUNTS; DISTRIBUTIONS; ALLOCATIONS
    	
30
    
	
 
    	
 
    	
 
    
	
Section 5.01
    	
Capital   Contributions
    	
30
    
	
Section 5.02
    	
Capital   Accounts
    	
30
    
	
Section 5.03
    	
Amounts   and Priority of Distributions
    	
32
    
	
Section 5.04
    	
Allocations
    	
34
    
	
Section 5.05
    	
Other   Allocation Rules
    	
37
    
	
Section 5.06
    	
Tax   Withholding; Withholding Advances
    	
38
    
	
 
    	
 
    	
 
    
	
ARTICLE VI CERTAIN TAX MATTERS
    	
39
    
	
 
    	
 
    	
 
    
	
Section 6.01
    	
Tax   Matters Partner
    	
39
    
	
Section 6.02
    	
Section 754   Election
    	
40
    
	
Section 6.03
    	
RESERVED
    	
40
    
	
Section 6.04
    	
RESERVED
    	
40
    
	
Section 6.05
    	
Debt   Allocation
    	
40
    

 

i

 

	
ARTICLE VII MANAGEMENT OF THE COMPANY
    	
40
    
	
 
    	
 
    	
 
    
	
Section 7.01
    	
Management   by the Managing Member
    	
40
    
	
Section 7.02
    	
Withdrawal   of the Managing Member
    	
40
    
	
Section 7.03
    	
Decisions   by the Members
    	
41
    
	
Section 7.04
    	
RESERVED
    	
41
    
	
Section 7.05
    	
RESERVED
    	
41
    
	
Section 7.06
    	
RESERVED
    	
41
    
	
Section 7.07
    	
Fiduciary   Duties
    	
42
    
	
Section 7.08
    	
Officers
    	
43
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII TRANSFERS OF INTERESTS
    	
44
    
	
 
    	
 
    	
 
    
	
Section 8.01
    	
Restrictions   on Transfers
    	
44
    
	
Section 8.02
    	
Certain   Permitted Transfers
    	
45
    
	
Section 8.03
    	
RESERVED
    	
46
    
	
Section 8.04
    	
RESERVED
    	
46
    
	
Section 8.05
    	
RESERVED
    	
46
    
	
Section 8.06
    	
Registration   of Transfers
    	
46
    
	
 
    	
 
    	
 
    
	
ARTICLE IX CERTAIN OTHER AGREEMENTS
    	
46
    
	
 
    	
 
    	
 
    
	
Section 9.01
    	
RESERVED
    	
46
    
	
Section 9.02
    	
RESERVED
    	
46
    
	
Section 9.03
    	
RESERVED
    	
46
    
	
Section 9.04
    	
Non-Compete;   Non-Solicitation
    	
46
    
	
Section 9.05
    	
Company   Call Right
    	
48
    
	
Section 9.06
    	
RESERVED
    	
48
    
	
Section 9.07
    	
RESERVED
    	
49
    
	
Section 9.08
    	
RESERVED
    	
49
    
	
Section 9.09
    	
Employee   Holdco
    	
49
    
	
 
    	
 
    	
 
    
	
ARTICLE X LIMITATION ON LIABILITY,   EXCULPATION AND INDEMNIFICATION
    	
50
    
	
 
    	
 
    	
 
    
	
Section 10.01
    	
Limitation   on Liability
    	
50
    
	
Section 10.02
    	
Exculpation   and Indemnification
    	
50
    
	
Section 10.03
    	
Indemnification   of Certain Matters
    	
53
    
	
 
    	
 
    	
 
    
	
ARTICLE XI DISSOLUTION AND TERMINATION
    	
53
    
	
 
    	
 
    	
 
    
	
Section 11.01
    	
Dissolution
    	
53
    
	
Section 11.02
    	
Winding   Up of the Company
    	
54
    
	
Section 11.03
    	
Termination
    	
54
    
	
Section 11.04
    	
Survival
    	
54
    
	
 
    	
 
    	
 
    
	
ARTICLE XII MISCELLANEOUS
    	
55
    
	
 
    	
 
    	
 
    
	
Section 12.01
    	
Expenses
    	
55
    
	
Section 12.02
    	
Further   Assurances
    	
55
    
	
Section 12.03
    	
Notices
    	
55
    

 

ii

 

	
Section 12.04
    	
Binding   Effect; Benefit; Assignment
    	
55
    
	
Section 12.05
    	
Jurisdiction
    	
56
    
	
Section 12.06
    	
WAIVER   OF JURY TRIAL
    	
56
    
	
Section 12.07
    	
Counterparts
    	
57
    
	
Section 12.08
    	
Entire   Agreement
    	
57
    
	
Section 12.09
    	
Severability
    	
57
    
	
Section 12.10
    	
Amendment
    	
57
    
	
Section 12.11
    	
Confidentiality
    	
59
    
	
Section 12.12
    	
Governing   Law
    	
60
    
	
 
    	
 
    	
 
    
	
Schedule   A
    	
Restricted   Investments
    	
 
    
	
Schedule   B
    	
Restricted   Members
    	
 
    
	
Schedule   C
    	
Common   Units
    	
 
    
				

 

iii

 

THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) OF VIRTU FINANCIAL LLC, a Delaware limited liability company (the “Company”), dated as of [        ], 2015, by and among the Company, Virtu Financial, Inc., a Delaware corporation (“Pubco”), and the other Persons listed on the signature pages hereto.

 

W I T N E S S E T H:

 

WHEREAS, the Company has been heretofore formed as a limited liability company under the Delaware Act (as defined below) pursuant to a certificate of formation which was executed and filed with the Secretary of State of the State of Delaware on April 8, 2011;

 

WHEREAS, SLP Virtu Investors, LLC, a Delaware limited liability company (“SL Investor”), entered into the initial Limited Liability Company Agreement of the Company, dated as of April 17, 2011 (the “Initial LLC Agreement”);

 

WHEREAS, the Initial LLC Agreement was amended and restated in its entirety by the Amended and Restated Limited Liability Company Agreement of the Company, dated as of April 17, 2011 and effective as of July 8, 2011, by and among the Company and the other Persons listed on the signature pages thereto, as amended by Amendment No. 1, dated as of July 8, 2011, Amendment No. 2, dated as of December 28, 2011, Amendment No. 3, dated as of May 1, 2013, and Amendment No. 4, dated as of November 8, 2013 (as amended, the “A&R LLC Agreement”);

 

WHEREAS, the A&R LLC Agreement was amended and restated in its entirety by the Second Amended and Restated Limited Liability Company Agreement of the Company, dated as of December 31, 2014, by and among the Company and the other Persons listed on the signature pages thereto (the “Second A&R LLC Agreement”); and

 

WHEREAS, pursuant to the terms of the Reorganization Agreement (the “Reorganization Agreement”), dated as of the date hereof, by and among the Company, Pubco and the other Persons listed on the signature pages thereto, the parties thereto have agreed to consummate the reorganization of the Company contemplated by Section 9.01 of the Second A&R LLC Agreement and to take the other actions contemplated in such Reorganization Agreement (collectively, the “Reorganization”).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein made and other good and valuable consideration, the parties hereto hereby agree, to amend and restate the Second A&R LLC Agreement in its entirety as follows:

 

 

ARTICLE I

 

DEFINITIONS AND USAGE

 

Section 1.01                             Definitions.

 

(a)                                 The following terms shall have the following meanings for the purposes of this Agreement:

 

“Additional Member” means any Person admitted as a Member of the Company pursuant to Section 3.02 in connection with the new issuance of Units to such Person.

 

“Adjusted Capital Account Deficit” means, 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 giving effect to the following adjustments:

 

(i)                                     Credit to such Capital Account any amounts that such Member is deemed to be obligated to restore pursuant to the penultimate sentence in Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

 

(ii)                                  Debit to such Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).

 

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person; provided that no Member nor any Affiliate of any Member shall be deemed to be an Affiliate of any other Member or any of its Affiliates solely by virtue of such Members’ Units.  Notwithstanding the immediately preceding sentence (i) (except with respect to Section 12.11), no SL Equityholder shall be considered an Affiliate of any portfolio company in which the direct or indirect equityholders of such SL Equityholder or any of their affiliated investment funds have made a debt or equity investment (or vice versa), (ii) Viola will be deemed to be an Affiliate of every Viola Member and their Affiliates (and vice versa) and (iii) the Temasek Stockholder, Temasek Holdings and Temasek Holdings’ direct and indirect wholly owned subsidiaries the boards of directors or equivalent governing bodies of which comprise solely nominees or employees of (x) Temasek Holdings, (y) Temasek Pte Ltd. (a wholly owned subsidiary of Temasek Holdings) and/or (z) wholly owned direct and indirect subsidiaries of Temasek Pte Ltd., shall be the sole Affiliates of the Temasek Equityholders.

 

“Affiliated Transferee” means (i) in the case of any Member that is an individual, any Transferee of such Member that is (x) an immediate family member of such Member, (y) a trust, family-partnership or estate-planning vehicle for the benefit of 

 

2

 

such Member and/or any of its immediate family members or (z) otherwise an Affiliate of such Member or (ii) in the case of any Member that is a limited liability company or other entity, any Transferee of such Member that is (x) an immediate family member of the individual that controls a majority of the voting or economic interest in such Member, (y) a trust, family-partnership or estate-planning vehicle for the benefit of such individual and/or any of its immediate family members or (z) otherwise an Affiliate of such Member.  For the purposes of this definition, none of Pubco, the Company, Employee Holdco or any of their respective Controlled Affiliates shall be deemed to be an “Affiliate” of any Member and vice versa.

 

“Algorithmic Liquidity Trading” means trading Financial Assets through the use of an electronically automated trading system that generates order sets (which, for purposes of clarity, can consist of a single order) with the intention of (i) creating profit by providing two-sided liquidity to the market, (ii) making a profit margin consistent with the business of making the bid-offer spread or less per unit of the Financial Asset(s) being traded (including by providing either one-sided or two sided liquidity to the market) or (iii) creating Simultaneous order sets that are generated with the intention of locking in an Arbitrage profit.  For the avoidance of doubt, “Algorithmic Liquidity Trading” does not include trading in which an Order or Orders are manually generated and submitted for execution by a natural person (including, without limitation, Stop Orders, Limit Orders, Volume-Weighted Average Price Orders and other common Order types that may involve multiple instructions to a third party and which may involve such third party employing an algorithm in executing the Order provided the algorithm executes only on one side of the market as a “buy” or “sell” Order, and including a portfolio-rebalancing Order (which for the avoidance of doubt may involve both a “buy” and a “sell” component within a single Order)).

 

“Applicable Law” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority or Regulatory Agency that is binding upon or applicable to such Person or its assets, as amended unless expressly specified otherwise.

 

“Arbitrage” means arbitrage consistent with the practice of high frequency trading.

 

“Available Cash Flow” means, for any period, the Company’s consolidated net income determined in accordance with GAAP, adjusted by the Managing Member to exclude non-cash items, extraordinary or one-time items of gain or loss, any compensation expense related to Units or other Equity Securities issued under any management equity plan of Pubco or the Company, and, to the extent not reflected in consolidated net income determined in accordance with GAAP, less any Reserves established during such period (including the amount of any net increase during such period to a Reserve established in a prior period) and plus the amount of any net decrease during such period to a Reserve established by a prior period.

 

3

 

“Business” means the business of trading and market making in financial instruments globally on behalf of itself and/or third parties, including trading and developing and designing algorithmic programs to evaluate or execute trades in securities, futures, swaps, options, commodities, currencies, derivatives and other financial instruments, and any reasonable extension of such businesses including the provision of trading technologies and interfaces, infrastructure, trade execution and clearing services to parties in any financial instruments globally and providing technology, services and/or investing in new trading venues, platforms or clearinghouses, and to engage in such activities as are, in the Managing Member’s determination, necessary, incidental or appropriate in connection therewith, in each case, as conducted by the Company and its Subsidiaries.

 

“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.

 

“Capital Account” means the capital account established and maintained for each Member pursuant to Section 5.02.

 

“Capital Contribution” means, with respect to any Member, the amount of money and the initial Carrying Value of any Property (other than money) contributed to the Company.

 

 “Carrying Value” means with respect to any Property (other than money), such Property’s adjusted basis for federal income tax purposes, except as follows:

 

(i)                                     The initial Carrying Value of any such Property contributed by a Member to the Company shall be the gross fair market value of such Property, as reasonably determined by the Managing Member;

 

(ii)                                  The Carrying Values of all such Properties shall be adjusted to equal their respective gross fair market values (taking Section 7701(g) of the Code into account), as reasonably determined by the Managing Member, at the time of any Revaluation pursuant to Section 5.02(c);

 

(iii)                               The Carrying Value of any item of such Properties distributed to any Member shall be adjusted to equal the gross fair market value (taking Section 7701(g) of the Code into account) of such Property on the date of distribution as reasonably determined by the Managing Member; and

 

(iv)                              The Carrying Values of such Properties shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such Properties pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of “Net Income” and “Net Loss” or Section 5.04(b)(vi); provided, however, that Carrying Values shall not be adjusted pursuant to this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph (ii) is required in connection with a transaction that would 

 

4

 

otherwise result in an adjustment pursuant to this subparagraph (iv).  If the Carrying Value of such Property has been determined or adjusted pursuant to subparagraph (i), (ii) or (iv), such Carrying Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset, for purposes of computing Net Income and Net Loss.

 

“Class A Common Stock” means Class A common stock, $0.00001 par value per share, of Pubco.

 

“Class A-1 Interests” means Class A-1 Interests (as such term was defined in the Second A&R LLC Agreement), all of which have been reclassified into Common Units pursuant to the Reorganization Agreement and this Agreement.

 

“Class A-2 Capital Interests” means Class A-2 Capital Interests (as such term was defined in the Second A&R LLC Agreement), all of which have been reclassified into Common Units pursuant to the Reorganization Agreement and this Agreement.

 

“Class A-2 Profits Interests” means Class A-2 Profits Interests (as such term was defined in the Second A&R LLC Agreement), all of which have been reclassified into Common Units pursuant to the Reorganization Agreement and this Agreement.

 

“Class B Common Stock” means Class B common stock, $0.00001 par value per share, of Pubco.

 

“Class B Interests” means Class B Interests (as such term was defined in the Second A&R LLC Agreement), all of which have been reclassified into Common Units pursuant to the Reorganization Agreement and this Agreement.

 

“Class C Common Stock” means Class C common stock, $0.00001 par value per share, of Pubco.

 

“Class D Common Stock” means Class D common stock, $0.00001 par value per share, of Pubco.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Common Unit” means a common limited liability interest in the Company.

 

“Company Minimum Gain” means “partnership minimum gain,” as defined in Treasury Regulation Sections 1.704-2(b)(2) and 1.704-2(d).

 

“Competitive Activity” means (i) serving as a director, officer, employee, trader, manager, consultant, agent or advisor of, or otherwise directly or through an Affiliate providing services to a Competitive Enterprise; (ii) designing or developing any 

 

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Competitive Technology; (iii) directly or through an Affiliate (A) engaging in Strategy Competition or (B) retaining or otherwise engaging any other Person to undertake any of the actions described in clauses (i), (ii), (iii)(A) or (iv) of this definition; (iv) serving as a director, officer, employee, trader, manager, consultant, agent or advisor of, or otherwise directly or through an Affiliate providing services to any business, financial institution, investment bank or other business enterprise (in any form, including without limitation as a corporation, partnership, limited liability company or other Person) that is, or whose Affiliate is, engaged in Strategy Competition, in each case except in a capacity that does not involve or require the Member to engage in any activities described in clauses (i), (ii) or (iii) of this definition above or have any direct management oversight of or involvement in Strategy Competition; (v) acquiring directly or through an Affiliate in the aggregate directly or beneficially, whether as a shareholder, partner, member or otherwise, any equity (including stock options or warrants, whether or not exercisable), voting or profit participation interests (collectively, “Ownership Interests”) in a Competitive Enterprise, or any derivative where the reference asset is an Ownership Interest in a Competitive Enterprise, other than a passive investment of not more than, as calculated at the time of acquisition (but after giving effect to any transaction or transactions to occur in connection with such acquisition), 1% (measured by voting power or value, whichever is greater) of the fully diluted Ownership Interests of a Competitive Enterprise (for the avoidance of doubt, such percentage interest shall be calculated based on the Member’s percentage of direct and indirect ownership of the Competitive Enterprise and not any intermediary, such as a holding company or partnership) (it being understood that this clause (v) shall not apply to prohibit the holding of an Ownership Interest if, at the time of acquisition of such Ownership Interest, the Person in which such direct or indirect Ownership Interest is acquired is not a Competitive Enterprise and the Member is not aware at the time of such acquisition, after reasonable inquiry, that such Person has any plans to become a Competitive Enterprise); or (vi) directly or through an Affiliate owning any Ownership Interests in any Person listed in Schedule A (or any parent company or entity of a Person listed in Schedule A or any successors thereto, other than a parent company or entity that is not a Competitive Enterprise) (a “Restricted Investment”), or any derivative where the reference asset is an Ownership Interest in a Restricted Investment, except to the extent such Ownership Interests or derivatives are held through an index fund, an exchange traded fund, a mutual fund, hedge fund, or other form of collective investment or fund, or through a managed account, in each case, where a third party that is not affiliated with the Member exercises sole investment discretion in respect of such fund or account and such third party has not disclosed at the time Member makes his or its investment that it holds or intends to hold any Ownership Interests in a Restricted Investment.

 

“Competitive Enterprise” means any Person or business enterprise (in any form, including without limitation as a corporation, partnership, limited liability company or other Person), or subsidiary, division, unit, group or portion thereof, whose primary business is (A) engaging in Strategy Competition; or (B) engaging in any other business in which the Company or any of its Subsidiaries engages in a material way, or has concrete plans to engage in a material way as of the Relevant Date, in each case as reasonably determined by the Managing Member.  For the sake of clarity, in the case of a subsidiary, division, unit, group or portion whose primary business is described above:

 

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(1) the larger business enterprise or Person owning such subsidiary, division, unit, group or portion shall not be deemed to be a Competitive Enterprise unless the primary business of such larger business enterprise or Person is engaged in Strategy Competition and (2) the subsidiary, division, unit, group or portion whose primary business is engaging in Strategy Competition shall be deemed a Competitive Enterprise.

