Document:

Exhibit 10.10

 

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

 

of

 

VIRTU EMPLOYEE HOLDCO 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
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE II THE COMPANY
    	
13
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Formation
    	
13
    
	
Section 2.02
    	
Name
    	
13
    
	
Section 2.03
    	
Term
    	
13
    
	
Section 2.04
    	
Registered Agent and Registered Office
    	
13
    
	
Section 2.05
    	
Purposes
    	
14
    
	
Section 2.06
    	
Powers of the Company
    	
14
    
	
Section 2.07
    	
Partnership Tax Status
    	
14
    
	
Section 2.08
    	
Regulation of Internal Affairs
    	
14
    
	
Section 2.09
    	
Ownership of Property
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE III MEMBERS; BOOKS AND   RECORDS; REPORTS
    	
14
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Admission of Members
    	
14
    
	
Section 3.02
    	
Substitute Members and Additional Members
    	
16
    
	
Section 3.03
    	
Tax and Accounting Information
    	
17
    
	
Section 3.04
    	
Books and Records
    	
18
    
	
 
    	
 
    	
 
    
	
ARTICLE IV ADDITIONAL ISSUANCES   OF UNITS
    	
18
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Additional Issuances of Units
    	
18
    
	
 
    	
 
    	
 
    
	
ARTICLE V CAPITAL CONTRIBUTIONS; CAPITAL   ACCOUNTS; DISTRIBUTIONS; ALLOCATIONS
    	
18
    
	
 
    	
 
    
	
Section 5.01
    	
Capital Contributions
    	
18
    
	
Section 5.02
    	
Capital Accounts
    	
18
    
	
Section 5.03
    	
Amounts and Priority of Distributions
    	
19
    
	
Section 5.04
    	
Allocations
    	
20
    
	
Section 5.05
    	
Other Allocation Rules
    	
20
    
	
Section 5.06
    	
Tax Withholding; Withholding Advances
    	
20
    
	
 
    	
 
    	
 
    
	
ARTICLE VI CERTAIN TAX MATTERS
    	
22
    
	
 
    	
 
    
	
Section 6.01
    	
Tax Matters Partner
    	
22
    
	
Section 6.02
    	
Section 754 Election
    	
22
    
	
Section 6.03
    	
RESERVED
    	
22
    
	
Section 6.04
    	
RESERVED
    	
22
    
	
Section 6.05
    	
Debt Allocation
    	
22
    

 

i

 

	
ARTICLE VII MANAGEMENT OF THE   COMPANY
    	
22
    
	
 
    	
 
    
	
Section 7.01
    	
Management by the Manager
    	
22
    
	
Section 7.02
    	
Withdrawal or Removal of the Manager
    	
23
    
	
Section 7.03
    	
Decisions by the Members
    	
23
    
	
Section 7.04
    	
RESERVED
    	
24
    
	
Section 7.05
    	
RESERVED
    	
24
    
	
Section 7.06
    	
RESERVED
    	
24
    
	
Section 7.07
    	
WAIVER OF FIDUCIARY DUTIES
    	
24
    
	
Section 7.08
    	
Officers
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII TRANSFERS OF   INTERESTS
    	
25
    
	
 
    	
 
    
	
Section 8.01
    	
Restrictions on Transfers
    	
25
    
	
Section 8.02
    	
Exchange Elections
    	
26
    
	
Section 8.03
    	
RESERVED
    	
27
    
	
Section 8.04
    	
RESERVED
    	
27
    
	
Section 8.05
    	
RESERVED
    	
27
    
	
Section 8.06
    	
Registration of Transfers
    	
27
    
	
 
    	
 
    	
 
    
	
ARTICLE IX CERTAIN OTHER   AGREEMENTS
    	
27
    
	
 
    	
 
    
	
Section 9.01
    	
Underwriter Lock-Up Agreements
    	
27
    
	
Section 9.02
    	
RESERVED
    	
27
    
	
Section 9.03
    	
RESERVED
    	
27
    
	
Section 9.04
    	
Non-Compete; Non-Solicitation
    	
27
    
	
Section 9.05
    	
Company Call Right
    	
29
    
	
Section 9.06
    	
RESERVED
    	
31
    
	
Section 9.07
    	
RESERVED
    	
31
    
	
Section 9.08
    	
Termination of Certain Provisions
    	
31
    
	
Section 9.09
    	
Holdco
    	
31
    
	
 
    	
 
    	
 
    
	
ARTICLE X LIMITATION ON   LIABILITY, EXCULPATION AND INDEMNIFICATION
    	
31
    
	
 
    	
 
    
	
Section 10.01
    	
Limitation on Liability
    	
31
    
	
Section 10.02
    	
Exculpation and Indemnification
    	
32
    
	
 
    	
 
    	
 
    
	
ARTICLE XI DISSOLUTION AND   TERMINATION
    	
34
    
	
 
    	
 
    
	
Section 11.01
    	
Dissolution
    	
34
    
	
Section 11.02
    	
Winding Up of the Company
    	
35
    
	
Section 11.03
    	
Termination
    	
36
    
	
Section 11.04
    	
Survival
    	
36
    
	
 
    	
 
    	
 
    
	
ARTICLE XII MISCELLANEOUS
    	
36
    
	
 
    	
 
    
	
Section 12.01
    	
Expenses
    	
36
    
	
Section 12.02
    	
Further Assurances
    	
36
    
	
Section 12.03
    	
Notices
    	
36
    
	
Section 12.04
    	
Binding Effect; Benefit; Assignment
    	
37
    

 

ii

 

	
Section 12.05
    	
Jurisdiction
    	
37
    
	
Section 12.06
    	
WAIVER OF JURY TRIAL
    	
38
    
	
Section 12.07
    	
Counterparts
    	
38
    
	
Section 12.08
    	
Entire Agreement
    	
38
    
	
Section 12.09
    	
Severability
    	
38
    
	
Section 12.10
    	
Amendment
    	
38
    
	
Section 12.11
    	
Confidentiality
    	
39
    
	
Section 12.12
    	
Governing Law
    	
40
    
	
 
    	
 
    
	
Exhibit   A 
    	
Form   of Exchange Election
    	
 
    
	
Exhibit   B
    	
Lock-Up   Restrictions
    	
 
    
				

 

iii

 

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) OF VIRTU EMPLOYEE HOLDCO LLC, a Delaware limited liability company (the “Company”), dated as of [    ], 2015, by and among the Company, the Members (as defined below), Vincent Viola, an individual (“Viola”), as the initial Manager, and Virtu Financial LLC, a Delaware limited liability company (“Holdco”). 

 

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 June 24, 2011; 

 

WHEREAS, the Company, the initial Members of the Company and SLP Virtu Investors, LLC, a Delaware limited liability company, previously entered into the initial Limited Liability Company Agreement of the Company, dated as of July 8, 2011, as amended by Amendment No.1 on December 28, 2011 and Amendment No. 2 on May 1, 2013 (the “Initial LLC Agreement”); 

 

WHEREAS, pursuant to the Amended and Restated Limited Liability Company Agreement of Holdco, dated as of April 17, 2011, and effective as of July 8, 2011, by and among Holdco and the members thereof, 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 and restated by the Second Amended and Restated Limited Liability Company Agreement of Holdco, dated and effective as of December 31, 2014) (the “Second A&R LLC Agreement”), Holdco has previously issued Class A-2 Profits Interests of Holdco (“Holdco Class A-2 Profits Interests”) and Class B Interests of Holdco (“Holdco Class B Interests”) to the Company on the terms and subject to the conditions set forth therein; 

 

WHEREAS, pursuant to certain letters and notices of grant or issuance, by and between each of the Members, on the one hand, and the Company, on the other hand (the “Grants”), each Member has previously been awarded the right to receive Class A-2 Profits Interests and/or Class B Interests (each as defined below) that correspond to Holdco Class A-2 Profits Interests and/or Holdco Class B Interests, as the case may be, held by the Company, in each case, on the terms and subject to the conditions set forth therein; 

 

WHEREAS, pursuant to the Liquidation Agreement, dated as of the date hereof, by and among Virtu East MIP LLC, a Delaware limited liability company (“East MIP”), Holdco, the members of East MIP and the Company (the “East MIP Liquidation Agreement”), among other things, (i) East MIP has contributed to the Company certain Holdco Class A-2 Capital Interests in exchange for an equal number of Class A-2 Capital Interests of the Company and, (ii) East MIP has distributed such Class A-2 Capital Interests to certain Members.  

 

 

WHEREAS, pursuant to the terms of the Reorganization Agreement (the “Reorganization Agreement”), dated as of the date hereof, by and among the Company, Holdco, Virtu Financial, Inc., a Delaware corporation (“Pubco”), and the other Persons listed on the signature pages thereto, the parties thereto have agreed to consummate the reorganization of Holdco 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”); and 

 

WHEREAS, effective upon the Reorganization, pursuant to Section [2.1(b)(vi)] of the Reorganization Agreement, Holdco adopted the Third Amended and Restated Limited Liability Company Agreement of Holdco, dated as of the date hereof (as the same may be amended from time to time, the “Holdco LLC Agreement”), whereby, among other things, Holdco reclassified each Holdco Class A-2 Capital Interest, Holdco Class A-2 Profits Interest and Holdco Class B Interest outstanding immediately prior to the Reorganization into Common Units of Holdco (“Holdco Common Units”). 

 

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 Initial 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. 

 

 “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. 

 

“Agreement” means this Limited Liability Company Agreement of the Company, as the same may be amended from time to time. 

 

“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  

 

2

 

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. 

 

“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 contributed to the Company by such Member equal to the “Capital Contribution” (if any, and as defined in the Holdco LLC Agreement) contributed by the Company to Holdco with respect to the Attributable Units held or purchased by the Company on behalf of such Member. 

 

“Class A-2 Capital Interests” means Class A-2 limited liability company capital interests of the Company.  Pursuant to the East MIP Liquidation Agreement, (i) such Class A-2 Capital Interests were issued to East MIP in consideration for the contribution of Holdco Class A-2 Capital Interests and (ii) subsequently distributed to certain Members who were Class B Members of East MIP.  Each Holdco Class A-2 Capital Interest so contributed to the Company shall be deemed to be the Attributable Interest (as such term was defined in the Initial LLC Agreement) of one Company Class A-2 Capital Interest so distributed by the Company pursuant to the East MIP Liquidation Agreement.  All Class A-2 Capital Interests have been reclassified into Common Units pursuant to the Reorganization Agreement and this Agreement.  

 

3

 

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

 

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

 

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

 

“Common Unit” means a common limited liability company interest in the Company that corresponds to a Holdco Common Unit issued by Holdco to the Company for the benefit of such Member. 

 

“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 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  

 

4

 

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 Holdco 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 Manager.  For the sake of clarity, in the case of a subsidiary, division, unit, group or portion whose primary business is described above: (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.  

 

5

 

“Covered Person” means (i) each Member 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, (iii) each officer, director, shareholder, member, partner, employee, representative, agent or trustee of Holdco, the managing member of Holdco, Pubco (in the event Pubco is not the managing member of Holdco), the Company or an Affiliate controlled thereby, (iv) the Manager and (v) Holdco, in all cases in such capacity. 

 

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

 

“Disposition Event” has the meaning set forth in the certificate of incorporation of Pubco. 

 

“Employee Equity Letters” means those certain Unit Vesting, Equity Retention and Restrictive Covenant Agreements by and between Pubco, Holdco and/or the Members, in each case dated as of the date hereof. 

 

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

 

“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. 

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended. 

 

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

 

“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 Manager.  

 

6

 

“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.

 

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

 

“Holdco Percentage Interest” means “Percentage Interest” (as such term is defined in the Holdco LLC Agreement).

 

“Holdco Units” means Holdco Common Units and any other Equity Securities of Holdco held by the 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.

 

“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).

 

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

 

“Limited Ownership Minimum” has the meaning set forth in the Holdco LLC Agreement.

 

“Manager” means Viola so long as Viola has not withdrawn or been removed as the Manager pursuant to Section 7.02.

 

7

 

“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.

 

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

 

“Net Income” and “Net Loss” mean, for each Fiscal Year or other period,   the “Net Income” and “Net Loss” (each term, as defined in the Holdco LLC Agreement) of the Company relating to the Attributable Units, as adjusted from time to time pursuant to the Holdco LLC Agreement.

 

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

 

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

 

“Percentage Interest” means, as of any time of determination with respect to any Member, the Holdco Percentage Interest relating to the Attributable Units of such Member, as adjusted from time to time pursuant to the Holdco LLC Agreement.

 

The sum of the outstanding Percentage Interests of all Members shall at all times equal the sum of the Holdco Percentage Interests attributable to the Holdco Units held by the Company.

 

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

 

“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.

 

“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 Board” means the board of directors of Pubco.

 

“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.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date hereof, by and among Pubco and the stockholders party thereto.

 

8

 

“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, Holdco or any of Holdco’s Subsidiaries.

 

“Regulatory Disqualification” means, with respect to any Person, that Person being subject to (i) “statutory disqualification”, as such term is defined in the Exchange Act, or (ii) any other disqualification that would be a basis for censure, limitations on the activities, functions, or operations of, or suspension or revocation of any registration, license or permit of Holdco, the Company or any of their respective Affiliates by any Governmental Authority or Regulatory Agency.

 

“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 Documents” means the Reorganization Agreement, this Agreement, the Holdco LLC Agreement, the Tax Receivable Agreement, the Exchange Agreement, the Registration Rights Agreement, the Employee Equity Letters, the MIP and the Equity Purchase Agreements.

