THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF STR HOLDINGS LLC

 

 

TABLE OF CONTENTS

 

Page

 

ARTICLE I

DEFINITIONS

1

 

ARTICLE II	ORGANIZATION		17
Section 2.01.		Formation of Company	17
Section 2.02.		Name	17
Section 2.03.		Office; Agent for Service of Process	18
Section 2.04.		Term	18
Section 2.05.		Purpose and Scope	18
Section 2.06.		Authorized Acts	18
Section 2.07.		Fiscal Year	19

 

ARTICLE III	CONTRIBUTIONS AND MEMBERS		19
Section 3.01.		Initial Capital Contributions	19
Section 3.02.		Additional Capital Contributions	19
Section 3.03.		Interest Payments	20
Section 3.04.		Ownership and Issuance of Units	20
Section 3.05.		Vesting	21
Section 3.06.		Termination	24
Section 3.07.		Members with Employment or Consulting Agreements	24
Section 3.08.		Profits Interests	24
Section 3.09.		Voting Rights	26
Section 3.10.		Withdrawals	26
Section 3.11.		Liability of the Members Generally	26
Section 3.12.		Capital Accounts	26
Section 3.13.		No Deficit Restoration Obligation	26

 

ARTICLE IV	MANAGEMENT		27
Section 4.01.		Management and Control of the Company	27
Section 4.02.		Actions by the Board of Managers	30
Section 4.03.		Officers	30
Section 4.04.		Expenses	30
Section 4.05.		Exculpation	31

 

i

 

								Page
Section 4.06.					Indemnification			31
ARTICLE V				DISTRIBUTIONS				32
Section 5.01.					Distributions Generally			32
Section 5.02.					Priority of Distributions			32
Section 5.03.					Adjustment to Distributions on Account of Unvested Units			33
Section 5.04.					Tax Distributions			33
Section 5.05.					Distributions of Securities			34
Section 5.06.					Withholding of Certain Amounts			34
Section 5.07.					Restricted Distributions			34
Section 5.08.					Withholding Tax Payments and Obligations			34
ARTICLE VI			ALLOCATIONS					35
Section 6.01.					General Application			35
Section 6.02.					Loss Limitation			36
Section 6.03.					Special Allocations			36
Section 6.04.					Transfer of Interest			36
Section 6.05.					Tax Allocations			37
ARTICLE VII		ACCOUNTING AND TAX MATTERS						37
Section 7.01.					Books and Records			37
Section 7.02.					Reports to Members			37
Section 7.03.					Tax Returns			38
Section 7.04.					Tax Controversies			38
Section 7.05.					Accounting Methods; Elections			39
Section 7.06.					Partnership Status			39
Section 7.07.					Confidentiality			39
Section 7.08.					Restrictive Covenants			40
Section 7.09.					Investment Opportunities and Conflicts of Interest			41
Section 7.10.					Conflicting Agreements			42
ARTICLE VIII	TRANSFERS							42
Section 8.01.					General Restrictions on Transfer			42

 

ii

 

						Page
Section 8.02.			[Reserved]			42
Section 8.03.			Permitted Transferees			42
Section 8.04.			Restrictions on Transfers by Other Members			43
Section 8.05.			Restrictions on Transfers by DLJMB Members			43
Section 8.06.			Tag-Along Rights			43
Section 8.07.			Drag-Along Rights			46
Section 8.08.			Additional Conditions to Tag-Along Sales and Drag-Along Sales			47
Section 8.09.			Repurchase Rights			48
Section 8.10.			Preemptive Rights			53
ARTICLE IX		DISSOLUTION; LIQUIDATION				54
Section 9.01.			Dissolution			54
Section 9.02.			Final Accounting			54
Section 9.03.			Liquidation			55
Section 9.04.			Cancellation of Certificate			55
ARTICLE X	REPRESENTATIONS					55
Section 10.01.			Investment Purpose			55
Section 10.02.			Independent Inquiry			56
ARTICLE XI	GENERAL PROVISIONS					57
Section 11.01.			Members Representative			57
Section 11.02.			Aggregation of Shares			57
Section 11.03.			Binding Effect; Assignability; Benefit			57
Section 11.04.			Notices			57
Section 11.05.			Waiver; Amendment.			58
Section 11.06.			Transfer of All Securities			59
Section 11.07.			Fees and Expenses			59
Section 11.08.			Governing Law			59
Section 11.09.			Jurisdiction			59
Section 11.10.			Waiver of Jury Trial			59
Section 11.11.			Specific Enforcement; Cumulative Remedies			60

