Document:

Exhibit 10.5

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (as amended, supplemented or otherwise modified from time to time, this “Agreement”), dated as of [•], 2014, is made by and among:

 

i.                  Virtu Financial, Inc., a Delaware corporation (the “Company”);

 

ii.               TJMT Holdings LLC (f/k/a Virtu Holdings LLC), a Delaware limited liability company, and the other Persons who execute the signature pages hereto under the heading “Viola Holders” (the “Viola Holders”);

 

iii.            SLP III EW Feeder I, L.P., a Delaware limited partnership (the “SL Stockholder”), and Silver Lake Technology Associates III, L.P., a Delaware limited partnership, Silver Lake Partners III DE (AIV III), L.P., a Delaware limited partnership, and Silver Lake Technology Investors III, L.P., a Delaware limited partnership (collectively, the “SL Members” and, together with the SL Stockholder, the “SL Holders”);

 

iv.           Virtu Employee Holdco LLC, a Delaware limited liability company, and Virtu East MIP LLC, a Delaware limited liability company (together, the “Management Vehicles”); and

 

v.              the other Persons who execute the signature pages hereto under the heading “Additional Holders” (collectively with the Management Vehicles, the “Other Holders”).

 

The Viola Holders, SL Holders and Other Holders are each referred to herein as a “Holder” and are collectively referred to herein as the “Holders”.  In addition, the Holders and the Company are each referred to herein as a “Party” and are collectively referred to herein as the “Parties”.

 

WHEREAS, pursuant to a Reorganization Agreement, dated as of the date hereof, by and among the Company, Virtu Financial (as defined below) and the other Persons listed on the signature pages thereto, the Company has effected a series of reorganization transactions (the “Reorganization Transactions”);

 

WHEREAS, after giving effect to the Reorganization Transactions, (i) the Viola Holders own non-voting common interest units (“Virtu Financial Units”) in Virtu Financial LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Virtu Financial”), together with shares of the Company’s Class D common stock, $0.00001 par value per share (the “Class D Common Stock”), which are exchangeable from time to time at the option of the Viola Holders for shares of the Company’s Class B common stock, $0.00001 par value per share (the “Class B Common Stock”), pursuant to an Exchange Agreement, dated as of the date hereof, by and among the Company, Virtu Financial and the other Persons listed on the signature pages thereto (the “Exchange Agreement”), and (ii) the SL Members and Other Holders own Virtu Financial Units together with shares of the Company’s Class C common stock, $0.00001 par value per share (the “Class C Common Stock”), which are exchangeable from time to time at the option of the respective holders (subject to certain vesting restrictions in the case of the Other Holders) for shares of the Company’s Class A common stock, $0.00001 par

 

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value per share (the “Class A Common Stock”), pursuant to the Exchange Agreement and (iii) the SL Stockholder owns shares of Class A Common Stock;

 

WHEREAS, in connection with the Reorganization Transactions, Virtu Financial, the Company and the Holders have entered into the Second Amended and Restated Limited Liability Company Agreement of Virtu Financial (the “LLC Agreement”);

 

WHEREAS, the Company has priced an initial public offering of shares of its Class A Common Stock (the “IPO”) pursuant to an Underwriting Agreement, dated as of the date hereof; and

 

WHEREAS, in connection with the Reorganization Transactions and the IPO, the Company has agreed to provide the Holders with certain registration rights with respect to their Registrable Securities, subject to the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the premises and of the mutual agreements, covenants and provisions contained in this Agreement, the Parties agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1                               Definitions.  The following terms shall have the following respective meanings:

 

“Agreement” has the meaning set forth in the preamble.

 

“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.

 

“Class A Common Stock” has the meaning set forth in the recitals.

 

“Class B Common Stock” has the meaning set forth in the recitals.

 

“Class C Common Stock” has the meaning set forth in the recitals.

 

“Class D Common Stock” has the meaning set forth in the recitals.

 

“Common Stock” means the Class A Common Stock.

 

“Company” has the meaning set forth in the preamble.

 

“Continuance Notice” has the meaning set forth in Section 2.6(c).

 

“Cutback Trigger Offering” has the meaning set forth in Section 2.1(f).

 

“Demand” has the meaning set forth in Section 2.1(a).

 

“Demand Registration” has the meaning set forth in Section 2.1(a).

 

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“Disclosure Package” means (i) the preliminary prospectus, (ii) each Free Writing Prospectus and (iii) all other information that is deemed, under Rule 159 under the Securities Act, to have been conveyed to purchasers of securities at the time of sale (including a contract of sale).

 

“Electing Registration Party” has the meaning set forth in Section 2.6(c).

 

“Employee Holders” means the Other Holders and any Transferees thereof, provided such Transferee enters into a joinder agreement and, if applicable, a spousal consent, substantially in the forms attached hereto as Annex B and Annex C, respectively.

 

“Exchange” means (i) the exchange of shares of Class D Common Stock together with Virtu Financial Units for shares of Class B Common Stock, pursuant to the Exchange Agreement, and the further conversion of such shares of Class B Common Stock into shares of Common Stock and (ii) the exchange of shares of Class C Common Stock together with Virtu Financial Units for shares of Common Stock, pursuant to the Exchange Agreement.

 

“Exchange Agreement” has the meaning set forth in the recitals.

 

“Exchange Registration” has the meaning set forth in Section 3.1.

 

“Exchange Registration Statement” has the meaning set forth in Section 3.1.

 

“Form S-3 Registration Statement” has the meaning set forth in Section 2.3(b).

 

“Form S-3 Shelf Registration Statement” has the meaning set forth in Section 2.3(b).

 

“Free Writing Prospectus” means any “free writing prospectus,” as defined in Rule 405 under the Securities Act.

 

“Holder” has the meaning set forth in the preamble.

 

“Initiating Shelf Holder” has the meaning set forth in the Section 2.4(a).

 

“IPO” has the meaning set forth in the recitals.

 

“LLC Agreement” has the meaning set forth in the recitals.

 

“Management Vehicles” has the meaning set forth in the preamble.

 

“Marketed Underwritten Shelf Take-Down” has the meaning set forth in Section 2.4(b).

 

“Non-Marketed Take-Down Share” has the meaning set forth in Section 2.4(d).

 

“Non-Marketed Underwritten Shelf Take-Down” has the meaning set forth in Section 2.4(c).

 

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“Non-Marketed Underwritten Shelf Take-Down Notice” has the meaning set forth in Section 2.4(d).

 

“Non-Marketed Underwritten Shelf Take-Down Piggyback Election” has the meaning set forth in Section 2.4(c).

 

“Notice Recipient” has the meaning set forth in Section 2.4(c).

 

“Other Holders” has the meaning set forth in the preamble.

 

“Other Securities” means Common Stock of the Company sought to be included in a registration other than Registrable Securities.

 

“Parties” has the meaning set forth in the preamble.

 

“Piggyback Notice” has the meaning set forth in Section 2.2(a).

 

“Public Offering” means a public offering of Common Stock pursuant to an effective registration statement (other than on Form S-4 or Form S-8 or their respective equivalents) filed by the Company under the Securities Act.

 

“Registrable Securities” means shares of Common Stock owned by the Holders, whether now held or hereinafter acquired, including any shares of Common Stock issuable or issued upon conversion or exchange of other securities of the Company or any of its Subsidiaries (“Overlying Securities”), including upon an Exchange or by way of unit or stock dividend or unit or stock split, or in connection with a combination of units or shares, recapitalization, merger, consolidation or other reorganization, until:  (i) a registration statement covering such shares of Common Stock or applicable Overlying Securities has been declared effective by the SEC and such shares of Common Stock or applicable Overlying Securities have been disposed of pursuant to such effective registration statement; (ii) such shares of Common Stock or applicable Overlying Securities are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met; or (iii) (A) such shares of Common Stock or applicable Overlying Securities are otherwise Transferred to a non-Affiliate of the Transferor, (B) the Company has delivered a new certificate or other evidence of ownership for such shares of Common Stock or applicable Overlying Securities not bearing a restrictive legend and (C) such shares of Common Stock or applicable Overlying Securities may be resold without limitation or subsequent registration under the Securities Act.

 

“Registration Expenses” means any and all expenses incident to performance of or compliance with any registration of securities pursuant to Article II (other than underwriting discounts and commissions), including (i) the fees, disbursements and expenses of the Company’s counsel and accountants, including for special audits and comfort letters; (ii) all expenses, including filing fees, in connection with the preparation, printing and filing of the registration statement, any preliminary prospectus or final prospectus, any other offering document and amendments and supplements thereto and the mailing and delivering of copies thereof to any underwriters and dealers; (iii) the cost of printing or producing any underwriting agreements and blue sky or legal investment memoranda and any other documents in connection

 

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with the offering, sale or delivery of the securities to be disposed of; (iv) all expenses in connection with the qualification of the securities to be disposed of for offering and sale under state “blue sky” securities laws, including the reasonable fees and disbursements of one counsel for the underwriters and the Selling Holders in connection with such qualification and in connection with any blue sky and legal investment surveys; (v) all expenses, including filing fees, incident to securing any required review by FINRA of the terms of the sale of the securities to be disposed of; (vi) transfer agents’ and registrars’ fees and expenses and the fees and expenses of any other agent or trustee appointed in connection with such offering; (vii) all security engraving and security printing expenses; (viii) all fees and expenses payable in connection with the listing of the securities on any securities exchange or automated interdealer quotation system or the rating of such securities; (ix) all expenses with respect to road shows that the Company is obligated to pay pursuant to Section 2.7(o); and (x) the reasonable fees and disbursements of one counsel for the Registration Parties participating in the registration (which counsel shall be chosen by the participating Registration Party, other than the Viola Registration Parties, that then holds the most Registrable Securities) incurred in connection with any such registration and any offering of Common Stock relating to such registration, including Shelf-Take Downs (as defined below).

 

“Registration Party” means any SL Registration Party or any Viola Registration Party.

 

“Reorganization Transactions” has the meaning set forth in the recitals.

 

“Selling Holder” means, with respect to any registration statement, any Holder whose Registrable Securities are included therein.

 

“Shelf Holder” means any Holder whose Registrable Securities are included in the Form S-3 Shelf Registration Statement.

 

“Shelf Take-Down” has the meaning set forth in Section 2.4(a).

 

“SL Holder” has the meaning set forth in the preamble.

 

“SL Member” has the meaning set forth in the preamble.

 

“SL Registration Party” means any SL Holder or any of its respective Transferees under Section 2.1(c) holding Registrable Securities.

 

“SL Stockholder” has the meaning set forth in the preamble.

 

“Underwritten Shelf Take-Down” has the meaning set forth in Section 2.4(b).

 

“Underwritten Shelf Take-Down Notice” has the meaning set forth in Section 2.4(b).

 

“Virtu Financial” has the meaning set forth in the recitals.

 

“Virtu Financial Units” has the meaning set forth in the recitals.

 

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“Viola Holders” has the meaning set forth in the preamble.

 

“Viola Registration Party” means any Viola Holder or any of its respective Transferees under Section 2.1(c) holding Registrable Securities.

 

“Withdrawn Offering” has the meaning set forth in Section 2.6(c).

 

Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the LLC Agreement.

 

ARTICLE II

 

REGISTRATION RIGHTS

 

2.1                               Demand Rights.

 

(a)                                 Demand Rights.  Subject to the terms and conditions of this Agreement (including Section 2.1(b)), at any time after consummation of the IPO, upon written notice delivered by a Viola Registration Party or a SL Registration Party (a “Demand”) at any time requesting that the Company effect the registration (a “Demand Registration”) under the Securities Act of any or all of the Registrable Securities held by such Registration Party, which Demand shall specify the number and type of such Registrable Securities to be included in such registration and the intended method or methods of disposition of such Registrable Securities, the Company shall, as promptly as reasonably practicable, give written notice of such Demand to all other Holders and shall, as promptly as reasonably practicable at any time after the expiration of the lockup agreements delivered pursuant to the Underwriting Agreement, file the appropriate registration statement and use reasonable best efforts to effect the registration under the Securities Act and applicable state securities laws of (i) the Registrable Securities which the Company has been so requested to register for sale by such Registration Party in the Demand, and (ii) all other Registrable Securities which the Company has been requested to register for sale by such other Holders by written request given to the Company within 20 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registrable Securities), in each case subject to Section 2.1(f), all to the extent required to permit the disposition (in accordance with such intended methods of disposition) of the Registrable Securities to be so registered for sale.  Notwithstanding the foregoing, in the event the method of disposition is an underwritten offering, the right of any Holder to include Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise agreed by the Holders with a majority of the Registrable Shares participating in the registration and by the requesting Registration Party) to the extent provided in this Agreement, and all Holders proposing to distribute their Registrable Shares through such underwriting shall (together with the Company as provided in Section 2.7) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting.

 

(b)                                 Limitations on Demand Rights.  The Viola Registration Parties shall be entitled to make seven Demands under Section 2.1(a) and the SL Registration Parties shall be entitled to make three Demands under Section 2.1(a), subject in each case to Section 2.6(c); provided, that any Viola Registration Party or SL Registration Party shall only be entitled to

 

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make a Demand pursuant to Section 2.1(a) if such Registration Party is requesting the registration of Registrable Securities held by it and its Affiliates that are Registration Parties with an aggregate estimated market value of at least $50 million.  No registration effected pursuant to Section 2.2 or Section 2.3 and no Shelf Take-Down pursuant to Section 2.4 shall be counted as the making of a Demand for purposes of Section 2.1(a); provided, that, subject to Section 2.6(c), a request for a Marketed Underwritten Shelf Take-Down (as defined below) pursuant to Section 2.4(b) shall count as one Demand.  For the avoidance of doubt, a demand for shelf registration made together with a request for a Marketed Underwritten Shelf Take-Down shall together constitute a single Demand.