 

“Restricted Members” means the Members (regardless of whether or not such Persons continue to own Units) other than (i) any Persons identified on Schedule B(1) and (ii) any other Member who is a member of the Pubco Board but not otherwise an employee of Pubco, Holdco or any of their respective Controlled Affiliates.

 

“Separation Date” means (i) with respect to any Member that is an employee of Pubco, Holdco or any of their respective Controlled Affiliates, such Member’s Termination Date or (ii) with respect to any Member that is a member of the Pubco Board but not otherwise an employee of Pubco, Holdco or any of their respective Controlled Affiliates, such time as the Member ceases to be a member of such board.

 

	
(1)
    	
Note   to Draft: To include non-employee directors that have   previously been awarded Class A-2 Profits Interests.
    

 

9

 

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

 

“SL Member” has the meaning set forth in the Holdco LLC Agreement.

 

“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 Holdco 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 Manager.

 

“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 any “Tax Distribution” (if any, and as defined in the Holdco LLC Agreement) made by the Company with respect to the Attributable Units.

 

“Tax Receivable Agreement” means the Tax Receivable Agreement by and among Pubco, the Company and the other persons listed on the signature pages thereto, dated as of the date hereof.

 

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

 

“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.

 

10

 

“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 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.

 

“Vested Common Unit” means, on any date of determination, any 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 Member” has the meaning set forth in the Holdco LLC Agreement.

 

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

 

	
Term
    	
 
    	
Section
    
	
Agreement
    	
 
    	
Preamble
    
	
Attributable   Call Securities
    	
 
    	
9.05(a)
    
	
Attributable   Securities
    	
 
    	
3.01(a)
    
	
Attributable   Shares
    	
 
    	
3.01(a)
    
	
Attributable   Units
    	
 
    	
3.01(a)
    
	
Call   Members
    	
 
    	
9.05(a)
    
	
Call   Notice
    	
 
    	
9.05(a)
    
	
Call   Price
    	
 
    	
9.05(a)
    
	
Call   Units
    	
 
    	
9.05(a)
    
	
Company
    	
 
    	
Preamble
    
	
Company   Note
    	
 
    	
9.05(c)
    
	
Company   Parties
    	
 
    	
9.04(b)
    
	
Confidential   Information
    	
 
    	
12.11(b)
    
	
Controlled   Entities
    	
 
    	
10.02(e)
    
	
Dissolution   Event
    	
 
    	
11.01(c)
    
	
e-mail
    	
 
    	
12.03
    
	
East   MIP
    	
 
    	
Recitals
    
	
East   MIP Liquidation Agreement
    	
 
    	
Recitals
    
	
Exchange   Election
    	
 
    	
8.02(a)
    
	
Expenses
    	
 
    	
10.02(e)
    
	
GAAP
    	
 
    	
3.03(b)
    

 

11

 

	
Term
    	
 
    	
Section
    
	
Grants
    	
 
    	
Recitals
    
	
Holdco
    	
 
    	
Preamble
    
	
Holdco   Class A-2 Capital Interests
    	
 
    	
Recitals
    
	
Holdco   Class A-2 Profits Interests
    	
 
    	
Recitals
    
	
Holdco   Class B Interests
    	
 
    	
Recitals
    
	
Holdco   Common Units
    	
 
    	
Recitals
    
	
Holdco   LLC Agreement
    	
 
    	
Recitals
    
	
Indemnification   Sources
    	
 
    	
10.02(e)
    
	
Indemnitee-Related   Entities
    	
 
    	
10.02(e)(i)
    
	
Initial   LLC Agreement
    	
 
    	
Recitals
    
	
Investment   Company Act
    	
 
    	
8.01(c)
    
	
Jointly   Indemnifiable Claims
    	
 
    	
10.02(e)(ii)
    
	
Member   Parties
    	
 
    	
12.11(a)
    
	
Member   Schedule
    	
 
    	
3.01(b)
    
	
Minimum   Annual Payment
    	
 
    	
9.05(e)
    
	
Officers
    	
 
    	
7.08(a)
    
	
PROCESS   AGENT
    	
 
    	
12.05(b)
    
	
Pubco
    	
 
    	
Recitals
    
	
Reorganization
    	
 
    	
Recitals
    
	
Reorganization   Agreement
    	
 
    	
Recitals
    
	
Section 754   Election
    	
 
    	
6.02
    
	
Tax   Matters Partner
    	
 
    	
6.01
    
	
Transferring   Member
    	
 
    	
5.02(b)
    
	
Viola
    	
 
    	
Preamble
    
	
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 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, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified.  All Exhibits and 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 Exhibit or 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

 

12

 

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 June 24, 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 shall be governed by the terms and conditions of this Agreement and, except as provided herein, the Delaware Act.

 

Section 2.02                             Name.  The name of the Company is “Virtu Employee Holdco LLC.”  The Company’s business may be conducted under any other name or names deemed advisable by the Manager.

 

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

 

13

 

State of Delaware and any successor registered agent, respectively, as may be determined from time to time by the Manager 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 purchase, sell and hold Holdco Units, shares of Pubco Common Stock and any other Equity Securities of Holdco or Pubco and to carry on any other lawful act or activities consistent therewith and incidental thereto.

 

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 Manager.

 

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

 

ARTICLE III

 

MEMBERS; BOOKS AND RECORDS; REPORTS

 

Section 3.01                             Admission of Members.

 

(a)                                 The Company has been established as a special purpose investment vehicle through which the Members indirectly hold Equity Securities in Holdco (the “Attributable Units”).  Effective upon the Reorganization, pursuant to [Section 2.1(b)(xviii)] of the Reorganization Agreement, the Company has hereby reclassified each Class A-2 Capital Interest, Class A-2 Profits Interest and Class B Interest outstanding as of immediately prior to the Form 8-A Effective Time (as such term is defined in the Reorganization Agreement) into a number of Common Units equal to the number of Holdco Common Units into which such Class A-2 Capital Interest’s, Class A-2 Profits Interest’s or Class-B Interest’s Attributable Interest (as each such term was defined in the Initial LLC Agreement), as the case may be, has been reclassified pursuant to Section 2.1(b)(vi) of the Reorganization Agreement.   In connection with such reclassification, Common Units reclassified from Class A-2 Capital Interests, Class A-2 Profits Interests or Class B Interests that were subject to vesting

 

14

 

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.  The number and terms of the Common Units held by the Members shall at all times be identical to the number and terms of the Attributable Units that correspond to such Common Units.  In addition to such Attributable Units, the Company shall also hold for the benefit of such Member any corresponding shares of Pubco Common Stock constituting the remainder of any Paired Interests in which such Attributable Units are included (the “Attributable Shares” and, together with any Attributable Units, “Attributable Securities”).

 

(b)                                 After giving effect to the reclassification described in the second sentence of this Section 3.01(a), each of the Members owns the number of Common Units set forth opposite such Member’s name on the schedule maintained by the Manager on behalf of the Company in accordance herewith (the “Member Schedule”).  The Member Schedule shall also include the number and class of Attributable Securities corresponding to such Common Units.  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 (as such term is defined in the Holdco LLC Agreement) attributable to such Member’s Attributable Interests, the resulting number of Common Units then owned thereby and the number of Attributable Securities that correspond to such Common Units.  The Member Schedule shall be maintained by the Manager on behalf of the Company in accordance with this Agreement.

 

(c)                                  From time to time, as determined by the Manager in accordance with the MIP and subject to Section 3.01 of the Holdco LLC Agreement, if Holdco and/or Pubco issues one or more series of Attributable Securities to the Company for the benefit of Persons employed by or otherwise performing services for Holdco or any of its Subsidiaries in accordance with the Holdco LLC Agreement, then the Company shall admit as a Member (if such Person is not already a Member) and issue to such Member Units that shall correspond to the Attributable Securities issued to the Company for the benefit of such Person.

 

(d)                                 When any Attributable Units that have been issued to the Company for the benefit of any Person employed by or otherwise performing services for Holdco are issued, repurchased, redeemed, converted, changed or forfeited (including with respect to Percentage Interest) by Holdco in accordance with the Holdco LLC Agreement, (i) Pubco shall, to the extent applicable, issue, repurchase, redeem, convert, change or forfeit, as the case may be, any shares of Pubco Common Stock constituting the remainder of any Paired Interests in which such Attributable Units are included and (ii) the Company shall, except to the extent otherwise set forth herein, accordingly issue, repurchase, redeem, convert, change or forfeit, as the case may be, the Units to which such Attributable Securities correspond, and the Member Schedule shall be amended by the Manager to reflect such issuance, repurchase, redemption, conversion or change and the resulting Percentage Interest of each Member.  The Company shall not issue, repurchase, redeem, convert, change or forfeit, as the case may be, any Units unless (x) Holdco has issued, repurchased, redeemed, converted, changed or forfeited, as the case

 

15

 

may be, Attributable Units to which such Units correspond and (y) Pubco has, to the extent applicable, issued, repurchased, redeemed, converted, changed or forfeited, as the case may be, any shares of Pubco Common Stock constituting the remainder of any Paired Interests in which such Attributable Units are included.  In addition, when any Units are Transferred in accordance with this Agreement, the Member Schedule shall be amended by the Manager to reflect such Transfer, the admission of additional or substitute Members and the resulting Percentage Interest of 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.

 

(e)                                  Unvested Common Units shall be subject to the terms of the MIP and any applicable Employee Equity Letters, and the managing member of Holdco 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 Unvested Common Units that correspond to Participating Unvested Common Units (as such term is defined in the Holdco LLC Agreement)).  Unvested Common Units that fail to vest and are forfeited by the applicable Member shall be cancelled by the Company 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 Manager 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, 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.

 

16

 

(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 Manager in accordance with Applicable Law and with accounting methods followed for federal income tax purposes.  In making such decisions, the Manager 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.  If determined by the Manager, the books and records of the Company may be audited as of the end of each Fiscal Year by an accounting firm selected by the Manager.

 

(d)                                 Tax Returns.

 

(i)                                     The Company shall cause to be prepared by an accounting firm federal, state, local and foreign tax returns (including information returns) of the Company, which may be required by a jurisdiction in which the Company, Holdco and Holdco’s 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 filed.

 

(ii)                                  The Company shall furnish to each Member (a) all information concerning the Company 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; (b) 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) such other information concerning the Company 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.

 

(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.

 

17

 

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 Member shall have any right to inspect the books and records of the Company or any of its Subsidiaries.

 

ARTICLE IV

 

ADDITIONAL ISSUANCES OF UNITS

 

Section 4.01                             Additional Issuances of Units.  The Company shall not issue any interests or other Equity Securities, except for Units issued to Persons employed by or otherwise performing services for Holdco or any of its Subsidiaries in connection with an issuance by Holdco to the Company of Attributable Units for the benefit of such Persons and any applicable issuance by Pubco of any shares of Pubco Common Stock constituting the remainder of any Paired Interests in which such Attributable Units are included.

 

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.

 

(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 equal to the share of the Capital Account (as defined in the Holdco LLC Agreement) of the Company attributable to the Attributable Units of such Member, as adjusted from time to time pursuant to the Holdco LLC Agreement in accordance with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv); provided, that if Holdco ceases to maintain Capital Accounts (as defined in the Holdco LLC Agreement), the Manager shall be authorized to establish and maintain a Capital Account for each Member on the books of the Company on an equitable basis and in accordance with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv).

 

18

 

(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 “Transferring Member”) to the extent such Capital Account relates to the Transferred Units.

 

(c)                                  RESERVED.

 

(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 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 a Member as set forth in this Section 5.03, at such times and in such amounts as made by Holdco in respect of such Member’s Attributable Units.

 

(b)                                 Distributions to the Members.  Subject to Section 5.03(e) and Section 5.03(f), the Company shall promptly distribute to a Member the proceeds of any distribution received by the Company from Holdco in respect of such Member’s Attributable Units.

 

(c)                                  RESERVED.

 

(d)                                 Distributions in Kind.  Except for Holdco Units or shares of Pubco Common Stock, if any, received by the Company in respect of such Member’s Attributable Units, the Company shall promptly distribute to a Member any in kind distribution received by the Company from Holdco in respect of such Member’s Attributable Units.

 

(e)                                  Tax Distributions.  Promptly following receipt by the Company of any Tax Distribution in respect of the Attributable Units of a Member, the Company shall distribute the proceeds of such Tax Distribution to such Member.

 

(f)                                   Pre-IPO Profits Distribution.  Notwithstanding Section 5.03(b), any distributions made to the Company by Holdco pursuant to Section 5.03(f) of

 

19

 

the Holdco LLC Agreement shall be distributed to the Members that held Class A-2 Profits Interests as of immediately prior to the Reorganization, in proportion to their respective Available Cash Flow Percentages (as such term was defined in the Initial LLC Agreement) as of immediately prior to the Reorganization.

 

Section 5.04                             Allocations.  All items of income, gain, loss or deduction of the Company for any Fiscal Year shall be allocated among the Members in a manner consistent with the allocations of income, gain, loss or deduction provided for in the Holdco LLC Agreement as if the Members held directly their Attributable Units; provided, that the Manager may make such adjustments as it deems necessary or appropriate in order to effectuate the intended economic arrangement of the Members.

 

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’ Units in the Company change pursuant to the terms of the Agreement during any Fiscal Year, the amount of income, gain, loss or deduction (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 Transferring Member with respect to the transferred Units.