 

iii

 

				Page
Section 11.12.	Entire Agreement			60
Section 11.13.	Captions			60
Section 11.14.	Pronouns			60
Section 11.15.	Severability			60
Section 11.16.	Counterparts; Effectiveness			60
Section 11.17.	Initial Public Offering			60

 

iv

 

Section 1.04.           “ 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 obligated to restore pursuant to any provision of this Agreement or is deemed obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

 

(ii)           debit to such Capital Account the items described in 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 Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

Section 1.05.           “ Adverse Person ” means any Person who, either directly or through an Affiliate, is a competitor of, or is otherwise materially adverse to, the Company or any of its Subsidiaries as reasonably determined by the Board of Managers in good faith; provided, however, that a Person shall not be deemed an Adverse Person solely as a result of owning directly or indirectly, five percent (5%) or less of the outstanding capital stock of a publicly traded company that is a competitor of the Company.

 

Section 1.06.           “ Affiliate ” of any Person means any Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with such Person, and the term “ Affiliated ” shall have a correlative meaning.

 

Section 1.07.           “ Agreement ” means this Third Amended and Restated Limited Liability Company Agreement, including all exhibits and schedules hereto, as it may be amended or restated from time to time.

 

Section 1.08.           “ Aggregate Ownership ” means, with respect to any Member or group of Members, the total number of the relevant class of Units owned (without duplication) by such Member or group of Members as of the date of such calculation, calculated on a fully-diluted basis.

 

Section 1.09.           “ Amended Agreement ” has the meaning set forth in the Recitals.

 

Section 1.10.           “ Assumed Tax Rate ” means the highest marginal effective rate of Federal, state and local income tax applicable to an individual resident in Connecticut taking account of any difference in rates applicable to ordinary income, qualified dividends, capital gains and any allowable deductions in respect of such state and local taxes in computing such individual’s federal income taxes (taking into account any phase-outs related thereto).

 

Section 1.11.           “ Board of Managers ” has the meaning set forth in Section 4.01(a)(i) .

 

Section 1.12.           “ Book Item ” has the meaning set forth in Section 6.05(a) .

 

2

 

Section 1.13.           “ Business Day ” means any day, excluding Saturday, Sunday and any other day on which commercial banks in New York, New York are authorized or required by law to close.

 

Section 1.14.           “ Call Notice Date ” has the meaning set forth in Section 8.09(a).

 

Section 1.15.           “ Call Period ” means, with respect to Units that are held by a Terminated Member on the Termination Date, the period from the Termination Date with respect to such Terminated Member to the date that is 180 days after such Termination Date.

 

Section 1.16.           “ Capital Account ” has the meaning set forth in Section 3.12 .

Section 1.17.           “ Capital Contribution ” means, with respect to any Member, the amount of money or the Gross Asset Value of any property (other than money) contributed to the Company by such Member at such time with respect to the Units held by such Member.  “ Capital Contributions ” means, with respect to any Member, the aggregate amount of money and the Gross Asset Values of any property (other than money) contributed to the Company by such Member (or its predecessors in interest) with respect to the Units held by such Member.