 

(c)                                  Assignment.  In connection with the Transfer of Registrable Securities to any Person, a Registration Party or Other Holder may assign to any Transferee of such Registrable Securities (i) the right to make one or more Demands pursuant to Section 2.1(a) and (ii) the right to participate in or effect any registration and/or Shelf Take-Down pursuant to the terms of Section 2.1(a)(ii), Section 2.2, Section 2.3 and Section 2.4, in each case to the extent that such Transferor has such rights.  In the event of any such assignment, references to the Registration Parties in Section 2.1, Section 2.2, Section 2.3 and Section 2.4 shall be deemed to refer to such Transferee if such Transferee is making any Demand or otherwise exercising its registration rights hereunder.  In each of the foregoing cases, in the event the relevant Registration Party or Other Holder assigns, directly or indirectly, any registration rights to any Person as contemplated in this Section 2.1(c) in connection with a Transfer of Registrable Securities, the Registration Party or Other Holder shall, as a condition to any such assignment, require such Transferee to enter into a Joinder Agreement in the form attached hereto as Annex B to become party to this Agreement and expressly be subject to Section 2.12 and/or Section 3.4 herein, as applicable.  If any such Transferee is an individual and married, such relevant Registration Party or Other Holder shall, as a condition to such Transfer, cause such Transferee to deliver to the Company a duly executed copy of a Spousal Consent in the form attached hereto as Annex C.  In the event of any such assignment, references to the Registration Party or Other Holder in Section 2.12 shall be deemed to refer to such Transferee.  In addition, in each of the foregoing cases, the relevant Registration Party or Other Holder, as applicable, shall, as promptly as reasonably practicable, give written notice of any such assignment to the Company and, in the case of an assignment by a Registration Party, the other Registration Parties in accordance with the LLC Agreement or, to the extent applicable to such other Registration Parties, to the addresses and other contact information set forth on Annex A to this Agreement.  For the avoidance of doubt, any registration rights or allocations provided under this Agreement to a SL Holder may be assigned by such SL Holder without limitation to any other SL Holder.

 

(d)                                 Company Blackout Rights.  With respect to any registration statement filed, or to be filed, including any amendment, renewal or replacement thereof, pursuant to this Section 2.1, if (i) the board of directors of the Company determines in good faith after consultation with outside counsel that such registration would cause the Company to disclose material non-public information, which disclosure (x) would be required to be made in any registration statement so that such registration statement would not be materially misleading, (y) would not be required to be made at such time but for the filing or effectiveness of such registration statement and (z) would be materially detrimental to the Company or would materially interfere with any material financing, acquisition, corporate reorganization or merger or other similar transaction involving the Company or any of its Subsidiaries, and that, as a result

 

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of such potential disclosure or interference, it is in the best interests of the Company to defer the filing or effectiveness of such registration statement at such time or suspend the Selling Holders’ use of any prospectus which is a part of the registration statement, and (ii) the Company furnishes to the Selling Holders a certificate signed by the chief executive officer of the Company to that effect, then the Company shall have the right to defer such filing or effectiveness or suspend the continuance of such effectiveness for a period of not more than 135 days (in which event, in the case of a suspension, such Selling Holder shall discontinue sales of Registrable Securities pursuant to such registration statement); provided, that the Company shall not use this right, together with any other deferral or suspension of the Company’s obligations under Section 2.1 or Section 2.3, more than once in any 12-month period. The Company shall as promptly as reasonably practicable notify the Selling Holders of the expiration of any period during which it exercised its rights under this Section 2.1(d).  The Company agrees that, in the event it exercises its rights under this Section 2.1(d), it shall, as promptly as reasonably practicable following the expiration of the applicable deferral or suspension period, file or update and use its reasonable best efforts to cause the effectiveness of, as applicable, the applicable deferred or suspended registration statement or prospectus which is a part of the registration statement.

 

(e)                                  Fulfillment of Registration Obligations.  Notwithstanding any other provision of this Agreement, a registration requested pursuant to this Section 2.1 shall not be deemed to have been effected and the Registration Party that issued the Demand shall not be deemed to have used one of its Demands for purposes of Section 2.1(b):  (i) if the registration statement is withdrawn without becoming effective; (ii) if after it has become effective such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or any other Governmental Authority for any reason other than a misrepresentation or an omission by a Selling Holder that is the Registration Party, or an Affiliate of the Registration Party (other than the Company and its controlled Affiliates), that made the Demand relating to such registration and, as a result thereof, the Registrable Securities requested to be registered cannot be completely distributed in accordance with the plan of distribution set forth in the related registration statement; (iii) if the registration does not contemplate an underwritten offering, if it does not remain effective for at least 180 days (or such shorter period as will terminate when all securities covered by such registration statement have been sold or withdrawn); or if such registration statement contemplates an underwritten offering, if it does not remain effective for at least 180 days plus such longer period as, in the opinion of counsel for the underwriter or underwriters, a prospectus is required by Applicable Law to be delivered in connection with the sale of Registrable Securities by an underwriter or dealer; or (iv) in the event of an underwritten offering, if the conditions to closing (including any condition relating to an overallotment option) specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied or waived other than by reason of some wrongful act or omission by a Selling Holder that is the Registration Party, or an Affiliate of the Registration Party, that made the Demand relating to such registration.

 

(f)                                   Cutbacks in Demand Registration.  If the lead underwriter or managing underwriter advises the Company in writing (with a copy to each Selling Holder) that, in such firm’s good faith view, the number of Registrable Securities and Other Securities requested to be included in a Demand Registration exceeds the number which can be sold in such offering without being likely to have a significant adverse effect upon the price, timing or distribution of

 

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the offering and sale of the Registrable Securities and Other Securities then contemplated, the Company shall include in such registration:

 

(1)                                 first, Registrable Securities owned by the Registration Parties that are requested to be included in such registration pursuant to Section 2.1(a) and that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such fully vested Registrable Securities owned by the Viola Registration Parties and the SL Registration Parties seeking or requesting inclusion in such registration; provided, that until and including the offering that is counted under Section 2.1(b) as the third Demand under this Agreement (the “Cutback Trigger Offering”), such Registrable Securities that are allocable to the Registration Parties in the aggregate pursuant to the preceding portion of this clause (1) shall be allocated among the Registration Parties as follows:  (x) first, 50% to the Viola Registration Parties seeking or requesting inclusion in such registration and 50% to the SL Registration Parties seeking or requesting inclusion in such registration, until either such Viola Registration Parties, on the one hand, or such SL Registration Parties, on the other hand, have been allocated all their Registrable Securities sought or requested to be included in such registration, and (y) thereafter, 100% to the remaining Registration Parties seeking or requesting inclusion in such registration;

 

(2)                                 second, Registrable Securities owned by the Other Holders that are requested to be included in such registration pursuant to Section 2.1(a) and that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such fully vested Registrable Securities owned by the Other Holders requesting inclusion in such registration; and

 

(3)                                 third, the Other Securities owned by any holder thereof with a contractual right to include such Other Securities in such registration that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such fully vested Other Securities owned by the Persons requesting inclusion in such registration.

 

2.2                               Piggyback Registration Rights.

 

(a)                                 Notice and Exercise of Rights.  If the Company at any time proposes or is required to register any of its Common Stock or any other Equity Securities under the Securities Act (other than a Demand Registration pursuant to Section 2.1 or a registration pursuant to Section 2.3 or Article III), whether or not for sale for its own account, in a manner that would permit registration of Registrable Securities for sale for cash to the public under the Securities Act, subject to the last sentence of this Section 2.2(a), it shall at each such time give written notice (the “Piggyback Notice”), as promptly as reasonably practicable, to each Holder of its intention to do so, which Piggyback Notice shall specify the number of shares of such Common Stock or other Equity Securities to be included in such registration.  Upon the written request of any Holder made within 20 days after receipt of the Piggyback Notice by such Person (which request shall specify the number of Registrable Securities intended to be disposed of), subject to the other provisions of this Article II, the Company shall effect, in connection with the registration of such Common Stock or other Equity Securities, the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register; provided, that in no event shall the Company be required to register pursuant to this Section 2.2

 

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any securities other than Common Stock.  Notwithstanding anything to the contrary contained in this Section 2.2, the Company shall not be required to effect any registration of Registrable Securities under this Section 2.2 incidental to the registration of any of its securities on Forms S-4 or S-8 (or any similar or successor form providing for the registration of securities in connection with mergers, acquisitions, exchange offers, subscription offers, dividend reinvestment plans or stock option or other executive or employee benefit or compensation plans) or any other form that would not be available for registration of Registrable Securities.

 

(b)                                 Determination Not to Effect Registration.  If at any time after giving such Piggyback Notice and prior to the effective date of the registration statement filed in connection with such registration the Company shall determine for any reason not to register the securities originally intended to be included in such registration, the Company may, at its election, give written notice of such determination to the Selling Holders and thereupon the Company shall be relieved of its obligation to register such Registrable Securities in connection with the registration of securities originally intended to be included in such registration, without prejudice, however, to the right of a Viola Registration Party or a SL Registration Party immediately to request that such registration be effected as a registration under Section 2.1 (including a shelf registration under Section 2.3) to the extent permitted thereunder.

 

(c)                                  Cutbacks in Company Offering.  If the registration referred to in the first sentence of Section 2.2(a) is to be an underwritten registration on behalf of the Company, and the lead underwriter or managing underwriter advises the Company in writing (with a copy to each Selling Holder) that, in such firm’s good faith view, the number of Other Securities and Registrable Securities requested to be included in such registration exceeds the number which can be sold in such offering without being likely to have a significant adverse effect upon the price, timing or distribution of the offering and sale of the Other Securities and Registrable Securities then contemplated, the Company shall include in such registration:

 

(1)                                 first, all securities proposed to be registered on behalf the Company;

 

(2)                                 second, Registrable Securities owned by the Registration Parties that are requested to be included in such registration pursuant to this Section 2.2 and that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such fully vested Registrable Securities owned by the Viola Registration Parties and the SL Registration Parties requesting inclusion in such registration; provided, that, until the Cutback Trigger Offering, such Registrable Securities that are allocable to the Registration Parties in the aggregate pursuant to the preceding portion of this clause (2) shall be allocated among the Registration Parties as follows:  (x) first, 50% to the Viola Registration Parties requesting inclusion in such registration and 50% to the SL Registration Parties requesting inclusion in such registration, until either such Viola Registration Parties, on the one hand, or such SL Registration Parties, on the other hand, have been allocated all their Registrable Securities sought or requested to be included in such registration, and (y) thereafter, 100% to the remaining Registration Parties seeking or requesting inclusion in such registration;

 

(3)                                 third, Registrable Securities owned by the Other Holders that are requested to be included in such registration pursuant to this Section 2.2 and that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the

 

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relative number of such fully vested Registrable Securities owned by the Other Holders requesting inclusion in such registration; and

 

(4)                                 fourth, the Other Securities that are requested to be included in such registration pursuant to the terms of any agreement providing for registration rights to which the Company is a party that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such Other Securities owned by the Persons requesting inclusion in such registration.

 

(d)                                 Cutbacks in Other Offerings. If the registration referred to in the first sentence of Section 2.2(a) is to be an underwritten registration other than on behalf of the Company, and the lead underwriter or managing underwriter advises the Selling Holders in writing (with a copy to the Company) that, in such firm’s good faith view, the number of Registrable Securities and Other Securities requested to be included in such registration exceeds the number which can be sold in such offering without being likely to have a significant adverse effect upon the price, timing or distribution of the offering and sale of the Registrable Securities and Other Securities then contemplated, the Company shall include in such registration:

 

(1)                                 first, the Other Securities held by any holder thereof with a contractual right to include such Other Securities in such registration prior to any other Person;

 

(2)                                 second, Registrable Securities owned by the Registration Parties that are requested to be included in such registration pursuant to this Section 2.2 and that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such fully vested Registrable Securities owned by the Viola Registration Parties and the SL Registration Parties requesting inclusion in such registration; provided, that until the Cutback Trigger Offering, such Registrable Securities that are allocable to the Registration Parties in the aggregate pursuant to the preceding portion of this clause (2) shall be allocated among the Registration Parties as follows:  (x) first, 50% to the Viola Registration Parties requesting inclusion in such registration and 50% to the SL Registration Parties requesting inclusion in such registration, until either such Viola Registration Parties, on the one hand, or such SL Registration Parties, on the other hand, have been allocated all their Registrable Securities sought or requested to be included in such registration, and (y) thereafter, 100% to the remaining Registration Parties seeking or requesting inclusion in such registration;

 

(3)                                 third, Registrable Securities owned by the Other Holders that are requested to be included in such registration pursuant to this Section 2.2 and that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such fully vested Registrable Securities owned by the Other Holders requesting inclusion in such registration; and

 

(4)                                 fourth, the Other Securities that are requested to be included in such registration pursuant to the terms of any agreement providing for registration rights to which the Company is a party that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such Other Securities owned by the Persons requesting inclusion in such registration.

 

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(e)                                  IPO.  The Parties agree that the provisions of this Section 2.2 shall not apply to the IPO.

 

2.3                               Form S-3 Registration.

 

(a)                                 Notwithstanding anything in Section 2.1 or Section 2.2 to the contrary, in case the Company shall receive from any Viola Registration Party or any SL Registration Party a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Registration Party (which shall not constitute a Demand), and the Company is then eligible to use Form S-3 for the resale of Registrable Securities, the Company shall:

 

(1)                                 as promptly as reasonably practicable, give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and

 

(2)                                 as promptly as reasonably practicable, file and use reasonable best efforts to effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registration Party’s Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder joining in such request as are specified in a written request given within 15 days after receipt of such written notice from the Company; provided, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 2.3 (or, with respect to a request under Section 2.4, any Shelf Take-Down pursuant to Section 2.4):

 

(A)                               if Form S-3 is not available for such offering by the Registration Parties;

 

(B)                               solely with respect to filing and causing the effectiveness of a registration on Form S-3 or effecting a Marketed Underwritten Shelf Take-Down, if the Registration Parties, together with the Holders of any Registrable Securities entitled to inclusion in such registration (or Marketed Underwritten Shelf Take-Down, as applicable), propose to sell Registrable Securities at an aggregate price to the public (net of any underwriters’ discounts or commissions) of less than $50 million;

 

(C)                               if (i) the board of directors of the Company determines in good faith after consultation with outside counsel that such Form S-3 registration would cause the Company to disclose material non-public information, which disclosure (x) would be required to be made in any registration statement so that such registration statement would not be materially misleading, (y) would not be required to be made at such time but for the filing or effectiveness of such registration statement and (z) would be materially detrimental to the Company or would materially interfere with any material financing, acquisition, corporate reorganization or merger or other similar transaction involving the Company or any of its Subsidiaries, and that, as a result of such potential disclosure or interference, it is in the best interests of the Company to defer the filing or effectiveness of such registration statement (or, with respect to a Shelf Take-Down under Section 2.4, the sale of securities of the Company pursuant to such Form S-3 registration

 

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statement) at such time, and (ii) the Company furnishes to the Registration Parties a certificate signed by the chief executive officer of the Company to that effect, then the Company shall have the right to defer such filing of the Form S-3 registration statement (or Shelf Take-Down) for a period of not more than 120 days after receipt of the request of the Registration Party under this Section 2.3 (or Section 2.4, as applicable); provided, that the Company shall not use this right, together with any other deferral or suspension of the Company’s obligations under Section 2.1 or Section 2.3, more than once in any 12-month period.  The Company shall as promptly as reasonably practicable notify the Selling Holders of the expiration of any period during which it exercised its rights under this Section 2.3(a)(2)(C).  The Company agrees that, in the event it exercises its rights under this Section 2.3(a)(2)(C), it shall, as promptly as reasonably practicable following the expiration of the applicable deferral period, file or update and use its reasonable best efforts to cause the effectiveness of, as applicable, the applicable deferred registration statement (or Shelf Take-Down);

 

(D)                               solely with respect to filing and causing the effectiveness of a registration on Form S-3, subject to Section 2.3(d), if the Company has, within the 120-day period preceding the date of such request, already effected one registration on Form S-3 for a Registration Party pursuant to this Section 2.3 (but, for the avoidance of doubt, regardless of whether any Shelf Take-Downs have been effected during such period); provided, that any such registration shall be deemed to have been “effected” if the registration statement relating thereto (x) has become or been declared or ordered effective under the Securities Act, and any of the Registrable Securities of the Registration Party included in such registration have actually been sold thereunder, and (y) has remained effective for a period of at least 180 days in the case of a registration on Form S-3 for a Viola Registration Party or a SL Registration Party; or

 

(E)                                in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

 

(b)                                 Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities so requested to be registered, as promptly as reasonably practicable, after receipt of the request or requests of the Registration Party and the other Holders (the “Form S-3 Registration Statement”) and any such Holder may request inclusion of a plan of distribution in accordance with Section 2.7(i) and/or that such Form S-3 Registration Statement constitute a shelf offering on a delayed or continuous basis in accordance with Rule 415 under the Securities Act (a “Form S-3 Shelf Registration Statement”), in which case the provisions of Section 2.4 shall also be applicable.