 

Section 5.06                             Tax Withholding; Withholding Advances.

 

(a)                                 Tax Withholding.

 

(i)                                     If requested by the Manager, each Member shall, if able to do so, deliver to the Manager:  (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

 

20

 

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.

 

(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 Manager 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).

 

21

 

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 designated by the Manager.  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, subject to, in each case, the authority of the Manager in connection therewith.  The Manager 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.  The Manager and the Tax Matters Partner shall be entitled to be reimbursed by the Company for all reasonable third-party costs and expenses incurred by them in connection with any administrative or judicial proceeding affecting tax matters of the Company and the Members in their capacity as such.  Neither the Manager nor the Tax Matters Partner shall 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 Manager of such settlement agreement and its terms within thirty (30) calendar days after the date of settlement.  This provision shall survive any termination of this Agreement.

 

Section 6.02                             Section 754 Election.  The Company has previously made Company an election (a “Section 754 Election”) under Section 754 of the Code (and a corresponding election under state and local law).

 

Section 6.03                             RESERVED.

 

Section 6.04                             RESERVED.

 

Section 6.05                             Debt Allocation.  Indebtedness of the Company treated as a “nonrecourse liability” (as defined in Treasury Regulation Section 1.752-1(a)(2)) shall be allocated to the Members based on their Relative Percentage Interests.

 

ARTICLE VII

 

MANAGEMENT OF THE COMPANY

 

Section 7.01                             Management by the Manager.  Except as otherwise specifically set forth in this Agreement, the Manager 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 shall be managed, operated and controlled by the Manager in accordance with the terms of this Agreement and no other Members shall have management authority or rights over the Company.  The Manager is, to the extent of its rights and powers set forth in this

 

22

 

Agreement, an agent of the Company for the purpose of the Company’s business, and the actions of the Manager 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 Manager shall have all necessary powers to carry out the purposes, business, and objectives of the Company.  The Manager may delegate to Members, employees, officers or agents of the Company in his discretion the authority to sign agreements and other documents on behalf of the Company.

 

Section 7.02                             Withdrawal or Removal of the Manager.  Viola shall be the Manager until such time as he withdraws as Manager or is removed by Holdco, at which time Holdco or its designee shall be appointed as and have all rights and obligations of the Manager set forth herein and all references to the authority and discretion of the “Manager” herein shall be deemed to refer to the authority and discretion of Holdco acting by action of its managing member pursuant to Section 7.01 of the Holdco LLC Agreement.

 

Section 7.03                             Decisions by the Members.

 

(a)                                 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.  For the avoidance of doubt, except as otherwise determined by the Manager (including pursuant to Section 9.09), no Member shall have the right to grant or otherwise determine any vote, approval or consent with respect any Attributable Securities held on behalf of such Member if and until such Attributable Securities have been distributed to such Member or are otherwise held directly thereby and, until such time, the Company shall retain all power and authority to provide any vote, approval or consent with respect to such Attributable Securities at the direction of the Manager; provided that, with respect to any election of directors of the Pubco Board, the Manager shall direct the Company to vote any Attributable Securities entitled to vote in such election in favor of the nominees recommended by the Pubco Board.

 

(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 the Manager and a majority in interest of the Members or such class of Members, as the case may be, by (i) resolution at a duly convened meeting of the Members or such class of Members, as the case may be, or (ii) written consent of the Manager and a majority in interest of the Members or such class of Members, as the case may be, in each case, based on the Relative Percentage Interests thereof.  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.  In

 

23

 

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.

 

Section 7.07                             WAIVER OF FIDUCIARY DUTIES. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW AND NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED HEREIN OR APPLICABLE PROVISIONS OF LAW OR EQUITY OR OTHERWISE, THE PARTIES HERETO HEREBY AGREE THAT PURSUANT TO THE AUTHORITY OF SECTIONS 18-1101(c)-(e) OF THE DELAWARE ACT, THE PARTIES HERETO HEREBY ELIMINATE ANY AND ALL FIDUCIARY DUTIES THE MANAGER OR ANY MEMBER MAY HAVE TO SUCH PARTIES HEREUNDER AND HEREBY AGREE THAT THE MANAGER AND THE MEMBERS SHALL HAVE NO FIDUCIARY DUTY HEREUNDER TO THE COMPANY OR ANY OTHER MEMBER OR OTHER PARTY TO THIS AGREEMENT, PROVIDED THAT SUCH EXCLUSION OR LIMITATION OF LIABILITY SHALL NOT EXTEND TO MISAPPROPRIATION OF ASSETS OR FUNDS OF THE COMPANY OR OTHER ACTS OR OMISSIONS THAT CONSTITUTE A BAD FAITH VIOLATION OF THE IMPLIED CONTRACTUAL COVENANT OF GOOD FAITH AND FAIR DEALING.

 

Section 7.08                             Officers.

 

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

 

24

 

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

 

(c)                                  Removal, Resignation and Filling of Vacancy of Officers.  The Manager 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 Manager.

 

ARTICLE VIII

 

TRANSFERS OF INTERESTS

 

Section 8.01                             Restrictions on Transfers.

 

(a)                                 Except as expressly permitted by Section 8.02 (only to the extent permitted by Section 8.01(b), Section 8.01(c), Section 8.01(d), Section 8.01(e), any underwriter lock-up agreement applicable to such Member, such Member’s Employee Equity Letter and/or any other agreement between such Member and the Company, Holdco, Pubco or any of their Controlled Affiliates), without the prior written approval of the Manager, 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.

 

(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; and

 

(ii)                                  the Transfer shall comply with all Applicable Laws and not result in any Regulatory Disqualification.

 

(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, in the reasonable discretion of the Manager, such Transfer would cause the Company (i) to be classified as a “publicly traded partnership” as that term is defined in Section 7704 of the Code and the

 

25

 

Regulations promulgated thereunder or (ii) require the Company to be registered as an investment company under the United States Investment Company Act of 1940 (the “Investment Company Act”).  In addition, notwithstanding any provision of this Agreement to the contrary, to the extent the Units do not meet the requirements of Treasury Regulation Section 1.7704-1(h), the Manager shall impose such restrictions on the direct or indirect Transfer of Units or other interests in the Company as are necessary or advisable so that the Company is not treated as a publicly traded partnership taxable as a corporation under Section 7704 of the Code.

 

(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, any Transfer of Units by any Restricted Member shall be subject to the restrictions on Transfer attached hereto as Exhibit B.

 

Section 8.02                             Exchange Elections.

 

(a)                                 Subject to Section 8.02(b), a Member may receive shares of Class A Common Stock (to the extent such shares of Class A Common Stock may be Transferred pursuant to such Member’s Employee Equity Letter) as contemplated by this Section 8.02(a), subject to the delivery to the Company of a written election in the form attached hereto as Exhibit A of its intention to receive such shares of Class A Common Stock (a “Exchange Election”) and compliance with this Section 8.02(a).  The Manager shall select for the consummation of the transactions contemplated by such Exchange Election a date not later than thirty (30) calendar days (or, if later, as required under Applicable Law) after receipt of such Exchange Election.  On such date, if the Company has not previously elected to exercise its repurchase rights pursuant to Section 9.05 to the extent applicable at such time upon receipt of such Exchange Election and as contemplated thereby, (i) the Manager shall cause the Company to distribute to such Transferring Member the Attributable Units that correspond to any Vested Common Units designated to be Transferred in such Exchange Election (together with any shares of Class A Common Stock constituting the remainder of any Paired Interests in which such Attributable Units were included), which Vested Common Units shall be cancelled in full redemption thereof without any further consideration being paid to such Vested Common Units other than amounts (if any) actually paid to the Company under the Tax Receivable Agreement in respect of such Attributable Securities (and, to the extent such Transferring Member no longer owns any other Units, such Transferring Member shall cease to be a Member of the Company), (ii) the Company shall assign to such Member, and such Member shall assume, the Company’s rights and obligations under the Exchange Agreement, the Registration Rights Agreement and the Holdco LLC Agreement, in each case, solely to the extent applicable to such Attributable Securities and (iii) such Transferring Member shall immediately exchange such Attributable Securities for shares of Class A Common Stock pursuant to the Exchange Agreement (and such Transferring Member shall cease to be a Member of Holdco with respect to any

 

26

 

such Attributable Units).  Any such Transferring Member shall execute and deliver any documentation reasonably required by the Company to consummate the foregoing transactions.

 

(b)                                 Notwithstanding  Section 8.02(a), no Member shall be entitled to make an Exchange Election or otherwise Transfer any Units thereof during the period commencing on the Separation Date of the Member and ending on the earlier to occur of (i) the Company waiving in writing its right to deliver a Call Notice (as defined below) with respect to such Units pursuant to Section 9.05(a) and (ii) the Company failing to deliver a Call Notice on or prior to the date that is thirty (30) calendar days following such Separation Date with respect to such Units pursuant to Section 9.05(a).

 

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                             Underwriter Lock-Up Agreements.  Pursuant to the Initial LLC Agreement, each Member has previously appointed the Company as its true and lawful proxy and attorney-in-fact, with full power of substitution, to execute a “lock-up” agreement in respect of any Holdco Units or shares of Pubco Common Stock distributed to such Member on or after the Holdco IPO and such other documentation as has been or shall be reasonably requested by the underwriters of the Holdco IPO.

 

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, Holdco, each SL Member and each 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)                                 The 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, Holdco or any of Holdco’s

 

27

 

Subsidiaries (the “Company Parties”) until the third (3rd) anniversary following such Restricted Member’s Termination Date.

 

(c)                                  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; provided, however, that nothing in this Section 9.04(d) shall prevent any Member from (i) testifying truthfully in any legal or administrative proceeding if such testimony is compelled or requested, or (ii) complying with applicable legal requirements.

 

(e)                                  RESERVED.

 

(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, by the MTH Transaction Documents (as such term is defined in the Holdco LLC Agreement) 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 Company Parties against any Restricted Member;

 

(y)         the SL Members against any Restricted Member so long as it meets the Limited Ownership Minimum; and

 

28

 

(z)                the Viola Members against any Restricted Member 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 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)                                 (i) On or after a Member’s Separation Date or (ii) in connection with any Involuntary Transfer, Holdco or Pubco may, in Pubco’s sole discretion, elect to purchase any or all of the vested Attributable Securities (“Attributable Call Securities”) held by the Company that correspond to the Vested Common Units of such Member or, in the case of any Involuntary Transfer, that correspond to any such Units transferred to such Transferee (each such Member or Transferee, a “Call Members” and such Units, “Call Units”)) at any time by delivery of a written notice (a “Call Notice”) by the Manager to such Call Member(s) on or prior to the date that is sixty (60) calendar days following such Separation Date.  The Call Notice shall set forth the Call Price and the proposed closing date of Holdco’s or Pubco’s, as applicable, purchase of such Attributable Call Securities; provided that such closing date shall occur within ninety (90) days following the date of such Call Notice.  In the event that Holdco or Pubco do not elect to purchase any or all of Attributable Call Securities held by the Company that correspond to such Call Units, the Company may nevertheless in its sole discretion elect to purchase from such Call Member any or all of such Call Units that correspond to such Attributable Call Securities in the same manner as if Holdco and Pubco had elected to purchase such Attributable Call Securities.  At the closing of any such sale, (x) each Call Member shall deliver to the Company for cancellation its Call Units that correspond to such Attributable Call Securities, duly endorsed, or accompanied by written instruments of transfer in form satisfactory to the Company and accompanied by all requisite transfer taxes, if any in exchange for a purchase price equal to the fair market value of such Call Units (as determined by the Manager in its sole discretion) (the “Call Price”), which may be paid the form of a Company Note pursuant to Section 9.05(c), (y) such Call Units shall be free and clear of any Liens and (z) 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 Units.  Following such closing, any such Call

 

29

 

Member shall no longer be entitled to any rights in respect of such Call Units, including any distributions of the Company thereupon (other than the payment of (A) the Call Price at such closing and (B) amounts (if any) actually paid to the Company under the Tax Receivable Agreement in respect of such Attributable Call Securities), and, to the extent any such Call Member does not hold any Units thereafter, shall thereupon cease to be a Member of the Company.  Any post-termination payments in respect of such Call Units (including under the Company Note and any Minimum Annual Payments (as defined below) shall be conditioned on the Member executing and delivering (and not revoking) a waiver and release of claims satisfactory to Holdco and Pubco within 60 days following the Separation Date; provided that if such 60 day period spans two taxable years of the Member, then the first post-termination payment shall commence in the second taxable year (but in all events after the release has become effective).  Notwithstanding the definition of “Call Price”, in the event of a breach by the Member of Section 9.04, (1) the “Call Price” shall be no or nominal consideration as determined in the Manager’s sole discretion, and 2B) to the extent a Company Note has been issued to such Call Member, or consideration payable pursuant to this Section 9.05 is otherwise payable in installments (including any Minimum Annual Payment),  all remaining amounts payable to such Call Member shall be deemed forfeited.

 

(b)                                 For the avoidance of doubt, upon the Separation Date of any Member, all Unvested Common Units held by such Member shall be forfeited without the payment of any consideration.