 

“Competitive Technology” means any system, program, hardware or software (including any network architecture, system architecture, messaging architecture, trade processing and clearing systems and architecture, database architecture and storage of market and trading data for purposes of statistical analysis, network infrastructure, market data processing and messaging types that support such market data processing, order processing or any other software or hardware): (a) only if developed for one or more financial institution(s) or designed primarily for use by, or sale or license to, one or more financial institutions, is (i) used (or will be used in the future in its current or any enhanced or modified form) in Strategy Competition to evaluate, route or execute orders or trades in any Financial Asset or (ii) used (or will be used in the future in its current or any enhanced or modified form) in Strategy Competition for the efficient processing and dissemination of market data or messaging for Financial Assets, or (b) in any case, is specifically designed or intended for use in Strategy Competition.

 

“Control” (including the terms “controlling” and “controlled”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of such subject Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

 

“Covered Person” means (i) each Equityholder or an Affiliate thereof, in each case in such capacity, (ii) each officer, director, shareholder, member, partner, employee, representative, agent or trustee of a Member or an Affiliate thereof, in all cases in such capacity, and (iii) each officer, director, shareholder (other than any public shareholder of Pubco that is not an Equityholder or a Member TJMT Holdings, Employee HoldCo), member, partner, employee, representative, agent or trustee of the Managing Member, Pubco (in the event Pubco is not the Managing Member), the Company or an Affiliate controlled thereby, in all cases in such capacity.

 

“Credit Agreement” means the Second Amended and Restated Credit Agreement, dated as of November 8, 2013, among the Company, as Holdings, Parent LLC, as Borrower, the lenders party thereto, Credit Suisse AG, Cayman Islands Branch, as Administrative Agent, Credit Suisse Securities (USA) LLC, as Sole Lead Arranger and Bookrunner (or any refinancings or replacements thereof).

 

“Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq.

 

“Depreciation” means, 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 for federal income tax purposes at the beginning of such Fiscal Year, 

 

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Depreciation shall be an amount that bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the Managing Member.

 

“DGCL” means the State of Delaware General Corporation Law, as amended from time to time.

 

“East” means Virtu Financial Operating LLC, a Delaware limited liability company.

 

“Employee Equity Letters” means (i) those certain Unit Vesting, Equity Retention and Restrictive Covenant Agreements by and between Pubco, the Company and certain Non-Pubco Members party thereto, (ii) those certain Equity Retention and Restrictive Covenant Agreements by and between Pubco, the Company and certain Non-Pubco Members party thereto and (iii) those certain Unit Vesting, Equity Retention and Restrictive Covenant Agreements by and between Pubco, the Company and the members of Employee Holdco, in each case dated as of the date hereof.

 

“Employee Holdco LLC Agreement” means the limited liability company agreement of Employee Holdco.

 

“Employee Holdco” means Virtu Employee Holdco LLC, a Delaware limited liability company.

 

“Equity Purchase Agreements” means (i) the Purchase Agreement by and between Pubco and SL Stockholder and (ii) the Purchase Agreement by and among Pubco and certain members of the Company, in each case dated as of the date hereof.

 

“Equity Redemption and Purchase Agreement” means that certain Equity Redemption and Purchase Agreement, dated as of December 7, 2014, by and among Pre-IPO Temasek Member, Temasek Stockholder, Silver Lake Partners III DE (AIV III), L.P., Silver Lake Technology Investors III, L.P., SL Stockholder, the management parties thereto, Silver Lake Technology Associates III, L.P., and, solely for the purposes of the provisions expressly referred to therein, SLP Virtu Investors, LLC, Employee Holdco and the Company.

 

“Equity Securities” means, with respect to any Person, any (i) membership interests or shares of capital stock, (ii) equity, ownership, voting, profit or participation interests or (iii) similar rights or securities in such Person or any of its Subsidiaries, or any rights or securities convertible into or exchangeable for, options or other rights to acquire from such Person or any of its Subsidiaries, or obligation on the part of such Person or any of its Subsidiaries to issue, any of the foregoing.

 

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“Exchange Agreement” means the Exchange Agreement, dated as of the date hereof, by and among Pubco, the Company and the holders of Common Units and shares of Class C Common Stock and Class D Common Stock from time to time party thereto.

 

“Exchanged Shares” means any shares of Class A Common Stock or Class B Common Stock issued in exchange for Paired Interests pursuant to the Exchange Agreement.

 

“Financial Asset” means commodities, currencies, equities, notes, bonds, securities, evidence of indebtedness and derivatives thereof.

 

“FINRA” means the Financial Industry Regulatory Authority, Inc.

 

“Fiscal Year” means the Company’s fiscal year, which shall initially be the calendar year and which may be changed from time to time as determined by the Managing Member.

 

“Form 8-A Effective Time” has the meaning set forth in the Reorganization Agreement.

 

“Governmental Authority” means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.

 

“Indebtedness” means (a) all indebtedness for borrowed money (including capitalized lease obligations, sale-leaseback transactions or other similar transactions, however evidenced), (b) any other indebtedness that is evidenced by a note, bond, debenture, draft or similar instrument, (c) notes payable and (d) lines of credit and any other agreements relating to the borrowing of money or extension of credit.

 

“Intermediate Holdings I” means Virtu Financial Intermediate Holdings LLC, a Delaware limited liability company.

 

“Intermediate Holdings II” means Virtu Financial Intermediate Holdings II LLC, a Delaware limited liability company.

 

“Involuntary Transfer” means any Transfer of Units by a Member resulting from (i) any seizure under levy of attachment or execution, (ii) any bankruptcy (whether voluntary or involuntary), (iii) any Transfer to a state or to a public officer or agency pursuant to any statute pertaining to escheat or abandoned property, (iv) any divorce or separation agreement or a final decree of a court in a divorce action or (v) death or permanent disability.

 

“IPO” means the initial underwritten public offering of Pubco.

 

“IRS” means the Internal Revenue Service of the United States.

 

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“Jaguar Trading” means trading through the use of electronically automated means to analyze and act upon Economic Numerical Data (i.e., economic data released by government agencies, quasi-governmental agencies, or industry groups commonly tracked by investors (e.g., ADP or Gallup employment data, the Michigan Consumer Sentiment Index and National Association of Realtors home-sale data)) with the intent to enter a position within two seconds after the public (or equivalent) release of such economic numerical data, including by using models and algorithms to predict the effect on prices of such economic numerical data.  Economic Numerical Data does not include financial instrument price and volume data.  Jaguar Trading does not include trading in which each instruction to acquire or dispose of a specified quantity of a single instrument is individually manually generated and submitted for execution by a natural person (and not by any algorithmic means), even if such Order is executed within two seconds after the release of such economic numerical data (for example, and without limitation, the execution of a previously placed Stop Order triggered after the release of economic numerical data).

 

“Liens” means any pledge, encumbrance, security interest, purchase option, conditional sale agreement, call or similar right.

 

“Limited Ownership Minimum” means, with respect to the SL Equityholders, the Temasek Equityholders or the Viola Members, as the case may be, if the number of its Owned Shares exceeds [              ],(1) as adjusted for any stock split, stock dividend, reverse stock split, combination, recapitalization, reclassification or similar event.

 

“Managing Member” means (i) Pubco so long as Pubco has not withdrawn as the Managing Member pursuant to Section 7.02 and (ii) any successor thereof appointed as Managing Member in accordance with Section 7.02.

 

“Member” means any Person named as a Member of the Company on the Member Schedule and the books and records of the Company, as the same may be amended from time to time to reflect any Person admitted as an Additional Member or a Substitute Member, for so long as such Person continues to be a Member of the Company.

 

“Member Nonrecourse Debt” has the same meaning as the term “partner nonrecourse debt” in Treasury Regulations Section 1.704-2(b)(4).

 

“Member Nonrecourse Debt Minimum Gain” means an amount with respect to each “partner nonrecourse debt” (as defined in Treasury Regulation Section 1.704-2(b)(4)) equal to the Company Minimum Gain that would result if such partner nonrecourse debt were treated as a nonrecourse liability (as defined in Treasury 

 

(1)          Note to Draft: To be a number equal to at least 25.9% of the Class A common stock held by the Silver Lake Parties immediately prior to the IPO (calculated assuming that all of the SL Parties’ Common Stock and corresponding shares of Class C common stock are exchanged for Class A common stock).

 

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Regulation Section 1.752-1(a)(2)) determined in accordance with Treasury Regulation Section 1.704-2(i)(3).

 

“Member Nonrecourse Deductions” has the same meaning as the term “partner nonrecourse deductions” in Treasury Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2).

 

“Merger Sub I” means Virtu Financial Merger Sub LLC, a Delaware limited liability company.

 

“Merger Sub II” means Virtu Financial Merger Sub II LLC, a Delaware limited liability company.

 

“MIP” means the Virtu Financial LLC Management Incentive Plan, as the same may be amended from time to time.

 

“MTH Transaction Agreement” means the Transaction and Merger Agreement, dated as of April 17, 2011, and amended as of July 8, 2011, by and among the Company, Parent LLC, West, East and the other parties signatory thereto.

 

“MTH Transaction Documents” means (i) the MTH Transaction Agreement and (ii) the Ancillary Agreements and the Specified Agreements (as each such term is defined in the MTH Transaction Agreement).

 

“MTH Transaction Effective Date” means July 8, 2011.

 

“Net Income” and “Net Loss” mean, for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss for such Fiscal Year or period, determined in accordance with Section 703(a) 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) of the Code shall be included in taxable income or loss), with the following adjustments (without duplication):

 

(i)                                     Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of “Net Income” and “Net Loss” shall be added to such taxable income or loss;

 

(ii)                                  Any expenditures of the Company described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income and Net Loss pursuant to this definition of “Net Income” and “Net Loss,” shall be treated as deductible items;

 

(iii)                               In the event the Carrying Value of any Company asset is adjusted pursuant to subparagraphs (ii) or (iii) of the definition of “Carrying Value,” the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Carrying Value of the asset) or an item of loss (if the adjustment decreases the 

 

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Carrying Value of the asset) from the disposition of such asset and shall be taken into account, immediately prior to the event giving rise to such adjustment, for purposes of computing Net Income and/or Net Loss;

 

(iv)                              Gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Carrying Value of the Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Carrying Value;

 

(v)                                 In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year, computed in accordance with the definition of Depreciation;

 

(vi)                              To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) of the Code is required, pursuant to Treasury Regulations Section 1.704-(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s interest in the Company, the amount of such adjustment 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) from the disposition of such asset and shall be taken into account for purposes of computing Net Income or Net Loss; and

 

(vii)                           Notwithstanding any other provision of this definition, any items that are specially allocated pursuant to Section 5.04(b), Section 5.04(c) and Section 5.04(d) shall not be taken into account in computing Net Income and Net Loss.

 

The amounts of the items of Company income, gain, loss, or deduction available to be specially allocated pursuant to Section 5.04(b), Section 5.04(c) and Section 5.04(d) shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (vi) above.

 

“Non-Pubco Member” means any Member that is not a Pubco Member.

 

“Nonrecourse Deductions” has the meaning set forth in Treasury Regulations Sections 1.704-2(b)(1) and 1.704-2(c).

 

“Order” means an instruction to acquire or dispose of a specified quantity or amount of a Financial Asset.

 

“Owned Shares”  with respect to the SL Equityholders, the Temasek Equityholders or the Viola Members, as the case may be, the total number of shares of Class A Common Stock beneficially owned (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) by the SL Equityholders, the Temasek Equityholders or the Viola Members, as the case may be (including, for the purposes of this definition, any Person that owns either Units or Pubco Common Stock and that otherwise qualifies under the definition of “SL Equityholder”, “Temasek Equityholder” 

 

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or “Viola Member”, as the case may be), in the aggregate and without duplication, as of the date of such calculation (determined on an “as-converted” basis taking into account any and all securities then convertible into, or exercisable or exchangeable for, shares of Class A Common Stock (including Common Units and shares of Class C Common Stock exchangeable pursuant to the Exchange Agreement).

 

“Ownership Minimum” means, with respect to the SL Members, the Temasek Equityholders or the Viola Members, as the case may be, if the number of its Owned Shares exceeds [              ],(2) as adjusted for any stock split, stock dividend, reverse stock split, combination, recapitalization, reclassification or similar event.

 

“Paired Interest” has the meaning set forth in the Exchange Agreement.

 

“Parent LLC” means VFH Parent LLC, a Delaware limited liability company.

 

“Participating Unvested Common Units” means Unvested Common Units that have been reclassified from Class A-2 Profits Interests that remain subject to further time-based vesting requirements under the terms of such Class A-2 Profits Interests.

 

“Percentage Interest” means, with respect to any Member, a fractional amount, expressed as a percentage: (i) the numerator of which is the aggregate number of Common Units owned of record thereby (excluding any Unvested Common Units other than Participating Unvested Common Units) and (ii) the denominator of which is the aggregate number of Common Units issued and outstanding (excluding any Unvested Common Units other than Participating Unvested Common Units).  The sum of the outstanding Percentage Interests of all Members shall at all times equal 100%.

 

“Person” means any individual, firm, corporation, partnership, limited liability company, trust, estate, joint venture, governmental authority or other entity.

 

“Plan Assets Regulation” means the Department of Labor regulations codified at 29 CFR Section 2510.3-101.

 

“Post-IPO SL Members” means (i) SLP Virtu Investors, LLC, a Delaware limited liability company, and (ii) Silver Lake Technology Associates III, L.P., a Delaware limited partnership.

 

“Pre-IPO Temasek Member” means Wilbur Investments LLC, a Delaware limited liability company.

 

“Prime Rate” means the rate of interest from time to time identified by JP Morgan Chase, N.A. as being its “prime” or “reference” rate.

 

(2)          Note to Draft: To be a number equal to at least 51.8% of the Class A common stock held by the Silver Lake Parties immediately prior to the IPO (calculated assuming that all of the SL Parties’ Common Stock and corresponding shares of Class C common stock are exchanged for Class A common stock).

 

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“Property” means an interest of any kind in any real, personal or intellectual (or mixed) property, including cash, and any improvements thereto, and shall include both tangible and intangible property.

 

“Pubco Common Stock” means all classes and series of common stock of Pubco, including the Class A Common Stock, Class B Common Stock, Class C Common Stock and Class D Common Stock.

 

“Pubco Equity Plan” means the Virtu Financial, Inc. 2014 Equity Incentive Plan, as the same may be amended from time to time.

 

“Pubco Member” means (i) Pubco and (ii) any Subsidiary of Pubco (other than the Company and its Subsidiaries) that that is a Member (including, as of immediately following the Reorganization, Intermediate Holdings I and Intermediate Holdings II).

 

“Pubco Subscription Agreements” means those certain Subscription Agreements by and between Pubco and each of the Non-Pubco Members as of the date hereof, dated as of the date hereof.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date hereof, by and among Pubco, SL Stockholder, Temasek Stockholder and the Non-Pubco Members party thereto (which the parties hereto acknowledge and agree replaces the form of Registration Rights Agreement attached as Exhibit A to the Second A&R LLC Agreement).

 

“Regulatory Agency” means the SEC, FINRA, the Financial Services Authority, any non-U.S. regulatory agency and any other regulatory authority or body (including any state or provincial securities authority and any self-regulatory organization) with jurisdiction over the Company or any of its Subsidiaries.

 

“Relative Percentage Interest” means, with respect to any Member relative to another Member or Members, a fractional amount, expressed as a percentage, the numerator of which is the Percentage Interest of such Member; and the denominator of which is (x) the Percentage Interest of such Member plus (y) the aggregate Percentage Interest of such other Member or Members.

 

“Relevant Date” means, with respect to any Restricted Member, (i) for as long the Termination Date has not occurred with respect to such Restricted Member, the date that such Restricted Member engages in any activity that is prohibited by Section 9.04 and (ii) if the Termination Date has occurred with respect to such Restricted Member, such Termination Date.

 

“Reorganization Date Capital Account Balance” means, with respect to any Member, the positive Capital Account balance of such Member as of immediately following the Reorganization, the amount or deemed value of which is set forth on the Member Schedule.

 

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“Reorganization Documents” means the Reorganization Agreement, this Agreement, the SL-Temasek Merger Agreement, the Temasek Merger Agreement, the Tax Receivable Agreements, the Exchange Agreement, the SL Stockholders Agreement, the Registration Rights Agreement, the Pubco Subscription Agreement, the Employee Equity Letters, the MIP and the Equity Purchase Agreements.

 

“Reserves” means, as of any date of determination, amounts allocated by the Managing Member, in its reasonable judgment, to reserves maintained for working capital of the Company, for contingencies of the Company, for operating expenses and debt reduction of the Company.

 

“Restricted Member” means the Persons identified on Schedule B.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Simultaneous” means, with respect to more than one event, the occurrence of such events occurring within 500 milliseconds of each other.

 

“SL” means SLP Virtu Investors, LLC. or any other SL Equitholder designated in writing to the Company as such by SL.

 

“SL Equityholder” means the SL Members and the SL Stockholder (so long as it owns Pubco Common Stock) and any Affiliate thereof that owns Pubco Common Stock.

 

“SL Members” means the Post-IPO SL Members and any other investment fund managed, sponsored, controlled or advised by SL’s investment manager or any of its Affiliates that owns Units.

 

“SL-Temasek Merger Agreement” means the Merger Agreement, dated as of the date hereof, by and among Pubco, Merger Sub I, Intermediate Holdings I, SLP III EW Feeder LLC, a Delaware limited liability company, SL Stockholder, and Temasek Stockholder.

 

“SL Stockholder” means SLP III EW Feeder I, L.P., a Delaware limited partnership.

 

“SL Stockholders Agreement” means the Stockholders Agreement, dated as of the date hereof, by and among Pubco, the Post-IPO SL Members, SL Stockholder, Viola, TJMT Holdings and the other Persons party thereto or that may become parties thereto from time to time.