 

(c)                                  If the Viola Registration Parties or the SL Registration Parties intend to distribute the Registrable Securities covered by their request under this Section 2.3 by means of a Marketed Underwritten Shelf Take-Down pursuant to Section 2.4(b), they shall so advise the Company as a part of their request made pursuant to this Section 2.3 and, subject to the limitations set forth in Section 2.3(a), the Company shall include such information in the written notice referred to in Section 2.3(a).  In such event, the right of any Holder to include Registrable Securities in such registration (or Underwritten Shelf Take-Down, as applicable) shall be

 

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conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise agreed by the Holders with a majority of the Registrable Securities participating in the registration and by the requesting Registration Party) to the extent provided in this Agreement.  All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.7) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting.  Notwithstanding any other provision of this Section 2.3 or Section 2.4, if the lead underwriter or managing underwriter advises the Company in writing (with a copy to each Selling Holder) that, in such firm’s good faith view, the number of Registrable Securities and Other Securities requested to be included in such offering exceeds the number which can be sold in such offering without being likely to have a significant adverse effect upon the price, timing or distribution of the offering and sale of the Registrable Securities and Other Securities then contemplated, the Company shall include in such offering:

 

(1)                                 first, Registrable Securities owned by the Viola Registration Parties and the SL Registration Parties that are requested to be included in such offering pursuant to Section 2.3 and Section 2.4 and that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such Registrable Securities owned by the Viola Registration Parties and the SL Registration Parties seeking such inclusion in such offering; provided, that until and including the Cutback Trigger Offering, such Registrable Securities that are allocable to the Registration Parties in the aggregate pursuant to the preceding portion of this clause (1) shall be allocated among the Registration Parties as follows:  (x) first, 50% to the Viola Registration Parties seeking inclusion in such offering and 50% to the SL Registration Parties seeking inclusion in such offering, until either such Viola Registration Parties, on the one hand, or such SL Registration Parties, on the other hand, have been allocated all their Registrable Securities sought or requested to be included in such offering, and (y) thereafter, 100% to the remaining Registration Parties seeking or requesting inclusion in such offering;

 

(2)                                 second, Registrable Securities owned by the Other Holders that are requested to be included in such offering pursuant to Section 2.3 and Section 2.4 and that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such fully vested Registrable Securities owned by the Other Holders seeking inclusion in such offering; and

 

(3)                                 third, the Other Securities owned by any holder thereof with a contractual right to include such Other Securities in such offering that can be sold without having the significant adverse effect referred to above, pro rata on the basis of the relative number of such fully vested Other Securities owned by the Persons seeking inclusion in such offering.

 

(d)                                 Notwithstanding the foregoing, if the Company shall receive from any Holders of Registrable Securities then outstanding a written request or requests under Section 2.3 that the Company effect a registration statement on Form S-3 that includes only those items and that information that is required to be included in parts I and II of such Form, and does not include any additional or extraneous items of information (e.g., a lengthy description of the Company or the Company’s business) (an “Ordinary S-3 Registration Statement”), then Section 2.3(a)(2)(D) shall not apply to such Ordinary S-3 Registration Statement request.

 

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(e)                                  Upon the written request of any Viola Registration Party or SL Registration Party (which shall not constitute a Demand), prior to the expiration of effectiveness of any existing Form S-3 Shelf Registration Statement in accordance with Rule 415, the Company shall file and seek the effectiveness of a new Form S-3 Shelf Registration Statement in order to permit the continued offering of the Registrable Securities included under such existing Form S-3 Shelf Registration Statement.

 

2.4                               Shelf Take-Downs.

 

(a)                                 Any Selling Holder of Registrable Securities included in a Form S-3 Shelf Registration Statement (an “Initiating Shelf Holder”) may initiate an offering or sale of all or part of such Registrable Securities (a “Shelf Take-Down”), in which case the provisions of this Section 2.4 shall apply.

 

(b)                                 If an Initiating Shelf Holder who is a Viola Registration Party or a SL Registration Party so elects in a written request delivered to the Company (an “Underwritten Shelf Take-Down Notice”), a Shelf Take-Down may be in the form of an underwritten offering (an “Underwritten Shelf Take-Down”) and, subject to the limitations set forth in the proviso to Section 2.3(a)(2) as modified by Section 2.3(d), the Company shall file and effect an amendment or supplement to its Form S-3 Shelf Registration Statement (including the filing of a supplemental prospectus) for such purpose as promptly as reasonably practicable; provided, that any such Marketed Underwritten Shelf Take-Down shall, subject to Section 2.6(c), be deemed to be, for purposes of Section 2.1(b), a Demand.  Such Initiating Shelf Holder shall indicate in such Underwritten Shelf Take-Down Notice whether it intends for such Underwritten Shelf Take-Down to involve a customary “road show” (including an “electronic road show”) or other substantial marketing effort by the underwriters over a period of at least 48 hours (a “Marketed Underwritten Shelf Take-Down”).  Upon receipt of an Underwritten Shelf Take-Down Notice indicating that such Underwritten Shelf Take-Down will be a Marketed Underwritten Shelf Take-Down, the Company shall as promptly as reasonably practicable (but in any event no later than two Business Days after receipt of such Marketed Underwritten Shelf Take-Down Notice) give written notice of such Marketed Underwritten Shelf Take-Down to all other Shelf Holders and shall permit the participation of all such Shelf Holders that request inclusion in such Marketed Underwritten Shelf Take-Down who respond in writing within five days after the receipt of such notice of their election to participate.  The provisions of Section 2.3(c) (other than the first sentence thereof) shall apply with respect to the right of the Initiating Shelf Holder and any other Shelf Holder to participate in any Underwritten Shelf Take-Down.

 

(c)                                  If the Initiating Shelf Holder desires to effect an Underwritten Shelf Take-Down that does not constitute a Marketed Underwritten Shelf Take-Down (a “Non-Marketed Underwritten Shelf Take-Down”), the Initiating Shelf Holder shall so indicate in a written request delivered to the Company no later than two Business Days prior to the expected date of such Non-Marketed Underwritten Shelf Take-Down, which request shall include (i) the total number of Registrable Securities expected to be offered and sold in such Non-Marketed Underwritten Shelf Take-Down, (ii) the expected plan of distribution of such Non-Marketed Underwritten Shelf Take-Down, (iii) the action or actions required (including the timing thereof) in connection with such Non-Marketed Underwritten Shelf Take-Down (including the delivery of one or more stock certificates representing shares of Registrable Securities to be sold in such

 

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Non-Marketed Underwritten Shelf Take-Down) and (iv) at the option and in the sole discretion of such Initiating Shelf Holder, an election that such Non-Marketed Underwritten Shelf Take-Down shall be subject to Section 2.4(d) (a “Non-Marketed Underwritten Shelf Take-Down Piggyback Election”), and, subject to the limitations set forth in the proviso to Section 2.3(a)(2) as modified by Section 2.3(d), the Company shall file and effect an amendment or supplement to its Form S-3 Shelf Registration Statement (including the filing of a supplemental prospectus) for such purpose as promptly as reasonably practicable (and in any event within three Business Days).

 

(d)                                 Upon receipt from any Viola Registration Party or SL Registration Party of a written request pursuant to Section 2.4(c) that contains an affirmative Non-Marketed Underwritten Shelf Take-Down Piggyback Election, the Company shall provide written notice (a “Non-Marketed Underwritten Shelf Take-Down Notice”) of such Non-Marketed Underwritten Shelf Take-Down promptly to all Holders (other than the requesting Registration Party), which Non-Marketed Underwritten Shelf Take-Down Notice shall set forth (i) the total number of Registrable Securities expected to be offered and sold in such Non-Marketed Underwritten Shelf Take-Down, (ii) the expected plan of distribution of such Non-Marketed Underwritten Shelf Take-Down, (iii) that each recipient of such Non-Marketed Underwritten Shelf Take-Down Notice (each, a “Notice Recipient”) shall have the right, upon the terms and subject to the conditions set forth in this Section 2.4(d), to elect to sell up to its Non-Marketed Take-Down Share (as defined below) and (iv) the action or actions required (including the timing thereof, which for the avoidance of doubt shall not require any delay in the expected date of such Non-Marketed Underwritten Shelf Take-Down or extension of the Company’s obligation to file and effect an amendment or supplement to its Form S-3 Shelf Registration Statement as soon as practicable (and in any event within two Business Days) of the Initiating Shelf Holder’s Non-Marketed Underwritten Shelf Taken-Down request pursuant to Section 2.4(c)) in connection with such Non-Marketed Underwritten Shelf Take-Down with respect to each Notice Recipient that elects to exercise such right (including the delivery of one or more stock certificates representing shares of Registrable Securities held by such Notice Recipient to be sold in such Non-Marketed Underwritten Shelf Take-Down).  Upon receipt of such Non-Marketed Underwritten Shelf Take-Down Notice, each such Notice Recipient may elect to sell up to its Non-Marketed Take-Down Share with respect to each such Non-Marketed Underwritten Shelf Take-Down, by taking such action or actions referred to in clause (iv) above in a timely manner.  If the Viola Registration Parties or the SL Registration Parties do not elect to sell all of their respective Non-Marketed Take-Down Share, the unelected portion of such Non-Marketed Take-Down Share shall be allocated to the other Holders, pro rata based on their respective Non-Marketed Take-Down Shares.  Notwithstanding the delivery of any Non-Marketed Underwritten Shelf Take-Down Notice, all determinations as to whether to complete any Non-Marketed Underwritten Shelf Take-Down and as to the timing, manner, price and other terms of any Non-Marketed Underwritten Shelf Take-Down contemplated by Section 2.4(d) shall be at the discretion of the Initiating Shelf Holder.  “Non-Marketed Take-Down Share” shall mean, with respect to any Non-Marketed Underwritten Shelf Take-Down subject to this Section 2.4(d) and each Initiating Shelf Holder and each other Notice Recipients delivering such notice with respect to and participating in such Non-Marketed Underwritten Shelf Take-Down subject to this Section 2.4(d), a number determined as follows:

 

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(x) in the case of all participating Registration Parties collectively, an aggregate number equal to the product of the following: (i) the total number of Registrable Securities to be included in such Non-Marketed Underwritten Shelf Take-Down and (ii) a fraction, the numerator of which is the total number of Registrable Securities beneficially owned by the participating Registration Parties in the aggregate, and the denominator of which is the total number of Registrable Securities beneficially owned by the Initiating Shelf Holder and all the other Notice Recipients delivering such a notice and participating in such Non-Marketed Underwritten Shelf Take-Down; and such aggregate number shall be allocated among the participating Registration Parties pro rata on the basis of the relative number of Registrable Securities owned by the participating Registration Parties; provided, that until the Cutback Trigger Offering, the Registrable Securities that are allocable to the participating Registration Parties in the aggregate pursuant to the preceding portion of this clause (x) shall be allocated among the participating Registration Parties as follows:  (A) first, 50% to the Viola Registration Parties requesting inclusion in such Non-Marketed Underwritten Shelf Take-Down and 50% to the SL Registration Parties requesting inclusion in such Non-Marketed Underwritten Shelf Take-Down, until either such Viola Registration Parties, on the one hand, or such SL Registration Parties, on the other hand, have been allocated all their Registrable Securities sought or requested to be included in such Non-Marketed Underwritten Shelf Take-Down, and (B) thereafter, 100% to the remaining Registration Parties seeking or requesting inclusion in such Non-Marketed Underwritten Shelf Take-Down; and

 

(y) in the case of each other participating Notice Recipient, a number equal to the product of the following:  (i) the total number of Registrable Securities to be included in such Non-Marketed Underwritten Shelf Take-Down and (ii) a fraction, the numerator of which is the total number of Registrable Securities beneficially owned by such participating Notice Recipient, and the denominator of which is the total number of Registrable Securities beneficially owned by the Initiating Shelf Holder and all the other Notice Recipient delivering such a notice and participating in such Non-Marketed Underwritten Shelf Take-Down.

 

2.5                               Selection of Underwriters.  In the event that any registration pursuant to this Article II (other than a registration under Section 2.2) shall involve, in whole or in part, an underwritten offering, the underwriter or underwriters shall be designated by the Registration Party (or in the case of a Shelf Take-Down, the Initiating Shelf Holder) that requested such underwritten offering in accordance with this Article II, which underwriter or underwriters shall be reasonably acceptable to the Company.

 

2.6                               Withdrawal Rights; Expenses.

 

(a)                                 A Selling Holder may withdraw all or any part of its Registrable Securities from any registration or offering (including a registration effected pursuant to Section 2.1) by giving written notice to the Company of its request to withdraw at any time.  Except in the case of a withdrawal of Registrable Securities made within 30 days of receipt by such Selling Holder of a certificate or notice from the Company that it will defer the filing or effectiveness of a

 

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registration statement pursuant to Section 2.1(d) or Section 2.3(a)(2)(C), the Company shall be entitled to reimbursement for any SEC registration fees incurred by the Company in connection with the registration of the Registrable Securities so withdrawn (unless such registration fees can be used in connection with the registration of other securities by the Company, including in connection with a future registration).  In the case of a withdrawal, any Registrable Securities so withdrawn shall be reallocated among the remaining participants in accordance with the applicable provisions of this Agreement.