 

Section 1.18.           “ Cause ” means, with respect to any Management Member, “cause” as defined in such Management Member’s employment agreement, or if not so defined:

 

(i)            the Management Member’s commission of fraud, embezzlement, misappropriation of funds, material misrepresentation, breach of fiduciary duty or other act of dishonesty against the Company or any of its Subsidiaries;

 

(ii)           the Management Member’s conviction of a felony or of a misdemeanor if such misdemeanor involves moral turpitude or misrepresentation, including a plea of guilty or nolo contendere;

 

(iii)          the Management Member’s material breach of any provision of this Agreement, any employment agreement or non-competition agreement, which breach is not cured within 30 days following written notice;

 

(iv)         the Management Member’s intentional wrongful act or gross negligence that has a material detrimental effect on the Company or its Subsidiaries;

 

(v)          the Management Member’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s or any of its Subsidiaries’ premises; or

 

(vi)         the Management Member’s failure or refusal to follow the reasonable instructions of the Board of Managers or the board of directors of any Subsidiary of the Company, which failure or refusal is not cured within 30 days following written notice.

 

Section 1.19.           “ CEO Manager ” has the meaning set forth in Section 4.01(a)(i)(3) .

 

3

 

Section 1.20.           “ Certificate ” means the Certificate of Formation as filed with the Secretary of State of the State of Delaware pursuant to the Act as set forth in the Recitals, as it may be amended or restated from time to time.

 

Section 1.21.           “ Change of Control ” means:

 

(i)            the sale (in one transaction or a series of transactions) of all or substantially all of the assets of the Company or STR to a third party other than any of the Existing Members or any of their respective Affiliates;

 

(ii)           a sale or issuance (in one transaction or a series of transactions) of any securities resulting in more than 50% of the voting power of the Company or STR being held by a “person” or “group” (as such terms are used in the Exchange Act) that does not include any of the Existing Members or any of their respective Affiliates; or

 

(iii)          a merger or consolidation of the Company or STR with or into another Person if following such merger or consolidation, more than 50% of the voting power of the Company is held by a “person” or “group” (as such terms are used in the Exchange Act) that does not include any of the Existing Members or any of their respective Affiliates.

 

Section 1.22.           “ Class A Member ” means each Person admitted to the Company as a Member and who holds Class A Units, and any other Person admitted as an additional or substitute Member and who holds Class A Units, so long as such Person holds Class A Units together with any Permitted Transferees thereof.  If a Class A Member holds different classes of Units, then such Class A Member shall be treated as a Class A Member only with respect to its Class A Units.

 

Section 1.23.           “ Class A Units ” has the meaning set forth in Section 3.04(a)(i) .

 

Section 1.24.           “ Class B Member ” means each Person admitted to the Company as a Member and who holds Class B Units, and any other Person admitted as an additional or substitute Member and who holds Class B Units, so long as such Person holds Class B Units together with any Permitted Transferees thereof.  If a Class B Member holds different classes of Units, then such Class B Member shall be treated as a Class B Member only with respect to its Class B Units.

 

Section 1.25.           “ Class B Units ” has the meaning set forth in Section 3.04(a)(ii) .

 

Section 1.26.           “ Class C Member ” means each Person admitted to the Company as a Member and who holds Class C Units, and any other Person admitted as an additional or substitute Member and who holds Class C Units, so long as such Person holds Class C Units together with any Permitted Transferees thereof.  If a Class C Member holds different classes of Units, then such Class C Member shall be treated as a Class C Member only with respect to its Class C Units.

 

Section 1.27.           “ Class C Units ” has the meaning set forth in Section 3.04(a)(iii) .

 

4

 

Section 1.28.           “ Class D Member ” means each Person admitted to the Company as a Member and who holds Class D Units, and any other Person admitted as an additional or substitute Member and who holds Class D Units, so long as such Person holds Class D Units together with any Permitted Transferees thereof.  If a Class D Member holds different classes of Units, then such Class D Member shall be treated as a Class D Member only with respect to its Class D Units.

 

Section 1.29.           “ Class D Units ” has the meaning set forth in Section 3.04(a)(iv) .

 

Section 1.30.           “ Class E Member ” means each Person admitted to the Company as a Member and who holds Class E Units, and any other Person admitted as an additional or substitute Member and who holds Class E Units, so long as such Person holds Class E Units together with any Permitted Transferees thereof.  If a Class E Member holds different classes of Units, then such Class E Member shall be treated as a Class E Member only with respect to its Class E Units.

 

Section 1.31.           “ Class E Units ” has the meaning set forth in Section 3.04(a)(v) .