 

(c)                                  The Company shall have the option in the Manager’s sole discretion to settle its obligations to purchase all or any portion of the Call Units pursuant to this Section 9.05 by delivery to such Call Member at the closing of the purchase of such Call Units a promissory note of Holdco in a face amount equal to the Call Price of such Call Units (a “Company Note”).  Each Company Note shall be subject to this Section 9.05 and bear interest at a rate of five percent (5%) per annum.  Each Company Note (i) shall be subordinated to the prior payment in full of all of the Company’s indebtedness for borrowed money, (ii) shall mature no later than the three-year anniversary of the date of the Call Notice and (iii) all principal and accrued interest thereon shall accrue become payable on such maturity date or, at the election of the Manager in its sole discretion, in earlier installments.

 

(d)                                 In furtherance of the foregoing, the Manager may elect, in its sole discretion, to cause the Company to, and Holdco acknowledges that the Company may, in lieu of a purchase of Call Units pursuant to Section 9.05(a), (i) distribute to such Call Member the Attributable Call Securities that correspond to such Call Units and (ii) Holdco shall repurchase such Attributable Call Securities from such Call Member for consideration (including in the form of a Company Note) equal to the consideration such Member would have received pursuant to Section 9.05(a) with respect to such Call Member’s Call Units.  Upon such a repurchase, the Call Units and Attributable Call Securities held by such Call Member shall be cancelled and such Call Member shall cease to be a Member of the Company or Holdco or a stockholder of Pubco with respect to such Call Units and Attributable Call Securities.

 

30

 

(e)                                  Notwithstanding the definition of “Call Price”, if (i) the Member is terminated by Holdco without Cause (as defined in the MIP) (and other than due to death or disability) or terminates his or her employment with or without “good reason” and (ii) payments for the repurchase of any Call Units in accordance with this Section 9.05, would result in such Call Member receiving less than the greater of (x) such Member’s annual base salary at the time of termination of employment and (y) $250,000 (such greater amount, the “Minimum Annual Payment”), per year, for the three year period following termination of employment in respect thereof, Holdco (or the Company, as applicable) may, at its sole discretion, provide such Call Member with additional amounts such that he or she receives up to the Minimum Annual Payment.

 

Section 9.06                             RESERVED.

 

Section 9.07                             RESERVED.

 

Section 9.08                             Termination of Certain Provisions.  Notwithstanding anything to the contrary herein, upon the consummation of a Disposition Event, the following provisions shall be deemed automatically terminated: Section 8.01 (but not the requirement under Section 8.01(b)(ii) that such Transfer comply with Applicable Laws and Section 8.01(c)), Section 9.05 and Section 12.10.

 

Section 9.09                             Holdco.   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 the Company and the Members, the Manager, the Company, Holdco and Pubco may treat any Member as if it were (i) a member of Holdco and a direct holder of the underlying Attributable Units owned by the Company and (ii) a stockholder of Pubco and a direct holder of the underlying Attributable Shares owned by the Company.  Accordingly, upon (x) any issuance of additional Holdco Units or shares of Pubco Common Stock to the Company for the benefit of any Member (or the occurrence of any event that causes the repurchase or forfeiture of any Holdco Units or shares of Pubco Common Stock), (y) the Transfer of Holdco Units or shares of Pubco Common Stock by the Company or (z) any merger, consolidation, sale of all or substantially all of the assets of Holdco, issuance of debt or other similar capital transaction of Holdco, the Manager, the Company and/or Holdco may take any action or make any adjustment with respect to the Units to replicate, as closely as possible, such actions (including the effects thereof), and the Members shall take all actions reasonably requested by the Manager in connection therewith and this Section 9.09.

 

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

 

31

 

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)                                 No Covered Person described in clause (iii), (iv) or (v) 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 or (ii) results from the breach by any Member (in such capacity) of its contractual obligations under this Agreement (including Section 9.04).  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 (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

 

32

 

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 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

 

33

 

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 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.

 

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

 

34

 

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 Manager.

 

(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.

 

Section 11.02                      Winding Up of the Company.

 

(a)                                 The Manager shall promptly notify the other Members of any Dissolution Event.  Upon dissolution, the Company’s business shall be liquidated in an orderly manner.  The Manager 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,

 

35

 

corresponding as nearly as possible to such Member’s Relative 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.

 

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.

 

ARTICLE XII

 

MISCELLANEOUS

 

Section 12.01                      Expenses.  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; provided that Holdco shall reimburse the Manager and the Company for any reasonable expenses incurred on behalf of the Company in accordance with the business and operations of the Company conducted in accordance with the terms hereof.

 

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 law or as, in the reasonable judgment of the Manager, 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 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.

 

36

 

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 Manager.

 

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 BY CERTIFIED MAIL AT THE ADDRESS SPECIFIED FOR SUCH PARTY ON THE MEMBER SCHEDULE HERETO OR TO SUCH OTHER ADDRESS AS SUCH PARTY MAY HEREAFTER SPECIFY FOR THE PURPOSE BY NOTICE TO THE OTHER PARTIES HERETO.

 

37

 

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 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 other Reorganization Documents and the Grants 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 hereto, except to the extent provided herein with respect to Indemnitee-Related Entities, SL Members, Holdco or Pubco, 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.  This Agreement can be amended at any time and from time to time by (i) the Manager and (ii) Holdco without the prior written consent of the Members; provided that without the prior written consent of the SL

 

38

 

Members, no amendment to this Agreement may adversely modify the express rights of the SL Members set forth in Section 9.04 (only so long as the SL Members are entitled to such express rights), Section 12.08 and this Section 12.10.

 

Section 12.11                      Confidentiality.

 

(a)                                 Each of the Members 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 “Member Parties”) who have access to Confidential Information to, keep confidential and not disclose any Confidential Information to any Person other than a Member 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 or, in the case of Confidential Information acquired from another Member, such other Member, 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 Member or its Affiliates;

 

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

 

(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 Manager 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.

 

(b)                                 “Confidential Information” means any information related to the activities of the Company, the Members and their respective Affiliates that a Member may acquire from the Company or the Members, other than information that (i) is already available through publicly available sources of information (other than as a result of disclosure by such Member), (ii) was available to a Member on a non-confidential basis prior to its disclosure to such Member by the Company, or (iii) becomes available to a Member on a non-confidential basis from a third party, provided such third party is not known by such Member, 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 Member or any other Company matters. Confidential Information may be used by a Member and its Member Parties only in connection with Company matters and in connection with the maintenance of its interest in the Company.

 

39

 

(c)                                  In the event that any Member or any Member Parties of such Member is required to disclose any of the Confidential Information, such Member 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 Member 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 Member and its Member 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 Member may disclose to (i) any persons the U.S. federal income tax treatment and tax structure of the Company or (ii) any subsequent employer the restrictions to which such Member is subject to pursuant to Section 9.04.  For purposes of clause (i), “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 Member.

 

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

 

[signature pages follow]

 

40

 

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

 

 

 

	
 
    	
VIRTU   EMPLOYEE HOLDCO LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
VIRTU   FINANCIAL LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
VINCENT   VIOLA
    

 

[Signature Page to Amended and Restated Limited Liability Company Agreement of Virtu Employee Holdco LLC]

 

 

Exhibit A
  Form of Exchange Election

 

[To come.]

 

A-1

 

Exhibit B
  Lock-Up Restrictions

 

(a)                                 Except as otherwise provided in this Exhibit B, without the prior written consent of Pubco, the Restricted Member will not directly or indirectly Transfer all or any part of its Pre-IPO Securities or any right or economic interest pertaining thereto, including the right to vote or consent on any matter or receive or have any economic interest in distributions or advances from Pubco or Holdco pursuant thereto (the foregoing restrictions are hereinafter referred to as the “Lock-Up Restrictions”).

 

(b)                                 Except as may be otherwise expressly provided in such Restricted Member’s Employee Equity Letter, the Lock-Up Restrictions shall cease to apply to the Pre-IPO Securities as follows:

 

(i)                                     upon the consummation of the Holdco IPO, each Restricted Member may Transfer up to 15% of its Pre-IPO Securities pursuant to the Equity Purchase Agreements, to the extent such Pre-IPO Securities have vested;

 

(ii)                                  on and after the first (1st) anniversary of the consummation of the Holdco IPO, each Restricted Member may Transfer up to a cumulative 30% of its Pre-IPO Securities, to the extent such Pre-IPO Securities have vested;

 

(iii)                               on and after the second (2nd) anniversary of the consummation of the Holdco IPO, each Restricted Member may Transfer up to a cumulative 45% of its Pre-IPO Securities, to the extent such Pre-IPO Securities have vested;

 

(iv)                              on and after the third (3rd) anniversary of the consummation of the Holdco IPO, each Restricted Member may Transfer up to a cumulative 60% of its Pre-IPO Securities, to the extent such Pre-IPO Securities have vested;

 

(v)                                 on and after the fourth (4th) anniversary of the consummation of the Holdco IPO, each Restricted Member may Transfer up to a cumulative 75% of its Pre-IPO Securities, to the extent such Pre-IPO Securities have vested;

 

(vi)                              on and after the fifth (5th) anniversary of the consummation of the Holdco IPO, each Restricted Member may Transfer up to a cumulative 90% of its Pre-IPO Securities, to the extent such Pre-IPO Securities have vested; and

 

(vii)                           on and after the sixth (6th) anniversary of the consummation of the Holdco IPO, the Lock-Up Restrictions shall no longer apply, and each Restricted Member may Transfer any or all of its remaining Pre-IPO Securities, to the extent such Pre-IPO Securities have vested.

 

B-1

 

(c)                                  For the purposes of paragraph (b) of this Exhibit B, the percentage of Pre-IPO Securities permitted to be Transferred shall be determined based on the total number of shares of Class A Common Stock owned by each Restricted Member as of the date hereof (including any Pre-IPO Securities to be sold thereby pursuant to the Equity Purchase Agreements, but excluding any shares of Class A Common Stock underlying awards under the Virtu Financial, Inc. 2015 Management Incentive Plan (the “Pubco MIP”) made thereto in connection with the IPO) (“IPO Grants”)), in each case, determined on an “as-converted” basis based on the number of shares of Class A Common Stock, in the aggregate and without duplication, into which the Pre-IPO Securities owned of record thereby (whether vested or unvested) are directly or indirectly convertible or exchangeable; provided that, for the purposes of clause (b)(i) only, such total number of Pre-IPO Securities owned by such Restricted Member shall be determined based on the number of such Pre-IPO Securities that would have been owned thereby as of the date of the Reorganization assuming that, for the purposes of reclassifying the limited liability company interests of Holdco into Holdco Common Units pursuant to Section 2.1(b)(vi) of the Reorganization Agreement, the Midpoint Liquidation Value was the hypothetical liquidation value of Holdco and the IPO price per share of the Class A Common Stock was the IPO Price Range Midpoint.

 

(d)                                 Notwithstanding anything herein to the contrary in this Exhibit B, the Lock-Up Restrictions shall not apply to (i) shares of Pubco Common Stock and any securities then convertible into or exchangeable for shares of Pubco Common Stock acquired (x) in open market transactions after the completion of the IPO or (y) pursuant to awards under the Pubco MIP (including any IPO Grants), (ii) the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act, for the Transfer of shares of Pubco Common Stock; provided that such plan does not provide for the Transfer of shares of Pubco Common Stock not otherwise permitted pursuant to clause (b) above, (iii) the granting of a revocable proxy to officers or directors of Pubco at the request of the Pubco Board in connection with actions to be taken at annual or special meetings of stockholders or in connection with any action by written consent of the stockholders solicited by the Pubco Board (at such times as action by written consent of stockholders is permitted under the certificate of incorporation of Pubco), (iv) entering into a voting trust, agreement or arrangement (with or without granting a proxy) solely with Pubco and/or its stockholders that (A) is disclosed in writing to the Secretary of Pubco, (B) either has a term not exceeding one (1) year or is terminable by such Restricted Member at any time and (C) does not involve any payment of cash, securities, property or other consideration to such Restricted Member other than the mutual promise to vote Pre-IPO Securities in a designated manner, (v) entering into a customary voting or support agreement (with or without granting a proxy) in connection with  any merger, consolidation or other business combination of Pubco, whether effectuated through one transaction or series of related transactions (including a tender offer followed by a merger in which holders of Class A Common Stock  receive the same consideration per share paid in the tender offer) (a “Business Combination”), (vi) the fact that the spouse of such Restricted Member possesses or obtains an interest in such holder’s Pre-IPO Securities arising solely by reason of the application of the community property laws of any jurisdiction, so long as no other event or circumstance shall exist or have occurred that constitutes a Transfer of such shares of Pre-IPO Securities, (vii) any Transfer in

 

B-2

 

connection with, and as contemplated by, the Reorganization Agreement, (viii) any Transfer pursuant to any Business Combination and, to the extent such Business Combination is a Disposition Event, following such Disposition Event (it being understood and agreed that, to the extent such Business Combination is not a Disposition Event, the Lock-Up Restrictions shall continue to apply to any securities into which such Pre-IPO Securities are exchanged or converted in such Business Combination).

 

(e)                                  Each Restricted Member also agrees and consents to the entry of stop transfer instructions with Pubco’s transfer agent and registrar against the transfer of each Restricted Member’s shares of Pubco Common Stock except in compliance with this Exhibit B.

 

(f)                                   For the avoidance of doubt, in addition to the Lock-Up Restrictions, (i) any Transfer of Common Units shall be subject to the restrictions on Transfer applicable thereto pursuant to the Agreement and (ii) the Attributable Units in which such Restricted Member has an indirect ownership interest shall be subject to the restrictions on exchange set forth in the Exchange Agreement; provided that, the Lock-Up Restrictions shall not preclude such Restricted Member from delivering an Exchange Election in connection with an Exchange (as such term is defined in the Exchange Agreement), so long as such Exchange is not consummated prior to the date such Restricted Member would be entitled to Transfer the shares of Class A Common Stock issuable in such Exchange in accordance with the Lock-Up Restrictions.