 

(b)                                 Except as provided in this Agreement, the Company shall pay all Registration Expenses with respect to a particular offering (or proposed offering).  Except as provided herein, each Selling Holder and the Company shall be responsible for its own fees and expenses of financial advisors and their internal administrative and similar costs, as well as their respective pro rata shares of underwriters’ commissions and discounts, which shall not constitute Registration Expenses.

 

(c)                                  If the Registration Party that requested a Demand Registration or a Marketed Underwritten Shelf Take-Down pursuant to Section 2.1 or Section 2.4 withdraws all of its Registrable Securities from such Demand Registration or Marketed Underwritten Shelf Take-Down (a “Withdrawn Offering”), the other Registration Party(ies) or the Company may, in any of their sole discretion, elect within two Business Days thereafter to have the Company continue such Withdrawn Offering by giving written notice of such election to the Company and/or the other Registration Parties (a “Continuance Notice”), in which case such Withdrawn Offering shall proceed in accordance with the applicable provisions of this Agreement as if such Withdrawn Offering had been initiated by the Party providing the Continuance Notice (which, for the avoidance of doubt, shall not cause any new notice or consent period with respect to other Holders to occur under this Agreement and shall not otherwise change the requirements for and timing of any notices and consents under this Agreement as they then exist with respect to such Withdrawn Offering).  If a Continuance Notice is provided by a Registration Party (the “Electing Registration Party”), for the purpose of the limits on number of Demands set forth in Section 2.1(b), such Withdrawn Offering shall count as use of one Demand by such Electing Registration Party and shall not count as use of a Demand by the Registration Party that originally requested such Withdrawn Offering.  If a Continuance Notice is provided by the Company, such Withdrawn Registration shall not count as use of a Demand for any Registration Party for the purpose of the limits on number of Demands set forth in Section 2.1(b).  If no Continuance Notice is timely provided with respect to a Withdrawn Offering, the Company shall abandon the Withdrawn Offering, and such Withdrawn Offering shall count as use of one Demand by the Registration Party that originally requested such Withdrawn Offering for the purpose of the limits on number of Demands set forth in Section 2.1(b), unless such Registration Party elects in writing to bear the Registration Expenses for such Withdrawn Offering.

 

2.7                               Registration and Qualification.  If and whenever the Company is required to effect the registration of any Registrable Securities under the Securities Act as provided in this Article II, the Company shall as promptly as practicable:

 

(a)                                 Registration Statement.  (i) Prepare and (as promptly as reasonably practicable thereafter and in any event no later than 20 days after the end of the applicable period specified in Section 2.1(a), Section 2.2(a) or Section 2.3(a)(2) within which requests for

 

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registration may be given to the Company) file a registration statement under the Securities Act relating to the Registrable Securities to be offered and use reasonable best efforts to cause such registration statement to become effective as promptly as practicable thereafter, and keep such registration statement effective for 180 days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, that in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 180-day period shall be extended, if necessary, to keep the registration statement continuously effective, supplemented and amended to the extent necessary to ensure that it is available for sales of such Registrable Securities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the SEC as announced from time to time, until (A) the Selling Holders have sold all of such Registrable Securities or (B) no Registrable Securities then exist; (ii) furnish to the lead underwriter or underwriters, if any, and to the Selling Holders who have requested that Registrable Securities be covered by such registration statement, prior to the filing thereof with the SEC, a copy of the registration statement, and each amendment thereof, and a copy of any prospectus, and each amendment or supplement thereto (excluding amendments caused by the filing of a report under the Exchange Act); and (iii) use reasonable best efforts to reflect in each such document, when so filed with the SEC, such comments as such Persons reasonably may on a timely basis propose;

 

(b)                                 Amendments; Supplements.  Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be (i) reasonably requested by any Selling Holder (to the extent such request relates to information relating to such Selling Holder), or (ii) necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities until the earlier of (A) such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition set forth in such registration statement and (B) if a Form S-3 registration, the expiration of the applicable period specified in Section 2.7(a) and, if not a Form S-3 registration, the applicable period specified in Section 2.1(e)(iii); provided, that any such required period shall be extended for such number of days (x) during any period from and including the date any written notice contemplated by paragraph (f) below is given by the Company until the date on which the Company delivers to the Selling Holders the supplement or amendment contemplated by paragraph (f) below or written notice that the use of the prospectus may be resumed, as the case may be, and (y) during which the offering of Registrable Securities pursuant to such registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court; provided, further, that the Company shall have no obligation to a Selling Holder participating on a “piggyback” basis pursuant to Section 2.1(a) or Section 2.2 in a registration statement that has become effective to keep such registration statement effective for a period beyond 180 days from the effective date of such registration statement.  The Company shall respond, as promptly as reasonably practicable, to any comments received from the SEC and request acceleration of effectiveness, as promptly as reasonably practicable, after it learns that the SEC will not review the registration statement or after it has satisfied comments received from the SEC.  With respect to each Free Writing Prospectus or other materials to be included in the Disclosure Package, ensure that no Registrable Securities be sold “by means of” (as defined in Rule 159A(b) under the Securities Act) such Free Writing Prospectus or other materials without the prior written consent of the

 

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Selling Holders of the Registrable Securities covered by such registration statement, which Free Writing Prospectuses or other materials shall be subject to the review of counsel to such Selling Holders, and make all required filings of all Free Writing Prospectuses with the SEC;

 

(c)                                  Copies.  Furnish to the Selling Holders and to any underwriter of such Registrable Securities such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus, summary prospectus and Free Writing Prospectus), in conformity with the requirements of the Securities Act, such documents incorporated by reference in such registration statement or prospectus, and such other documents, as such Selling Holders or such underwriter may reasonably request, and upon request a copy of any and all transmittal letters or other correspondence to or received from, the SEC or any other Governmental Authority or self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering;

 

(d)                                 Blue Sky.  Register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Selling Holders and do any and all other acts and things which may be reasonably necessary or advisable to enable such Selling Holders to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Selling Holder; provided, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

 

(e)                                  Delivery of Certain Documents.  (i) Furnish to each Selling Holder and to any underwriter of such Registrable Securities an opinion of counsel for the Company (which opinion (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, or, in the case of a non-underwritten offering, to the Selling Holders) addressed to each Selling Holder and any underwriter of such Registrable Securities and dated the date of the closing under the underwriting agreement (if any) (or if such offering is not underwritten, dated the effective date of the applicable registration statement) covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings, (ii) furnish to each Selling Holder and any underwriter of such Registrable Securities a “cold comfort” and “bring-down” letter addressed to each Selling Holder and any underwriter of such Registrable Securities and signed by the independent public accountants who have audited the financial statements of the Company included in such registration statement, in each such case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) as are customarily covered in accountants’ letters delivered to underwriters in underwritten public offerings of securities and such other matters as any Selling Holder may reasonably request and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements and (iii) cause such authorized officers of the Company to execute customary certificates as may be requested by any Selling Holder or any underwriter of such Registrable Securities;

 

(f)                                   Notification of Certain Events; Corrections.  Promptly notify the Selling Holders and any underwriter of such Registrable Securities in writing (i) of the occurrence of any event as a result of which the registration statement or the prospectus included in such

 

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registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (ii) of any request by the SEC or any other regulatory body or other body having jurisdiction for any amendment of or supplement to any registration statement or other document relating to such offering, and (iii) if for any other reason it shall be necessary to amend or supplement such registration statement or prospectus in order to comply with the Securities Act and, in any such case as promptly as reasonably practicable thereafter, prepare and file with the SEC an amendment or supplement to such registration statement or prospectus which will correct such statement or omission or effect such compliance;

 

(g)                                  Notice of Effectiveness.  Notify the Selling Holders and the lead underwriter or underwriters, if any, and (if requested) confirm such advice in writing, as promptly as reasonably practicable after notice thereof is received by the Company (i) when the applicable registration statement or any amendment thereto has been filed or becomes effective and when the applicable prospectus or any amendment or supplement thereto has been filed, (ii) of any comments by the SEC, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of such registration statement or any order preventing or suspending the use of any preliminary or final prospectus or the initiation or threat of any proceedings for such purposes and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threat of any proceeding for such purpose;

 

(h)                                 Stop Orders.  Use its reasonable best efforts to prevent the entry of, and use its reasonable best efforts to obtain as promptly as reasonably practicable the withdrawal of, any stop order with respect to the applicable registration statement or other order suspending the use of any preliminary or final prospectus;

 

(i)                                     Plan of Distribution.  Promptly incorporate in a prospectus supplement or post-effective amendment to the applicable registration statement such information as any Selling Holder requests (subject to the agreement of the lead underwriter or underwriters, if any) be included therein relating to the plan of distribution with respect to such Registrable Securities; and make all required filings of such prospectus supplement or post-effective amendment as promptly as reasonably practicable after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment;

 

(j)                                    Other Filings.  Use its reasonable best efforts to cause the Registrable Securities covered by the applicable registration statement to be registered with or approved by such other Governmental Authorities as may be necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Securities;

 

(k)                                 FINRA Compliance.  Cooperate with each Selling Holder and each underwriter or agent, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;

 

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(l)                                     Listing.  Use its reasonable best efforts to cause all such Registrable Securities registered pursuant to such registration to be listed and remain on each securities exchange and automated interdealer quotation system on which identical securities issued by the Company are then listed;

 

(m)                             Transfer Agent; Registrar; CUSIP Number.  Provide a transfer agent and registrar for all Registrable Securities registered pursuant to such registration and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of the applicable registration statement;

 

(n)                                 Compliance; Earnings Statement.  Otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to each Selling Holder, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first month after the effective date of the applicable registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act;

 

(o)                                 Road Shows.  To the extent reasonably requested by the lead or managing underwriters in connection with an underwritten offering pursuant to Section 2.1 or a Form S-3 underwritten offering pursuant to Section 2.3 and Section 2.4(b), send appropriate officers of the Company to attend any “road shows” scheduled in connection with any such underwritten offering, with all out of pocket costs and expenses incurred by the Company or such officers in connection with such attendance to be paid by the Company;

 

(p)                                 Certificates.  Unless the relevant securities are issued in book-entry form, furnish for delivery in connection with the closing of any offering of Registrable Securities pursuant to a registration effected pursuant to this Article II unlegended certificates representing ownership of the Registrable Securities being sold in such denominations as shall be requested by any Selling Holder or the underwriters of such Registrable Securities (it being understood that the Selling Holders shall use reasonable best efforts to arrange for delivery to the Depository Trust Company); and

 

(q)                                 Reasonable Best Efforts. Use reasonable best efforts to take all other steps necessary to effect the registration and offering of the Registrable Securities contemplated hereby.

 

2.8                               Underwriting; Due Diligence.

 

(a)                                 If requested by the underwriters for any underwritten offering of Registrable Securities pursuant to a registration requested under this Article II, the Company shall enter into an underwriting agreement with such underwriters for such offering, which agreement will contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in underwriting agreements generally with respect to secondary distributions to the extent relevant, including indemnification and contribution provisions substantially to the effect and to the extent provided in Section 2.9, and agreements as to the provision of opinions of counsel and accountants’ letters to the effect and to the extent provided in Section 2.7(e).  The Selling Holders on whose behalf the Registrable

 

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Securities are to be distributed by such underwriters shall be parties to any such underwriting agreement, and the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters, shall also be made to and for the benefit of such Selling Holders and the conditions precedent to the obligations of such underwriters under such underwriting agreement shall also be conditions precedent to the obligations of such Selling Holders to the extent applicable.  Subject to the following sentence, such underwriting agreement shall also contain such representations and warranties by such Selling Holders and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, when relevant.  No Selling Holder shall be required in any such underwriting agreement or related documents to make any representations or warranties to or agreements with the Company or the underwriters other than customary representations, warranties or agreements regarding such Selling Holder’s title to Registrable Securities and any written information provided by the Selling Holder to the Company expressly for inclusion in the related registration statement, and the liability of any Selling Holder under the underwriting agreement shall be several and not joint and in no event shall the liability of any Selling Holder under the underwriting agreement be greater in amount than the dollar amount of the proceeds received by such Selling Holder under the sale of the Registrable Securities pursuant to such underwriting agreement (net of underwriting discounts and commissions).

 

(b)                                 In connection with the preparation and filing of each registration statement registering Registrable Securities under the Securities Act pursuant to this Article II, the Company shall make available upon reasonable notice at reasonable times and for reasonable periods for inspection by each Selling Holder, by any lead underwriter or underwriters participating in any disposition to be effected pursuant to such registration statement, and by any attorney, accountant or other agent retained by any Selling Holder or any lead underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and use its reasonable best efforts to cause all of the Company’s officers, directors and employees and the independent public accountants who have certified the Company’s financial statements to make themselves reasonably available to discuss the business of the Company and to supply all information reasonably requested by any such Selling Holders, lead underwriters, attorneys, accountants or agents in connection with such registration statement as shall be necessary to enable them to exercise their due diligence responsibility (subject to entry by each party referred to in this clause (b) into customary confidentiality agreements in a form reasonably acceptable to the Company).

 

(c)                                  In the case of an underwritten offering requested by the Registration Parties pursuant to Section 2.1 or Section 2.3 or an Underwritten Shelf Take-Down pursuant to Section 2.4, the price, underwriting discount and other financial terms for the Registrable Securities of the related underwriting agreement shall be determined by the Registration Party exercising its Demand.  In the case of any underwritten offering of securities by the Company pursuant to Section 2.2, such price, discount and other terms shall be determined by the Company, subject to the right of Selling Holders to withdraw their Registrable Securities from the registration pursuant to Section 2.6(a).

 

(d)                                 Subject to Section 2.8(a), no Person may participate in an underwritten offering (including an Underwritten Shelf Take-Down) unless such Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the

 

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Persons entitled to approve such arrangements and (ii) completes and executes all customary questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreement and other documents reasonably required under the terms of such underwriting arrangements.