 

Section 1.32.           “ Class F Member ” means each Person admitted to the Company as a Member and who holds Class F Units, and any other Person admitted as an additional or substitute Member and who holds Class F Units, so long as such Person holds Class F Units together with any Permitted Transferees thereof.  If a Class F Member holds different classes of Units, then such Class F Member shall be treated as a Class F Member only with respect to its Class F Units.

 

Section 1.33.           “ Class F Units ” has the meaning set forth in Section 3.04(a)(vi) .

 

Section 1.34.           “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

 

Section 1.35.           “ Company ” has the meaning specified in the introductory paragraph hereof.

 

Section 1.36.           “ Company Business ” has the meaning set forth in Section 2.05(a) .

 

Section 1.37.           “ Company Expenses ” has the meaning set forth in Section 4.04(a) .

 

Section 1.38.           “ Company Minimum Gain ” has the same meaning as “partnership minimum gain” set forth in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

 

Section 1.39.           “ Company Register ” has the meaning set forth in Section 3.01 .

 

Section 1.40.           “ Compensatory Interests ” has the meaning set forth in Section 3.08(b)(i) .

 

Section 1.41.           “ Confidential Information ” has the meaning set forth in Section 7.07(b) .

 

5

 

Section 1.42.           “ Consolidated EBITDA ” means Consolidated EBITDA as defined in and calculated pursuant to the Credit Facilities.

 

Section 1.43.           “ Consolidated Net Debt ” means (x) any Indebtedness of the Company and its Subsidiaries minus (y) the Company’s and its Subsidiaries’ cash on hand and in banks, and any liquid investments readily convertible to cash, excluding any cash held in escrow or otherwise restricted.

 

Section 1.44.           “ Control ,” “ Controlled ” and “ Controlling ” mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting Securities, by contract or otherwise.

 

Section 1.45.           “ Credit Facilities ” means that certain Credit Agreement, dated as of the Effective Date, by and between the Company, STR Acquisition, Inc., the Lenders (as defined therein) and Credit Suisse, Cayman Islands Branch, as it may be amended or restated from time to time.

 

Section 1.46.           “ Disability ” means, with respect to any Management Member, “disability” as defined in such Management Member’s employment agreement, or if not so defined shall mean any physical or mental illness, injury or infirmity which prevents a Management Member from performing the Management Member’s job functions for a period of (i) one hundred twenty consecutive calendar days or (ii) an aggregate of one hundred eighty calendar days out of any consecutive twelve month period.  Any determination of disability shall be made by the Board of Managers in consultation with a qualified physician or physicians selected by the Board of Managers and reasonably acceptable to the Management Member.  The failure of the Management Member to submit to a reasonable examination by such physician or physicians shall act as an estoppel to any objection by the Management Member to the determination of disability by the Board of Managers.

 

Section 1.47.           “ Distribution Threshold ” means, with respect to all Incentive Units issued pursuant to Section 3.04(c) , an amount determined by the Board of Managers which will (but will not necessarily be the minimum amount which will) cause such Units to constitute “profits interests” within the meaning of Rev. Proc. 93-27 and 2001-43.

 

Section 1.48.           “ DLJMB ” means DLJ Merchant Banking Partners IV, L.P.

 

Section 1.49.           “ DLJMB Managers ” has the meaning set forth in Section 4.01(a)(i)(1) .

 

Section 1.50.           “ DLJMB Members ” means DLJMB, DLJMB Offshore Partners IV, L.P., DLJ Merchant Banking Partners IV (Pacific), L.P. and MBP IV Plan Investors, L.P., DLJ Merchant Banking Partners IV (Co-Investments), L.P., together with any Permitted Transferees thereof.

 

Section 1.51.           “ Drag-Along Portion ” means, with respect to any Other Member in a Drag-Along Sale, the total number of the relevant class of Units owned by such Other Member multiplied by a fraction, the numerator of which is the aggregate number of the relevant class of

 

6

 

Units proposed to be sold by the Drag-Along Seller in the applicable Drag-Along Sale and the denominator of which is the total number of the relevant class of Units owned by the Drag-Along Seller at such time.