 

“Strategy Competition” means (i) trading activities that utilize trading strategies that constitute Algorithmic Liquidity Trading or Jaguar Trading or (ii) any other strategy in which the Company or any of its Subsidiaries engages in a material way or has concrete plans to engage in a material way as of the Relevant Date, in each case as reasonably determined by the Managing Member.

 

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“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of Equity Securities or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.

 

“Substitute Member” means any Person admitted as a Member of the Company pursuant to Section 3.02 in connection with the Transfer of then-existing Units to such Person.

 

“Tax Distribution” means a distribution made by the Company pursuant to Section 5.03(e)(i) or Section 5.03(e)(iii) or a distribution made by the Company pursuant to another provision of Section 5.03 but designated as a Tax Distribution pursuant to Section 5.03(e)(ii).

 

“Tax Distribution Amount” means, with respect to a Member’s Units, whichever of the following applies with respect to the applicable Tax Distribution, in each case in amount not less than zero:

 

(i)                                     With respect to a Tax Distribution pursuant to Section 5.03(e)(i), the excess, if any, of (A) such Member’s required annualized income installment for such estimated payment date under Section 6655(e) of the Code, assuming that (w) such Member is a corporation (which assumption, for the avoidance of doubt, shall not affect the determination of the Tax Rate), (x) Section 6655(e)(2)(C)(ii) is in effect, (y) such Member’s only income is from the Company, and (z) the Tax Rate applies, which amount shall be calculated based on the projections believed by the Managing Member in good faith to be, reasonable projections of the net taxable income to be allocated to such Units pursuant to this Agreement and without regard to any adjustments pursuant to Section 704(c) or Section 743(b) of the Code over (B) the aggregate amount of Tax Distributions designated by the Company pursuant to Section 5.03(e)(ii) with respect to such Units since the date of the previous Tax Distribution pursuant to Section 5.03(e)(i) (or if no such Tax Distribution was required to be made, the date such Tax Distribution would have been made pursuant to Section 5.03(e)(i)).

 

(ii)                                  With respect to the designation of an amount as a Tax Distribution pursuant to Section 5.03(e)(ii), the product of (x) the net taxable income, determined without regard to any adjustments pursuant to Section 704(c) or Section 743(b) of the Code projected, in the good faith belief of the Managing Member, to be allocated to such Units pursuant to this Agreement during the period since the date of the previous Tax Distribution (or, if more recent, the date that the previous Tax Distribution pursuant to Section 5.03(e)(i) would have been made or, in the case of the

 

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first distribution pursuant to Section 5.03(b), the date of this Agreement), and (y) the Tax Rate.

 

(iii)                               With respect to an entire Fiscal Year to be calculated for purposes of Section 5.03(e)(iii), the excess, if any, of (A) the product of (x) the net taxable income, determined without regard to any adjustments pursuant to Section 704(c) or Section 743(b) of the Code, allocated to such Units pursuant to this Agreement for the relevant Fiscal Year, and (y) the Tax Rate, over (B) the aggregate amount of Tax Distributions (other than Tax Distributions under Section 5.03(e)(iii) with respect to a prior Fiscal Year) with respect to such Units made with respect to such Fiscal Year.

 

For purposes of this Agreement, in determining the Tax Distribution Amount of a Member, the taxable income allocated to such Member’s Units shall be offset by any taxable losses (determined without regard to any adjustments pursuant to Section 704(c) or Section 743(b) of the Code) previously allocated to such Units to the extent such losses were not allocated in the same proportion as the Member’s Percentage Interests and have not previously offset taxable income in the determination of the Tax Distribution Amount.

 

“Tax Rate” means the highest marginal tax rates for an individual or corporation that is resident in New York City applicable to ordinary income, qualified dividend income or capital gains, as appropriate, taking into account the holding period of the assets disposed of and the year in which the taxable net income is recognized by the Company, and taking into account the deductibility of state and local income taxes as applicable at the time for federal income tax purposes and any limitations thereon including pursuant to Section 68 of the Code, which Tax Rate shall be the same for all Members and shall not be less than 45%.

 

“Tax Receivable Agreements” means (i) the Tax Receivable Agreement by and among Pubco, TJMT Holdings, Employee Holdco and the other persons listed on the signature pages thereto, (ii) the Tax Receivable Agreement by and among Pubco and the SL Members and (iii) the Tax Receivable Agreement by and among Pubco, the SL Stockholder and the Temasek Stockholder.

 

“Temasek” means the Temasek Stockholder or any other Temasek Equityholder designated in writing to the Company as such by Temasek.

 

“Temasek Equityholder” means the Temasek Stockholder (so long as it owns Pubco Common Stock) and any Affiliate thereof that owns Pubco Common Stock.

 

“Temasek Holdings” means Temasek Holdings (Private) Limited, a Singapore private limited company.

 

“Temasek Merger Agreement” means the Merger Agreement, dated as of the date hereof, by and among Pubco, Merger Sub II, Intermediate Holdings II, the Pre-IPO Temasek Member and Temasek Stockholder.

 

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“Temasek Stockholder” means Havelock Fund Investments Pte Ltd., a Singapore private limited company.

 

“Termination Date” means, with respect to any Restricted Member, the date such Restricted Member ceases to be employed by Pubco, the Company or any of their respective Controlled Affiliates.

 

“TJMT Holdings” means TJMT Holdings LLC (f/k/a Virtu Holdings LLC), a Delaware limited liability company.

 

“Transfer” means any sale, assignment, transfer, exchange, gift, bequest, pledge, hypothecation or other disposition or encumbrance, direct or indirect, in whole or in part, by operation of law or otherwise, and shall include all matters deemed to constitute a Transfer under Article VIII.  The terms “Transferred”, “Transferring”, “Transferor”, “Transferee” and “Transferable” have meanings correlative to the foregoing.

 

“Treasury Regulations” mean the regulations promulgated under the Code, as amended from time to time.

 

“Units” means Common Units or any other class of limited liability interests in the Company designated by the Company after the date hereof in accordance with this Agreement; provided that any type, class or series of Units shall have the designations, preferences and/or special rights set forth or referenced in this Agreement, and the membership interests of the Company represented by such type, class or series of Units shall be determined in accordance with such designations, preferences and/or special rights.

 

“Unvested Common Unit” means, on any date of determination, any Common Unit held by a Member that is not “vested” in accordance with the MIP and such Member’s (or its direct or indirect Transferor’s) applicable Employee Equity Letter.

 

“Unvested Member” means any Member that is a holder of Unvested Common Units in such Member’s capacity as a holder of such Unvested Common Units.

 

“Vested Common Unit” means, on any date of determination, any Common Unit held by a Member that is “vested” in accordance with the MIP and such Member’s (or its direct or indirect Transferor’s) applicable Employee Equity Letter.

 

“Viola” means Vincent Viola, an individual.

 

“Viola Members” means (i) Viola, (ii) TJMT Holdings and (iii) any Affiliated Transferee of a Viola Member that owns Units from time to time; provided, that under no circumstances shall Employee Holdco be deemed a Viola Member.

 

“West” means Virtu-MTH Holdings LLC, a Delaware limited liability company.

 

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(b)                                 Each of the following terms is defined in the Section set forth opposite such term:

 

	
Term
    	
 
    	
Section
    
	
645 Madison
    	
 
    	
10.03
    
	
A&R LLC Agreement
    	
 
    	
Recitals
    
	
Agreement
    	
 
    	
Preamble
    
	
Call Member
    	
 
    	
9.05(a)
    
	
Call Notice
    	
 
    	
9.05(a)
    
	
Call Paired Interests
    	
 
    	
9.05(a)
    
	
Call Price
    	
 
    	
9.05(b)
    
	
Cifu
    	
 
    	
7.07(a)
    
	
Company
    	
 
    	
Preamble
    
	
Company Parties
    	
 
    	
9.04(b)
    
	
Confidential Information
    	
 
    	
12.11(b)
    
	
Controlled Entities
    	
 
    	
10.02(e)
    
	
Dissolution Event
    	
 
    	
11.01(c)
    
	
Economic Pubco Security
    	
 
    	
4.01(a)
    
	
e-mail
    	
 
    	
12.03
    
	
Employee Holdco Action
    	
 
    	
9.09(a)
    
	
Employee Holdco Interests
    	
 
    	
9.09(a)
    
	
Employee Holdco Members
    	
 
    	
9.09(a)
    
	
Equityholder Parties
    	
 
    	
12.11(a)
    
	
Equityholders
    	
 
    	
12.11(a)
    
	
Expenses
    	
 
    	
10.02(e)
    
	
GAAP
    	
 
    	
3.03(b)
    
	
Hypothetical Liquidation Value
    	
 
    	
3.01(a)
    
	
Indemnification Sources
    	
 
    	
10.02(e)
    
	
Indemnitee-Related Entities
    	
 
    	
10.02(e)(i)
    
	
Initial LLC Agreement
    	
 
    	
Recitals
    
	
Jointly Indemnifiable Claims
    	
 
    	
10.02(e)(ii)
    
	
Lease
    	
 
    	
10.03
    
	
Member Schedule
    	
 
    	
3.01(a)
    
	
Officers
    	
 
    	
7.08(a)
    
	
PROCESS AGENT
    	
 
    	
12.05(b)
    
	
Pubco
    	
 
    	
Preamble
    
	
Regulatory Allocations
    	
 
    	
5.04(c)
    
	
Reorganization
    	
 
    	
Recitals
    
	
Reorganization Agreement
    	
 
    	
Recitals
    
	
Revaluation
    	
 
    	
5.02(c)
    
	
SL Investor
    	
 
    	
Recitals
    
	
Tax Matters Partner
    	
 
    	
6.01
    
	
Transferor Member
    	
 
    	
5.02(b)
    
	
Withholding Advances
    	
 
    	
5.06(b)
    

 

Section 1.02                                Other Definitional and Interpretative Provisions.  The words “hereof”, “herein” and “hereunder” and words of like import used in this

 

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Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.  References to Articles, Sections and Schedules are to Articles, Sections and Schedules of this Agreement unless otherwise specified.  All Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.  Any capitalized terms used in any Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement.  Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.  “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.  References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder.  References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.  References to any Person include the successors and permitted assigns of that Person.  References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.  References to “law”, “laws” or to a particular statute or law shall be deemed also to include any Applicable Law.  As used in this Agreement, all references to “majority in interest” and phrases of similar import shall be deemed to refer to such percentage or fraction of interest based on the Relative Percentage Interests of the Members subject to such determination.  Unless otherwise expressly provided herein, when any approval, consent or other matter requires any action or approval of any group of Members, including any holders of any class of Units, such approval, consent or other matter shall require the approval of a majority in interest of such group of Members.  Except to the extent otherwise expressly provided herein, all references to any Member shall be deemed to refer solely to such Person in its capacity as such Member and not in any other capacity.

 

ARTICLE II

 

THE COMPANY

 

Section 2.01                                Formation.  The Company was formed upon the filing of the certificate of formation of the Company with the Secretary of State of the State of Delaware on April 8, 2011, as amended on July 8, 2011.  The authorized officer or representative, as an “authorized person” within the meaning of the Delaware Act, shall file and record any amendments and/or restatements to the certificate of formation of the Company and such other certificates and documents (and any amendments or restatements thereof) as may be required under the laws of the State of Delaware and of any other jurisdiction in which the Company may conduct business.  The authorized officer or representative shall, on request, provide any Member with copies of each such document as filed and recorded.  The Members hereby agree that the Company and its Subsidiaries shall be governed by the terms and conditions of this Agreement and, except as provided herein, the Delaware Act.

 

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Section 2.02                                Name.  The name of the Company shall be Virtu Financial LLC; provided that the Managing Member may change the name of the Company to such other name as the Managing Member shall determine in its sole discretion, and shall have the authority to execute, acknowledge, deliver, file and record such further certificates, amendments, instruments and documents, and to do all such other acts and things, as may be required by Applicable Law or as, in the reasonable judgment of the Managing Member, may be necessary or advisable to effect such change.

 

Section 2.03                                Term.  The Company shall have perpetual existence unless sooner dissolved and its affairs wound up as provided in Article XI.

 

Section 2.04                                Registered Agent and Registered Office.  The name of the registered agent of the Company for service of process on the Company in the State of Delaware shall be The Corporation Trust Company, and the address of such registered agent and the address of the registered office of the Company in the State of Delaware shall be Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.  Such office and such agent may be changed to such place within the State of Delaware and any successor registered agent, respectively, as may be determined from time to time by the Managing Member in accordance with the Delaware Act.

 

Section 2.05                                Purposes.  The Company has been formed for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is to engage in the Business and to carry on any other lawful act or activities for which limited liability companies may be organized under the Delaware Act.

 

Section 2.06                                Powers of the Company.  The Company shall have the power and authority to take any and all actions necessary, appropriate or advisable to or for the furtherance of the purposes set forth in Section 2.05.

 

Section 2.07                                Partnership Tax Status.  The Members intend that the Company shall be treated as a partnership for federal, state and local income tax purposes to the extent such treatment is available, and agree to take (or refrain from taking) such actions as may be necessary to receive and maintain such treatment and refrain from taking any actions inconsistent thereof.

 

Section 2.08                                Regulation of Internal Affairs.  The internal affairs of the Company and the conduct of its business shall be regulated by this Agreement, and to the extent not provided for herein, shall be determined by the Managing Member.

 

Section 2.09                                Ownership of Property.  Legal title to all Property, conveyed to, or held by the Company or its Subsidiaries shall reside in the Company or its Subsidiaries and shall be conveyed only in the name of the Company or its Subsidiaries and no Member or any other Person, individually, shall have any ownership of such Property.

 

Section 2.10                                Subsidiaries.  The Company shall cause the business and affairs of each of the Subsidiaries to be managed by the Managing Member in accordance with and in a manner consistent with this Agreement.

 

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ARTICLE III

 

UNITS; MEMBERS; BOOKS AND RECORDS; REPORTS

 

Section 3.01                                Units; Admission of Members.

 

(a)                                  Effective upon the Reorganization, pursuant to Section 2.1(b)(vi) of the Reorganization Agreement, (i) Pubco has been admitted to the Company as the Managing Member and (ii) the Company has hereby reclassified all Class A-1 Interests, Class A-2 Capital Interests, Class A-2 Profits Interests and Class B Interests outstanding as of immediately prior to the Form 8-A Effective Time into the number of Common Units, in the aggregate, set forth on Schedule C and each such Class A-1 Interest, Class A-2 Capital Interest, Class A-2 Profits Interest and Class B Interest has been hereby reclassified into a number of Common Units (rounded up or down to the nearest whole number) having a value equal to the amount that would have been distributed in respect thereof pursuant to Article XI of the Second A&R LLC Agreement had the Company been liquidated on the date of the Form 8-A Effective Time and gross proceeds from such liquidation been distributed to the Members as of immediately prior to the Form 8-A Effective Time pursuant to Article XI of the Second A&R LLC Agreement in an aggregate amount equal to the total equity value of all Class A-1 Interests, Class A-2 Capital Interests, Class A-2 Profits Interests and Class B Interests immediately prior to the Reorganization that is implied by the public offering price per share of Class A Common Stock in the IPO (with respect to each Class A-1 Interest, Class A-2 Capital Interest, Class A-2 Profits Interest or Class B Interest, its “Hypothetical Liquidation Value”).  In connection with such reclassification, Common Units reclassified from Class A-2 Profits Interests or Class B Interests that were subject to time-based vesting restrictions immediately prior to the Reorganization have been hereby reclassified as Unvested Common Units on terms set forth in the Employee Equity Letters and the MIP.  After giving effect to the reclassification described in clause (ii) above, each of the Persons listed on the Member Schedule delivered to the SL Equityholders, the Temasek Equityholders and TJMT Holdings concurrently with the execution of this Agreement (the “Member Schedule”) owns the number of Common Units set forth opposite such Member’s name on the Member Schedule.  As soon as reasonably practicable following the execution of this Agreement, the Company shall provide written notice to each Member setting forth the Hypothetical Liquidation Value attributable to the Class A-1 Interests, Class A-2 Capital Interests, Class A-2 Profits Interests and/or Class B Interests previously held thereby and the resulting number of Common Units then owned thereby.  The Member Schedule shall be maintained by the Managing Member on behalf of the Company in accordance with this Agreement and, upon any subsequent update to the Member Schedule, the Managing Member shall promptly deliver a copy of such updated Member Schedule to the SL Equityholders, the Temasek Equityholders and the Viola Members.  When any Units or other Equity Securities of the Company are issued, repurchased, redeemed, converted or Transferred in accordance with this Agreement, the Member Schedule shall be amended by the Managing Member to reflect such issuance, repurchase, redemption or Transfer, the admission of additional or substitute Members and the resulting Percentage Interest of

 

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each Member.  Following the date hereof, no Person shall be admitted as a Member and no additional Units shall be issued except as expressly provided herein.

 

(b)                                 The Managing Member may cause the Company to authorize and issue from time to time such other Units or other Equity Securities of any type, class or series and having the designations, preferences and/or special rights as may be determined the Managing Member.  Such Units or other Equity Securities may be issued pursuant to such agreements as the Managing Member shall approve, including pursuant to the MIP, with respect to Persons employed by or otherwise performing services for the Company or any of its Subsidiaries, other equity compensation agreements, options or warrants.  When any such other Units or other Equity Securities are authorized and issued, the Member Schedule and this Agreement shall be amended by the Managing Member to reflect such additional issuances and resulting dilution, which shall be borne pro rata by all Members based on their Common Units.

 

(c)                                  Unvested Common Units shall be subject to the terms of the MIP and any applicable Employee Equity Letters, and the Managing Member shall have sole and absolute discretion to interpret and administer the MIP and Employee Equity Letters and to adopt such amendments thereto or otherwise determine the terms and conditions of such Unvested Common Units in accordance with this Agreement and the applicable Employee Equity Letters.  Distributions shall not be made in respect of Unvested Common Units (other than Participating Unvested Common Units).  Unvested Common Units that fail to vest and are forfeited by the applicable Unvested Member shall be cancelled by the Company (and the corresponding shares of Class C Common Stock constituting the remainder of any Paired Interests in which such Unvested Common Units were included shall be cancelled by Pubco, in each case for no consideration) and shall not be entitled to any distributions pursuant to Section 5.03.