 

(g)                                  For the purpose of this Exhibit B:

 

(i)                                     “IPO Price Range Midpoint” means the midpoint of the estimated public offering price range for the Class A Common Stock set forth on the cover page of the preliminary prospectus forming a part of the registration statement on Form S-1 filed by Pubco with the SEC on [   ], 2015.

 

(ii)                                  “Midpoint Liquidation Value” means the aggregate equity value of Holdco as of the date of the Reorganization implied by the IPO Price Range Midpoint.

 

(iii)                               “Pre-IPO Securities” means (i) any Common Units, and (ii) any Holdco Common Units or shares of Pubco Common Stock (x) into which the foregoing are converted or exchanged (including pursuant to an exchange of Holdco Common Units, together with shares of Class C Common Stock, for shares of Class A Common Stock pursuant to the Exchange Agreement) or (y) that are distributed in respect of the foregoing.

 

(iv)                              “Transfer” means any offer, sale, contract to sell, grant of an option to purchase, short sale, assignment, transfer, exchange, gift, bequest, pledge or other disposition or encumbrance, direct or indirect, in whole or in part, by operation of law or otherwise.  The foregoing restriction is expressly agreed to preclude the relevant person from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the

 

B-3

 

referent securities even if such securities would be disposed of by someone other than such person. Such prohibited hedging or other transactions would include any short sale or any purchase, sale or grant of any right (including any put or call option) with respect to any of the referent securities or with respect to any security that includes, relates to, or derives any significant part of its value from such securities.  The terms “Transferred”, “Transferring”, “Transferor”, “Transferee” and “Transferable” have meanings correlative to the foregoing.

 

B-4Exhibit 10.14

 

Virtu Financial, Inc. 2015 Management Incentive Plan

 

1.     Purpose.  The Virtu Financial, Inc. 2015 Management Incentive Plan (the “Plan”) is intended to help Virtu Financial, Inc., a Delaware corporation (including any successor thereto, the “Company”) and its Affiliates (i) attract and retain key personnel by providing them the opportunity to acquire an equity interest in the Company or other incentive compensation measured by reference to the value of Common Stock and (ii) align the interests of key personnel with those of the Company’s shareholders.

 

2.     Effective Date; Duration.  The Plan shall be effective as of [            ], 2015 (the “Effective Date”).  The expiration date of the Plan, on and after which date no Awards may be granted, shall be the tenth anniversary of the Effective Date; provided, however, that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards.

 

3.     Definitions.  The following definitions shall apply throughout the Plan.

 

(a)           “Affiliate” means (i) any person or entity that directly or indirectly controls, is controlled by or is under common control with the Company and/or (ii) to the extent provided by the Committee, any person or entity in which the Company has a significant interest.  The term “control” (including, with correlative meaning, the terms “ controlled by” and “under common control with”), as applied to any person or entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting or other securities, by contract or otherwise.

 

(b)           “Award” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Award and/or Performance Compensation Award granted under the Plan.

 

(c)           “Beneficial Ownership” has the meaning set forth in Rule 13d-3 promulgated under Section 13 of the Exchange Act.

 

(d)           “Board” means the Board of Directors of the Company.

 

(e)           “Cause” means, in the case of a particular Award, unless the applicable Award agreement states otherwise, the Company or an Affiliate having “cause” to terminate the Participant’s employment or service, (i) as such term is defined in any employment, consulting, change-in-control, severance or any other agreement between the Participant and the Company or an Affiliate in effect at the time of such termination or (ii) in the absence of any such employment, consulting, change-in-control, severance or other agreement (or the absence of any definition of “cause” or term of similar import therein), due to the Participant’s (A) willful misconduct or gross neglect of his duties; (B) having engaged in conduct harmful (whether financially, reputationally or otherwise) to the Company or an Affiliate; (C) failure or refusal to perform his duties; (D) conviction of, or guilty or no contest plea to, a felony or any crime involving dishonesty or moral turpitude; (E) willful violation of the written policies of the Company or an Affiliate; (F) misappropriation or misuse of Company or Affiliate funds or property or other act of personal dishonesty in connection with his employment; or (G) willful breach of fiduciary duty.  The determination of whether Cause exists shall be made by the Committee in its sole discretion.

 

(f)            “Change in Control” shall, in the case of a particular Award, unless the applicable Award agreement (or any employment, consulting, change-in-control, severance or other agreement between the Participant and the Company or an Affiliate) states otherwise, be deemed to occur upon any of the following events:

 

 

(i)            the acquisition by any Person of Beneficial Ownership of 30% or more (on a fully diluted basis) of either (A) the then outstanding shares of Common Stock, including Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock (the “Outstanding Company Common Stock”); or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote in the election of directors (the “Outstanding Company Voting Securities”); but excluding any acquisition by the Company or any of its Affiliates, or by Vincent Viola, his Permitted Transferees or any of their respective Affiliates or by any employee benefit plan sponsored or maintained by the Company or any of its Affiliates;

 

(ii)           a change in the composition of the Board such that members of the Board during any consecutive 12-month period (the “Incumbent Directors”) cease to constitute a majority of the Board.  Any person becoming a director through election or nomination for election approved by a valid vote of at least two-thirds of the Incumbent Directors shall be deemed an Incumbent Director; provided, however, that no individual becoming a director as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

 

(iii)          the approval by the shareholders of the Company of a plan of complete dissolution or liquidation of the Company; or

 

(iv)          the consummation of a reorganization, recapitalization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company (a “Business Combination”), or sale, transfer or other disposition of all or substantially all of the business or assets of the Company to an entity that is not an Affiliate of the Company (a “Sale”), unless immediately following such Business Combination or Sale:  (A) more than 50% of the total voting power of the entity resulting from such Business Combination or the entity that acquired all or substantially all of the business or assets of the Company in such Sale (in either case, the “Surviving Company”), or the ultimate parent entity that has Beneficial Ownership of sufficient voting power to elect a majority of the board of directors (or analogous governing body) of the Surviving Company (the “Parent Company”), is represented by the Outstanding Company Voting Securities that were outstanding immediately prior to such Business Combination or Sale (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities were converted pursuant to such Business Combination or Sale), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business Combination or Sale, (B) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company), is or becomes the beneficial owner, directly or indirectly, of 30% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) and (C) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination or Sale were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination or Sale.

 

2

 

(g)           “Class A Common Stock” means the Class A common stock of the Company, par value $0.00001 per share (and any stock or other securities into which such common shares may be converted or into which it may be exchanged).

 

(h)           “Code” means the U.S. Internal Revenue Code of 1986, as amended, and any successor thereto.  References to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successors thereto.

 

(i)            “Committee” means the Compensation Committee of the Board or subcommittee thereof if required with respect to actions taken to obtain the exception for performance-based compensation under Section 162(m) of the Code or to comply with Rule 16b-3 promulgated under the Exchange Act in respect of Awards or, if no such Compensation Committee or subcommittee thereof exists, the Board.

 

(j)            “Common Stock” means collectively or individually the Class A Common Stock.

 

(k)           “Disability” means cause for termination of the Participant’s employment or service due to a determination that the Participant is disabled in accordance with a long-term disability insurance program maintained by the Company or a determination by the U.S. Social Security Administration that the Participant is totally disabled.

 

(l)            “Eligible Person” means any (i) individual employed by the Company or an Affiliate; provided, however, that no such employee covered by a collective bargaining agreement shall be an Eligible Person; (ii) director or officer of the Company or an Affiliate; (iii) consultant or advisor to the Company or an Affiliate who may be offered securities registrable on Form S-8 under the Securities Act; or (iv) prospective employee, director, officer, consultant or advisor who has accepted an offer of employment or consultancy from the Company or its Affiliates (and would satisfy the provisions of clauses (i) through (iii) above once he begins employment with or providing services to the Company or its Affiliates.

 

(m)          “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and any successor thereto.  References to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successors thereto.

 

(n)           “Fair Market Value” means, on a given date, (i) if the Common Stock is listed on a national securities exchange, the closing sales price of the Common Stock reported on such exchange on such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported; or (ii) if the Common Stock is not listed on any national securities exchange, the amount determined by the Committee in good faith to be the fair market value of the Common Stock.

 

(o)           “Incentive Stock Option” means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan.

 

(p)           “NASDAQ” means The Nasdaq Global Market.

 

(q)           “Nonqualified Stock Option” means an Option which is not designated by the Committee as an Incentive Stock Option.

 

(r)            “Option” means an Award granted under Section 7 of the Plan.

 

3

 

(s)            “Performance Compensation Award” means an Award designated by the Committee as a Performance Compensation Award pursuant to Section 11 of the Plan.

 

(t)            “Performance Criteria” shall mean the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Performance Compensation Award under the Plan.

 

(u)           “Performance Formula” shall mean, for a Performance Period, the one or more objective formulae applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.

 

(v)           “Performance Goals” shall mean, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.

 

(w)          “Performance Period” shall mean the one or more periods of time as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining the Participant’s right to, and the payment of, a Performance Compensation Award.

 

(x)           “Person” has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company.

 

(y)           “Restricted Stock” means an Award of Common Stock, subject to certain specified restrictions, granted under Section 9 of the Plan.

 

(z)           “Restricted Stock Unit” means an Award of an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain specified restrictions, granted under Section 9 of the Plan.

 

(aa)         “Securities Act” means the U.S. Securities Act of 1933, as amended, and any successor thereto.  Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

 

(bb)         “Stock Appreciation Right” or “SAR” means an Award granted under Section 8 of the Plan.

 

4.     Administration.

 

(a)           The Committee shall administer the Plan, and shall have the sole and plenary authority to:  (i) designate Participants; (ii) determine the type, size, and terms and conditions of Awards to be granted; (iii) determine the method by which an Award may be settled, exercised, canceled, forfeited, or suspended; (iv) determine the circumstances under which the delivery of cash, property or other amounts payable with respect to an Award may be deferred either automatically or at the Participant’s or Committee’s election; (v) interpret and administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any Award granted under, the Plan; (vi) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem

 

4

 

appropriate for the proper administration of the Plan; (vii) accelerate the vesting, delivery or exercisability of, payment for or lapse of restrictions on, or waive any condition in respect of, Awards; and (viii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan or to comply with any applicable law, including Section 162(m) of the Code.  To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if applicable and if the Board is not acting as the Committee under the Plan) or necessary to obtain the exception for performance-based compensation under Section 162(m) of the Code, or any exception or exemption under the rules of NASDAQ or any other securities exchange or inter-dealer quotation service on which the Common Stock is listed or quoted, as applicable, it is intended that each member of the Committee shall, at the time he takes any action with respect to an Award under the Plan, be (i) a “non-employee director” within the meaning of Rule 16b-3 promulgated under the Exchange Act and (ii) an “outside director” within the meaning of Section 162(m) of the Code and/or (iii) an “independent director” under the rules of NASDAQ or any other securities exchange or inter-dealer quotation service on which the Common Stock is listed or quoted (“Eligible Director”).  However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted or action taken by the Committee that is otherwise validly granted or taken under the Plan.

 

(b)           The Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person(s) selected by it, except for grants of Awards to persons (i) who are non-employee members of the Board or otherwise are subject to Section 16 of the Exchange Act or (ii) who are or may reasonably be expected to be “covered employees” for purposes of Section 162(m) of the Code.  Any such allocation or delegation may be revoked by the Committee at any time.

 

(c)           As further set forth in Section 15(f) of the Plan, the Committee shall have the authority to amend the Plan and Awards to the extent necessary to permit participation in the Plan by Eligible Persons who are located outside of the United States on terms and conditions comparable to those afforded to Eligible Persons located within the United States; provided, however, that no such action shall be taken without shareholder approval if such approval is required by applicable law or regulation.

 

(d)           Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions regarding the Plan or any Award or any documents evidencing Awards granted pursuant to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons or entities, including, without limitation, the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, and any shareholder of the Company.

 

(e)           No member of the Board, the Committee or any employee or agent of the Company (each such person, an “Indemnifiable Person”) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission).  Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be involved as a party, witness or otherwise by reason of any action taken or omitted to be taken or determination made under the Plan or any Award agreement and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval (not to be unreasonably withheld), in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined as provided below that the

 

5

 

Indemnifiable Person is not entitled to be indemnified); provided, that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of recognized standing of the Company’s choice.  The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts or omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company’s Certificate of Incorporation or By-laws.  The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the Company’s Certificate of Incorporation or By-laws, as a matter of law, individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless.

 

(f)            The Board may at any time and from time to time, grant Awards and administer the Plan with respect to such Awards.  In any such case, the Board shall have all the authority granted to the Committee under the Plan.

 

5.     Grant of Awards; Shares Subject to the Plan; Limitations.

 

(a)           The Committee may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Other Stock-Based Awards and/or Performance Compensation Awards to one or more Eligible Persons.