 

Section 1.52.           “ Drag-Along Rights ” has the meaning set forth in Section 8.07(a) .

 

Section 1.53.           “ Drag-Along Sale ” has the meaning set forth in Section 8.07(a) .

 

Section 1.54.           “ Drag-Along Sale Notice ” has the meaning set forth in Section 8.07(b) .

 

Section 1.55.           “ Drag-Along Sale Notice Period ” has the meaning set forth in Section 8.07(b) .

 

Section 1.56.           “ Drag-Along Sale Price ” has the meaning set forth in Section 8.07(b) .

 

Section 1.57.           “ Drag-Along Seller ” has the meaning set forth in Section 8.07(a) .

 

Section 1.58.           “ Drag-Along Transferee ” has the meaning set forth in Section 8.07(a) .

 

Section 1.59.           “ Effective Date ” has the meaning specified in the introductory paragraph hereof.

 

Section 1.60.           “ Electing Call Member ” has the meaning set forth in Section  8.09(a)(iii) .

 

Section 1.61.           “ Electing Put Member ” has the meaning set forth in Section  8.09(b)(iii) .

 

Section 1.62.           “ Entity ” means any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association or other entity.

 

Section 1.63.           “ Equity Securities ” has the meaning set forth in Section 3.02(a)(i) .

 

Section 1.64.           “ Equity Valuation ” means, with respect to a particular Fiscal Year, (A) the product of (i) ten (10) and (ii) the Consolidated EBITDA for such Fiscal Year, less (B) Consolidated Net Debt as of the end of such Fiscal Year.

 

Section 1.65.           “ Excess Portion ” has the meaning set forth in Section 8.06(d) .

 

Section 1.66.           “ Excess Units ” has the meaning set forth in Section 8.10(c) .

 

Section 1.67.           “ Exchange Act ” means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.

 

7

 

Section 1.68.           “ Excluded Units ” means any Class A Units or other Equity Securities:

 

(i)            issued as a dividend or distribution on any of the Units in accordance with this Agreement;

 

(ii)           granted or issued to employees, officers, directors, managers of, or contractors, consultants or advisors to, the Company or any of its Subsidiaries pursuant to incentive agreements, equity purchase or equity option plans, equity bonuses or awards, warrants, contracts or other arrangements that are approved by the Board of Managers, including, without limitation, Incentive Units;

 

(iii)          issued or issuable in connection with any equipment leases, real property leases, loans, credit lines, guarantees of indebtedness or similar transactions, in each case, approved by the Board of Managers;

 

(iv)         issued pursuant to the acquisition of another Person by the Company or any of its Subsidiaries by consolidation, merger, purchase of all or substantially all of the assets, or other transaction in which the Company or such Subsidiary acquires, in a single transaction or series of related transactions, all or substantially all of the assets of such other Person, fifty percent (50%) or more of the voting power of such other Person or fifty percent (50%) or more of the equity ownership of such other Person;

 

(v)          issued pursuant to any public offering and sale pursuant to an effective registration statement under the Securities Act;

 

(vi)         issued as an “equity kicker” to a lender in connection with a third party debt financing (including the award of any such “equity kicker” or the agreement to award or issue any such shares or “equity kicker”); provided that Credit Suisse or its Affiliates may only be granted such securities if such entities are part of a syndication or group of lenders; or

 

(vii)        issued to Persons other than Affiliates of the DLJMB Members who the Board of Managers believes will provide strategic benefits to the Company or any of its Subsidiaries.

 

Section 1.69.           “ Existing Members ” means each of the Members other than the Management Members.

 

Section 1.70.           “ Fiscal Year ” has the meaning set forth in Section 2.07 .

 

Section 1.71.           “ Fully Participating Member ” has the meaning set forth in Section 8.10(c) .

 

Section 1.72.           “ Fully Participating Tagging Person ” has the meaning set forth in Section 8.06(d) .

 

8

 

Section 1.73.           “ GAAP ” means generally accepted accounting principles as formulated and interpreted by the Financial Accounting Standards Board in the United States of America.