 

2.9                               Indemnification and Contribution.

 

(a)                                 Indemnification by the Company.  In the case of each offering of Registrable Securities made pursuant to this Article II, the Company agrees to indemnify and hold harmless, to the extent permitted by Applicable Law, each Selling Holder, each underwriter of Registrable Securities so offered and each Person, if any, who controls or is alleged to control (within the meaning set forth in the Securities Act) any of the foregoing Persons, the Affiliates of each of the foregoing (other than the Company and its controlled Affiliates), and the officers, directors, partners, members, employees and agents of each of the foregoing, against any and all losses, liabilities, costs (including reasonable attorney’s fees and disbursements), claims and damages, joint or several, to which they or any of them may become subject, under the Securities Act or otherwise, including any amount paid in settlement of any litigation commenced or threatened, insofar as such losses, liabilities, costs, claims and damages (or actions or proceedings in respect thereof, whether or not such indemnified Person is a party thereto) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement (or in any preliminary, final or summary prospectus included therein) or in the Disclosure Package, or in any offering memorandum or other offering document relating to the offering and sale of such Registrable Securities, or any amendment thereof or supplement thereto, or in any document incorporated by reference therein, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus or preliminary prospectus, in light of the circumstances under which they were made) not misleading; provided, however, that the Company shall not be liable to any Person in any such case to the extent that any such loss, liability, cost, claim or damage arises out of or relates to any untrue statement, or any omission, if such statement or omission shall have been made in reliance upon and in conformity with information relating to such Person (which information shall be limited to the name of such Person, the address of such Person, the number of shares of Common Stock held by such Person, the number of shares of Common Stock being offered by such Person in the offering and the nature of the beneficial ownership of the Common Stock owned by such Person) furnished in writing to the Company by or on behalf of such Person expressly for inclusion in the registration statement (or in any preliminary, final or summary prospectus included therein), offering memorandum or other offering document, or any amendment thereof or supplement thereto.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any such Person and shall survive the transfer of such securities.

 

(b)                                 Indemnification by Selling Holders.  In the case of each offering made pursuant to this Agreement, each Selling Holder, by exercising its registration and/or piggyback rights under this Agreement, agrees, severally and not jointly, to indemnify and hold harmless, to the extent permitted by Applicable Law, the Company, each other Selling Holder and each Person, if any, who controls or is alleged to control (within the meaning set forth in the Securities Act) any of the foregoing, any Affiliate of any of the foregoing, and the officers, directors, partners, members, employees and agents of each of the foregoing, against any and all losses, liabilities, costs (including reasonable attorney’s fees and disbursements), claims and

 

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damages to which they or any of them may become subject, under the Securities Act or otherwise, including any amount paid in settlement of any litigation commenced or threatened, insofar as such losses, liabilities, costs, claims and damages (or actions or proceedings in respect thereof, whether or not such indemnified Person is a party thereto) arise out of or are based upon any untrue statement made by such Selling Holder of a material fact contained in the registration statement (or in any preliminary, final or summary prospectus included therein) or in the Disclosure Package relating to the offering and sale of such Registrable Securities prepared by the Company or at its direction, or any amendment thereof or supplement thereto, or any omission by such Selling Holder of a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus or preliminary prospectus, in light of the circumstances under which they were made) not misleading, but in each case only to the extent that such untrue statement of a material fact occurs in reliance upon and in conformity with, or such material fact is omitted from, information relating to such Selling Holder (which information shall be limited to the name of such Selling Holder, the address of such Selling Holder, the number of shares of Common Stock held by such Selling Holder, the number of shares of Common Stock being offered by such Selling Holder in the offering and the nature of the beneficial ownership of the Common Stock owned by such Person) furnished in writing to the Company by or on behalf of such Selling Holder expressly for inclusion in such registration statement (or in any preliminary, final or summary prospectus included therein) or Disclosure Package, or any amendment thereof or supplement thereto.

 

(c)                                  Indemnification Procedures.  Each Party entitled to indemnification under this Section 2.9 shall give notice to the Party required to provide indemnification, as promptly as reasonably practicable, after such indemnified Party has actual knowledge that a claim is to be made against the indemnified Party as to which indemnity may be sought, and shall permit the indemnifying Party to assume the defense of such claim or litigation resulting therefrom and any related settlement and settlement negotiations, subject to the limitations on settlement set forth below; provided, that counsel for the indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the indemnified Party (whose approval shall not unreasonably be withheld, conditioned or delayed), and the indemnified Party may participate in such defense at such Party’s expense; and provided, further, that the failure of any indemnified Party to give notice as provided in this Agreement shall not relieve the indemnifying Party of its obligations under this Section 2.9, except to the extent the indemnifying Party is actually prejudiced by such failure to give notice.  Notwithstanding the foregoing, an indemnified Party shall have the right to retain separate counsel, with the reasonable fees and expenses of such counsel being paid by the indemnifying Party, if representation of such indemnified Party by the counsel retained by the indemnifying Party would be inappropriate due to actual or potential differing interests between such indemnified Party and any other party represented by such counsel or if the indemnifying Party has failed to assume the defense of such action.  No indemnified Party shall enter into any settlement of any litigation commenced or threatened with respect to which indemnification is or may be sought without the prior written consent of the indemnifying Party (such consent not to be unreasonably withheld, conditioned or delayed).  No indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified Party of a release, reasonably satisfactory to the indemnified Party, from all liability in respect to such claim or litigation.  Each

 

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indemnified Party shall furnish such information regarding itself or the claim in question as an indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.

 

(d)                                 Contribution.  If the indemnification provided for in this Section 2.9 shall for any reason be unavailable (other than in accordance with its terms) to an indemnified Party in respect of any loss, liability, cost, claim or damage referred to therein, then each indemnifying Party shall, in lieu of indemnifying such indemnified Party, contribute to the amount paid or payable by such indemnified Party as a result of such loss, liability, cost, claim or damage in such proportion as shall be appropriate to reflect the relative fault of the indemnifying Party on the one hand and the indemnified Party on the other with respect to the statements or omissions which resulted in such loss, liability, cost, claim or damage as well as any other relevant equitable considerations.  The relative fault shall be determined by reference to whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the indemnifying Party on the one hand or the indemnified Party on the other, the intent of the Parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission.  The amount paid or payable by an indemnified Party as a result of the loss, cost, claim, damage or liability, or action in respect thereof, referred to above in this paragraph (d) shall be deemed to include, for purposes of this paragraph (d), any legal or other expenses reasonably incurred by such indemnified Party in connection with investigating or defending any such action or claim.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  Notwithstanding anything in this Section 2.9(d) to the contrary, no indemnifying Party (other than the Company) shall be required pursuant to this Section 2.9(d) to contribute any amount in excess of the amount by which the net proceeds received by such indemnifying Party from the sale of Registrable Securities in the offering to which the losses of the indemnified Parties relate exceeds the amount of any damages which such indemnifying Party has otherwise been required to pay by reason of such untrue statement or omission.  The Parties agree that it would not be just and equitable if contribution pursuant to this Section 2.9(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in this Section 2.9(d).

 

(e)                                  Indemnification/Contribution under State Law.  Indemnification and contribution similar to that specified in the preceding paragraphs of this Section 2.9 (with appropriate modifications) shall be given by the Company and the Selling Holders with respect to any required registration or other qualification of securities under any state Applicable Law or with any Governmental Authority.

 

(f)                                   Obligations Not Exclusive; Priority.  The obligations of the Parties under this Section 2.9 shall be in addition to any liability which any Party may otherwise have to any other Person.

 

(g)                                  Survival.  For the avoidance of doubt, the provisions of this Section 2.9 shall survive any termination of this Agreement.

 

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(h)                                 Limitation of Selling Holder Liability.  The liability of any Selling Holder under this Section 2.9 shall be several and not joint and in no event shall the liability of any Selling Holder under this Section 2.9 be greater in amount than the dollar amount of the proceeds, net of underwriting discounts and commissions, received by such Selling Holder from the sale of the Registrable Securities giving rise to such indemnification/contribution obligation.

 

(i)                                     Third Party Beneficiary.  Each of the indemnified Persons referred to in this Section 2.9 shall be a third party beneficiary of the rights conferred to such Person in this Section.

 

2.10                        Cooperation; Information by Selling Holder.

 

(a)                                 It shall be a condition of each Selling Holder’s rights under this Article II that such Selling Holder cooperate with the Company by entering into any undertakings and taking such other action relating to the conduct of the proposed offering which the Company or the underwriters may reasonably request as being necessary to insure compliance with federal and state securities laws and the rules or other requirements of FINRA or which are otherwise customary and which the Company or the underwriters may reasonably request to effectuate the offering.

 

(b)                                 Each Selling Holder shall furnish to the Company such information regarding such Selling Holder and the distribution proposed by such Selling Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Article II.  The Company shall have the right to exclude from the registration any Selling Holder that does not comply with this Section 2.10.

 

(c)                                  At such time as an underwriting agreement with respect to a particular underwriting is entered into, the terms of any such underwriting agreement shall govern with respect to the matters set forth therein to the extent inconsistent with this Article II; provided, that the indemnification provisions of such underwriting agreement as they relate to the Selling Holders are customary for registrations of the type then proposed and provide for indemnification by such Selling Holders only with respect to information relating to such Selling Holder (which information shall be limited to the name of such Selling Holder, the address of such Selling Holder, the number of shares of Common Stock held by such Selling Holder, the number of shares of Common Stock being offered by such Selling Holder in the offering and the nature of the beneficial ownership of the Common Stock owned by such Person) furnished in writing to the Company by or on behalf of such Selling Holder expressly for inclusion in such registration statement (or in any preliminary, final or summary prospectus included therein) or Disclosure Package, or any amendment thereof or supplement thereto.

 

2.11                        Rule 144.  Following the IPO, the Company shall use its reasonable best efforts to ensure that the conditions to the availability of Rule 144 under the Securities Act set forth in paragraph (c) of Rule 144 shall be satisfied.  The Company agrees to use its reasonable best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act, at any time after it has become subject to such reporting requirements.  Upon the request of any Holder for so long as such

 

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information is a necessary element of such Person’s ability to avail itself of Rule 144, the Company shall deliver to such Person (i) a written statement as to whether it has complied with such requirements and (ii) a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as such Person may reasonably request in availing itself of any rule or regulation of the SEC allowing such Person to sell any such securities without registration.

 

2.12                        Holdback Agreement.  Each of the Company and each Holder (other than a Holder that (1) is not an employee of the Company or any of its Subsidiaries and (2) beneficially owns less than 10% of the Common Stock that is outstanding immediately prior to the offering (calculated on a fully-diluted and fully-Exchanged basis) of Registrable Securities (whether or not such Registrable Securities are covered by a registration statement filed pursuant to Section 2.1, Section 2.2, Section 2.3 or Article III)) agrees that during (i) such period following the effective date (which period shall in no event exceed 180 days, subject to any applicable “booster shot” extensions to the extent required under the applicable regulations of FINRA) of a registration statement of the Company filed in connection with the IPO as may be requested by the underwriter or underwriters of such underwritten offering, (ii) with respect to underwritten offerings (other than Non-Marketed Underwritten Shelf Take-Downs) only, such period (which period shall in no event exceed 90 days, subject to any applicable “booster shot” extensions to the extent required under the applicable regulations of FINRA) following the effective date of a registration statement of the Company filed under the Securities Act subsequent to the IPO (or, if later in the case of a Marketed Underwritten Shelf Take-Down, the date the underwriting agreement for such Marketed Underwritten Shelf Take-Down is entered into) as may be requested by the underwriter or underwriters of such underwritten offering, and (iii) with respect to Non-Marketed Underwritten Shelf Take-Downs for which an affirmative Non-Marketed Shelf Take-Down Piggyback Election is made only, such period (which period shall in no event exceed 45 days, subject to any applicable “booster shot” extensions to the extent required under the applicable regulations of FINRA) following the date the underwriting agreement for such Non-Marketed Underwritten Shelf Take-Down is entered into as may be requested by the underwriter or underwriters of such underwritten offering, each of the Company, such Holder and its Affiliates shall not, to the extent requested by the Company and/or any underwriter, offer, sell, contract to sell, pledge, hypothecate, transfer, make any short sale of, loan, grant any option or right to purchase of, or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any Registrable Securities held by it at any time during such period (which prohibition precludes such Holder and its Affiliates from engaging in any hedging transaction with respect to Registrable Securities), except Registrable Securities included in such registration; provided, that with respect to restrictions imposed pursuant to clause (iii) above, in no event shall any Holder be subject to such restrictions for more than 90 days during any 12-month period (plus any applicable “booster shot” periods to the extent required under the applicable regulations of FINRA ).  Each Holder agrees that it shall deliver to the underwriter or underwriters of any offering to which clause (i), (ii) or (iii) is applicable a customary agreement reflecting its agreement set forth in this Section 2.12. For the avoidance of doubt, no restrictions under this Section 2.12 shall apply with respect to Non-Marketed Underwritten Shelf Take-Downs for which no Non-Marketed Shelf Take-Down

 

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Piggyback Election is made. For the avoidance of doubt, for the purposes of this Section 2.12, a Management Vehicle shall be deemed to be an employee of the Company.

 

2.13                        Suspension of Sales.  Each Selling Holder participating in a registration agrees that, upon receipt of notice from the Company pursuant to Section 2.7(f), such Selling Holder shall discontinue disposition of its Registrable Securities pursuant to such registration statement until receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.7(f), or until advised in writing by the Company that the use of the prospectus may be resumed, as the case may be, and, if so directed by the Company, such Selling Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Selling Holder’s possession, of the prospectus covering such Registrable Securities which are current at the time of the receipt of the notice of the event described in Section 2.7(f).

 

2.14                        Third Party Registration Rights.  Nothing in this Agreement shall be deemed to prevent the Company from providing registration rights to any other Person on such terms as the board of directors of the Company deems desirable in its sole discretion, so long as (1) such registration rights do not limit the ability of the Registration Parties to require a Demand Registration or a Marketed Underwritten Shelf Take-Down under this Agreement and (2) such Person may include Common Stock in a registration only to the extent that the inclusion of such Common Stock will not diminish the amount of Registrable Securities that are entitled to be included in such registration by the Viola Holders and the SL Holders.

 

ARTICLE III

 

EXCHANGE REGISTRATION

 

3.1                               Exchange Registration.  At such time as the Company first becomes eligible to file a Registration Statement on Form S-3, which shall be not less than one year after the date hereof, the Company shall, as promptly as reasonably practicable, file and use reasonable best efforts to effect the registration under the Securities Act and applicable state securities laws a registration statement (“Exchange Registration Statement”) for the shares of Common Stock issuable upon Exchange of all of the shares of Class C Common Stock together with all of the Virtu Financial Units held by the Employee Holders for shares of Common Stock.  Such registration pursuant to this Section 3.3, including as amended, renewed or replaced as provided in Section 3.3(b), is referred to herein as an “Exchange Registration.”