 

(b)           Subject to Section 12 of the Plan and subsection (e) below, the following limitations apply to the grant of Awards:  (i) no more than [·] shares of Class A Common Stock may be delivered in the aggregate pursuant to Awards granted under the Plan; (ii) no more than [·] shares of Class A Common Stock may be subject to grants of Options or SARs under the Plan to any single Participant during any 12-month period; provided, however, that the limitation set forth in this clause (ii) shall not apply to the initial grant of Options to Vincent Viola in connection with the Company’s initial public offering; (iii) no more than [·] shares of Class A Common Stock may be delivered pursuant to the exercise of Incentive Stock Options granted under the Plan; (iv) no more than 1,000,000 shares of Class A Common Stock may be delivered in respect of Performance Compensation Awards denominated in shares of Common Stock granted pursuant to Section 11 of the Plan to any Participant for a single Performance Period (or with respect to each single fiscal year in the event a Performance Period extends beyond a single fiscal year), or in the event such Performance Compensation Award is paid in cash, other securities, other Awards or other property, no more than the Fair Market Value of 1,000,000 shares of Class A Common Stock on the last day of the Performance Period to which such Award relates; and (v) the maximum amount that can be paid to any individual Participant for a single fiscal year during a Performance Period (or with respect to each single year in the event a Performance Period extends beyond a single year) pursuant to a Performance Compensation Award denominated in cash described in Section 11(a) of the Plan shall be $10,000,000.

 

(c)           Shares of Common Stock shall be deemed to have been used in settlement of Awards whether or not they are actually delivered or the Fair Market Value equivalent of such shares is paid in cash; provided, however, that if shares of Common Stock issued upon exercise, vesting or settlement of an Award, or shares of Common Stock owned by the Participant are surrendered or tendered to the Company in payment of the Exercise Price or any taxes required to be withheld in respect of an Award, in each case, in accordance with the terms and conditions of the Plan and any applicable Award agreement, such surrendered or tendered shares shall again become available for other Awards; provided, further, that

 

6

 

in no event shall such shares increase the number of shares of Common Stock that may be delivered pursuant to Incentive Stock Options.  If and to the extent all or any portion of an Award expires, terminates or is canceled or forfeited for any reason without the Participant having received any benefit therefrom, the shares covered by such Award or portion thereof shall again become available for other Awards.  For purposes of the foregoing sentence, the Participant shall not be deemed to have received any “benefit” (i) in the case of forfeited Restricted Stock by reason of having enjoyed voting rights and dividend rights prior to the date of forfeiture or (ii) in the case of an Award canceled by reason of a new Award being granted in substitution therefor.

 

(d)           Shares of Common Stock delivered by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase, or a combination of the foregoing.

 

(e)           The Committee may grant Awards in assumption of, or in substitution for, outstanding awards previously granted by the Company or any Affiliate or an entity directly or indirectly acquired by the Company or with which the Company combines (“Substitute Awards”), and such Substitute Awards shall not be counted against the aggregate number of shares of Common Stock available for Awards; provided, that Substitute Awards issued or intended as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of Incentive Stock Options available under the Plan.

 

6.     Eligibility.  Participation shall be limited to Eligible Persons who have been selected by the Committee and who have entered into an Award agreement with respect to an Award granted to them under the Plan (each such Eligible Person, a “Participant”).

 

7.     Options.

 

(a)           Generally.  Each Option shall be subject to the conditions set forth in the Plan and in the Award agreement.  All Options granted under the Plan shall be Nonqualified Stock Options unless the Award agreement expressly states otherwise.  Incentive Stock Options shall be granted only subject to and in compliance with Section 422 of the Code, and only to Eligible Persons who are employees of the Company and its Affiliates and who are eligible to receive an Incentive Stock Option under the Code.  If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.

 

(b)           Exercise Price.  The exercise price (“Exercise Price”) per share of Common Stock for each Option shall not be less than 100% of the Fair Market Value of such share, determined as of the date of grant.  Any modification to the Exercise Price of an outstanding Option shall be subject to the prohibition on repricing set forth in Section 14(b).

 

(c)           Vesting, Exercise and Expiration.  The Committee shall determine the manner and timing of vesting, exercise and expiration of Options.  The period between date of grant and the scheduled expiration date of the Option (“Option Period”) shall not exceed ten years, unless the Option Period (other than in the case of an Incentive Stock Option) would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s securities trading policy or a Company-imposed “blackout period”, in which case the Option Period shall be automatically extended until the 30th day following the expiration of such prohibition (so long as such extension shall not violate Section 409A of the Code). The Committee may accelerate the vesting and/or exercisability of any Option, which acceleration shall not affect any other terms and conditions of such Option.

 

7

 

(d)           Method of Exercise and Form of Payment.  No shares of Common Stock shall be delivered pursuant to any exercise of an Option until the Participant has made payment in full to the Company of the Exercise Price and an amount equal to any U.S. Federal, state and local income and employment taxes and non-U.S. income and employment taxes, social contributions and any other tax-related items required to be withheld.  Options may be exercised by delivery of written or electronic notice of exercise to the Company or its designee (including a third party administrator) in accordance with the terms of the Option accompanied by payment of the Exercise Price.  The Exercise Price and all applicable required withholding taxes shall be payable (i) in cash, check, cash equivalent and/or shares of Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual delivery of such shares to the Company); provided, that such shares of Common Stock are not subject to any pledge or other security interest; or (ii) by such other method as the Committee may permit, including without limitation:  (A) in other property having a Fair Market Value on the date of exercise equal to the Exercise Price and all applicable required withholding taxes; (B) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price and all applicable required withholding taxes; or (C) by means of a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise deliverable in respect of an Option that are needed to pay for the Exercise Price and all applicable required withholding taxes.  Notwithstanding the foregoing, unless otherwise determined by the Committee, if on the last day of the Option Period, the Fair Market Value exceeds the Exercise Price, the Participant has not exercised the Option, and the Option has not expired, such Option shall be deemed to have been exercised by the Participant on such last day by means of a “net exercise” procedure described above.  Any fractional shares of Common Stock shall be settled in cash.

 

(e)           Notification upon Disqualifying Disposition of an Incentive Stock Option.  Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date he makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option.  A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (A) two years after the date of grant of the Incentive Stock Option or (B) one year after the date of exercise of the Incentive Stock Option.  The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instruction from such Participant as to the sale of such Common Stock.

 

(f)            Compliance with Laws, etc.  Notwithstanding the foregoing, in no event shall the Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation service on which the Common Stock of the Company is listed or quoted.

 

(g)           Incentive Stock Option Grants to 10% Shareholders.  Notwithstanding anything to the contrary in this Section 7, if an Incentive Stock Option is granted to a Participant who owns stock representing more than ten percent of the voting power of all classes of stock of the Company or of a subsidiary or a parent of the Company, the Option Period shall not exceed five years from the date of

 

8

 

grant of such Option and the Option Price shall be at least 110% of the Fair Market Value (on the date of grant) of the shares subject to the Option.

 

(h)           $100,000 Per Year Limitation for Incentive Stock Options.  To the extent the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options.

 

8.     Stock Appreciation Rights (SARs).

 

(a)           Generally.  Each SAR shall be subject to the conditions set forth in the Plan and the Award agreement.  Any Option granted under the Plan may include a tandem SAR.  The Committee also may award SARs independent of any Option.

 

(b)           Strike Price.  The strike price (“Strike Price”) per share of Common Stock for each SAR shall not be less than 100% of the Fair Market Value of such share (determined as of the date of grant); provided, however, that a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price equal to the Exercise Price of the corresponding Option.  Any modification to the Strike Price of an outstanding SAR shall be subject to the prohibition on repricing set forth in Section 14(b).

 

(c)           Vesting and Expiration.  A SAR granted in tandem with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option.  A SAR granted independently of an Option shall vest and become exercisable and shall expire in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “SAR Period”); provided, however, that notwithstanding any vesting or exercisability dates set by the Committee, the Committee may accelerate the vesting and/or exercisability of any SAR, which acceleration shall not affect the terms and conditions of such SAR other than with respect to vesting and/or exercisability.  If the SAR Period would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s securities trading policy or a Company-imposed “blackout period”, the SAR Period shall be automatically extended until the 30th day following the expiration of such prohibition (so long as such extension shall not violate Section 409A of the Code).

 

(d)           Method of Exercise.  SARs may be exercised by delivery of written or electronic notice of exercise to the Company or its designee (including a third party administrator) in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded.  Notwithstanding the foregoing, if on the last day of the Option Period (or in the case of a SAR independent of an Option, the SAR Period), the Fair Market Value exceeds the Strike Price, the Participant has not exercised the SAR or the corresponding Option (if applicable), and neither the SAR nor the corresponding Option (if applicable) has expired, such SAR shall be deemed to have been exercised by the Participant on such last day and the Company shall make the appropriate payment therefor.

 

(e)           Payment.  Upon the exercise of a SAR, the Company shall pay to the holder thereof an amount equal to the number of shares subject to the SAR that are being exercised multiplied by the excess, if any, of the Fair Market Value of one share of Common Stock on the exercise date over the Strike Price, less an amount equal to any U.S. Federal, state and local income and employment taxes and non-U.S. income and employment taxes, social contributions and any other tax-related items required to be withheld.  The Company shall pay such amount in cash, in shares of Common Stock valued at Fair

 

9

 

Market Value, or any combination thereof, as determined by the Committee.  Any fractional shares of Common Stock shall be settled in cash.

 

9.     Restricted Stock and Restricted Stock Units.

 

(a)           Generally.  Each Restricted Stock and Restricted Stock Unit grant shall be subject to the conditions set forth in the Plan and the Award agreement.  The Committee shall establish restrictions applicable to such Restricted Stock and Restricted Stock Units, including the period over which the restrictions shall apply (the “Restricted Period”), and the time or times at which Restricted Stock or Restricted Stock Units shall become vested.  The Committee may accelerate the vesting and/or the lapse of any or all of the restrictions on the Restricted Stock and Restricted Stock Units, which acceleration shall not affect any other terms and conditions of such Awards.  No shares shall be issued at the time an Award of Restricted Stock Units is made, and the Company will not be required to set aside a fund for the payment of any such Award.

 

(b)           Stock Certificates; Escrow or Similar Arrangement.  Upon the grant of Restricted Stock, the Committee shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions.  The Committee also may cause a stock certificate registered in the name of the Participant to be issued.  In such event, the Committee may provide that such certificates shall be held by the Company or in escrow rather than delivered to the Participant pending vesting and release of restrictions, in which case the Committee may require the Participant to execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable, and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock.  If the Participant shall fail to execute and deliver the escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void.  Subject to the restrictions set forth in this Section 9 and the Award agreement, the Participant shall have the rights and privileges of a shareholder as to such Restricted Stock, including without limitation the right to vote such Restricted Stock.

 

(c)           Restrictions; Forfeiture.  Restricted Stock and Restricted Stock Units awarded to the Participant shall be subject to forfeiture until the expiration of the Restricted Period and the attainment of any other vesting criteria established by the Committee, and shall be subject to the restrictions on transferability set forth in the Award agreement.  In the event of any forfeiture, all rights of the Participant to such Restricted Stock (or as a shareholder with respect thereto), and/or to such Restricted Stock Units, as applicable, including to any dividends and/or dividend equivalents that may have been accumulated and withheld during the Restricted Period in respect thereof, shall terminate without further action or obligation on the part of the Company.  The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock and Restricted Stock Units whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Restricted Stock Award or Restricted Stock Unit Award, such action is appropriate.

 

(d)           Delivery of Restricted Stock and Settlement of Restricted Stock Units.

 

(i)    Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock and the attainment of any other vesting criteria, the restrictions set forth in the applicable Award agreement shall be of no further force or effect, except as set forth in the Award agreement.  If an escrow arrangement is used, upon such expiration the Company shall deliver to the Participant or his beneficiary (via book entry notation or, if applicable, in stock certificate form) the shares of Restricted Stock with respect to which the Restricted Period has expired (rounded down to the nearest full share).  Dividends, if any, that may have been withheld by the Committee and attributable to the Restricted Stock shall be distributed to the Participant in cash

 

10

 

or in shares of Common Stock having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share.

 

(ii)                                  Unless otherwise provided by the Committee in an Award agreement, upon the expiration of the Restricted Period and the attainment of any other vesting criteria established by the Committee, with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his beneficiary (via book entry notation or, if applicable, in stock certificate form), one share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit which has not then been forfeited and with respect to which the Restricted Period has expired and any other such vesting criteria are attained (“Released Unit”); provided, however, that the Committee may elect to (i) pay cash or part cash and part Common Stock in lieu of delivering only shares of Common Stock in respect of such Released Units or (ii) defer the delivery of Common Stock (or cash or part Common Stock and part cash, as the case may be) beyond the expiration of the Restricted Period if such extension would not cause adverse tax consequences under Section 409A of the Code.  If a cash payment is made in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units.  To the extent provided in an Award agreement, the holder of outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in cash or, if determined by the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends (and interest may, if determined by the Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Committee), which accumulated dividend equivalents (and interest thereon, if applicable) shall be payable at the same time as the underlying Restricted Stock Units are settled following the release of restrictions on such Restricted Stock Units, and, if such Restricted Stock Units are forfeited, the holder thereof shall have no right to such dividend equivalent payments.

 

(e)                                  Legends on Restricted Stock.  Each certificate representing Restricted Stock awarded under the Plan, if any, shall bear a legend substantially in the form of the following in addition to any other information the Company deems appropriate until the lapse of all restrictions with respect to such Common Stock:

 

TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE VIRTU FINANCIAL, INC. 2015 MANAGEMENT INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT, DATED AS OF                     , BETWEEN VIRTU FINANCIAL, INC. AND                   .  A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF VIRTU FINANCIAL, INC.