 

Section 3.02                                Substitute Members and Additional Members.

 

(a)                                  No Transferee of any Units or Person to whom any Units are issued pursuant to this Agreement shall be admitted as a Member hereunder or acquire any rights hereunder, including any class voting rights or the right to receive distributions and allocations in respect of the Transferred or issued Units, as applicable, unless (i) such Units are Transferred or issued in compliance with the provisions of this Agreement (including Article VIII) and (ii) such Transferee or recipient shall have executed and delivered to the Company such instruments as the Managing Member deems necessary or desirable, in its reasonable discretion, to effectuate the admission of such Transferee or recipient as a Member and to confirm the agreement of such Transferee or recipient to be bound by all the terms and provisions of this Agreement.  Upon complying with the immediately preceding sentence, without the need for any further action of any Person, a Transferee or recipient shall be deemed admitted to the Company as a Member.  A Substitute Member shall enjoy the same rights, and be subject to the same obligations, as the Transferor; provided that such Transferor shall not be relieved of any obligation or liability hereunder arising prior to the consummation of such Transfer but shall be relieved of all future obligations with respect to the Units so Transferred.  As promptly as practicable after the admission of any Person as a Member,

 

23

 

the books and records of the Company shall be changed to reflect such admission of a Substitute Member or Additional Member.  In the event of any admission of a Substitute Member or Additional Member pursuant to this Section 3.02(a), this Agreement shall be deemed amended to reflect such admission, and any formal amendment of this Agreement (including the Member Schedule) in connection therewith shall only require execution by the Company and such Substitute Member or Additional Member, as applicable, to be effective.

 

(b)                                 If a Member shall Transfer all (but not less than all) its Units, the Member shall thereupon cease to be a Member of the Company.

 

Section 3.03                                Tax and Accounting Information.

 

(a)                                  Accounting Decisions and Reliance on Others.  All decisions as to accounting matters, except as otherwise specifically set forth herein, shall be made by the Managing Member in accordance with Applicable Law and with accounting methods followed for federal income tax purposes.  In making such decisions, the Managing Member may rely upon the advice of the independent accountants of the Company.

 

(b)                                 Records and Accounting Maintained.  The books and records of the Company shall be kept, and the financial position and the results of its operations recorded, in all material respects in accordance with United States generally accepted accounting principles as in effect from time to time (“GAAP”).  The Fiscal Year of the Company shall be used for financial reporting and for federal income tax purposes.

 

(c)                                  Financial Reports.

 

(i)                                     The books and records of the Company shall be audited as of the end of each Fiscal Year by the same accounting firm that audits the books and records of Pubco (or, if such firm declines to perform such audit, by an accounting firm selected by the Managing Member).

 

(ii)                                  In the event neither Pubco nor the Company is required to file an annual report on Form 10-K or quarterly report on Form 10-Q, the Company shall deliver, or cause to be delivered, the following to the SL Equityholders, the Temasek Equityholders and to the Viola Members, in each case so long as it meets the Ownership Minimum:

 

(A)                              not later than ninety (90) days after the end of each fiscal year of the Company, a copy of the audited consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year and the related statements of operations and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous year, all in reasonable detail; and

 

(B)                                not later than forty five (45) days or such later time as permitted under applicable securities law after the end of each of the

 

24

 

first three fiscal quarters of each fiscal year, the unaudited consolidated balance sheet of the Company and its Subsidiaries, and the related statements of operations and cash flows for such quarter and for the period commencing on the first day of the fiscal year and ending on the last day of such quarter.

 

(d)                                 Tax Returns.

 

(i)                                     The Company shall timely cause to be prepared by an accounting firm selected by the Managing Member all federal, state, local and foreign tax returns (including information returns) of the Company and its Subsidiaries, which may be required by a jurisdiction in which the Company and its Subsidiaries operate or conduct business for each year or period for which such returns are required to be filed and shall cause such returns to be timely filed.  Upon request of any SL Equityholder, Temasek Equityholder or any other Member, the Company shall furnish to such Member or Equityholder a copy of each such tax return;

 

(ii)                                  The Company shall furnish to each Member (a) as soon as reasonably practical after the end of each Fiscal Year and in any event by April 30, all information concerning the Company and its Subsidiaries required for the preparation of tax returns of such Members (or any beneficial owner(s) of such Member), including a report (including Schedule K-1), indicating each Member’s share of the Company’s taxable income, gain, credits, losses and deductions for such year, in sufficient detail to enable such Member to prepare its federal, state and other tax returns; provided that estimates of such information believed by the Managing Member in good faith to be reasonable shall be provided by March 10, (b) as soon as reasonably possible after the close of the relevant fiscal period, but in no event later than ten days prior to the date an estimated tax payment is due, such information concerning the Company as is required to enable such Member (or any beneficial owner of such Member) to pay estimated taxes and (c) as soon as reasonably possible after a request by such Member, such other information concerning the Company and its Subsidiaries that is reasonably requested by such Member for compliance with its tax obligations (or the tax obligations of any beneficial owner(s) of such Member) or for tax planning purposes; and

 

(iii)                               So long as it meets the Ownership Minimum, the SL Equityholders, the Temasek Equityholders and the Viola Members shall be entitled to review and comment on any tax returns or reports to be prepared pursuant to this Section 3.03(d) at least 60 days prior to the due date for the applicable tax return or report (including extensions).  The SL Equityholders, the Temasek Equityholders and the Viola Members shall notify the Company no later than 30 days after receipt of a tax return or report of any changes recommended thereby to such return or report.  The Company shall consider in good faith all reasonable comments of the SL Equityholders, the Temasek Equityholders and the Viola Members to such tax returns or reports.  If the Company does not accept any such comment, the Company shall notify the SL Equityholders, the Temasek Equityholders or the Viola Members, as applicable, of that fact.  If within five (5) days of such notification, the SL Equityholders, the Temasek Equityholders or the Viola Members, as the case may be, request in writing a review of a rejected comment, the Company shall cause its regular tax advisors to review the comment and consult with

 

25

 

the SL Equityholders, the Temasek Equityholders or the Viola Members, as the case may be.  The determination of the tax advisors following such review and consultation shall definitively determine the position taken on the Company’s tax return or report.  For the avoidance of doubt, each of SL and Temasek shall have the same rights with respect to reviewing and commenting on any tax returns or reports prepared pursuant to Section 3.03(d) of the Second A&R LLC Agreement for taxable periods prior to the date hereof, notwithstanding whether SL or Temasek, as applicable, is a then-current Member.

 

(e)                                  Inconsistent Positions.  No Member shall take a position on its income tax return with respect to any item of Company income, gain, deduction, loss or credit that is different from the position taken on the Company’s income tax return with respect to such item unless such Member notifies the Company of the different position the Member desires to take and the Company’s regular tax advisors, after consulting with the Member, are unable to provide an opinion that (after taking into account all of the relevant facts and circumstances) the arguments in favor of the Company’s position outweigh the arguments in favor of the Member’s position.

 

Section 3.04                                Books and Records.  The Company shall keep full and accurate books of account and other records of the Company at its principal place of business.  No Equityholder (other than the Managing Member and, in each case so long as it meets the Ownership Minimum, the SL Equityholders, the Temasek Equityholders and the Viola Members) shall have any right to inspect the books and records of Pubco, the Company or any of its Subsidiaries; provided that, in the case of the SL Equityholders, the Temasek Equityholders and the Viola Members, (i) such inspection shall be at reasonable times and upon reasonable prior notice to the Company, but not more frequently than once per calendar quarter and (ii) neither Pubco, the Company nor any of its Subsidiaries shall be required to disclose (x) any source code or detailed trading algorithms or any similar information the Managing Member determines to be competitively sensitive or (y) any privileged information of Pubco, the Company or any of its Subsidiaries so long as the Company has used commercially reasonable efforts to enter into an arrangement pursuant to which it may provide such information to the SL Equityholders, the Temasek Equityholders or the Viola Members, as the case may be, without the loss of any such privilege.

 

ARTICLE IV

 

PUBCO OWNERSHIP; RESTRICTIONS ON PUBCO STOCK

 

Section 4.01                                Pubco Ownership.

 

(a)                                  If at any time Pubco issues a share of Class A Common Stock or Class B Common Stock or any other Equity Security of Pubco entitled to any economic rights (including in the IPO) (an “Economic Pubco Security”) with regard thereto (other than Class C Common Stock, Class D Common Stock or other Equity Security of Pubco not entitled to any economic rights with respect thereto), (i) the Company shall issue to Pubco one Common Unit (if Pubco issues a share of Class A Common Stock or Class B Common Stock) or such other Equity Security of the

 

26

 

Company (if Pubco issues an Economic Pubco Security other than Class A Common Stock or Class B Common Stock) corresponding to the Economic Pubco Security, and with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Economic Pubco Security and (ii) the net proceeds received by Pubco with respect to the corresponding Economic Pubco Security, if any, shall be concurrently contributed to the Company; provided, however, that if Pubco issues any Economic Pubco Securities, some or all of the net proceeds of which are to be used to fund expenses or other obligations of Pubco for which Pubco would be permitted a distribution pursuant to Section 5.03(c), then Pubco shall not be required to transfer such net proceeds to the Company which are used or will be used to fund such expenses or obligations, and provided, further, that if Pubco issues any shares of Class A Common Stock or Class B Common Stock in order to purchase or fund the purchase from a Non-Pubco Member of a number of Common Units (and shares of Class C Common Stock and/or Class D Common Stock, as applicable) or to purchase or fund the purchase of shares of Class A Common Stock or Class B Common Stock, in each case equal to the number of shares of Class A Common Stock or Class B Common Stock issued, then the Company shall not issue any new Common Units in connection therewith and Pubco shall not be required to transfer such net proceeds to the Company (it being understood that such net proceeds shall instead be transferred to such Non-Pubco Member as consideration for such purchase).

 

(b)                                 Notwithstanding Section 4.01(a), this Article IV shall not apply (i) to the issuance and distribution to holders of shares of Pubco Common Stock of rights to purchase Equity Securities of Pubco under a “poison pill” or similar shareholders rights plan (it being understood that upon exchange of Paired Interests for Class A Common Stock or Class B Common Stock, as the case may be, pursuant to the Exchange Agreement, such Class A Common Stock or Class B Common Stock, as the case may be, will be issued together with a corresponding right) or (ii) to the issuance under the Pubco Equity Plan or Pubco’s other employee benefit plans of any warrants, options or other rights to acquire Equity Securities of Pubco or rights or property that may be converted into or settled in Equity Securities of Pubco, but shall in each of the foregoing cases apply to the issuance of Equity Securities of Pubco in connection with the exercise or settlement of such rights, warrants, options or other rights or property.

 

Section 4.02                             Restrictions on Pubco Common Stock.

 

(a)                                 Except as otherwise determined by the Managing Member in accordance with Section 4.02(d), (i) the Company may not issue any additional Common Units to Pubco or any of its Subsidiaries unless substantially simultaneously therewith Pubco or such Subsidiary issues or sells an equal number of shares of Class A Common Stock or Class B Common Stock to another Person and (ii) the Company may not issue any other Equity Securities of the Company to Pubco or any of its Subsidiaries unless substantially simultaneously, Pubco or such Subsidiary issues or sells, to another Person, an equal number of shares of a new class or series of Equity Securities of Pubco or such Subsidiary with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Company.

 

27

 

(b)                                 Except as otherwise determined by the Managing Member in accordance with Section 4.02(d), (i) Pubco or any of its Subsidiaries may not redeem, repurchase or otherwise acquire any shares of Class A Common Stock or Class B Common Stock (including upon forfeiture of any Unvested Common Units or the acquisition of any such shares deposited in escrow) unless substantially simultaneously the Company redeems, repurchases or otherwise acquires from Pubco an equal number of Units for the same price per security (or, if Pubco uses funds received from distributions from the Company or the net proceeds from an issuance of Class A Common Stock or Class B Common Stock to fund such redemption, repurchase or acquisition, then the Company shall cancel an equal number of Units for no consideration) and (ii) Pubco or any of its Subsidiaries may not redeem or repurchase any other Equity Securities of Pubco unless substantially simultaneously, the Company redeems or repurchases from Pubco an equal number of Equity Securities of the Company of a corresponding class or series with substantially the same rights to dividends and distributions (including distributions upon liquidation) or other economic rights as those of such Equity Securities of Pubco for the same price per security (or, if Pubco uses funds received from distributions from the Company or the net proceeds from an issuance of Equity Securities other than Class A Common Stock or Class B Common Stock to fund such redemption, repurchase or acquisition, then the Company shall cancel an equal number of its corresponding Equity Securities for no consideration).  Except as otherwise determined by the Managing Member in accordance with Section 4.02(d): (x) the Company may not redeem, repurchase or otherwise acquire Common Units from Pubco or any of its Subsidiaries unless substantially simultaneously Pubco or such Subsidiary redeems, repurchases or otherwise acquires an equal number of Class A Common Stock or Class B Common Stock for the same price per security from holders thereof (except that if the Company cancels Common Units for no consideration as described in Section 4.02(b)(i), then the price per security need not be the same) and (y) the Company may not redeem, repurchase or otherwise acquire any other Equity Securities of the Company from Pubco or any of its Subsidiaries unless substantially simultaneously Pubco or such Subsidiary redeems, repurchases or otherwise acquires for the same price per security an equal number of Equity Securities of Pubco of a corresponding class or series with substantially the same rights to dividends and distributions (including dividends and distributions upon liquidation) and other economic rights as those of such Equity Securities of Pubco (except that if the Company cancels Equity Securities for no consideration as described in Section 4.02(b)(ii), then the price per security need not be the same).  Notwithstanding the immediately preceding sentence, to the extent that any consideration payable to Pubco in connection with the redemption or repurchase of any shares or other Equity Securities of Pubco or any of its Subsidiaries consists (in whole or in part) of shares or such other Equity Securities (including, for the avoidance of doubt, in connection with the cashless exercise of an option or warrant), then redemption or repurchase of the corresponding Common Units or other Equity Securities of the Company shall be effectuated in an equivalent manner (except if the Company cancels Common Units or other Equity Securities for no consideration as described in this Section 4.02(b)).

 

(c)                                  The Company shall not in any manner effect any subdivision (by any stock or unit split, stock or unit dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse

 

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stock or unit split, reclassification, reorganization, recapitalization or otherwise) of the outstanding Common Units unless accompanied by a substantively identical subdivision or combination, as applicable, of the outstanding Pubco Common Stock, with corresponding changes made with respect to any other exchangeable or convertible securities.  Pubco shall not in any manner effect any subdivision (by any stock or unit split, stock or unit dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock or unit split, reclassification, reorganization, recapitalization or otherwise) of the outstanding Pubco Common Stock unless accompanied by a substantively identical subdivision or combination, as applicable, of the outstanding Common Units, with corresponding changes made with respect to any other exchangeable or convertible securities.

 

(d)                                 Notwithstanding anything to the contrary in this Article IV:

 

(i)                                     if at any time the Managing Member shall determine that the Credit Agreement or any other debt instrument of Pubco, the Company or its Subsidiaries shall not permit Pubco or the Company to comply with the provisions of Section 4.02(a) or Section 4.02(b) in connection with the issuance, redemption or repurchase of any shares of Class A Common Stock or Class B Common Stock or other Equity Securities of Pubco or any of its Subsidiaries or any Units or other Equity Securities of the Company, then the Managing Member may in good faith implement an economically equivalent alternative arrangement without complying with such provisions; provided that, in the case that any such alternative arrangement is implemented because of restrictions in any debt instrument other than the Credit Agreement, such arrangement shall also be subject to the prior written consent (not to be unreasonably withheld) of the Viola Members and the SL Equityholders, in each case so long as it meets the Limited Ownership Minimum; and

 

(ii)                                  if (x) Pubco incurs any indebtedness and desires to transfer the proceeds of such indebtedness to the Company and (y) Pubco is unable to lend the proceeds of such indebtedness to the Company on an equivalent basis because of restrictions in the Credit Agreement or any other debt instrument of Pubco, the Company or its Subsidiaries, then notwithstanding Section 4.02(a) or Section 4.02(b), the Managing Member may in good faith implement an economically equivalent alternative arrangement in connection with the transfer of proceeds to the Company using non-participating preferred Equity Securities of the Company without complying with such provisions; provided that, in the case that any such alternative arrangement is implemented because of restrictions in any debt instrument other than the Credit Agreement, such arrangement shall also be subject to the prior written consent (not to be unreasonably withheld) of the Viola Members and the SL Equityholders, in each case so long as it meets the Limited Ownership Minimum.

 

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ARTICLE V

 

CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;
 DISTRIBUTIONS; ALLOCATIONS

 

Section 5.01                             Capital Contributions.

 

(a)                                 From and after the date hereof, no Member shall have any obligation to the Company, to any other Member or to any creditor of the Company to make any further Capital Contribution, except as expressly provided in Section 18.02(c)(iii) of the MTH Transaction Agreement or Section 4.01(a).

 

(b)                                 RESERVED.

 

(c)                                  Except as expressly provided herein, no Member, in its capacity as a Member, shall have the right to receive any cash or any other property of the Company.

 

Section 5.02                             Capital Accounts.

 

(a)                                 Maintenance of Capital Accounts.  The Company shall maintain a Capital Account for each Member on the books of the Company in accordance with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv) and, to the extent consistent with such provisions, the following provisions:

 

(i)                                     Each Member listed on the Member Schedule shall be credited with the Reorganization Date Capital Account Balance set forth on the Member Schedule.  The Member Schedule shall be amended by the Managing Member after the closing of the IPO and from time to time to reflect adjustments to the Members’ Capital Accounts made in accordance with Sections 5.02(a)(ii), 5.02(a)(iii), 5.02(a)(iv), 5.02(c) or otherwise.

 

(ii)                                  To each Member’s Capital Account there shall be credited:  (A) such Member’s Capital Contributions, (B) such Member’s distributive share of Net Income and any item in the nature of income or gain that is allocated pursuant to Section 5.04 and (C) the amount of any Company liabilities assumed by such Member or that are secured by any Property distributed to such Member.