 

3.2                               Continued Effectiveness; Renewal and Replacement.  The Company shall use its reasonable best efforts to keep the Exchange Registration Statement continuously effective under the Securities Act and applicable state securities laws until the date as of which no Employee Holder holds Class C Common Stock or Virtu Financial Units.  In addition, the Company shall promptly amend, renew or replace, as necessary, any Exchange Registration Statement that shall have expired or otherwise been deemed unusable and shall use its reasonable best efforts to keep such amended, renewed or replaced Exchange Registration Statement continuously effective under the Securities Act and applicable state securities laws until the date as of which no Employee Holder holds Class C Common Stock or Virtu Financial Units.  For so long as an Exchange Registration Statement is effective and is usable under this Article III by the

 

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Employee Holders, no Management Vehicle or Transferee thereof shall have any registration rights under Article II.  For the avoidance of doubt, this Article III shall not provide any Employee Holder the right to request an Underwritten Shelf Take-Down.  Nothing in this Section 3.2 shall be deemed to waive any obligation of a Holder pursuant to Section 2.12 hereof.

 

3.3                               Company Blackout Rights.  With respect to any Exchange Registration Statement filed, or to be filed, including any amendment, renewal or replacement thereof, pursuant to this Section 3.3, if (i) the board of directors of the Company determines in good faith after consultation with outside counsel that the Exchange Registration would cause the Company to disclose material non-public information, which disclosure (x) would be required to be made in the Exchange Registration Statement so that it would not be materially misleading, (y) would not be required to be made at such time but for the filing or effectiveness of the Exchange Registration Statement and (z) would be materially detrimental to the Company or would materially interfere with any material financing, acquisition, corporate reorganization or merger or other similar transaction involving the Company or any of its Subsidiaries, and that, as a result of such potential disclosure or interference, it is in the best interests of the Company to defer the filing or effectiveness of the Exchange Registration Statement at such time or suspend the Employee Holders’ use of any prospectus which is a part of the Exchange Registration Statement, and (ii) the Company furnishes to the Employee Holders a certificate signed by the chief executive officer of the Company to that effect, then the Company shall have the right to defer such filing or effectiveness or suspend the continuance of such effectiveness for a period of not more than 120 days (in which event, in the case of a suspension, the Employee Holders shall discontinue Exchanges pursuant to the Exchange Registration Statement); provided, that the Company shall not use this right, together with any other deferral or suspension of the Company’s obligations under Section 2.1 or Section 2.3, more than once in any 12-month period.  The Company shall notify the Employee Holders of the expiration of any period during which it exercised its rights under this Section 3.3.  The Company agrees that, in the event it exercises its rights under this Section 3.3, it shall, as promptly as reasonably practicable following the expiration of the applicable deferral or suspension period, file or update and use its reasonable best efforts to cause the effectiveness of, as applicable, the applicable deferred or suspended Exchange Registration Statement or prospectus which is a part of the Exchange Registration Statement.

 

3.4                               Article III Holdbacks.

 

Notwithstanding anything in this Article III to the contrary, in order for any Employee Holder to receive the benefit of this Article III, such Employee Holder hereby agrees to be subject to Section 2.12, irrespective of the percentage of outstanding Common Stock beneficially owned by such Employee Holder, mutatis mutandis.

 

ARTICLE IV
 MISCELLANEOUS

 

4.1                               Notices.  All notices, requests, demands and other communications to any party hereunder shall be made in writing (including facsimile transmission and electronic mail (“e-mail”) transmission, so long as a receipt of such e-mail is requested and received by non-automated response) and shall be given:

 

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(a)                                 if to the Company, to:

 

Virtu Financial, Inc.

645 Madison Avenue

New York, New York 10022

Attention: General Counsel
 E-mail: jwaldie@virtu.com

 

With copies (which shall not constitute actual or constructive notice) to:

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019

Attention:  John C. Kennedy

Jeffrey D. Marell

Facsimile:  (212) 757-3990

E-mail:  jkennedy@paulweiss.com

jmarell@paulweiss.com

 

(b)                                 if to any Viola Holder, to:

 

TJMT Holdings LLC

c/o Virtu Financial Inc.

645 Madison Avenue

New York, New York 10022

Attention: General Counsel
 E-mail: jwaldie@virtu.com

 

With copies (which shall not constitute actual or constructive notice) to:

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019

Attention:  John C. Kennedy

Jeffrey D. Marell

Facsimile:  (212) 757-3990

E-mail:  jkennedy@paulweiss.com

jmarell@paulweiss.com

 

(c)                                  if to any SL Holder, to:

 

c/o Silver Lake Partners

2775 Sand Hill Road, Suite 100

Menlo Park, California 94025

Attention:  Karen King

Facsimile:  (650) 233-8125

E-mail:  karen.king@silverlake.com

 

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and

 

c/o Silver Lake Partners

9 West 57th Street

32nd Floor

New York, NY 10019

Attention:  Andrew J. Schader

Facsimile:  (212) 981-3535

E-mail:  andy.schader@silverlake.com

 

With copies (which shall not constitute actual or constructive notice) to:

 

Simpson Thacher & Bartlett LLP

2475 Hanover Street

Palo Alto, California 94304

Attention: Rich Capelouto

Atif I. Azher

Facsimile:  (650) 251-5002

E-mail:  rcapelouto@stblaw.com

aazher@stblaw.com

 

(d)                                 if to any Management Vehicle, to:

 

Virtu Employee Holdco LLC / Virtu East MIP LLC

c/o Virtu Financial Inc.

645 Madison Avenue

New York, New York 10022

Attention: General Counsel
 E-mail: jwaldie@virtu.com

 

(e)                                  if to any Additional Holder, to the addresses and other contact information set forth on Annex A to this Agreement (it being understood that any Holder may, from time to time, update any address and/or other contact information for itself on Annex A by providing written notice of such update to the Company and the other Holders),

 

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. New York City time 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.

 

4.2                               Section Headings.  The article and section headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.  References in this Agreement to a designated “Article” or “Section” refer to an Article or Section of this Agreement unless otherwise specifically indicated.

 

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4.3                               Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

 

4.4                               Consent to Jurisdiction and Service of Process.  The Parties 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 by this Agreement (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 4.1 shall be deemed effective service of process on such Party.

 

4.5                               WAIVER OF JURY TRIAL.  EACH OF THE PARTIES 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 BY THIS AGREEMENT.

 

4.6                               Amendments; Termination.  This Agreement may be amended only by an instrument in writing executed by the Company, the Viola Holders and the SL Holders.  Any such amendment will apply to all Holders equally, without distinguishing between them.  Any consent or other action to be taken by the SL Holders shall be taken by those SL Holders holding in the aggregate a majority of the Registrable Securities held by all the SL Members.  This Agreement will terminate as to any Holder when it no longer holds any Registrable Securities.  This Agreement will no longer be applicable to Registrable Securities that are registered in a Public Offering on The New York Stock Exchange, Nasdaq National Market or any successor thereto or any other U.S. securities exchange on which shares issued by the Company are then so qualified or listed or are sold pursuant to a brokers’ transaction or a transaction directly with a market maker, including a sale pursuant to Rule 144 of the Securities Act or any similar rule or successor rule promulgated for similar purposes.

 

4.7                               Specific Enforcement.  The Parties acknowledge that the remedies at law of the other Parties for a breach or threatened breach of this Agreement would be inadequate and, in recognition of this fact, any Party to this Agreement, without posting any bond, and in addition to all other remedies that may be available, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy that may then be available.

 

4.8                               Entire Agreement.  This Agreement constitutes the entire agreement and understanding of the Parties with respect to the transactions contemplated by this Agreement.  The registration rights granted under this Agreement supersede any registration, qualification or

 

33

 

similar rights with respect to any Registrable Securities granted under any other agreement at any time, and any of such preexisting registration rights are hereby terminated.

 

4.9                               Severability.  The invalidity or unenforceability of any specific provision of this Agreement shall not invalidate or render unenforceable any of its other provisions.  Any provision of this Agreement held invalid or unenforceable shall be deemed reformed, if practicable, to the extent necessary to render it valid and enforceable and to the extent permitted by law and consistent with the intent of the parties to this Agreement.

 

4.10                        Counterparts.  This Agreement may be executed in multiple counterparts, including by means of facsimile or .pdf, each of which shall be deemed an original, but all of which together shall constitute the same instrument.

 

[Signature Page Follows]

 

34

 

So agreed:

 

 

	
 
    	
VIRTU FINANCIAL, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

[Signature Page to Registration Rights Agreement]

 

 

	
 
    	
VIOLA HOLDERS
    
	
 
    	
 
    
	
 
    	
TJMT HOLDINGS LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

	
 
    	
[OTHER VIOLA HOLDERS]
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

[Signature Page to Registration Rights Agreement]

 

 

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

 

[Signature Page to Registration Rights Agreement]

 

 

	
 
    	
SLP   III EW FEEDER I, L.P.
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Technology Associates III, L.P., its general partner
    
	
 
    	
 
    
	
 
    	
By:   SLTA III (GP), L.L.C., its general partner
    
	
 
    	
 
    
	
 
    	
By:   Silver Lake Group, L.L.C., its sole member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Title:   Managing Member
    

 

[Signature Page to Registration Rights Agreement]

 

 

	
 
    	
VIRTU EMPLOYEE HOLDCO LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
VIRTU EAST MIP LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

[Signature Page to Registration Rights Agreement]

 

 

	
 
    	
ADDITIONAL HOLDERS
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Douglas   A. Cifu
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Christopher   Concannon
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Graham   Free
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Other   Additional Holders]
    

 

[Signature Page to Registration Rights Agreement]

 

 

Annex A

 

Contact Information

 

 

Annex B

 

FORM OF 
 JOINDER AGREEMENT

 

The undersigned is executing and delivering this Joinder Agreement pursuant to that certain Registration Rights Agreement, dated as of [          ], 2014 (as amended, restated, supplemented or otherwise modified in accordance with the terms thereof, the “Registration Rights Agreement”), by and among Virtu Financial, Inc., TJMT Holdings LLC, and the other Persons who execute the signature pages thereto under the heading “Viola Holders,” SLP III EW Feeder I, L.P., Silver Lake Technology Associates III, L.P., Silver Lake Partners III DE (AIV III), L.P., Silver Lake Technology Investors III, L.P., Virtu Employee Holdco LLC, Virtu East MIP LLC, and the other Persons who execute the signature pages thereto under the heading “Additional Holders.”  Capitalized terms used but not defined in this Joinder Agreement shall have the respective meanings ascribed to such terms in the Registration Rights Agreement.

 

By executing and delivering this Joinder Agreement to the Registration Rights Agreement, the undersigned hereby adopts and approves the Registration Rights Agreement and agrees, effective commencing on the date hereof and as a condition to the undersigned’s becoming a Transferee of Registrable Securities, to be bound by and comply with the provisions of, the Registration Rights Agreement, including Section 2.12 or Section 3.4, as applicable, therein, in the same manner as if the undersigned were an original signatory to the Registration Rights Agreement.

 

The undersigned acknowledges and agrees that Article IV of the Registration Rights Agreement is incorporated herein by reference, mutatis mutandis.

 

Accordingly, the undersigned has executed and delivered this Joinder Agreement as of the      day of                         ,           .

 

	
 
    	
 
    
	
 
    	
(Signature of Transferee)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Print Name of Transferee)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Telephone:
    
	
 
    	
Facsimile:
    
	
 
    	
Email:
    

 

 

AGREED AND ACCEPTED

as of the          day of                         ,           .

 

 

	
VIRTU FINANCIAL INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

Annex C

 

FORM OF 
 SPOUSAL CONSENT

 

In consideration of the execution of that certain Registration Rights Agreement, dated as of [          ], 2014 (as amended, restated, supplemented or otherwise modified in accordance with the terms thereof, the “Registration Rights Agreement”), by and among Virtu Financial, Inc., TJMT Holdings LLC, and the other Persons who execute the signature pages thereto under the heading “Viola Holders,” SLP III EW Feeder I, L.P., Silver Lake Technology Associates III, L.P., Silver Lake Partners III DE (AIV III), L.P., Silver Lake Technology Investors III, L.P., Virtu Employee Holdco LLC, Virtu East MIP LLC, and the other Persons who execute the signature pages thereto under the heading “Additional Holders,” I,                                         , the spouse of                                                       , who is a party to the Registration Rights Agreement, do hereby join with my spouse in executing the foregoing Registration Rights Agreement and do hereby agree to be bound by all of the terms and provisions thereof, in consideration of Transfer of Registrable Securities and all other interests I may have in the shares and securities subject thereto, whether the interest may be pursuant to community property laws or similar laws relating to marital property in effect in the state or province of my or our residence as of the date of signing this consent.  Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Registration Rights Agreement.