 

10.       Other Stock-Based Awards.  The Committee may issue unrestricted Common Stock, rights to receive future grants of Awards, or other Awards denominated in Common Stock (including performance shares or performance units), or Awards that provide for cash payments based in whole or in part on the value or future value of shares of Common Stock under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts as the Committee shall from time to time determine (“Other Stock-Based Awards”).  Each Other Stock-Based Award shall be evidenced by an Award agreement which may include conditions including without limitation the payment by the Participant of the Fair Market Value of such shares of Common Stock on the date of grant.

 

11

 

11.       Performance Compensation Awards.

 

(a)                                 Generally.  The Committee shall have the authority, at or before the time of grant of any Award described in Sections 7 through 10 of the Plan, to designate such Award as a Performance Compensation Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code.  In addition, the Committee shall have the authority to make an award of a cash bonus to any Participant and designate such Award as a Performance Compensation Award intended to qualify as “performance based compensation” under Section 162(m).  Notwithstanding the foregoing, (i) any Award to a Participant who is a “covered employee” within the meaning of Section 162(m) for a fiscal year that satisfies the requirements of this Section 11 may be treated as a Performance Compensation Award in the absence of any such Committee designation and (ii) if the Company determines that a Participant who has been granted an Award designated as a Performance Compensation Award is not (or is no longer) a “covered employee” within the meaning of Section 162(m), the terms and conditions of such Award may be modified without regard to any restrictions or limitations set forth in this Section 11 (but subject otherwise to the provisions of Section 14 of the Plan).

 

(b)                                 Discretion of Committee with Respect to Performance Compensation Awards.  The Committee may select the length of a Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) and the Performance Formula.  Within the first 90 days of a Performance Period (or the maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing (which may be in the form of minutes of a meeting of the Committee).

 

(c)                                  Performance Criteria.  The Performance Criteria that will be used to establish the Performance Goal(s) may be based on the attainment of specific levels of performance of the Company (and/or one or more Affiliates, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, units, or any combination of the foregoing) and shall be limited to the following:  (i) net earnings or net income (before or after taxes); (ii) basic or diluted earnings per share (before or after taxes); (iii) net revenue or net revenue growth; (iv) gross revenue or gross revenue growth, gross profit or gross profit growth; (v) net operating profit (before or after taxes); (vi) return measures (including, but not limited to, return on investment, assets, capital, gross revenue or gross revenue growth, invested capital, equity or sales); (vii) cash flow measures (including, but not limited to, operating cash flow, free cash flow and cash flow return on capital), which may but are not required to be measured on a per-share basis; (viii) earnings before or after taxes, interest, depreciation, and amortization (including EBIT and EBITDA); (ix) gross or net operating margins; (x) productivity ratios; (xi) share price (including, but not limited to, growth measures and total shareholder return); (xii) expense targets or cost reduction goals, general and administrative expense savings; (xiii) operating efficiency; (xiv) objective measures of customer satisfaction; (xv) working capital targets; (xvi) measures of economic value added or other ‘‘value creation’’ metrics; (xvii) enterprise value; (xviii) stockholder return; (xix) client retention; (xx) competitive market metrics; (xxi) employee retention; (xxii) objective measures of personal targets, goals or completion of projects (including but not limited to succession and hiring projects, completion of specific acquisitions, reorganizations or other corporate transactions or capital-raising transactions, expansions of specific business operations and meeting divisional or project budgets); (xxiii) system-wide revenues; (xxiv) cost of capital, debt leverage year-end cash position or book value; (xxv) strategic objectives, development of new product lines and related revenue, sales and margin targets, or international operations; or (xxvi) any combination of the foregoing.  Any one or more of the Performance Criteria may be stated as a percentage of another Performance Criteria, or a percentage of a prior period’s Performance Criteria, or used on an absolute, relative or adjusted basis to

 

12

 

measure the performance of the Company and/or one or more Affiliates as a whole or any divisions or operational and/or business units, product lines, brands, business segments, administrative departments of the Company and/or one or more Affiliates or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a group of comparator companies, or a published or special index that the Committee deems appropriate, or as compared to various stock market indices.  The Committee also has the authority to provide for accelerated vesting, delivery and exercisability of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph.  To the extent required under Section 162(m) of the Code, the Committee shall, within the first 90 days of a Performance Period (or within the maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period.

 

(d)                                 Modification of Performance Goal(s).  The Committee may alter Performance Criteria without obtaining shareholder approval if applicable tax and/or securities laws so permit.  The Committee may modify the calculation of a Performance Goal during the first 90 days of a Performance Period (or within the maximum period allowed under Section 162(m) of the Code), or at any time thereafter if the change would not cause any Performance Compensation Award to fail to qualify as “performance-based compensation” under Section 162(m), to reflect any of the following events:  (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) extraordinary nonrecurring items as described in Accounting Standards Codification Topic 225-20 (or any successor pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year; (vi) acquisitions or divestitures; (vii) any other specific unusual or nonrecurring events, or objectively determinable category thereof; (viii) foreign exchange gains and losses; (ix) discontinued operations and nonrecurring charges; and (x) a change in the Company’s fiscal year.

 

(e)                                  Payment of Performance Compensation Awards.

 

(i)             Condition to Receipt of Payment.  Unless otherwise provided in the applicable Award agreement or any employment, consulting, change-in-control, severance or other agreement between the Participant and the Company or an Affiliate, the Participant must be employed by or rendering services for the Company or an Affiliate on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.

 

(ii)                                  Limitation.  Unless otherwise provided in the applicable Award agreement, or any employment, consulting, change-in-control, severance or other agreement between the Participant and the Company or an Affiliate, the Participant shall be eligible to receive payment or delivery, as applicable, in respect of a Performance Compensation Award only to the extent the Committee determines that: (A) the Performance Goals for such period are achieved, as determined by the Committee; and (B) all or some of the portion of such Participant’s Performance Compensation Award has been earned for the Performance Period based on the application of the Performance Formula to such achieved Performance Goals, as determined by the Committee; provided, however, that if so provided by the Committee in its sole discretion, in the event of (x) the termination of the Participant’s employment or service by the Company other than for Cause (and other than due to death or Disability), in each case within 12 months following a Change in Control, or (y) the termination of a Participant’s employment or service due to the Participant’s death or Disability, the Participant shall receive payment in respect of a Performance Compensation Award based on (1) actual performance through the date of termination as determined by the Committee, or (2) if the Committee determines that

 

13

 

measurement of actual performance cannot be reasonably assessed, the assumed achievement of target performance as determined by the Committee (but not to the extent that application of this clause (2) would cause Section 162(m) of the Code to result in the loss of the deduction of the compensation payable in respect of such Performance Compensation Award for any Participant reasonably expected to be a “covered employee” within the meaning of Section 162(m) of the Code), in each case prorated based on the time elapsed from the date of grant to the date of termination of employment or service.

 

(iii)                               Certification.  Following the completion of a Performance Period, the Committee shall review and certify in writing (which may be in the form of minutes of a meeting of the Committee) whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing (which may be in the form of minutes of a meeting of the Committee) that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula.  The Committee shall then determine the amount of each Participant’s Performance Compensation Award actually payable for the Performance Period and, in so doing, may apply discretion to eliminate or reduce the size of a Performance Compensation Award consistent with Section 162(m) of the Code.  Unless otherwise provided in the applicable Award agreement, the Committee shall not have the discretion to (A) provide payment or delivery in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained; or (B) increase a Performance Compensation Award above the applicable limitations set forth in Section 5 of the Plan.

 

(f)                                   Timing of Award Payments.  Unless otherwise provided in the applicable Award agreement, Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 11.  Any Performance Compensation Award that has been deferred shall not (between the date as of which the Award is deferred and the payment date) increase (i) with respect to a Performance Compensation Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Committee or (ii) with respect to a Performance Compensation Award that is payable in shares of Common Stock, by an amount greater than the appreciation of a share of Common Stock from the date such Award is deferred to the payment date.  Unless otherwise provided in an Award agreement, any Performance Compensation Award that is deferred and is otherwise payable in shares of Common Stock shall be credited (during the period between the date as of which the Award is deferred and the payment date) with dividend equivalents (in a manner consistent with the methodology set forth in the last sentence of Section 9(d)(ii)).

 

12.       Changes in Capital Structure and Similar Events.  In the event of (a) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate transaction or event (including, without limitation, a Change in Control) that affects the shares of Common Stock, or (b) unusual or nonrecurring events (including, without limitation, a Change in Control) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation service, accounting principles or law, such that in any case an adjustment is determined by the Committee to be necessary or appropriate, then the Committee shall make any such adjustments in such manner as it may deem equitable, including without limitation any or all of the following:  (i) adjusting any or all of (A) the number of shares of Common Stock or other

 

14

 

securities of the Company (or number and kind of other securities or other property) which may be delivered in respect of Awards or with respect to which Awards may be granted under the Plan (including, without limitation, adjusting any or all of the limitations under Section 5 of the Plan) and (B) the terms of any outstanding Award, including, without limitation, (1) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the Exercise Price or Strike Price with respect to any Award or (3) any applicable performance measures (including, without limitation, Performance Criteria, Performance Formula and Performance Goals); (ii) providing for a substitution or assumption of Awards (or awards of an acquiring company), accelerating the delivery, vesting and/or exercisability of, lapse of restrictions and/or other conditions on, or termination of, Awards or providing for a period of time (which shall not be required to be more than ten (10) days) for Participants to exercise outstanding Awards prior to the occurrence of such event (and any such Award not so exercised shall terminate upon the occurrence of such event); and (iii) cancelling any one or more outstanding Awards (or awards of an acquiring company) and causing to be paid to the holders thereof, in cash, shares of Common Stock, other securities or other property, or any combination thereof, the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per share of Common Stock received or to be received by other shareholders of the Company in such event), including without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the shares of Common Stock subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR, respectively (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor); provided, however, that the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect any “equity restructuring” (within the meaning of the Financial Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)).  Except as otherwise determined by the Committee, any adjustment in Incentive Stock Options under this Section 12 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 12 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 promulgated under the Exchange Act.  The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

 

13.       Effect of Change in Control.  Except to the extent otherwise provided in an Award agreement, or any applicable employment, consulting, change-in-control, severance or other agreement between the Participant and the Company or an Affiliate, in the event of a Change in Control, notwithstanding any provision of the Plan to the contrary:

 

(a)                                 In the event the Participant’s employment with the Company or an Affiliate is terminated by the Company or Affiliate without Cause (and other than due to death or Disability) on or within 12 months following a Change in Control, the Committee may provide that all Options and SARs held by such Participant shall become immediately exercisable with respect to 100% of the shares subject to such Options and SARs, and that the Restricted Period (and any other conditions) shall expire immediately with respect to 100% of the shares of Restricted Stock and Restricted Stock Units and any other Awards held by such Participant (including a waiver of any applicable Performance Goals); provided, that in the event the vesting or exercisability of any Award would otherwise be subject to the achievement of performance conditions, the portion of such Award that shall become fully vested and immediately exercisable shall be based on the assumed achievement of target performance as determined by the Committee and prorated for the number of days elapsed from the grant date of such Award through the date of termination.

 

15

 

(b)                                 In addition, the Committee may upon at least ten (10) days’ advance notice to the affected persons, cancel any outstanding Award and pay to the holders thereof, in cash, securities or other property (including of the acquiring or successor company), or any combination thereof, the value of such Awards based upon the price per share of Common Stock received or to be received by other shareholders of the Company in the event.  Notwithstanding the above, the Committee shall exercise such discretion over any Award subject to Code Section 409A at the time such Award is granted.

 

To the extent practicable, the provisions of this Section 13 shall occur in a manner and at a time which allows affected Participants the ability to participate in the Change in Control transaction with respect to the Common Stock subject to their Awards.

 

14.       Amendments and Termination.

 

(a)                                 Amendment and Termination of the Plan.  The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided, that no such amendment, alteration, suspension, discontinuation or termination shall be made without shareholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or requirements of any securities exchange or inter-dealer quotation service on which the shares of Common Stock may be listed or quoted, for changes in GAAP to new accounting standards, or to prevent the Company from being denied a tax deduction under Section 162(m) of the Code); provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary, unless the Committee determines that such amendment, alteration, suspension, discontinuance or termination either is required or advisable in order for the Company, the Plan or the Award to satisfy any applicable law or regulation.  Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section 14(b) without shareholder approval.

 

(b)                                 Amendment of Award Agreements.  The Committee may, to the extent not inconsistent with the terms of any applicable Award agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award agreement, prospectively or retroactively (including after the Participant’s termination of employment or service with the Company); provided, that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant unless the Committee determines that such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination either is required or advisable in order for the Company, the Plan or the Award to satisfy any applicable law or regulation; provided, further, that except as otherwise permitted under Section 12 of the Plan, if (i) the Committee reduces the Exercise Price of any Option or the Strike Price of any SAR, (ii) the Committee cancels any outstanding Option or SAR and replaces it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash in a manner which would either (A) be reportable on the Company’s proxy statement or Form 10-K (if applicable) as Options which have been “repriced” (as such term is used in Item 402 of Regulation S-K promulgated under the Exchange Act), or (B) result in any “repricing” for financial statement reporting purposes (or otherwise cause the Award to fail to qualify for equity accounting treatment) or (iii) the Committee takes any other action which is considered a “repricing” for purposes of the shareholder approval rules of the applicable securities exchange or inter-dealer quotation service on which the Common Stock is listed or quoted, then, in the case of the immediately preceding clauses (i) through (iii), any such action shall not be effective without shareholder approval.