 

(iii)                               To each Member’s Capital Account there shall be debited: (A) the amount of money and the Carrying Value of any Property distributed to such Member pursuant to any provision of this Agreement, (B) such Member’s distributive share of Net Loss and any items in the nature of expenses or losses that are allocated to such Member pursuant to Section 5.04 and (C) the amount of any liabilities of such Member assumed by the Company or that are secured by any Property contributed by such Member to the Company.

 

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(iv)                              In determining the amount of any liability for purposes of subparagraphs (ii) and (iii) above there shall be taken into account Section 752(c) of the Code and any other applicable provisions of the Code and the Treasury Regulations.

 

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations.  In the event that the Managing Member shall reasonably determine that it is prudent to modify the manner in which the Capital Accounts or any debits or credits thereto are maintained (including debits or credits relating to liabilities that are secured by contributed or distributed Property or that are assumed by the Company or the Members), the Managing Member may make such modification so long as such modification will not have any effect on the amounts distributed to any Person pursuant to Article XI upon the dissolution of the Company.  The Managing Member also shall (i) make any adjustments that are necessary or appropriate to maintain equality between Capital Accounts of the Members and the amount of capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Treasury Regulations Section 1.704-1(b).

 

(b)                                 Succession to Capital Accounts.  In the event any Person becomes a Substitute Member in accordance with the provisions of this Agreement, such Substitute Member shall succeed to the Capital Account of the former Member (the “Transferor Member”) to the extent such Capital Account relates to the Transferred Units.

 

(c)                                  Adjustments of Capital Accounts.  The Company shall revalue the Capital Accounts of the Members in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f) (a “Revaluation”) at the following times:  (i) immediately prior to the contribution of more than a de minimis amount of money or other property to the Company by a new or existing Member as consideration for one or more Units; (ii) the distribution by the Company to a Member of more than a de minimis amount of property in respect of one or more Units; (iii) the issuance by the Company of more than a de minimis amount of Units as consideration for the provision of services to or for the benefit of the Company (as described in Treasury Regulations Section 1.704-1(b)(2)(iv)(f)(5)(iii)); and (iv) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g) (other than a liquidation pursuant to Section 708(b)(1)(B) of the Code); provided, however, that adjustments pursuant to clauses (i), (ii) and (iii) above shall be made only if the Managing Member reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interest of the Members.

 

(d)                                 No Member shall be entitled to withdraw capital or receive distributions except as specifically provided herein.  A Member shall have no obligation to the Company, to any other Member or to any creditor of the Company to restore any

 

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negative balance in the Capital Account of such Member.  Except as expressly provided elsewhere herein, no interest shall be paid on the balance in any Member’s Capital Account.

 

(e)                                  Whenever it is necessary for purposes of this Agreement to determine a Member’s Capital Account on a per Unit basis, such amount shall be determined by dividing the Capital Account of such Member attributable to the applicable class of Units held of record by such Member by the number of Units of such class held of record by such Member.

 

Section 5.03                             Amounts and Priority of Distributions.

 

(a)                                 Distributions Generally.  Except as otherwise provided in Section 11.02, distributions shall be made to the Members as set forth in this Section 5.03, at such times and in such amounts as the Managing Member, in its sole discretion, shall determine.

 

(b)                                 Distributions to the Members.  Subject to Sections 5.03(e), and 5.03(f), at such times and in such amounts as the Managing Member, in its sole discretion, shall determine, distributions shall be made to the Members to the Members in proportion to their respective Percentage Interests.

 

(c)                                  Pubco Distributions.  Notwithstanding the provisions of Section 5.03(b), the Managing Member, in its sole discretion, may authorize that (i) cash be paid to Pubco (which payment shall be made without pro rata distributions to the other Members) in exchange for the redemption, repurchase or other acquisition of Units held by Pubco to the extent that such cash payment is used to redeem, repurchase or otherwise acquire an equal number of shares of Class A Common Stock or Class B Common Stock in accordance with Section 4.02(b), and (ii) to the extent that the Managing Member determines that expenses or other obligations of Pubco are related to its role as the Managing Member or the business and affairs of Pubco that are conducted through the Company or any of the Company’s direct or indirect Subsidiaries, cash (and, for the avoidance of doubt, only cash) distributions may be made to Pubco (which distributions shall be made without pro rata distributions to the other Members) in amounts required for Pubco to pay (w) operating, administrative and other similar costs incurred by Pubco, including payments in respect of Indebtedness and preferred stock, to the extent the proceeds are used or will be used by Pubco to pay expenses or other obligations described in this clause (ii) (in either case only to the extent economically equivalent Indebtedness or Equity Securities of the Company were not issued to Pubco), payments representing interest with respect to payments not made when due under the terms of the Tax Receivable Agreements and payments pursuant to any legal, tax, accounting and other professional fees and expenses (but, for the avoidance of doubt, excluding any tax liabilities of Pubco), (x) any judgments, settlements, penalties, fines or other costs and expenses in respect of any claims against, or any litigation or proceedings involving, Pubco, (y) fees and expenses (including any underwriters discounts and commissions) related to any securities offering, investment or acquisition transaction (whether or not successful) authorized by the board of directors of Pubco and (z) other fees and expenses

 

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in connection with the maintenance of the existence of Pubco (including any costs or expenses associated with being a public company listed on a national securities exchange).  For the avoidance of doubt, distributions made under this Section 5.03(c) may not be used to pay or facilitate dividends or distributions on the Pubco Common Stock and must be used solely for one of the express purposes set forth under clause (i) or (ii) of the immediately preceding sentence.

 

(d)                                 Distributions in Kind.  Any distributions in kind shall be made at such times and in such amounts as the Managing Member, in its sole discretion, shall determine based on their fair market value as determined by the Managing Member in the same proportions as if distributed in accordance with Section 5.03(b), with all Members participating in proportion to their respective Percentage Interests.  If cash and property are to be distributed in kind simultaneously, the Company shall distribute such cash and property in kind in the same proportion to each Member.  For the purposes of this Section 5.03(d), if any such distribution in kind includes securities, distributions to the Members shall be deemed proportionate notwithstanding that the holders of Common Units that are included in Paired Interests with shares of Class D Common Stock receive securities that have no more than ten times the voting power of securities distributed to the holder of Common Units that are included in Paired Interests with shares of Class C Common Stock, so long as such securities issued to the holders of Common Units that are included in Paired Interests with shares of Class D Common stock remain subject to automatic conversion on terms no more favorable to such holders than those set forth in Section 6.2 of the certificate of incorporation of Pubco.

 

(e)                                  Tax Distributions.

 

(i)                                     Notwithstanding any other provision of this Section 5.03 to the contrary, to the extent permitted by Applicable Law and consistent with the Company’s obligations to its creditors as reasonably determined by the Managing Member, the Company shall make cash distributions by wire transfer of immediately available funds pursuant to this Section 5.03(e)(i) to each Member with respect to its Units at least two (2) Business Days prior to the date on which any U.S. federal corporate estimated tax payments are due, in an amount equal to such Member’s Tax Distribution Amount, if any; provided that the Managing Member shall have no liability to any Member in connection with any underpayment of estimated taxes, so long as cash distributions are made in accordance with this Section 5.03(e)(i) and the Tax Distribution Amounts are determined as provided in paragraph (i) of the definition of Tax Distribution Amount.

 

(ii)                                  On any date that the Company makes a distribution to the Members with respect to their Units under a provision of Section 5.03 other than this Section 5.03(e), if the Tax Distribution Amount is greater than zero, the Company shall designate all or a portion of such distribution as a Tax Distribution with respect to a Member’s Units to the extent of the Tax Distribution Amount with respect to such Member’s Units as of such date (but not to exceed the amount of such distribution).  For the avoidance of doubt, such designation shall be performed with respect to all Members with respect to which there is a Tax Distribution Amount as of such date.

 

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(iii)                               Notwithstanding any other provision of this Section 5.03 to the contrary, if the Tax Distribution Amount for such Fiscal Year is greater than zero, to the extent permitted by Applicable Law and consistent with the Company’s obligations to its creditors as reasonably determined by the Managing Member, the Company shall make additional distributions under this Section 5.03(e)(iii) to the extent of such Tax Distribution Amount for such Fiscal Year as soon as reasonably practicable after the end of such Fiscal Year (or as soon as reasonably practicable after any event that subsequently adjusts the taxable income of such Fiscal Year).

 

(iv)                              Under no circumstances shall Tax Distributions reduce the amount otherwise distributable to any Member pursuant to this Section 5.03 (other than this Section 5.03(e)) after taking into account the effect of Tax Distributions on the amount of cash or other assets available for distribution by the Company.

 

(f)                                   Pre-IPO Profits Distribution.  Notwithstanding Section 5.03(b), after the Reorganization, before any other distributions are distributed to the Members by the Company or any of its Subsidiaries, the Company shall, or shall cause its Subsidiaries to, distribute to the Class A Members (as such term was defined in the Second A&R LLC Agreement) as of the record date prior to the date hereof previously established by the Company, in proportion to their respective Available Cash Flow Percentages (as such term was defined in the Second A&R LLC Agreement) as of such record date, an aggregate amount of cash determined by the Managing Member up to an amount equal to (i) the Available Cash Flow attributable to the portion of the fiscal period beginning on January 1, 2015 and ended on the date hereof minus (ii) the amount of Available Cash Flow, if any, attributable to such period and distributed to such Class A Members prior to the date hereof.

 

(g)                                  Reserved.

 

(h)                                 Reserved.

 

(i)                                     Assignment.  SL and its Affiliated Transferees shall have the right to assign to any Transferee of Common Units, pursuant to a Transfer made in compliance with this Agreement, the right to receive any portion of the amounts distributable or otherwise payable to SL pursuant to Section 5.03(b).

 

Section 5.04                             Allocations.

 

(a)                                 Net Income and Net Loss.  Except as otherwise provided in this Agreement, and after giving effect to the special allocations set forth in Section 5.04(b), Section 5.04(c) and Section 5.04(d), Net Income and Net Loss (and, to the extent necessary, individual items of income, gain, loss, deduction or credit) of the Company shall be allocated among the Members in a manner such that the Capital Account of each Member, immediately after making such allocation, is, as nearly as possible, equal to (i) the distributions that would be made to such Member pursuant to Section 5.03(b) if the Company were dissolved, its affairs wound up and its assets sold for cash equal to their Carrying Value, all Company liabilities were satisfied (limited with

 

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respect to each nonrecourse liability to the Carrying Value of the assets securing such liability), and the net assets of the Company were distributed, in accordance with Section 5.03(b), to the Members immediately after making such allocation, minus (ii) such Member’s share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets.

 

(b)                                 Special Allocations.  The following special allocations shall be made in the following order:

 

(i)                                     Minimum Gain Chargeback.  Except as otherwise provided in Treasury Regulations Section 1.704-2(f), notwithstanding any other provision of this Article V, if there is a net decrease in Company Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g).  Allocations pursuant to the immediately preceding sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto.  The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(f)(6) and 1.704-2(j)(2).  This Section 5.04(b)(i) is intended to comply with the minimum gain chargeback requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

 

(ii)                                  Member Minimum Gain Chargeback.  Except as otherwise provided in Treasury Regulations Section 1.704-2(i)(4), notwithstanding any other provision of this Article V, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(4).  Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto.  The items to be so allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2).  This Section 5.04(b)(ii) is intended to comply with the minimum gain chargeback requirement in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

 

(iii)                               Qualified Income Offset.  In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or Section 1.704-1(b)(2)(ii)(d)(6), 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

 

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Member as promptly as possible; provided that an allocation pursuant to this Section 5.04(b)(iii) shall be made only if and to the extent that the Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article V have been tentatively made as if this Section 5.04(b)(iii) were not in the Agreement.

 

(iv)                              Nonrecourse Deductions.  Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Members in a manner determined by the Managing Member consistent with Treasury Regulations Sections 1.704-2(b) and 1.704-2(c).

 

(v)                                 Member Nonrecourse Deductions.  Any Member Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulations Sections 1.704-2(i)(1) and 1.704-2(j)(1).

 

(vi)                              Section 754 Adjustments.  (A) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Sections 734(b) or 743(b) of the Code is required pursuant to Treasury 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 liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of such asset) or loss (if the adjustment decreases the basis of such asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Income and Net Loss.  (B) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Sections 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of such 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 to such Members in accordance with their interests in the Company in the event Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

 

(c)                                  Curative Allocations.  The allocations set forth in Section 5.04(b)(i) through Section 5.04(b)(vi) and Section 5.04(d) (the “Regulatory Allocations”) are intended to comply with certain requirements of the Treasury Regulations.  It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss, or deduction pursuant to this Section 5.04(c).  Therefore, notwithstanding any other provision of this Article V (other than the Regulatory Allocations), the Managing Member shall make such offsetting special allocations of Company income, gain, loss, or deduction in whatever manner it

 

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determines appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Section 5.04.

 

(d)                                 Loss Limitation.  Net Loss (or individual items of loss or deduction) allocated pursuant to Section 5.04 hereof shall not exceed the maximum amount of Net Loss (or individual items of loss or deduction) that can be allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Fiscal Year.  In the event some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Net Loss (or individual items of loss or deduction) pursuant to Section 5.04 hereof, the limitation set forth in this Section 5.04(d) shall be applied on a Member by Member basis and Net Loss (or individual items of loss or deduction) not allocable to any Member as a result of such limitation shall be allocated to the other Members in accordance with the positive balances in such Member’s Capital Accounts so as to allocate the maximum permissible Net Loss to each Member under Treasury Regulations Section 1.704-1(b)(2)(ii)(d).  Any reallocation of Net Loss pursuant to this Section 5.04(d) shall be subject to chargeback pursuant to the curative allocation provision of Section 5.04(c).

 

Section 5.05                             Other Allocation Rules.

 

(a)                                 Interim Allocations Due to Percentage Adjustment.  If a Percentage Interest is the subject of a Transfer or the Members’ interests in the Company change pursuant to the terms of the Agreement during any Fiscal Year, the amount of Net Income and Net Loss (or items thereof) to be allocated to the Members for such entire Fiscal Year shall be allocated to the portion of such Fiscal Year which precedes the date of such Transfer or change (and if there shall have been a prior Transfer or change in such Fiscal Year, which commences on the date of such prior Transfer or change) and to the portion of such Fiscal Year which occurs on and after the date of such Transfer or change (and if there shall be a subsequent Transfer or change in such Fiscal Year, which precedes the date of such subsequent Transfer or change), in accordance with an interim closing of the books, and the amounts of the items so allocated to each such portion shall be credited or charged to the Members in accordance with Section 5.04 as in effect during each such portion of the Fiscal Year in question.  Such allocation shall be in accordance with Section 706 of the Code and the regulations thereunder and made without regard to the date, amount or receipt of any distributions that may have been made with respect to the transferred Percentage Interest to the extent consistent with Section 706 of the Code and the regulations thereunder.  As of the date of such Transfer, the Transferee Member shall succeed to the Capital Account of the Transferor Member with respect to the transferred Units.

 

(b)                                 Tax Allocations: Code Section 704(c).  In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss, and deduction with respect to any Property contributed to the capital of the Company and with respect to reverse Code Section 704(c) allocations described in Treasury Regulations 1.704-3(a)(6) shall, solely for tax purposes, be allocated among the Members

 

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so as to take account of any variation between the adjusted basis of such Property to the Company for federal income tax purposes and its initial Carrying Value or its Carrying Value determined pursuant to Treasury Regulation 1.704-1(b)(2)(iv)(f) (computed in accordance with the definition of Carrying Value) using the traditional allocation method under Treasury Regulation 1.704-3(b).  Any elections or other decisions relating to such allocations shall be made by the Managing Member in any manner that reasonably reflects the purpose and intention of this Agreement.  Allocations pursuant to this Section 5.05(b), Section 704(c) of the Code (and the principles thereof), and Treasury Regulation 1.704-1(b)(4)(i) are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Income, Net Loss, other items, or distributions pursuant to any provision of this Agreement.

 

Section 5.06                             Tax Withholding; Withholding Advances.

 

(a)                                 Tax Withholding.

 

(i)                                     If requested by the Managing Member, each Member shall, if able to do so, deliver to the Managing Member:  (A) an affidavit in form satisfactory to the Company that the applicable Member (or its partners, as the case may be) is not subject to withholding under the provisions of any federal, state, local, foreign or other law; (B) any certificate that the Company may reasonably request with respect to any such laws; and/or (C) any other form or instrument reasonably requested by the Company relating to any Member’s status under such law.  In the event that a Member fails or is unable to deliver to the Company an affidavit described in subclause (A) of this clause (i), the Company may withhold amounts from such Member in accordance with Section 5.06(b).

 

(ii)                                  After receipt of a written request of any Member, the Company shall provide such information to such Member and take such other action as may be reasonably necessary to assist such Member in making any necessary filings, applications or elections to obtain any available exemption from, or any available refund of, any withholding imposed by any foreign taxing authority with respect to amounts distributable or items of income allocable to such Member hereunder to the extent not adverse to the Company or any Member.  In addition, the Company shall, at the request of any Member, make or cause to be made (or cause the Company to make) any such filings, applications or elections; provided that any such requesting Member shall cooperate with the Company, with respect to any such filing, application or election to the extent reasonably determined by the Company and that any filing fees, taxes or other out-of-pocket expenses reasonably incurred and related thereto shall be paid and borne by such requesting Member or, if there is more than one requesting Member, by such requesting Members in accordance with their Relative Percentage Interests.

 

(b)                                 Withholding Advances.  To the extent the Company is required by Applicable Law to withhold or to make tax payments on behalf of or with respect to any Member (e.g., backup withholding) (“Withholding Advances”), the Company may withhold such amounts and make such tax payments as so required.