 

	
Dated   as of                        ,
    	
 
    
	
 
    	
(Signature   of Spouse)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Print   Name of Spouse)Exhibit 10.9

 

SECOND AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

 

of

 

VIRTU FINANCIAL LLC

 

Dated as of [        ], 2014

 

 

TABLE OF CONTENTS

 

	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE I DEFINITIONS AND USAGE
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 1.01
    	
Definitions
    	
2
    
	
 
    	
Section 1.02
    	
Other Definitional and Interpretative Provisions
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE II THE COMPANY
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 2.01
    	
Formation
    	
19
    
	
 
    	
Section 2.02
    	
Name
    	
20
    
	
 
    	
Section 2.03
    	
Term
    	
20
    
	
 
    	
Section 2.04
    	
Registered Agent and Registered Office
    	
20
    
	
 
    	
Section 2.05
    	
Purposes
    	
20
    
	
 
    	
Section 2.06
    	
Powers of the Company
    	
20
    
	
 
    	
Section 2.07
    	
Partnership Tax Status
    	
20
    
	
 
    	
Section 2.08
    	
Regulation of Internal Affairs
    	
20
    
	
 
    	
Section 2.09
    	
Ownership of Property
    	
20
    
	
 
    	
Section 2.10
    	
Subsidiaries
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE III UNITS; MEMBERS; BOOKS AND RECORDS; REPORTS
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 3.01
    	
Units; Admission of Members
    	
21
    
	
 
    	
Section 3.02
    	
Substitute Members and Additional Members
    	
22
    
	
 
    	
Section 3.03
    	
Tax and Accounting Information
    	
23
    
	
 
    	
Section 3.04
    	
Books and Records
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IV PUBCO OWNERSHIP; RESTRICTIONS ON PUBCO   STOCK
    	
25
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 4.01
    	
Pubco Ownership
    	
25
    
	
 
    	
Section 4.02
    	
Restrictions on Pubco Common Stock
    	
26
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE V CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;   DISTRIBUTIONS; ALLOCATIONS
    	
29
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 5.01
    	
Capital Contributions
    	
29
    
	
 
    	
Section 5.02
    	
Capital Accounts
    	
29
    
	
 
    	
Section 5.03
    	
Amounts and Priority of Distributions
    	
31
    
	
 
    	
Section 5.04
    	
Allocations
    	
33
    
	
 
    	
Section 5.05
    	
Other Allocation Rules
    	
36
    
	
 
    	
Section 5.06
    	
Tax Withholding; Withholding Advances
    	
37
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VI CERTAIN TAX MATTERS
    	
38
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 6.01
    	
Tax Matters Partner
    	
38
    
	
 
    	
Section 6.02
    	
Section 754 Election
    	
39
    
	
 
    	
Section 6.03
    	
RESERVED
    	
39
    
	
 
    	
Section 6.04
    	
RESERVED
    	
39
    
	
 
    	
Section 6.05
    	
Debt Allocation
    	
39
    

 

i

 

	
ARTICLE VII MANAGEMENT OF THE COMPANY
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 7.01
    	
Management by the Managing Member
    	
39
    
	
 
    	
Section 7.02
    	
Withdrawal of the Managing Member
    	
39
    
	
 
    	
Section 7.03
    	
Decisions by the Members
    	
40
    
	
 
    	
Section 7.04
    	
RESERVED
    	
40
    
	
 
    	
Section 7.05
    	
RESERVED
    	
40
    
	
 
    	
Section 7.06
    	
RESERVED
    	
40
    
	
 
    	
Section 7.07
    	
Fiduciary Duties
    	
41
    
	
 
    	
Section 7.08
    	
Officers
    	
42
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VIII TRANSFERS OF INTERESTS
    	
43
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 8.01
    	
Restrictions on Transfers
    	
43
    
	
 
    	
Section 8.02
    	
Certain Permitted Transfers
    	
44
    
	
 
    	
Section 8.03
    	
RESERVED
    	
45
    
	
 
    	
Section 8.04
    	
RESERVED
    	
45
    
	
 
    	
Section 8.05
    	
RESERVED
    	
45
    
	
 
    	
Section 8.06
    	
Registration of Transfers
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IX CERTAIN OTHER AGREEMENTS
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 9.01
    	
RESERVED
    	
45
    
	
 
    	
Section 9.02
    	
RESERVED
    	
45
    
	
 
    	
Section 9.03
    	
RESERVED
    	
45
    
	
 
    	
Section 9.04
    	
Non-Compete; Non-Solicitation
    	
45
    
	
 
    	
Section 9.05
    	
Company Call Right
    	
47
    
	
 
    	
Section 9.06
    	
RESERVED
    	
47
    
	
 
    	
Section 9.07
    	
RESERVED
    	
48
    
	
 
    	
Section 9.08
    	
RESERVED
    	
48
    
	
 
    	
Section 9.09
    	
Employee Holdcos
    	
48
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE X LIMITATION ON LIABILITY, EXCULPATION AND   INDEMNIFICATION
    	
49
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 10.01
    	
Limitation on Liability
    	
49
    
	
 
    	
Section 10.02
    	
Exculpation and Indemnification
    	
49
    
	
 
    	
Section 10.03
    	
Indemnification of Certain Matters
    	
52
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE XI DISSOLUTION AND TERMINATION
    	
52
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 11.01
    	
Dissolution
    	
52
    
	
 
    	
Section 11.02
    	
Winding Up of the Company
    	
53
    
	
 
    	
Section 11.03
    	
Termination
    	
53
    
	
 
    	
Section 11.04
    	
Survival
    	
53
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE XII MISCELLANEOUS
    	
54
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Section 12.01
    	
Expenses
    	
54
    
	
 
    	
Section 12.02
    	
Further Assurances
    	
54
    
	
 
    	
Section 12.03
    	
Notices
    	
54
    

 

 

	
 
    	
Section 12.04
    	
Binding Effect; Benefit; Assignment
    	
54
    
	
 
    	
Section 12.05
    	
Jurisdiction
    	
54
    
	
 
    	
Section 12.06
    	
WAIVER OF JURY TRIAL
    	
55
    
	
 
    	
Section 12.07
    	
Counterparts
    	
55
    
	
 
    	
Section 12.08
    	
Entire Agreement
    	
56
    
	
 
    	
Section 12.09
    	
Severability
    	
56
    
	
 
    	
Section 12.10
    	
Amendment
    	
56
    
	
 
    	
Section 12.11
    	
Confidentiality
    	
57
    
	
 
    	
Section 12.12
    	
Governing Law
    	
59
    
	
 
    	
 
    	
 
    	
 
    
	
Schedule   A
    	
Restricted   Investments
    	
 
    
	
Schedule   B
    	
Restricted   Members
    	
 
    
	
Schedule   C
    	
Common   Units
    	
 
    
					

 

 

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) OF VIRTU FINANCIAL LLC, a Delaware limited liability company (the “Company”), dated as of [        ], 2014, by and among the Company, Virtu Financial, Inc., a Delaware corporation (“Pubco”), and the other Persons listed on the signature pages hereto.

 

W I T N E S S E T H:

 

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

 

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

 

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

 

WHEREAS, pursuant to the terms of the Reorganization Agreement (the “Reorganization Agreement”), dated as of the date hereof, by and among the Company, Pubco and the other Persons listed on the signature pages thereto, the parties thereto have agreed to consummate the reorganization of the Company contemplated by Section 9.1 of the A&R LLC Agreement and to take the other actions contemplated in such Reorganization Agreement (collectively, the “Reorganization”).

 

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

 

 

ARTICLE I

 

DEFINITIONS AND USAGE

 

Section 1.01                             Definitions.

 

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

 

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

 

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

 

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

 

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

 

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

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person; provided that no Member nor any Affiliate of any Member shall be deemed to be an Affiliate of any other Member or any of its Affiliates solely by virtue of such Members’ Units.  Notwithstanding the immediately preceding sentence (i) (except with respect to Section 12.11), no SL Member shall be considered an Affiliate of any portfolio company in which the direct or indirect equityholders of such SL Member or any of their affiliated investment funds have made a debt or equity investment (or vice versa) and (ii) Viola will be deemed to be an Affiliate of every Viola Member (and vice versa).

 

“Affiliated Transferee” means (i) in the case of any Member that is an individual, any Transferee of such Member that is (x) an immediate family member of such Member, (y) a trust, family-partnership or estate-planning vehicle for the benefit of such Member and/or any of its immediate family members or (z) otherwise an Affiliate of such Member or (ii) in the case of any Member that is a limited liability company or other entity, any Transferee of such Member that is (x) an immediate family member of the individual that controls a majority of the voting or economic interest in such Member, (y) a trust, family-partnership or estate-planning vehicle for the benefit of such individual and/or any of its immediate family members or (z) otherwise an Affiliate of such

 

2

 

Member.  For the purposes of this definition, none of Pubco, the Company, the Employee Holdcos or any of their respective Controlled Affiliates shall be deemed to be an “Affiliate” of any Member and vice versa.

 

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

 

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

 

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

 

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

 

“Business” means the business of trading and market making in financial instruments globally on behalf of itself and/or third parties, including trading and developing and designing algorithmic programs to evaluate or execute trades in securities, futures, swaps, options, commodities, currencies, derivatives and other financial instruments, and any reasonable extension of such businesses including the provision of trading technologies and interfaces, infrastructure, trade execution and

 

3

 

clearing services to parties in any financial instruments globally and providing technology, services and/or investing in new trading venues, platforms or clearinghouses, and to engage in such activities as are, in the Managing Member’s determination, necessary, incidental or appropriate in connection therewith, in each case, as conducted by the Company and its Subsidiaries.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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not involve or require the Member to engage in any activities described in clauses (i), (ii) or (iii) of this definition above or have any direct management oversight of or involvement in Strategy Competition; (v) acquiring directly or through an Affiliate in the aggregate directly or beneficially, whether as a shareholder, partner, member or otherwise, any equity (including stock options or warrants, whether or not exercisable), voting or profit participation interests (collectively, “Ownership Interests”) in a Competitive Enterprise, or any derivative where the reference asset is an Ownership Interest in a Competitive Enterprise, other than a passive investment of not more than, as calculated at the time of acquisition (but after giving effect to any transaction or transactions to occur in connection with such acquisition), 1% (measured by voting power or value, whichever is greater) of the fully diluted Ownership Interests of a Competitive Enterprise (for the avoidance of doubt, such percentage interest shall be calculated based on the Member’s percentage of direct and indirect ownership of the Competitive Enterprise and not any intermediary, such as a holding company or partnership) (it being understood that this clause (v) shall not apply to prohibit the holding of an Ownership Interest if, at the time of acquisition of such Ownership Interest, the Person in which such direct or indirect Ownership Interest is acquired is not a Competitive Enterprise and the Member is not aware at the time of such acquisition, after reasonable inquiry, that such Person has any plans to become a Competitive Enterprise); or (vi) directly or through an Affiliate owning any Ownership Interests in any Person listed in Schedule A (or any parent company or entity of a Person listed in Schedule A or any successors thereto, other than a parent company or entity that is not a Competitive Enterprise) (a “Restricted Investment”), or any derivative where the reference asset is an Ownership Interest in a Restricted Investment, except to the extent such Ownership Interests or derivatives are held through an index fund, an exchange traded fund, a mutual fund, hedge fund, or other form of collective investment or fund, or through a managed account, in each case, where a third party that is not affiliated with the Member exercises sole investment discretion in respect of such fund or account and such third party has not disclosed at the time Member makes his or its investment that it holds or intends to hold any Ownership Interests in a Restricted Investment.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Employee Holdco LLC Agreement” means, with respect to each Employee Holdco, the limited liability company agreement thereof.

 

“Employee Holdcos” means (i) East MIP and (ii) Virtu Employee Holdco.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Limited Ownership Minimum” means, with respect to the SL Members or the Viola Members, as the case may be, if the number of its Owned Shares exceeds

 

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[              ],(1) as adjusted for any stock split, stock dividend, reverse stock split, combination, recapitalization, reclassification or similar event.

 

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

 

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

 

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

 

“Member Nonrecourse Debt Minimum Gain” means an amount with respect to each “partner nonrecourse debt” (as defined in Treasury Regulation Section 1.704-2(b)(4)) equal to the Company Minimum Gain that would result if such partner nonrecourse debt were treated as a nonrecourse liability (as defined in Treasury Regulation Section 1.752-1(a)(2)) determined in accordance with Treasury Regulation Section 1.704-2(i)(3).

 

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

 

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

 

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

 

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

 

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

 

“Net Income” and “Net Loss” mean, for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss for such Fiscal Year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of 

 

(1)         Note to Draft: To be a number equal to at least 15% of the Class A common stock held by the Silver Lake Parties immediately prior to the IPO (calculated assuming that all of the SL Parties’ Common Stock and corresponding shares of Class C common stock are exchanged for Class A common stock).

 

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income, gain, loss, or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments (without duplication):

 

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

 

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

 

(iii)                               In the event the Carrying Value of any Company asset is adjusted pursuant to subparagraphs (ii) or (iii) of the definition of “Carrying Value,” the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Carrying Value of the asset) or an item of loss (if the adjustment decreases the Carrying Value of the asset) from the disposition of such asset and shall be taken into account, immediately prior to the event giving rise to such adjustment, for purposes of computing Net Income and/or Net Loss;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Owned Shares”  with respect to the SL Members or the Viola Members, as the case may be, the total number of shares of Class A Common Stock beneficially owned (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) by the SL Members or the Viola Members, as the case may be (including, for the purposes of this definition, any Person that owns either Units or Pubco Common Stock and that otherwise qualifies under the definition of “SL Member” or “Viola Member”, as the case may be), in the aggregate and without duplication, as of the date of such calculation (determined on an “as-converted” basis taking into account any and all securities then convertible into, or exercisable or exchangeable for, shares of Class A Common Stock (including Common Units and shares of Class C Common Stock exchangeable pursuant to the Exchange Agreement).

 

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

 

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

 

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

 

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

 

“Percentage Interest” means, with respect to any Member, a fractional amount, expressed as a percentage: (i) the numerator of which is the aggregate number of Common Units owned of record thereby (excluding any Unvested Common Units other than Participating Unvested Common Units) and (ii) the denominator of which is the

 

(2)         Note to Draft: To be a number equal to at least 30% of the Class A common stock held by the Silver Lake Parties immediately prior to the IPO (calculated assuming that all of the SL Parties’ Common Stock and corresponding shares of Class C common stock are exchanged for Class A common stock).

 

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aggregate number of Common Units issued and outstanding (excluding any Unvested Common Units other than Participating Unvested Common Units).  The sum of the outstanding Percentage Interests of all Members shall at all times equal 100%.

 

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

 

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

 

“Post-IPO SL Members” means (i) Silver Lake Partners III DE (AIV III), L.P., a Delaware limited partnership, (ii) Silver Lake Technology Associates III, L.P., a Delaware limited partnership and (iii) Silver Lake Technology Investors III L.P., a Delaware limited partnership.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Relative Percentage Interest” means, with respect to any Member relative to another Member or Members, a fractional amount, expressed as a percentage, the

 

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numerator of which is the Percentage Interest of such Member; and the denominator of which is (x) the Percentage Interest of such Member plus (y) the aggregate Percentage Interest of such other Member or Members.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“SL” means Silver Lake Partners III DE (AIV III), L.P. or any other SL Member designated in writing to the Company as such by SL.

 

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

 

“SL Merger Agreement” means the Merger Agreement, dated as of the date hereof, by and among SLP III EW Feeder Corp., a Delaware corporation, SL Stockholder and Virtu Sub.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)                                     With respect to a Tax Distribution pursuant to Section 5.03(e)(i), the excess, if any, of (A) such Member’s required annualized income installment for such estimated payment date under Section 6655(e) of the Code, assuming that (w) such Member is a corporation (which assumption, for the avoidance of doubt, shall not affect the determination of the Tax Rate), (x) Section 6655(e)(2)(C)(ii) is in effect, (y) such Member’s only income is from the Company, and (z) the Tax Rate applies, which amount shall be calculated based on the projections believed by the Managing Member in good faith to be, reasonable projections of the net taxable income to be allocated to such Units pursuant to this Agreement and without regard to any adjustments pursuant to Section 704(c) or Section 743(b) of the Code over (B) the

 

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aggregate amount of Tax Distributions designated by the Company pursuant to Section 5.03(e)(ii) with respect to such Units since the date of the previous Tax Distribution pursuant to Section 5.03(e)(i) (or if no such Tax Distribution was required to be made, the date such Tax Distribution would have been made pursuant to Section 5.03(e)(i)).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Viola” means Vincent Viola, an individual.