 

Section 1.74.           “ Good Reason ” means, with respect to any Management Member, “good reason” as defined in such Management Member’s employment agreement, or if not so defined:

 

(i)            a reduction in such Management Member’s base salary (other than a general reduction in base salary or annual incentive compensation opportunities that affects all members of senior management equally);

 

(ii)           a material reduction in such Management Member’s duties and responsibilities, a material and adverse change in such Management Member’s title or the assignment to such Management Member of duties or responsibilities materially inconsistent with his title; or

 

(iii)          any material breach by the Company of any material written agreement with such Management Member.

 

provided, that any event described in clauses (i), (ii) or (iii) above shall constitute Good Reason only if the Company fails to cure such event within 30 days of receipt from Management Member of written notice of the event which such Management Member believes constitutes Good Reason; provided, further, that “Good Reason” shall cease to exist for an event on the 45th day following the later of its occurrence or such person’s knowledge thereof, unless such person has given the Company written notice thereof prior to such date.

 

Section 1.75.           “ Gross Asset Value ” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

 

(i)            the Gross Asset Value of any asset contributed by a Member to the Company is the gross fair market value of such asset as determined at the time of contribution;

 

(ii)           the Gross Asset Value of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Board of Managers, as of the following times:  (a) the acquisition of any additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for an interest in the Company; (c) the grant of an interest in the Company (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Company by an existing Member acting in a Member capacity, or by a new Member acting in a Member capacity or in anticipation of becoming a Member; and (d) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided , however , that the adjustments pursuant to clauses (a), (b) and (c) above shall be made only if the Board of Managers reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company; and

 

9

 

Section 1.91.           “ Member Nonrecourse Debt ” has the same meaning as the term “partner nonrecourse debt” set forth in Regulations Section 1.704-2(b)(4).

 

Section 1.92.           “ Member Nonrecourse Debt Minimum Gain ” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if the Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).

 

Section 1.93.           “ Members ” means, collectively, the Class A Members, the Class B Members, the Class C Members, the Class D Members, Class E Members and the Class F Members.

 

Section 1.94.           “ Members Representative ” has the meaning set forth in Section 11.01 .

 

Section 1.95.           “ Merger Agreement ” means the Amended and Restated Agreement and Plan of Merger, dated as of June 15, 2007, among the Company (as successor to STR Holdings Inc.), STR Acquisition, Inc. and Specialized Technology Resources, Inc., as it may be amended or restated from time to time.

 

Section 1.96.           “ Net Income ” and “ Net Loss ” means, 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 Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) 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 paragraph, shall be added to such income or loss;

 

(ii)           any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income or Net Loss pursuant to this paragraph, shall be subtracted from such taxable income or loss;

 

(iii)          in the event the Gross Asset Value of any Company asset is adjusted pursuant to subdivisions (ii) or (iii) of the definition of “Gross Asset Value” herein, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss;

 

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

 

(v)          in lieu of depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, such amounts shall

 

11

 

instead be determined in accordance with the requirements of Regulations Section 1.704-1(b)(2)(iv)(g); and

 

(vi)         any items which are specially allocated pursuant to the provisions of Section 6.03 shall not be taken into account in computing Net Income or Net Loss.

 

Section 1.97.           “ Non-competition Period ” has the meaning set forth in Section 7.08(a) .

 

Section 1.98.           “ Nonrecourse Liability ” has the meaning set forth in Regulations Section 1.704-2(b)(3).

 

Section 1.99.           “ Nonrecourse Deductions ” has the meaning set forth in Regulations Sections 1.704-2(b)(1) and 1.704-2(c).

 

Section 1.100.         “ Northwestern ” means The Northwestern Mutual Life Insurance Company.

 

Section 1.101.         “ Northwestern Observer ” has the meaning set forth in Section 4.01(a) .

 

Section 1.102.         “ Observer ” means each of the Whitney Observer, the Jilot Observer and the Northwestern Observer.

 

Section 1.103.         “ Officer ” has the meaning set forth in Section 4.03 .

 

Section 1.104.         “ Other Business ” has the meaning set forth in Section 7.09 .