 

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(c)                                  Repayment of Withholding Advances.  All Withholding Advances made on behalf of a Member, plus interest thereon at a rate equal to the Prime Rate as of the date of such Withholding Advances plus 2.0% per annum, shall (i) be paid on demand by the Member on whose behalf such Withholding Advances were made (it being understood that no such payment shall increase such Member’s Capital Account), or (ii) with the consent of the Managing Member and the affected Member be repaid by reducing the amount of the current or next succeeding distribution or distributions that would otherwise have been made to such Member or, if such distributions are not sufficient for that purpose, by so reducing the proceeds of liquidation otherwise payable to such Member.  Whenever repayment of a Withholding Advance by a Member is made as described in clause (ii) of this Section 5.06(c), for all other purposes of this Agreement such Member shall be treated as having received all distributions (whether before or upon any Dissolution Event) unreduced by the amount of such Withholding Advance and interest thereon.

 

(d)                                 Withholding Advances — Reimbursement of Liabilities.  Each Member hereby agrees to reimburse the Company for any liability with respect to Withholding Advances (including interest thereon) required or made on behalf of or with respect to such Member (including penalties imposed with respect thereto).

 

ARTICLE VI

 

CERTAIN TAX MATTERS

 

Section 6.01                             Tax Matters Partner.  The “Tax Matters Partner” (as such term is defined in Section 6231(a)(7) of the Code) of the Company shall be selected by the Managing Member with the initial Tax Matters Partner being Pubco.  The Tax Matters Partner shall use its reasonable efforts to comply with the responsibilities outlined in Sections 6221 through 6233 of the Code (including the Treasury Regulations promulgated thereunder) and shall have any powers necessary to perform fully in such capacity.  The Tax Matters Partner is authorized to represent the Company before taxing authorities and courts in tax matters affecting the Company and the Members in their capacity as such and shall keep the Members promptly informed of any such administrative and judicial proceedings; provided that the SL Members shall be entitled to participate with the Tax Matters Partner in any tax matters that would reasonably be expected to have a materially disproportionate adverse effect on the SL Members (or any beneficial owners of the SL Members) as compared to the Viola Members (or any beneficial owners of the Viola Members).  The Tax Matters Partner shall be entitled to be reimbursed by the Company for all reasonable third-party costs and expenses incurred by it in connection with any administrative or judicial proceeding affecting tax matters of the Company and the Members in their capacity as such.  The Tax Matters Partner shall not bind any Member to any settlement agreement or closing agreement without such Member’s prior written consent.  Any Member who enters into a settlement agreement with any tax authority with respect to any Company item shall notify the Tax Matters Partner of such settlement agreement and its terms within thirty (30) days after the date of settlement.  This provision shall survive any termination of this Agreement.

 

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Section 6.02                             Section 754 Election.  The Company has previously made a timely election under Section 754 of the Code (and a corresponding election under state and local law) effective starting with the taxable year ended December 31, 2011, and the Managing Member shall not take any action to revoke such election.

 

Section 6.03                             RESERVED.

 

Section 6.04                             RESERVED.

 

Section 6.05                             Debt Allocation.  Indebtedness of the Company treated as “excess nonrecourse liabilities” (as defined in Treasury Regulation Section 1.752-3(a)(3)) shall be allocated among the Members based on their Percentage Interests.

 

ARTICLE VII
 MANAGEMENT OF THE COMPANY

 

Section 7.01                             Management by the Managing Member.  Except as otherwise specifically set forth in this Agreement, the Managing Member shall be deemed to be a “manager” for purposes of applying the Delaware Act.  Except as expressly provided in this Agreement or the Delaware Act, the day-to-day business and affairs of the Company and its Subsidiaries shall be managed, operated and controlled by the Managing Member in accordance with the terms of this Agreement and no other Members shall have management authority or rights over the Company or its Subsidiaries.  The Managing Member is, to the extent of its rights and powers set forth in this Agreement, an agent of the Company for the purpose of the Company’s and its Subsidiaries’ business, and the actions of the Managing Member taken in accordance with such rights and powers, shall bind the Company (and no other Members shall have such right).  Except as expressly provided in this Agreement, the Managing Member shall have all necessary powers to carry out the purposes, business, and objectives of the Company and its Subsidiaries.  The Managing Member may delegate to Members, employees, officers or agents of the Company or any Subsidiary in its discretion the authority to sign agreements and other documents on behalf of the Company or any Subsidiary.

 

Section 7.02                             Withdrawal of the Managing Member.  Pubco may withdraw as the Managing Member and appoint as its successor at any time upon written notice to the Company (i) any wholly-owned Subsidiary of Pubco, (ii) any Person of which Pubco is a wholly-owned Subsidiary, (iii) any Person into which Pubco is merged or consolidated or (iv) any transferee of all or substantially all of the assets of Pubco, which withdrawal and replacement shall be effective upon the delivery of such notice.  No appointment of a Person other than Pubco (or its successor, as applicable) as Managing Member shall be effective unless Pubco (or its successor, as applicable) and the new Managing Member (as applicable) provide all other Members with contractual rights, directly enforceable by such other Members against the new Managing Member, to cause the new Managing Member to comply with all the Managing Member’s obligations under this Agreement and the Exchange Agreement.

 

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Section 7.03                             Decisions by the Members.

 

(a)                                 Other than the Managing Member, the Members shall take no part in the management of the Company’s business, shall transact no business for the Company and shall have no power to act for or to bind the Company; provided, however, that the Company may engage any Member or principal, partner, member, shareholder or interest holder thereof as an employee, independent contractor or consultant to the Company, in which event the duties and liabilities of such individual or firm with respect to the Company as an employee, independent contractor or consultant shall be governed by the terms of such engagement with the Company.

 

(b)                                 Except as expressly provided herein, neither the Members nor any class of Members shall have the power or authority to vote, approve or consent to any matter or action taken by the Company.  Except as otherwise provided herein, any proposed matter or action subject to the vote, approval or consent of the Members or any class of Members shall require the approval of (i) a majority in interest of the Members or such class of Members, as the case may be (by (x) resolution at a duly convened meeting of the Members or such class of Members, as the case may be, or (y) written consent of the Members or such class of Members, as the case may be) and (ii) except with respect to any approval or other rights expressly granted to the Viola Members, the Temasek Equityholders or the SL Equityholders, the Managing Member.  Except as expressly provided herein, all Members shall vote together as a single class on any matter subject to the vote, approval or consent of the Members (but not, for the avoidance of doubt, any vote, approval or consent of any class of Members).  In the case of any such approval, a majority in interest of the Members or any class of Members, as the case may be, may call a meeting of the Members or such class of Members at such time and place or by means of telephone or other communications facility that permits all persons participating in such meeting to hear and speak to each other for the purpose of a vote thereon.  Notice of any such meeting shall be required, which notice shall include a brief description of the action or actions to be considered by the Members or such class of Members, as the case may be.  Unless waived by any such Member in writing, notice of any such meeting shall be given to each Member or Member of such class, as the case may be, at least four (4) days prior thereto.  Attendance or participation of a Member at a meeting shall constitute a waiver of notice of such meeting, except when such Member attends or participates in the meeting for the express purpose of objecting at the beginning thereof to the transaction of any business because the meeting is not properly called or convened.  Any action required or permitted to be taken at any meeting of the Members may be taken without a meeting, if a consent in writing, setting forth the actions so taken, shall be signed by Members sufficient to approve such action pursuant to this Section 7.03(b).  A copy of any such consent in writing will be provided to the Members promptly thereafter.

 

Section 7.04                             RESERVED.

 

Section 7.05                             RESERVED.

 

Section 7.06                             RESERVED.

 

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Section 7.07                             Fiduciary Duties.

 

(a)                                 (i) The Managing Member shall, in its capacity as Managing Member, and not in any other capacity, have the same fiduciary duties to the Company and the Members as a member of the board of directors of a Delaware corporation (assuming such corporation had in its certificate of incorporation a provision eliminating the liabilities of directors and officers to the maximum extent permitted by Section 102(b)(7) of the DGCL); (ii) any member of the Board of Directors of Pubco that is an officer of Pubco or the Company (including Viola) shall, in its capacity as director, and not in any other capacity, have the same fiduciary duties to Pubco as a member of the board of directors of a Delaware corporation (assuming such corporation had in its certificate of incorporation a provision eliminating the liabilities of directors and officers to the maximum extent permitted by Section 102(b)(7) of the DGCL); and (iii) each Officer and each officer of Pubco (including Viola) shall, in their capacity as such, and not in any other capacity, have the same fiduciary duties to the Company and the Members (in the case of any Officer) or Pubco (in the case of any officer of Pubco) as an officer of a Delaware corporation (assuming such corporation had in its certificate of incorporation a provision eliminating the liabilities of directors and officers to the maximum extent permitted by Section 102(b)(7) of the DGCL).  Notwithstanding the immediately preceding sentence, to the extent he is an Officer or a director or officer of Pubco, Viola shall not have any duty or obligation to present any opportunity to the Company if he reasonably believes the opportunity is not appropriate for the Company to pursue.  For the avoidance of doubt, the fiduciary duties described in clause (i) above shall not be limited by the fact that the Managing Member shall be permitted to take certain actions in its sole or reasonable discretion pursuant to the terms of this Agreement or any agreement entered into in connection herewith.  For the avoidance of doubt, but without limiting any of their obligations under Section 9.04 or any other written agreement with Pubco, the Company or any other respective Subsidiaries, to the extent Viola or Douglas A. Cifu (“Cifu”) is an Officer or a director or officer of Pubco, this Section 7.07(a) shall not preclude Viola or Cifu from continuing to be engaged in, or provide services to, the businesses and activities disclosed by Viola to SL and Temasek in writing prior to the date hereof in reference to this Section 7.07(a), and shall not preclude Cifu from being permitted to become engaged in, or provide services to, any other business or activity, whether as owner, partner, investor, consultant, agent, employee, co-venturer or otherwise, in which Viola is permitted to become engaged in, to the extent that Cifu’s level of participation in such businesses or activities are consistent with his participation in such businesses and activities disclosed to SL and Temasek in writing prior to the date hereof.  Each of the SL Equityholders, the Temasek Equityholders and the Viola Members shall have the exclusive right to enforce the rights and duties, or to waive such rights and duties, set forth in this Section 7.07(a), in each case so long as it meets the Limited Ownership Minimum.

 

(b)                                 The parties acknowledge that the Managing Member will take action through its board of directors, and that the members of the Managing Member’s board of directors will owe fiduciary duties to the stockholders of the Managing Member.  The Managing Member will use all commercially reasonable and appropriate efforts and means, as determined in good faith by the Managing Member, to

 

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minimize any conflict of interest between the Members, on the one hand, and the stockholders of the Managing Member, on the other hand, and to effectuate any transaction that involves or affects any of the Company, the Managing Member, the Members and/or the stockholders of the Managing Member in a manner that does not (i) disadvantage the Members or their interests relative to the stockholders of the Managing Member or (ii) advantage the stockholders of the Managing Member relative to the Members or (iii) treats the Members and the stockholders of the Managing Member differently; provided that in the event of a conflict between the interests of the stockholders of the Managing Member and the interests of the Members other than the Managing Member, such other Members agree that the Managing Member shall discharge its fiduciary duties to such other Members by acting in the best interests of the Managing Member’s stockholders.  Each of the SL Equityholders and the Viola Members shall have the exclusive right to enforce the rights and duties, or to waive such rights and duties, set forth in this Section 7.07(b), in each case so long as it meets the Limited Ownership Minimum.

 

(c)                                  Without prior written consent of the SL Equityholders and the Viola Members (in each case so long as it owns any Owned Shares), the Managing Member will not engage in any business activity other than the direct or indirect management and ownership of the Company and its Subsidiaries, or own any assets (other than on a temporary basis) other than securities of the Company and its Subsidiaries (whether directly or indirectly held) and/or any cash or other property or assets distributed by or otherwise received from the Company in accordance with this Agreement, provided that the Managing Member may take any action (including incurring its own Indebtedness) or own any asset if it determines in good faith that such actions or ownership are in the best interest of the Company.

 

Section 7.08                             Officers.

 

(a)                                 Appointment of Officers.  The Managing Member may appoint individuals as officers (“Officers”) of the Company, which may include such officers as the Managing Member determines are necessary and appropriate.  No Officer need be a Member.  An individual may be appointed to more than one office.

 

(b)                                 Authority of Officers.  The Officers shall have the duties, rights, powers and authority as may be prescribed by the Managing Member from time to time.

 

(c)                                  Removal, Resignation and Filling of Vacancy of Officers.  The Managing Member may remove any Officer, for any reason or for no reason, at any time.  Any Officer may resign at any time by giving written notice to the Company, and such resignation shall take effect at the date of the receipt of that notice or any later time specified in that notice; provided that, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective.  Any such resignation shall be without prejudice to the rights, if any, of the Company or such Officer under this Agreement.  A vacancy in any office because of death, resignation, removal or otherwise shall be filled by the Managing Member.

 

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ARTICLE VIII

 

TRANSFERS OF INTERESTS

 

Section 8.01                             Restrictions on Transfers.

 

(a)                                 Except as expressly permitted by Section 8.02, and subject to Section 8.01(b), Section 8.01(c), Section 8.01(d) and Section 8.01(e), any underwriter lock-up agreement applicable to such Member, any Employee Equity Letter and/or any other agreement between such Member and the Company, Pubco or any of their controlled Affiliates, without the prior written approval of the Managing Member, no Member shall directly or indirectly Transfer all or any part of its Units or any right or economic interest pertaining thereto, including the right to vote or consent on any matter or to receive or have any economic interest in distributions or advances from the Company pursuant thereto.  Any such Transfer which is not in compliance with the provisions of this Agreement shall be deemed a Transfer by such Member of Units in violation of this Agreement (and a breach of this Agreement by such Member) and shall be null and void ab initio.  Notwithstanding anything to the contrary in this Article VIII, (i) the Exchange Agreement shall govern the exchange of Paired Interests for shares of Class A Common Stock or Class B Common Stock, and an exchange pursuant to and in accordance with the Exchange Agreement shall not be considered a “Transfer” for purposes of this Agreement, (ii) the certificate of incorporation of Pubco shall govern the conversion of Class B Common Stock to Class A Common Stock and the conversion of Class D Common Stock to Class C Common Stock, and a conversion pursuant to and in accordance with the certificate of incorporation of Pubco shall not be considered a “Transfer” for purposes of this Agreement, (iii) a Transfer of Registrable Securities (as such term is defined in the Registration Rights Agreement) in accordance with the Registration Rights Agreement shall not be considered a “Transfer” for the purposes of the Agreement and (iv) any other Transfer of shares of Class A Common Stock or Class B Common Stock shall not be considered a “Transfer” for purposes of this Agreement.

 

(b)                                 Except as otherwise expressly provided herein, it shall be a condition precedent to any Transfer otherwise permitted or approved pursuant to this Article VIII that:

 

(i)                                     the Transferor shall have provided to the Company prior notice of such Transfer;

 

(ii)                                  the Transfer shall comply with all Applicable Laws; and

 

(iii)                               with respect to any Transfer of any Common Unit that constitutes a portion of a Paired Interest, concurrently with such Transfer, such Transferor shall also Transfer to such Transferee the number of shares of Class C Common Stock or Class D Common Stock, as the case may be, constituting the remainder of such Paired Interest (which, as of the date hereof, would be one share of Class C Common Stock or Class D Common Stock, as the case may be).

 

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(c)                                  Notwithstanding any other provision of this Agreement to the contrary, no Member shall directly or indirectly Transfer all or any part of its Units or any right or economic interest pertaining thereto if such Transfer, in the reasonable discretion of the Managing Member, would cause the Company to be classified as a “publicly traded partnership” as that term is defined in Section 7704 of the Code and Regulations promulgated thereunder.

 

(d)                                 Any Transfer of Units pursuant to this Agreement, including this Article VIII, shall be subject to the provisions of Section 3.01 and Section 3.02.

 

(e)                                  For the avoidance of doubt, in addition to any restrictions on Transfer set forth in this Article VIII that may apply to such Transfer, (i) any Transfer of Units by any Member shall be subject to the restrictions on Transfer applicable thereto pursuant to any Employee Equity Letter to which such Member is a party and (ii) any Transfer of Employee Holdco Interests (as defined below) shall be subject to the restrictions on Transfer applicable thereto pursuant to the Employee Holdco LLC Agreement.

 

Section 8.02                             Certain Permitted Transfers.  Notwithstanding anything to the contrary herein, the following Transfers shall be permitted:

 

(a)                                 Any Transfer by any Member of its Units pursuant to a Pubco Offer (as such term is defined in the Exchange Agreement) or Disposition Event (as such term is defined in the certificate of incorporation of Pubco);

 

(b)                                 At any time, any Transfer by any SL Member of Units to any Transferee; provided that such Transfer, alone or together with other Transfers by any SL Member and any Transferee thereof, would not result in all SL Members and their Transferees, in the aggregate, representing at any time more than four partners for the purposes of Treasury Regulation Section 1.7704-1(h)(1)(ii), including the application of the anti-avoidance rule of Treasury Regulation Section 1.7704-1(h)(3), excluding Pubco from the four partners for purposes of this Section 8.02(b);

 

(c)                                  At any time, any Transfer by any Member (other than any SL Member) of Units to any Transferee (i) previously approved in writing by the Company prior to the Reorganization or (ii) approved in writing by the Managing Member (not to be unreasonably withheld), it being understood that it shall be reasonable for the Managing Member to withhold such consent if the Managing Member reasonably determines that such Transfer would materially increase the risk that the Company would be classified as a “publicly traded partnership” as that term is defined in Section 7704 of the Code and Regulations promulgated thereunder; or

 

(d)                                 Any Transfer of Units to any Employee Holdco Member in connection with (x) the exercise of any repurchase right in respect of such Units by Employee Holdco pursuant to the terms of the Employee Holdco LLC Agreement, (y) the exercise of any right of such Employee Holdco Member to be distributed such Units

 

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pursuant to the terms of the Employee Holdco LLC Agreement or (z) the liquidation, dissolution and/or winding up of Employee Holdco.

 

Section 8.03                             RESERVED.

 

Section 8.04                             RESERVED.

 

Section 8.05                             RESERVED.

 

Section 8.06                             Registration of Transfers.  When any Units are Transferred in accordance with the terms of this Agreement, the Company shall cause such Transfer to be registered on the books of the Company.

 

ARTICLE IX

 

CERTAIN OTHER AGREEMENTS

 

Section 9.01                             RESERVED.