 

“Viola Members” means (i) Viola, (ii) TJMT Holdings, (iii) the other Members designated as “Viola Members” on the signature pages hereto and (iv) any Affiliated Transferee of a Viola Member that owns Units from time to time; provided, that under no circumstances shall East MIP or Virtu Employee Holdco be deemed a Viola Member.

 

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

 

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

 

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

 

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

 

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

 

18

 

	
Term
    	
 
    	
Section
    
	
Transferor Member
    	
 
    	
5.02(b)
    
	
Withholding Advances
    	
 
    	
5.06(b)
    

 

Section 1.02                             Other Definitional and Interpretative Provisions.  The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.  References to Articles, Sections and Schedules are to Articles, Sections and Schedules of this Agreement unless otherwise specified.  All Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.  Any capitalized terms used in any Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement.  Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.  “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.  References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder.  References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.  References to any Person include the successors and permitted assigns of that Person.  References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.  References to “law”, “laws” or to a particular statute or law shall be deemed also to include any Applicable Law.  As used in this Agreement, all references to “majority in interest” and phrases of similar import shall be deemed to refer to such percentage or fraction of interest based on the Relative Percentage Interests of the Members subject to such determination.  Unless otherwise expressly provided herein, when any approval, consent or other matter requires any action or approval of any group of Members, including any holders of any class of Units, such approval, consent or other matter shall require the approval of a majority in interest of such group of Members.  Except to the extent otherwise expressly provided herein, all references to any Member shall be deemed to refer solely to such Person in its capacity as such Member and not in any other capacity.

 

ARTICLE II

 

THE COMPANY

 

Section 2.01                             Formation.  The Company was formed upon the filing of the certificate of formation of the Company with the Secretary of State of the State of Delaware on April 8, 2011, as amended on July 8, 2011.  The authorized officer or representative, as an “authorized person” within the meaning of the Delaware Act, shall file and record any amendments and/or restatements to the certificate of formation of the Company and such other certificates and documents (and any amendments or 

 

19

 

restatements thereof) as may be required under the laws of the State of Delaware and of any other jurisdiction in which the Company may conduct business.  The authorized officer or representative shall, on request, provide any Member with copies of each such document as filed and recorded.  The Members hereby agree that the Company and its Subsidiaries shall be governed by the terms and conditions of this Agreement and, except as provided herein, the Delaware Act.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 2.09                             Ownership of Property.  Legal title to all Property, conveyed to, or held by the Company or its Subsidiaries shall reside in the Company or 

 

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its Subsidiaries and shall be conveyed only in the name of the Company or its Subsidiaries and no Member or any other Person, individually, shall have any ownership of such Property.

 

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

 

ARTICLE III

 

UNITS; MEMBERS; BOOKS AND RECORDS; REPORTS

 

Section 3.01                             Units; Admission of Members.

 

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

 

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Member Schedule to the SL Members and the Viola Members.  When any Units or other Equity Securities of the Company are issued, repurchased, redeemed, converted or Transferred in accordance with this Agreement, the Member Schedule shall be amended by the Managing Member to reflect such issuance, repurchase, redemption or Transfer, the admission of additional or substitute Members and the resulting Percentage Interest of each Member.  Following the date hereof, no Person shall be admitted as a Member and no additional Units shall be issued except as expressly provided herein.

 

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

 

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

 

Section 3.02                             Substitute Members and Additional Members.

 

(a)                                 No Transferee of any Units or Person to whom any Units are issued pursuant to this Agreement shall be admitted as a Member hereunder or acquire any rights hereunder, including any class voting rights or the right to receive distributions and allocations in respect of the Transferred or issued Units, as applicable, unless (i) such Units are Transferred or issued in compliance with the provisions of this Agreement (including Article VIII) and (ii) such Transferee or recipient shall have executed and delivered to the Company such instruments as the Managing Member deems necessary or desirable, in its reasonable discretion, to effectuate the admission of such Transferee or recipient as a Member and to confirm the agreement of such Transferee or recipient to be bound by all the terms and provisions of this Agreement.  Upon complying with the immediately preceding sentence, without the need for any further action of any Person, a Transferee or recipient shall be deemed admitted to the 

 

22

 

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.

 

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

 

Section 3.03                             Tax and Accounting Information.

 

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

 

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

 

(c)                                  Financial Reports.

 

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

 

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

 

(A)                               not later than ninety (90) days after the end of each fiscal year of the Company, a copy of the audited consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year and the related statements of operations and cash flows for such fiscal year, setting forth 

 

23

 

in each case in comparative form the figures for the previous year, all in reasonable detail; and

 

(B)                               not later than forty five (45) days or such later time as permitted under applicable securities law after the end of each of the first three fiscal quarters of each fiscal year, the unaudited consolidated balance sheet of the Company and its Subsidiaries, and the related statements of operations and cash flows for such quarter and for the period commencing on the first day of the fiscal year and ending on the last day of such quarter.

 

(d)                                 Tax Returns.

 

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

 

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

 

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

 

24

 

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

 

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

 

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

 

ARTICLE IV

 

PUBCO OWNERSHIP; RESTRICTIONS ON PUBCO STOCK

 

Section 4.01                             Pubco Ownership.

 

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

 

25

 

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

 

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

 

Section 4.02                             Restrictions on Pubco Common Stock.

 

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

 

26

 

(including distributions upon liquidation) and other economic rights as those of such Equity Securities of the Company.

 

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

 

27

 

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

 

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

 

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

 

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

 

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ARTICLE V

 

CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;
 DISTRIBUTIONS; ALLOCATIONS

 

Section 5.01                             Capital Contributions.

 

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

 

(b)                                 RESERVED.

 

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

 

Section 5.02                             Capital Accounts.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 5.03                             Amounts and Priority of Distributions.

 

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

 

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

 

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

 

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

 

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

 

(e)                                  Tax Distributions.

 

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

 

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

 

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

 

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

 

(f)                                   Pre-IPO Profits Distribution.  Notwithstanding Section 5.03(b), after the Reorganization, before any other distributions are distributed to the Members by the Company or any of its Subsidiaries, the Company shall, or shall cause its Subsidiaries to, distribute to the Class A Members (as such term was defined in the A&R LLC Agreement) as of immediately prior to the Reorganization, in proportion to their respective Available Cash Flow Percentages (as such term was defined in the A&R LLC Agreement) as of immediately prior to the Reorganization, an aggregate amount of cash determined by the Managing Member up to an amount equal to (i) the Available Cash Flow attributable to the portion of the fiscal period beginning on January 1, 2014 and ended on the date hereof minus (ii) the amount of Available Cash Flow, if any, attributable to such period and distributed to such Class A Members prior to the date hereof.

 

(g)                                  Reserved.

 

(h)                                 Reserved.

 

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

 

Section 5.04                             Allocations.

 

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

 

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

 

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

 

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

 

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

 

(iii)                               Qualified Income Offset.  In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or Section 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of the 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 5.05                             Other Allocation Rules.

 

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

 

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

 

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

 

Section 5.06                             Tax Withholding; Withholding Advances.

 

(a)                                 Tax Withholding.

 

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

 

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

 

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

 

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

 

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

 

ARTICLE VI

 

CERTAIN TAX MATTERS

 

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

 

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

 

Section 6.03                             RESERVED.

 

Section 6.04                             RESERVED.

 

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

 

ARTICLE VII
 MANAGEMENT OF THE COMPANY

 

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

 

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

 

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Section 7.03                             Decisions by the Members.

 

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

 

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

 

Section 7.04                             RESERVED.

 

Section 7.05                             RESERVED.

 

Section 7.06                             RESERVED.

 

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Section 7.07                             Fiduciary Duties.

 

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

 

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

 

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

 

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

 

Section 7.08                             Officers.

 

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

 

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

 

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

 

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ARTICLE VIII

 

TRANSFERS OF INTERESTS

 

Section 8.01                             Restrictions on Transfers.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 8.02                             Certain Permitted Transfers.  The following Transfers shall be permitted:

 

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

 

(b)                                 At any time, any Transfer by any SL Member of Units to any Transferee; provided that such Transfer, alone or together with other Transfers by any SL Member and any Transferee thereof, would not result in all SL Members and their Transferees, in the aggregate, representing at any time more than four (4) partners for the purposes of Treasury Regulation Section 1.7704-1(h)(1)(ii), including the application of the anti-avoidance rule of Treasury Regulation Section 1.7704-1(h)(3), excluding Pubco from the four (4) partners for purposes of this Section 8.02(b);

 

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

 

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

 

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

 

Section 8.03                             RESERVED.

 

Section 8.04                             RESERVED.

 

Section 8.05                             RESERVED.

 

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

 

ARTICLE IX

 

CERTAIN OTHER AGREEMENTS

 

Section 9.01                             RESERVED.

 

Section 9.02                             RESERVED.

 

Section 9.03                             RESERVED.

 

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

 

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

 

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

 

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

 

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

 

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

 

(f)                                   RESERVED.

 

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

 

(x)         the Managing Member against any Restricted Member;

 

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

 

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

 

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

 

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

 

Section 9.05                             Company Call Right.

 

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

 

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

 

Section 9.06                             RESERVED.

 

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Section 9.07                             RESERVED.

 

Section 9.08                             RESERVED.

 

Section 9.09                             Employee Holdcos.

 

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

 

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

 

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ARTICLE X

 

LIMITATION ON LIABILITY, EXCULPATION
 AND INDEMNIFICATION

 

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

 

Section 10.02                      Exculpation and Indemnification.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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partnership or other organizational or governing documents of any Indemnitee-Related Entity, on the other hand.

 

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

 

ARTICLE XI

 

DISSOLUTION AND TERMINATION

 

Section 11.01                      Dissolution.

 

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

 

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

 

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

 

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

 

(ii)                                  upon the approval of the Managing Member.

 

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

 

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Section 11.02                      Winding Up of the Company.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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ARTICLE XII

 

MISCELLANEOUS

 

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

 

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

 

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

 

Section 12.04                      Binding Effect; Benefit; Assignment.

 

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

 

(b)                                 Except as provided in Article VIII, no Member may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the Managing Member.

 

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 

 

54

 

court, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 12.03 shall be deemed effective service of process on such party.

 

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

 

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

 

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

 

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

 

Section 12.10       Amendment.

 

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

 

(i)            without the prior written consent of the SL Members, (x) adversely modify the limited liability of any SL Member set forth in Section 5.01, Section 5.02, Section 5.04, Section 5.05, Section 5.06, Section 6.02, Section 6.05, Section 10.01, Section 10.02 or Section 12.01, or otherwise modify in any material respect the limited liability of any SL Member, or adversely increase the liabilities or obligations (other than de minimis liabilities or obligations) of any SL Member, (y) adversely modify the Units (or the rights, preferences or privileges of the Units) then held the SL Members in any different or disproportionate manner to those then held by the Viola Members that, in any such case, is favorable to the Viola Members relative to the SL Members or (z) adversely modify the express rights of the SL Members set forth in Section 3.01(a), Section 3.03(c)(ii), Section 3.03(d)(iii), Section 3.04, Article IV, Section 5.03(e), Section 6.01, Section 7.03(b), Section 7.07, Section 9.04 and this Section 12.10 (in the case of clause (z), only so long as the SL Members are entitled to such express rights);

 

(ii)           without the prior written consent of the Viola Members, (x) adversely modify the limited liability of any Viola Member set forth in Section 5.01, Section 5.02, Section 5.04, Section 5.05, Section 5.06, Section 6.02, Section 6.05, Article X or Section 12.01, or otherwise modify in any material respect the limited liability of any Viola Member, or adversely increase the liabilities or obligations

 

56

 

(other than de minimis liabilities or obligations) of any Viola Member, (y) adversely modify the Units (or the rights, preferences or privileges of the Units) then held the Viola Members in any different or disproportionate manner to those then held by the SL Members that, in any such case, is favorable to the SL Members relative to the Viola Members or (z) adversely modify the express rights of the Viola Members set forth in Section 3.01(a), Section 3.03(c)(ii), Section 3.03(d)(iii), Section 3.04, Article IV, Section 7.03(b), Section 7.07, Section 9.04 and this Section 12.10 (in the case of clause (z), only so long as the Viola Members are entitled to such express rights); or

 

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

 

(b)           For the avoidance of doubt: (i) the Managing Member, acting alone, may amend this Agreement, including the Member Schedule, (x) to reflect the admission of new Members or Transfers of Units, each as provided by and in accordance with, the terms of this Agreement, (y) to effect any subdivisions or combinations of Units made in compliance with Section 4.02(c) and (z) to issue additional Common Units or any new class of Units (whether or not pari passu with the Common Units) in accordance with the terms of this Agreement and to provide that the Members being issued such new Units be entitled to the rights provided to the SL Members and/or the Viola Members with respect to all or a portion of the provisions applicable thereto hereunder and any other rights that do not diminish or eliminate any of the express rights of the SL Members and/or the Viola Members described in Section 12.10(a)(i)(z) or Section 12.10(a)(ii)(z), as the case may be; and (ii) any merger, consolidation or other business combination that constitutes a Disposition Event (as such term is defined in the certificate of incorporation of Pubco) in which the Non-Pubco Members are required to exchange all of their Paired Interests pursuant to Section 2.03(c) of the Exchange Agreement and receive consideration in such Disposition Event in accordance with the terms of this Agreement and the Exchange Agreement as in effect immediately prior to the consummation of such Disposition Event shall not be deemed an amendment hereof; provided, that such amendment is only effective upon consummation of such Disposition Event.

 

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

 

Section 12.11       Confidentiality.

 

(a)           Each 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

 

57

 

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, of the Managing Member 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;

 

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

 

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

 

(b)           “Confidential Information” means any information related to the activities of the Company, the 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.

 

(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

 

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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 any persons the U.S. federal income tax treatment and tax structure of the Company and the transactions set out in the MTH Transaction Agreement and the Reorganization Agreement.  For this purpose, “tax structure” is limited to any facts relevant to the U.S. federal income tax treatment of the Company and does not include information relating to the identity of the Company or any 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]

 

59

 

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

 

 

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

 

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

 

 

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

 

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

 

 

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

 

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

 

 

	
 
    	
VIOLA   MEMBERS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TJMT   HOLDINGS LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[OTHER   VIOLA MEMBERS]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

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

 

 

	
 
    	
VIRTU   EAST MIP LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
VIRTU   EMPLOYEE HOLDCO LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

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

 

 

	
 
    	
 
    
	
 
    	
DOUGLAS   A. CIFU
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CHRISTOPHER   CONCANNON
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[OTHER   MEMBERS]
    

 

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

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