 

16

 

15.       General.

 

(a)                                 Award Agreements; Other Agreements.  Each Award under the Plan shall be evidenced by an Award agreement, which shall be delivered to the Participant and shall specify the terms and conditions of the Award and any rules applicable thereto.  An Award agreement may be in written or electronic form and shall be signed (either in written or electronic form) by the Participant and a duly authorized representative of the Company.  The terms of any Award agreement, or any employment, change-in-control, severance or other agreement in effect with the Participant, may have terms or features different from and/or additional to those set forth in the Plan, and, unless expressly provided otherwise in such Award or other agreement, shall control in the event of any conflict with the terms of the Plan.

 

(b)                                 Nontransferability.

 

(i)                                     Each Award shall be exercisable only by the Participant during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative.  No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

 

(ii)                                  Notwithstanding the foregoing, the Committee may permit Awards (other than Incentive Stock Options) to be transferred by the Participant, without consideration, subject to such rules as the Committee may adopt, to:  (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statements promulgated by the Securities and Exchange Commission (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant and his Immediate Family Members; (C) a partnership or limited liability company whose only partners or shareholders are the Participant and his Immediate Family Members; or (D) any other transferee as may be approved either (1) by the Board or the Committee, or (2) as provided in the applicable Award agreement; (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a “Permitted Transferee”); provided, that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.

 

(iii)                               The terms of any Award transferred in accordance with the immediately preceding sentence shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award agreement, to the Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award agreement, that such a registration statement is necessary or appropriate; (C) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of the termination of the Participant’s employment by, or services to, the Company or an Affiliate under the terms of the Plan and the applicable Award agreement shall continue to be applied with respect to the transferred Award, including, without

 

17

 

limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award agreement.

 

(c)                                  Dividends and Dividend Equivalents.  The Committee may provide the Participant as part of an Award with dividends or dividend equivalents, payable in cash, shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee, including, without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards; provided, that no dividends or dividend equivalents shall be payable in respect of outstanding (i) Options or SARs or (ii) unearned Performance Compensation Awards or other unearned Awards subject to performance conditions (other than or in addition to the passage of time); provided, further, that dividend equivalents may be accumulated in respect of unearned Awards and paid as soon as administratively practicable, but no more than 60 days, after such Awards are earned and become payable or distributable (and the right to any such accumulated dividends or dividend equivalents shall be forfeited upon the forfeiture of the Award to which such dividends or dividend equivalents relate).

 

(d)                                 Tax Withholding.

 

(i)                                     The Participant shall be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right (but not the obligation) and is hereby authorized to withhold, from any cash, shares of Common Stock, other securities or other property deliverable under any Award or from any compensation or other amounts owing to the Participant, the amount (in cash, Common Stock, other securities or other property) of any required withholding taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as the Committee or the Company deem necessary to satisfy all obligations for the payment of such withholding taxes.

 

(ii)                                  Without limiting the generality of clause (i) above, the Committee may permit the Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) payment in cash; (B) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest) owned by the Participant having a Fair Market Value equal to such withholding liability or (C) having the Company withhold from the number of shares of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value equal to such withholding liability.

 

(e)                                  No Claim to Awards; No Rights to Continued Employment.  No employee of the Company or an Affiliate, or other person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award.  There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards.  The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated.  Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company or an Affiliate, nor shall it be construed as giving any Participant any rights to continued service on the Board.

 

(f)                                   International Participants.  With respect to Participants who reside or work outside of the United States and who are not (and who are not expected to be) “covered employees” within the meaning of Section 162(m) of the Code, the Committee may amend the terms of the Plan or appendices thereto, or outstanding Awards, with respect to such Participants, in order to conform such terms with or

 

18

 

accommodate the requirements of local laws, procedures or practices or to obtain more favorable tax or other treatment for the Participant, the Company or its Affiliates.  Without limiting the generality of this subsection, the Committee is specifically authorized to adopt rules, procedures and sub-plans with provisions that limit or modify rights on death, disability, retirement or other terminations of employment, available methods of exercise or settlement of an Award, payment of income, social insurance contributions or payroll taxes, withholding procedures and handling of any stock certificates or other indicia of ownership which vary with local requirements. The Committee may also adopt rules, procedures or sub-plans applicable to particular Affiliates or locations.

 

(g)                                  Beneficiary Designation.  The Participant’s beneficiary shall be deemed to be his spouse (or domestic partner if such status is recognized by the Company and in such jurisdiction), or if the Participant is otherwise unmarried at the time of death, his estate, except to the extent a different beneficiary is designated in accordance with procedures that may be established by the Committee from time to time for such purpose.  Notwithstanding the foregoing, in the absence of a beneficiary validly designated under such Committee-established procedures and/or applicable law who is living (or in existence) at the time of death of a Participant residing or working outside the United States, any required distribution under the Plan shall be made to the executor or administrator of the estate of the Participant, or to such other individual as may be prescribed by applicable law.

 

(h)                                 Termination of Employment or Service.  Except as otherwise provided in an Award agreement, or any employment, consulting, change-in-control, severance or other agreement between the Participant and the Company or an Affiliate, unless determined otherwise by the Committee: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National guard unit) nor a transfer from employment or service with the Company to employment or service with an Affiliate (or vice versa) shall be considered a termination of employment or service with the Company or an Affiliate; and (ii) if the Participant’s employment with the Company or its Affiliates terminates, but such Participant continues to provide services with the Company or its Affiliates in a non-employee capacity (including as a Non-Employee Director) (or vice versa), such change in status shall not be considered a termination of employment or service with the Company or an Affiliate for purposes of the Plan.

 

(i)                                     No Rights as a Shareholder.  Except as otherwise specifically provided in the Plan or any Award agreement, no person shall be entitled to the privileges of ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered to that person.

 

(j)                                    Government and Other Regulations.

 

(i)                                     Nothing in the Plan shall be deemed to authorize the Committee or Board or any members thereof to take any action contrary to applicable law or regulation, or rules of NASDAQ or any other securities exchange or inter-dealer quotation service on which the Common Stock is listed or quoted.

 

(ii)                                  The obligation of the Company to settle Awards in Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required.  Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such

 

19

 

registration pursuant to and in compliance with the terms of an available exemption.  The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan.  The Committee shall have the authority to provide that all shares of Common Stock or other securities of the Company or any Affiliate delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award agreement, the U.S. Federal securities laws, or the rules, regulations and other requirements of the U.S. Securities and Exchange Commission, any securities exchange or inter-dealer quotation service upon which such shares or other securities of the Company are then listed or quoted and any other applicable Federal, state, local or non-U.S. laws, rules, regulations and other requirements, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on any such certificates of Common Stock or other securities of the Company or any Affiliate delivered under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of the Company or any Affiliate delivered under the Plan in book-entry form to be held subject to the Company’s instructions or subject to appropriate stop-transfer orders.  Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.

 

(iii)                               The Committee may cancel an Award or any portion thereof if it determines that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of shares of Common Stock from the public markets, the Company’s issuance of Common Stock to the Participant, the Participant’s acquisition of Common Stock from the Company and/or the Participant’s sale of Common Stock to the public markets, illegal, impracticable or inadvisable.  If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, unless prevented by applicable laws, the Company shall pay to the Participant an amount equal to the excess of (A) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or delivered, as applicable), over (B) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as a condition of delivery of shares of Common Stock (in the case of any other Award).  Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof.

 

(k)                                 No Section 83(b) Elections Without Consent of Company.  No election under Section 83(b) of the Code or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award agreement or by action of the Committee in writing prior to the making of such election.  If the Participant, in connection with the acquisition of shares of Common Stock under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision.

 

(l)                                     Payments to Persons Other Than Participants.  If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative or a beneficiary designation form has been filed with the Company) may, if the Committee so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed

 

20

 

by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment.  Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

 

(m)                             Nonexclusivity of the Plan.  Neither the adoption of the Plan by the Board nor the submission of the Plan to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

 

(n)                                 No Trust or Fund Created.  Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate, on the one hand, and the Participant or other person or entity, on the other hand.  No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes.  Participants shall have no rights under the Plan other than as unsecured general creditors of the Company.

 

(o)                                 Reliance on Reports.  Each member of the Committee and each member of the Board (and their respective designees) shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent registered public accounting firm of the Company and its Affiliates and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, other than himself.

 

(p)                                 Relationship to Other Benefits.  No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.

 

(q)                                 Purchase for Investment.  Whether or not the Options and shares covered by the Plan have been registered under the Securities Act, each person exercising an Option under the Plan or acquiring shares under the Plan, may be required by the Company to give a representation in writing that such person is acquiring such shares for investment and not with a view to, or for sale in connection with, the distribution of any part thereof.  The Company will endorse any necessary legend referring to the foregoing restriction upon the certificate or certificates representing any shares issued or transferred to the Participant upon the exercise of any Option granted under the Plan.

 

(r)                                    Governing Law.  The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof, or principles of conflicts of laws of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.

 

(s)                                   Severability.  If any provision of the Plan or any Award or Award agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

 

21

 

(t)                                    Obligations Binding on Successors.  The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company.

 

(u)                                 409A of the Code.

 

(i)                                     It is intended that the Plan comply with Section 409A of the Code, and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code.  Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with the Plan or any other plan maintained by the Company, including any taxes and penalties under Section 409A of the Code, and neither the Company nor any Affiliate shall have any obligation to indemnify or otherwise hold such Participant or any beneficiary harmless from any or all of such taxes or penalties.  With respect to any Award that is considered “deferred compensation” subject to Section 409A of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A of the Code.  For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as a separate payment.

 

(ii)                                  Notwithstanding anything in the Plan to the contrary, if the Participant is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, no payments or deliveries in respect of any Awards that are “deferred compensation” subject to Section 409A of the Code shall be made to such Participant prior to the date that is six months after the date of such Participant’s “separation from service” within the meaning of Section 409A of the Code or, if earlier, the Participant’s date of death.  All such delayed payments or deliveries will be paid or delivered (without interest) in a single lump sum on the earliest date permitted under Section 409A of the Code that is also a business day.

 

(iii)                               In the event that the timing of payments in respect of any Award that would otherwise be considered “deferred compensation” subject to Section 409A of the Code would be accelerated upon the occurrence of (A) a Change in Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code and any Treasury Regulations promulgated thereunder or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of “Disability” pursuant to Section 409A of the Code and any Treasury Regulations promulgated thereunder.

 

(v)                                 Clawback/Forfeiture.  Notwithstanding anything to the contrary contained herein, an Award agreement may provide that the Committee may cancel such Award if the Participant, without the consent of the Company, has engaged in or engages in activity that is in conflict with or adverse to the interest of the Company or any Affiliate while employed by or providing services to the Company or any Affiliate, including fraud or conduct contributing to any financial restatements or irregularities, or violates a non-competition, non-solicitation, non-disparagement or non-disclosure covenant or agreement with the Company or any Affiliate, as determined by the Committee.  The Committee may also provide in an Award agreement that in such event, the Participant will forfeit any compensation, gain or other value realized thereafter on the vesting, exercise or settlement of such Award, the sale or other transfer of such Award, or the sale of shares of Common Stock acquired in respect of such Award, and must promptly repay such amounts to the Company.  The Committee may also provide in an Award agreement that if the

 

22

 

Participant receives any amount in excess of what the Participant should have received under the terms of the Award for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), all as determined by the Committee, then the Participant shall be required to promptly repay any such excess amount to the Company.  To the extent required by applicable law (including, without limitation, Section 304 of the Sarbanes-Oxley Act and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act) and/or the rules and regulations of NASDAQ or any other securities exchange or inter-dealer quotation service on which the Common Stock is listed or quoted, or if so required pursuant to a written policy adopted by the Company, Awards shall be subject (including on a retroactive basis) to clawback, forfeiture or similar requirements (and such requirements shall be deemed incorporated by reference into all outstanding Award agreements).

 

(w)                               No Representations or Covenants With Respect to Tax Qualification.  Although the Company may endeavor to (i) qualify an Award for favorable U.S. or non-U.S. tax treatment or (ii) avoid adverse tax treatment, the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on holders of Awards under the Plan.

 

(x)                                 Code Section 162(m) Re-approval.  If the Company becomes subject to the provisions of Section 162(m) of the Code, the Committee may, for purposes of exempting certain Awards granted after such time from the deduction limitations of Section 162(m) of the Code, submit the provisions of the Plan regarding Performance Compensation Awards for re-approval by the shareholders of the Company (i) prior to the first shareholder meeting at which directors are to be elected that occurs in calendar year 2019, or such earlier time as required under applicable Treasury Regulations, and (ii) thereafter not later than every five years in accordance with applicable Treasury Regulations.  Nothing in this subsection, however, shall affect the validity of Awards granted after such time if such shareholder approval has not been obtained.

 

(y)                                 Expenses; Gender; Titles and Headings.  The expenses of administering the Plan shall be borne by the Company and its Affiliates.  Masculine pronouns and other words of masculine gender shall refer to both men and women.  The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control.

 

*       *       *

 

As adopted by the Board of Directors of the Company on [            ], 2015.

 

As approved by the shareholders of the Company on [            ], 2015.

 

23

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00242-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00242-of-00352.parquet"}]]