 

Section 9.02                             RESERVED.

 

Section 9.03                             RESERVED.

 

Section 9.04                             Non-Compete; Non-Solicitation.  Each Restricted Member agrees for the benefit of the Company and each SL Equityholder, Temasek Equityholder and Viola Member that:

 

(a)                                 No Restricted Member shall directly or indirectly engage in any Competitive Activity from and after the date hereof until the third (3rd) anniversary following such Restricted Member’s Termination Date.

 

(b)                                 Except as disclosed to SL in writing prior to the date hereof, Restricted Members shall not directly or indirectly solicit, or assist any other Person to solicit, as an employee or consultant any employee, former employee or Restricted Member of the Company or any of its Subsidiaries (the “Company Parties”) until the third (3rd) anniversary following such Restricted Member’s Termination Date.

 

(c)                                  Except as disclosed to SL in writing prior to the date hereof, the Restricted Members shall not, and shall cause their respective controlled Affiliates not to, hire, or assist any other Person to hire, as an employee or consultant any employee, former employee, Member or retired Member of the Company Parties until the third (3rd) anniversary following such Restricted Member’s Termination Date.

 

(d)                                 No Member shall take, and each Member shall take reasonable steps to cause its Affiliates not to take, any action or make any public statement, whether or not in writing, that disparages or denigrates the Company Parties or their respective directors, officers, employees, members, representatives and agents.

 

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(e)                                  Without prejudice to the other restrictions contained in this Section 9.04, so long as the SL Members meet the Limited Ownership Minimum, Viola and each of the Viola Members will not, and will cause their Affiliates (other than the Company and its Subsidiaries) not to, directly or indirectly, enter into any transaction with, employ or otherwise provide any compensation or other benefit to (i) any Person who at such time is, or at any time within three (3) years of such time was, an employee, Officer or consultant of the Company or its Subsidiaries or (ii) any controlled Affiliate of any Person described in clause (i) (other than cash compensation payable to the individuals disclosed to the SL Investor in writing prior to the date hereof in reference to this Section 9.04(e)).

 

(f)                                    RESERVED.

 

(g)                                 Each Restricted Member agrees that (i) the agreements and covenants contained in this Section 9.04 are reasonable in scope and duration, an integral part of the transactions contemplated by this Agreement and by the MTH Transaction Documents and the Reorganization Documents, and necessary to protect and preserve the Members’ and Company Parties’ legitimate business interests and to prevent any unfair advantage conferred on such Restricted Member taking into account and in specific consideration of the undertakings and obligations of the parties under the Agreement, the MTH Transaction Documents and the Reorganization Documents, (ii) but for each Restricted Member’s agreement to be bound by the agreements and covenants contained under this Section 9.04, the SL Members, the Viola Members and the Company Parties would not have entered into or consummated those transactions contemplated the Agreement, the MTH Transaction Documents and the Reorganization Documents and (iii) that irreparable harm would result to the SL Members, the Viola Members and the Company Parties as a result of a violation or breach (or potential violation or breach) by such Restricted Member (or his Affiliates) of this Section 9.04.  In addition, each Restricted Member agrees that each of the following parties shall have the right to specifically enforce the provisions of this Section 9.04 in any federal court located in the State of Delaware or any Delaware state court, in addition to any other remedy to which such parties are entitled at law or in equity:

 

(x)           the Managing Member against any Restricted Member;

 

(y)         the SL Members against (1) any Restricted Member (other than a Viola Member and/or Cifu) so long as it meets the Ownership Minimum and (2) any Viola Member and/or Cifu so long as it meets the Limited Ownership Minimum; and

 

(z)           the Viola Members against (1) any Restricted Member (other than a Viola Member and/or Cifu) so long as it meets the Ownership Minimum and (2) Cifu so long as it meets the Limited Ownership Minimum.

 

If a final judgment of a court of competent jurisdiction or other Governmental Authority determines that any term, provision, covenant or restriction contained in this Section 9.04 is invalid or unenforceable, then the parties hereto agree that the court of competent

 

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jurisdiction or other Governmental Authority will have the power to modify this Section 9.04 (including by reducing the scope, duration or geographic area of the term or provision, deleting specific words or phrases or replacing any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision) so as to effect the original intention of the invalid or unenforceable term or provision.  To the fullest extent permitted by law, in the event that any proceeding is brought under or in connection with this Section 9.04, the prevailing party in such proceeding (whether at final or on appeal) shall be entitled to recover from the other party all costs, expenses, and reasonable attorneys’ fees incident to any such proceeding.  The term “prevailing party” as used herein means the party in whose favor the final judgment or award is entered in any such proceeding.

 

Section 9.05                                Company Call Right.

 

(a)                                  In connection with any Involuntary Transfer by any Non-Pubco Member (other than any SL Member or any Viola Member), the Company or the Managing Member may, in the Managing Member’s sole discretion, elect to purchase from such Member and/or such Transferee(s) in such Involuntary Transfer (each, a “Call Member”) any or all of Units so Transferred, together with any shares of Pubco Common Stock constituting the remainder of any Paired Interests in which such Units were included (“Call Paired Interests”), at any time by delivery of a written notice (a “Call Notice”) to such Call Member.  The Call Notice shall set forth the Call Price and the proposed closing date of such purchase of such Call Paired Interests; provided that such closing date shall occur within ninety (90) days following the date of such Call Notice.  At the closing of any such sale, in exchange for the payment by the Company or the Managing Member to such Call Members of the Call Price in cash, (i) each Call Member shall deliver its Call Paired Interests, duly endorsed, or accompanied by written instruments of transfer in form satisfactory to the Company or the Managing Member, as applicable, duly executed by such Call Member and accompanied by all requisite transfer taxes, if any, (ii) such Call Paired Interests shall be free and clear of any Liens and (iii) each Call Member shall so represent and warrant and further represent and warrant that it is the sole beneficial and record owner of such Call Paired Interests.  Following such closing, any such Call Member shall no longer be entitled to any rights in respect of its Call Paired Interests, including any distributions of the Company or Pubco thereupon (other than the payment of the Call Price at such closing), and, to the extent any such Call Member does not hold any Units thereafter, shall thereupon cease to be a Member of the Company and, to the extent any such Call Member does not hold any shares of Pubco Common Stock thereafter, shall thereupon cease to be a stockholder of Pubco.

 

(b)                                 For the purposes of this Section 9.05, “Call Price” means an amount equal to the fair market value of such Call Paired Interests (as reasonably determined by the Managing Member based on the market price of the Class A Common Stock into which such Call Paired Interests are exchangeable).

 

Section 9.06                                RESERVED.

 

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Section 9.07                                RESERVED.

 

Section 9.08                                RESERVED.

 

Section 9.09                                Employee Holdco.

 

(a)                                  Employee Holdco has been established as a special purpose investment vehicle through which the members thereof (the “Employee Holdco Members”) indirectly hold interests in the Company through the ownership of membership interests in Employee Holdco (“Employee Holdco Interests”).  In applying the provisions of this Agreement (including Article V, Article VI, Article VII, Article VIII and Article IX), and in order to determine equitably the rights and obligations of Employee Holdco and the Employee Holdco Members, the Managing Member, the Company and/or Employee Holdco may treat (a) the Units held by Employee Holdco as if they were directly held by the Employee Holdco Members having an indirect economic interest therein and (b) any Employee Holdco Member as if it were a Member with a corresponding interest in a proportionate portion of the Units owned by Employee Holdco.  Accordingly, upon (i) any issuance of additional Units to Employee Holdco for the benefit of any Employee Holdco Member (or the occurrence of any event that causes the repurchase or forfeiture of any Units), (ii) the Transfer of Units by Employee Holdco or (iii) any merger, consolidation, sale of all or substantially all of the assets of the Company, issuance of debt or other similar capital transaction of the Company (each, an “Employee Holdco Action”), the Managing Member, the Company and/or Employee Holdco may take any action or make any adjustment with respect to the Employee Holdco Interests to replicate, as closely as possible, such Employee Holdco Action (including the effects thereof), and the Members shall take all actions reasonably requested by the Managing Member in connection with any Employee Holdco Action and this Section 9.09.

 

(b)                                 Notwithstanding the provisions of Section 5.03(b), the Managing Member, in its sole discretion, may authorize that cash be paid to Employee Holdco (which payment shall be made without pro rata distributions to the other Members) in exchange for the redemption, repurchase or other acquisition of such Employee Holdco’s Units to the extent that such cash payment is used by Employee Holdco to redeem, repurchase or otherwise acquire from an Employee Holdco Member the Employee Holdco Interests representing a corresponding indirect interest in the Units so redeemed, repurchased or otherwise acquired by the Company; provided, that the amount of cash so paid does not exceed the fair market value thereof (as determined by the Managing Member based on the market price of the Class A Common Stock into which such Units are exchangeable).

 

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ARTICLE X

 

LIMITATION ON LIABILITY, EXCULPATION
 AND INDEMNIFICATION

 

Section 10.01                          Limitation on Liability.  The debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Covered Person shall be obligated personally for any such debt, obligation or liability of the Company; provided that the foregoing shall not alter a Member’s obligation to return funds wrongfully distributed to it.

 

Section 10.02                          Exculpation and Indemnification.

 

(a)                                  Subject to the duties of the Managing Member and Officers set forth in Section 7.07, neither the Managing Member nor any other Covered Person described in clause (iii) of the definition thereof shall be liable, including under any legal or equitable theory of fiduciary duty or other theory of liability, to the Company or to any other Covered Person for any losses, claims, damages or liabilities incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company.  There shall be, and each Covered Person shall be entitled to, a presumption that such Covered Person acted in good faith.

 

(b)                                 A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such Person’s professional or expert competence.

 

(c)                                  The Company shall indemnify, defend and hold harmless each Covered Person against any losses, claims, damages, liabilities, expenses (including all reasonable out-of-pocket fees and expenses of counsel and other advisors), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, in which such Covered Person may be involved or become subject to, in connection with any matter arising out of or in connection with the Company’s business or affairs, or this Agreement or any related document, unless such loss, claim, damage, liability, expense, judgment, fine, settlement or other amount (i) is as a result of a Covered Person not acting in good faith on behalf of the Company or arose as a result of the willful commission by such Covered Person of any act that is dishonest and materially injurious to the Company, (ii) results from its contractual obligations under any MTH Transaction Document, the Equity Redemption and Purchase Agreement or any Reorganization Document to be performed in a capacity other than as a Covered Person or from the breach by such Covered Person of Section 9.04 or (iii) results from the breach by any Member (in such capacity) of its contractual obligations under this Agreement.  If any Covered Person becomes involved in any capacity in any action, suit, proceeding or investigation in connection with any matter arising out of or in connection with the Company’s business or affairs, or this Agreement or any related document (other than any MTH Transaction Document, the Equity Redemption and Purchase Agreement

 

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or Reorganization Document), other than (x) by reason of any act or omission performed or omitted by such Covered Person that was not in good faith on behalf of the Company or constituted a willful commission by such Covered Person of an act that is dishonest and materially injurious to the Company or (y) as a result of any breach by such Covered Person of Section 9.04, the Company shall reimburse such Covered Person for its reasonable legal and other reasonable out-of-pocket expenses (including the cost of any investigation and preparation) as they are incurred in connection therewith; provided that such Covered Person shall promptly repay to the Company the amount of any such reimbursed expenses paid to it if it shall be finally judicially determined that such Covered Person was not entitled to indemnification by, or contribution from, the Company in connection with such action, suit, proceeding or investigation.  If for any reason (other than the bad faith of a Covered Person or the willful commission by such Covered Person of an act that is dishonest and materially injurious to the Company) the foregoing indemnification is unavailable to such Covered Person, or insufficient to hold it harmless, then the Company shall contribute to the amount paid or payable by such Covered Person as a result of such loss, claim, damage, liability, expense, judgment, fine, settlement or other amount in such proportion as is appropriate to reflect any relevant equitable considerations.  There shall be, and each Covered Person shall be entitled to, a rebuttable presumption that such Covered Person acted in good faith.

 

(d)                                 The obligations of the Company under Section 10.02(c) shall be satisfied solely out of and to the extent of the Company’s assets, and no Covered Person shall have any personal liability on account thereof.

 

(e)                                  Given that certain Jointly Indemnifiable Claims may arise by reason of the service of a Covered Person to the Company and/or as a director, trustee, officer, partner, member, manager, employee, consultant, fiduciary or agent of other corporations, limited liability companies, partnerships, joint ventures, trusts, employee benefit plans or other enterprises controlled by the Company (collectively, the “Controlled Entities”), or by reason of any action alleged to have been taken or omitted in any such capacity, the Company acknowledges and agrees that the Company shall, and to the extent applicable shall cause the Controlled Entities to, be fully and primarily responsible for the payment to the Covered Person in respect of indemnification or advancement of all out-of-pocket costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements) in each case, actually and reasonably incurred by or on behalf of a Covered Person in connection with either the investigation, defense or appeal of a claim, demand, action, suit or proceeding or establishing or enforcing a right to indemnification under this Agreement or otherwise incurred in connection with a claim that is indemnifiable hereunder (collectively, “Expenses”) in connection with any such Jointly Indemnifiable Claim, pursuant to and in accordance with (as applicable) the terms of (i) the Delaware Act, (ii) this Agreement, (iii) any other agreement between the Company or any Controlled Entity and the Covered Person pursuant to which the Covered Person is indemnified, (iv) the laws of the jurisdiction of incorporation or organization of any Controlled Entity and/or (v) the certificate of incorporation, certificate of organization, bylaws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership, certificate

 

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of qualification or other organizational or governing documents of any Controlled Entity ((i) through (v) collectively, the “Indemnification Sources”), irrespective of any right of recovery the Covered Person may have from the Indemnitee-Related Entities.  Under no circumstance shall the Company or any Controlled Entity be entitled to any right of subrogation or contribution by the Indemnitee-Related Entities and no right of advancement or recovery the Covered Person may have from the Indemnitee-Related Entities shall reduce or otherwise alter the rights of the Covered Person or the obligations of the Company or any Controlled Entity under the Indemnification Sources.  In the event that any of the Indemnitee-Related Entities shall make any payment to the Covered Person in respect of indemnification or advancement of Expenses with respect to any Jointly Indemnifiable Claim, (i) the Company shall, and to the extent applicable shall cause the Controlled Entities to, reimburse the Indemnitee-Related Entity making such payment to the extent of such payment promptly upon written demand from such Indemnitee-Related Entity, (ii) to the extent not previously and fully reimbursed by the Company and/or any Controlled Entity pursuant to clause (i), the Indemnitee-Related Entity making such payment shall be subrogated to the extent of the outstanding balance of such payment to all of the rights of recovery of the Covered Person against the Company and/or any Controlled Entity, as applicable, and (iii) the Covered Person shall execute all papers reasonably required and shall do all things that may be reasonably necessary to secure such rights, including the execution of such documents as may be necessary to enable the Indemnitee-Related Entities effectively to bring suit to enforce such rights.  The Company and the Covered Person agree that each of the Indemnitee-Related Entities shall be third-party beneficiaries with respect to this Section 10.02(e), entitled to enforce this Section 10.02(e) as though each such Indemnitee-Related Entity were a party to this Agreement.  The Company shall cause each of the Controlled Entities to perform the terms and obligations of this Section 10.02(e) as though each such Controlled Entity was the “Company” under this Agreement.  For purposes of this Section 10.02(e), the following terms shall have the following meanings:

 

(i)                                     The term “Indemnitee-Related Entities” means any corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (other than the Company, any Controlled Entity or the insurer under and pursuant to an insurance policy of the Company or any Controlled Entity) from whom a Covered Person may be entitled to indemnification or advancement of Expenses with respect to which, in whole or in part, the Company or any Controlled Entity may also have an indemnification or advancement obligation.

 

(ii)                                  The term “Jointly Indemnifiable Claims” shall be broadly construed and shall include, without limitation, any claim, demand, action, suit or proceeding for which the Covered Person shall be entitled to indemnification or advancement of Expenses from both (i) the Company and/or any Controlled Entity pursuant to the Indemnification Sources, on the one hand, and (ii) any Indemnitee-Related Entity pursuant to any other agreement between any Indemnitee-Related Entity and the Covered Person pursuant to which the Covered Person is indemnified, the laws of the jurisdiction of incorporation or organization of any Indemnitee-Related Entity and/or the certificate of incorporation, certificate of organization, bylaws, partnership

 

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agreement, operating agreement, certificate of formation, certificate of limited partnership or other organizational or governing documents of any Indemnitee-Related Entity, on the other hand.

 

Section 10.03                          Indemnification of Certain Matters.  At and after the MTH Transaction Effective Date, the Company has, and has caused its Subsidiaries to, and shall continue, and cause its Subsidiaries to continue, jointly and severally, to indemnify Viola and his Affiliates for any liabilities or obligations of Viola and such Affiliates in respect of (i) that certain Guaranty by Viola on behalf of Virtu Financial BD LLC in favor of JPMorgan Chase, (ii) the Guaranty of Lease, dated as of April 18, 2008, by Viola to 645 Madison L.L.C., a New York limited liability company (“645 Madison”), in respect of the Agreement of Lease, between Madison and East, dated as April 18, 2008 (the “Lease”) and (iii) the Guaranty of Lease, dated as April 18, 2008, by Pioneer Futures, Inc.  to 645 Madison in respect of the Lease, in each case, for so long as such guaranties remain in effect.

 

ARTICLE XI

 

DISSOLUTION AND TERMINATION

 

Section 11.01                          Dissolution.

 

(a)                                  The Company shall not be dissolved by the admission of Additional Members or Substitute Members pursuant to Section 3.02.

 

(b)                                 No Member shall (i) resign from the Company prior to the dissolution and winding up of the Company except in connection with a Transfer of Units pursuant to the terms of this Agreement or (ii) take any action to dissolve, terminate or liquidate the Company or to require apportionment, appraisal or partition of the Company or any of its assets, or to file a bill for an accounting, except as specifically provided in this Agreement, and each Member, to the fullest extent permitted by Applicable Law, hereby waives any rights to take any such actions under Applicable Law, including any right to petition a court for judicial dissolution under Section 18-802 of the Delaware Act.

 

(c)                                  The Company shall be dissolved and its business wound up only upon the earliest to occur of any one of the following events (each a “Dissolution Event”):

 

(i)                                     The expiration of forty-five (45) days after the sale or other disposition of all or substantially all the assets of the Company; or

 

(ii)                                  upon the approval of the Managing Member.

 

(d)                                 The death, retirement, resignation, expulsion, bankruptcy, insolvency or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member of the Company shall not in and of itself cause dissolution of the Company.

 

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Section 11.02                          Winding Up of the Company.

 

(a)                                  The Managing Member shall promptly notify the other Members of any Dissolution Event.  Upon dissolution, the Company’s business shall be liquidated in an orderly manner.  The Managing Member shall appoint a liquidating trustee to wind up the affairs of the Company pursuant to this Agreement.  In performing its duties, the liquidating trustee is authorized to sell, distribute, exchange or otherwise dispose of the assets of the Company in accordance with the Delaware Act and in any reasonable manner that the liquidating trustee shall determine to be in the best interest of the Members.

 

(b)                                 The proceeds of the liquidation of the Company shall be distributed in the following order and priority:

 

(i)                                     first, to the creditors (including any Members or their respective Affiliates that are creditors) of the Company in satisfaction of all of the Company’s liabilities (whether by payment or by making reasonable provision for payment thereof, including the setting up of any reserves which are, in the judgment of the liquidating trustee, reasonably necessary therefor); and

 

(ii)                                  second, to the Members in the same manner as distributions under Section 5.03(b), subject to Section 5.03(e).

 

(c)                                  Distribution of Property.  In the event it becomes necessary in connection with the liquidation of the Company to make a distribution of Property in-kind, subject to the priority set forth in Section 11.02, the liquidating trustee shall have the right to compel each Member to accept a distribution of any Property in-kind (with such Property, as a percentage of the total liquidating distributions to such Member, corresponding as nearly as possible to such Member’s Percentage Interest), with such distribution being based upon the amount of cash that would be distributed to such Members if such Property were sold for an amount of cash equal to the fair market value of such Property, as determined by the liquidating trustee in good faith, subject to the last sentence of Section 5.03(d).

 

Section 11.03                          Termination.  The Company shall terminate when all of the assets of the Company, after payment of or reasonable provision for the payment of all debts and liabilities of the Company, shall have been distributed to the Members in the manner provided for in this Article XI, and the certificate of formation of the Company shall have been cancelled in the manner required by the Delaware Act.

 

Section 11.04                          Survival.  Termination, dissolution, liquidation or winding up of the Company for any reason shall not release any party from any liability which at the time of such termination, dissolution, liquidation or winding up already had accrued to any other party or which thereafter may accrue in respect to any act or omission prior to such termination, dissolution, liquidation or winding up.

 

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ARTICLE XII

 

MISCELLANEOUS

 

Section 12.01                          Expenses.  Other than as set forth in Section 5.03(c) of the Reorganization Agreement or as set forth in Section 3.5 of the SL Stockholders Agreement or as set forth in Section 3.1 of the Temasek Merger Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such cost or expense.

 

Section 12.02                          Further Assurances.  Each Member agrees to execute, acknowledge, deliver, file and record such further certificates, amendments, instruments and documents, and to do all such other acts and things, as may be required by Applicable Law or as, in the reasonable judgment of the Managing Member, may be necessary or advisable to carry out the intent and purposes of this Agreement.

 

Section 12.03                          Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission and electronic mail (“e-mail”) transmission, so long as a receipt of such e-mail is requested and received) and shall be given to such party at the address, facsimile number or e-mail address specified for such party on the Member Schedule hereto or, with respect to the Temasek Equityholder, as specified on the signature page hereto, or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.

 

Section 12.04                          Binding Effect; Benefit; Assignment.

 

(a)                                  The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.  No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.

 

(b)                                 Except as provided in Article VIII, no Member may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the Managing Member (it being understood that (i) Temasek Stockholder may assign, delegate or otherwise transfer such rights or obligations without such consent to Temasek Equityholders and (ii) SL Stockholder may assign, delegate or otherwise transfer such rights or obligations without such consent to SL Equityholders).

 

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Section 12.05                          Jurisdiction.

 

(a)                                  The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party or any of its Affiliates) shall be brought in the Delaware Chancery Court or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 12.03 shall be deemed effective service of process on such party.

 

(b)                                 EACH OF THE COMPANY AND THE MEMBERS HEREBY IRREVOCABLY DESIGNATES THE CORPORATION TRUST COMPANY (IN SUCH CAPACITY, THE “PROCESS AGENT”), WITH AN OFFICE AT CORPORATION TRUST CENTER, 1209 ORANGE STREET, WILMINGTON, NEW CASTLE COUNTY, DELAWARE 19801, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, FOR AND ON ITS BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY LEGAL ACTION OR PROCEEDINGS WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND SUCH SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT; PROVIDED THAT IN THE CASE OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY EFFECTING SUCH SERVICE SHALL ALSO DELIVER A COPY THEREOF TO EACH OTHER SUCH PARTY IN THE MANNER PROVIDED IN SECTION 12.03 OF THIS AGREEMENT.  EACH PARTY SHALL TAKE ALL SUCH ACTION AS MAY BE NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO APPOINT ANOTHER AGENT SO THAT SUCH PARTY SHALL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF PROCESS FOR THE ABOVE PURPOSES IN WILMINGTON, DELAWARE.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE LAW.  EACH PARTY EXPRESSLY ACKNOWLEDGES THAT THE FOREGOING WAIVER IS INTENDED TO BE IRREVOCABLE UNDER THE LAWS OF THE STATE OF DELAWARE AND OF THE UNITED STATES OF AMERICA.

 

Section 12.06                          WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL

 

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BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 12.07                      Counterparts.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

 

Section 12.08                      Entire Agreement.  This Agreement, the MTH Transaction Documents, the Equity Redemption and Purchase Agreement and the Reorganization Documents constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement.  Nothing in this Agreement shall create any third-party beneficiary rights in favor of any Person or other party, except to the extent provided herein with respect to Indemnitee-Related Entities, each of whom are intended third-party beneficiaries of those provisions that specifically relate to them with the right to enforce such provisions as if they were a party hereto.

 

Section 12.09                      Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

 

Section 12.10                      Amendment.

 

(a)                                 This Agreement can be amended at any time and from time to time by the Managing Member; provided, in addition to the approval of the Managing Member, no amendment to this Agreement may:

 

(i)                                     without the prior written consent of the SL Members, (x) adversely modify the limited liability of any SL Member set forth in Section 5.01, Section 5.02, Section 5.04, Section 5.05, Section 5.06, Section 6.02, Section 6.05, Section 10.01, Section 10.02 or Section 12.01, or otherwise modify in any material respect the limited liability of any SL Member, or adversely increase the liabilities or obligations (other than de minimis liabilities or obligations) of any SL Member, (y) adversely modify the Units (or the rights, preferences or privileges of the Units) then held the SL Members in any different or disproportionate manner to those then held by the Viola Members that, in any such case, is favorable to the Viola Members

 

57

 

relative to the SL Members or (z) adversely modify the express rights of the SL Members set forth in Section 3.01(a), Section 3.03(c)(ii), Section 3.03(d)(iii), Section 3.04, Article IV, Section 5.03(e), Section 6.01, Section 7.03(b), Section 7.07, Section 9.04 and this Section 12.10 (in the case of clause (z), only so long as the SL Members are entitled to such express rights);

 

(ii)                                  without the prior written consent of the Temasek Equityholders, (x) adversely modify the limited liability of any Temasek Equityholder set forth in Section 10.01, Section 10.02 or Section 12.01, or otherwise modify in any material respect the limited liability of any Temasek Equityholder, or adversely increase the liabilities or obligations (other than de minimis liabilities or obligations) of any Temasek Equityholder or (y) adversely modify the express rights of the Temasek Equityholders set forth in Section 3.01(a), Section 3.03(c)(ii), Section 3.03(d)(iii), Section 3.04, Article IV, Section 7.03(b), Section 7.07, Section 9.04 and this Section 12.10 (in the case of clause (y), only so long as the Temasek Equityholders are entitled to such express rights);

 

(iii)                               without the prior written consent of the Viola Members, (x) adversely modify the limited liability of any Viola Member set forth in Section 5.01, Section 5.02, Section 5.04, Section 5.05, Section 5.06, Section 6.02, Section 6.05, Article X or Section 12.01, or otherwise modify in any material respect the limited liability of any Viola Member, or adversely increase the liabilities or obligations (other than de minimis liabilities or obligations) of any Viola Member, (y) adversely modify the Units (or the rights, preferences or privileges of the Units) then held the Viola Members in any different or disproportionate manner to those then held by the SL Members that, in any such case, is favorable to the SL Members relative to the Viola Members or (z) adversely modify the express rights of the Viola Members set forth in Section 3.01(a), Section 3.03(c)(ii), Section 3.03(d)(iii), Section 3.04, Article IV, Section 7.03(b), Section 7.07, Section 9.04 and this Section 12.10 (in the case of clause (z), only so long as the Viola Members are entitled to such express rights); or

 

(iv)                              adversely modify in any material respect the Units (or the rights, preferences or privileges of the Units) then held by any Members in any materially disproportionate manner to those then held by any other Members without the prior written consent of a majority in interest of such disproportionately affected Member or Members.

 

(b)                                 For the avoidance of doubt: (i) the Managing Member, acting alone, may amend this Agreement, including the Member Schedule, (x) to reflect the admission of new Members or Transfers of Units, each as provided by and in accordance with, the terms of this Agreement, (y) to effect any subdivisions or combinations of Units made in compliance with Section 4.02(c) and (z) to issue additional Common Units or any new class of Units (whether or not pari passu with the Common Units) in accordance with the terms of this Agreement and to provide that the Members being issued such new Units be entitled to the rights provided to the SL Members, Temasek Equityholders and/or the Viola Members with respect to all or a portion of the provisions applicable thereto hereunder and any other rights that do not

 

58

 

diminish or eliminate any of the express rights of the SL Members, Temasek Equityholders and/or the Viola Members described in Section 12.10(a)(i)(z), Section 12.10(a)(ii)(y) or Section 12.10(a)(iii)(z), as the case may be; and (ii) any merger, consolidation or other business combination that constitutes a Disposition Event (as such term is defined in the certificate of incorporation of Pubco) in which the Non-Pubco Members are required to exchange all of their Paired Interests pursuant to Section 2.03(c) of the Exchange Agreement and receive consideration in such Disposition Event in accordance with the terms of this Agreement and the Exchange Agreement as in effect immediately prior to the consummation of such Disposition Event shall not be deemed an amendment hereof; provided, that such amendment is only effective upon consummation of such Disposition Event.

 

(c)                                  No waiver of any provision or default under, nor consent to any exception to, the terms of this Agreement or any agreement contemplated hereby shall be effective unless in writing and signed by the party to be bound and then only to the specific purpose, extent and instance so provided.

 

Section 12.11                      Confidentiality.

 

(a)                                 Each SL Equityholder, Temasek Equityholder and each other Member (collectively the “Equityholders”) shall, and shall direct those of its Affiliates and their respective directors, officers, members, stockholders, partners, employees, attorneys, accountants, consultants, trustees and other advisors (the “Equityholder Parties”) who have access to Confidential Information to, keep confidential and not disclose any Confidential Information to any Person other than a Equityholder Party who agrees to keep such Confidential Information confidential in accordance with this Section 12.11, in each case without the express consent, in the case of Confidential Information acquired from the Company, of the Managing Member or, in the case of Confidential Information acquired from another Equityholder, such other Equityholder, unless:

 

(i)                                     such disclosure shall be required by Applicable Law;

 

(ii)                                  such disclosure is reasonably required in connection with any tax audit involving the Company or any Equityholder or its Affiliates;

 

(iii)                               such disclosure is reasonably required in connection with any litigation against or involving the Company or any Equityholder;

 

(iv)                              such disclosure is reasonably required in connection with any proposed Transfer of all or any part of such Member’s Units in the Company; provided that with respect to any such use of any Confidential Information referred to in this clause (iv), advance notice must be given to the Managing Member so that it may require any proposed Transferee that is not a Member to enter into a confidentiality agreement with terms substantially similar to the terms of this Section 12.11 (excluding this clause (iv)) prior to the disclosure of such Confidential Information; or

 

59

 

(v)                                 such disclosure is of financial and other information of the type typically disclosed to limited partners and prospective investors in private equity funds and is made to the partners of, and/or prospective investors in, private equity Affiliates of the SL Members or Temasek Equityholders and such partner or prospective investor is bound by the confidentiality provisions of a customary non-disclosure agreement entered into with the disclosing party that covers the Confidential Information so disclosed.

 

(b)                                 “Confidential Information” means any information related to the activities of the Company, the Equityholders and their respective Affiliates that an Equityholder may acquire from the Company or the Equityholders, other than information that (i) is already available through publicly available sources of information (other than as a result of disclosure by such Equityholder), (ii) was available to a Equityholder on a non-confidential basis prior to its disclosure to such Equityholder by the Company, or (iii) becomes available to a Equityholder on a non-confidential basis from a third party, provided such third party is not known by such Equityholder, after reasonable inquiry, to be bound by this Agreement or another confidentiality agreement with the Company.  Such Confidential Information may include information that pertains or relates to the business and affairs of any other Equityholder or any other Company matters.  Confidential Information may be used by a Equityholder and its Equityholder Parties only in connection with Company matters and in connection with the maintenance of its interest in the Company.

 

(c)                                  In the event that any Equityholder or any Equityholder Parties of such Equityholder is required to disclose any of the Confidential Information, such Equityholder shall use reasonable efforts to provide the Company with prompt written notice so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement, and such Equityholder shall use reasonable efforts to cooperate with the Company in any effort any such Person undertakes to obtain a protective order or other remedy.  In the event that such protective order or other remedy is not obtained, or that the Company waives compliance with the provisions of this Section 12.11, such Equityholder and its Equityholder Parties shall furnish only that portion of the Confidential Information that is legally required and shall exercise all reasonable efforts to obtain reasonably reliable assurance that the Confidential Information shall be accorded confidential treatment.

 

(d)                                 Notwithstanding anything in this Agreement to the contrary, each Equityholder may disclose to any persons the U.S. federal income tax treatment and tax structure of the Company and the transactions set out in the MTH Transaction Agreement, the Equity Redemption and Purchase Agreement and the Reorganization Agreement.  For this purpose, “tax structure” is limited to any facts relevant to the U.S. federal income tax treatment of the Company and does not include information relating to the identity of the Company or any Equityholder.

 

Section 12.12                      Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the

 

60

 

conflicts of law rules of such State that would result in the application of the laws of any other State.

 

[signature pages follow]

 

61

 

IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and Restated Limited Liability Company Agreement to be duly executed as of the day and year first written above.

 

 

	
 
    	
VIRTU   FINANCIAL LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
VIRTU   FINANCIAL, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
VIRTU   FINANCIAL INTERMEDIATE 
    
	
 
    	
HOLDINGS   LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
VIRTU   FINANCIAL INTERMEDIATE 
    
	
 
    	
HOLDINGS   II LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to the Third Amended and Restated

Limited Liability Company Agreement of Virtu Financial LLC]

 

 

	
 
    	
SL   EQUITYHOLDERS:
    
	
 
    	
 
    
	
 
    	
SILVER   LAKE TECHNOLOGY 
    
	
 
    	
ASSOCIATES   III, L.P.
    
	
 
    	
 
    
	
 
    	
By:   SLTA III (GP), L.L.C., its general 
    
	
 
    	
partner
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Group, L.L.C., its sole 
    
	
 
    	
member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
 
    
	
 
    	
Title:   Managing Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SLP   VIRTU INVESTORS, LLC
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Partners III DE (AIV III),

L.P.,   its managing member
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Technology Associates III,

L.P.,   its general partner
    
	
 
    	
 
    
	
 
    	
By:   SLTA III (GP), L.L.C., its general

partner
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Group, L.L.C., its sole

member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Title:   Managing Member
    

 

[Signature Page to the Third Amended and Restated

Limited Liability Company Agreement of Virtu Financial LLC]

 

 

	
 
    	
SLP   III EW FEEDER I L.P.
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Technology Associates III,

L.P.,   its general partner
    
	
 
    	
 
    
	
 
    	
By:   SLTA III (GP), L.L.C., its general

partner
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Group, L.L.C., its sole

member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Title:   Managing Member
    
	
 
    	
 
    

 

[Signature Page to the Third Amended and Restated

Limited Liability Company Agreement of Virtu Financial LLC]

 

 

	
 
    	
VIOLA   MEMBERS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TJMT   HOLDINGS LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to the Third Amended and Restated

Limited Liability Company Agreement of Virtu Financial LLC]

 

 

	
 
    	
VIRTU   EMPLOYEE HOLDCO LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to the Third Amended and Restated

Limited Liability Company Agreement of Virtu Financial LLC]

 

 

	
 
    	
 
    
	
 
    	
 
    
	
 
    	
DOUGLAS   A. CIFU
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[OTHER   MEMBERS]
    

 

[Signature Page to the Third Amended and Restated

Limited Liability Company Agreement of Virtu Financial LLC]

 

 

	
 
    	
TEMASEK   EQUITYHOLDER:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HAVELOCK FUND INVESTMENTS
   PTE LTD.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

For notices and communications:

 

Temasek Holdings (Private) Limited

14th Floor, 375 Park Avenue

New York, NY 10152

Attention: Mukul Chawla

 

and

 

Temasek Holdings (Private) Limited

60b Orchard Road

#06-18 Tower 2

The Atrium@Orchard

Singapore 238891

Attention: Pradyumna Agrawal

Email: pradyumna@temasek.com.sg

 

with a copy, which shall not constitute notice, to:

 

Cravath, Swaine & Moore LLP

825 Eighth Avenue

New York, NY 10019

Telephone: (212) 474-1000

Facsimile: (212) 474-3700

Attention: Damien R. Zoubek and Ting S. Chen

 

[Signature Page to the Third Amended and Restated
 Limited Liability Company Agreement of Virtu Financial LLC]

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