 

Section 1.105.         “ Other Class A Members ” means all Class A Members other than the DLJMB Members.

 

Section 1.106.         “ Other Members ” means all Members other than the DLJMB Members.

 

Section 1.107.         “ Performance Target ” means the Equity Valuation target for each Fiscal Year as set forth on Schedule III hereto with respect to Class D Units issued prior to the date hereof and, with respect to subsequent Class D Units, shall be set forth in an exhibit to the applicable Incentive Unit Grant at the time of issuance.

 

Section 1.108.         “ Permitted Transferee ” means (i) in the case of any DLJMB Member, (A) any other DLJMB Member, (B), any actual or prospective shareholder, member or general or limited partner of any DLJMB Member (a “ DLJMB Partner ”), and any corporation, partnership, limited liability company, or other entity that is an Affiliate of any DLJMB Partner (collectively, “ DLJMB Affiliates ”), (C) any managing director, general partner, director, limited partner, officer or employee of any DLJMB Member or any DLJMB Affiliate, or any spouse, lineal descendant, sibling, parent, heir, executor, administrator, testamentary trustee, legatee or beneficiary of any of the foregoing persons described in this clause (C) (collectively, “ DLJMB Associates ”) or (D) any trust the beneficiaries of which, or any corporation, limited liability

 

12

 

company or partnership the stockholders, members or general or limited partners of which, include only such DLJMB Members, DLJMB Affiliates, DLJMB Associates, their spouses or other lineal descendants;

 

(ii)            in the case of any Other Class A Member, (A) any entity that is an Affiliate of such Class A Member, (B) any actual or prospective shareholder, member or general or limited partner of any such Class A Member, and any corporation, partnership, limited liability company, or other entity that is an Affiliate of any such Class A Member, (C) any spouse, lineal descendant, sibling, parent, heir, executor, administrator, testamentary trustee, legatee or beneficiary of such Class A Member, (C) a trust that is for the exclusive benefit of such Class A Member or its Permitted Transferees under clause (B) above or (D) in the case of the Whitney Members, any other Whitney Member; and

 

(iii)           in the case of any Management Member, (A) any spouse, lineal descendant, sibling, parent, heir, executor, administrator, testamentary trustee, legatee or beneficiary of such Management Member, (B) a trust that is for the exclusive benefit of such Management Member or its Permitted Transferees under clause (A) above or (C) a limited liability company or corporation, all of the outstanding capital stock or membership interests of which is of record and beneficially owned by such Management Member or any of those Persons in clause (A) above.

 

Section 1.109.         “ Person ” means any individual or Entity and, where the context so permits, the legal representatives, successors in interest and permitted assigns of such Person.

 

Section 1.110.         “ Prime Rate ” means the highest prime rate of interest quoted from time to time by The Wall Street Journal as the “base rate” on corporate loans at large money center commercial banks.

 

Section 1.111.         “ Profits Interest ” has the meaning set forth in Section 3.08(a) .

 

Section 1.112.         “ Proposed Rules ” has the meaning set forth in Section 3.08(b)(i) .

 

Section 1.113.         “ Pro Rata Share ” means, for each Other Class A Member and any proposed issuance of any class of Units with respect to which each such Other Class A Member shall be entitled to exercise his or her rights under Section 8.10 , the fraction that results from dividing (A) such Other Class A Member’s Aggregate Ownership of Class A Units proposed to be issued immediately before giving effect to such issuance, by (B) the total number of such Class A Units then outstanding and owned by all Members (immediately before giving effect to such issuance), calculated on a fully diluted basis.

 

Section 1.114.         “ Put Notice Date ” has the meaning set forth in Section 8.09(b).

 

Section 1.115.         “ Put Units ” has the meaning set forth in Section 8.09(b).

 

Section 1.116.         “ Registrable Securities ” means, at any time, any common stock of the Company, or any corporate successor to the Company by way of conversion, STR or any of their respective Subsidiaries which effects the Initial Public Offering held by any Member until (i) a registration statement covering such shares has been declared effective by the SEC and such shares have been disposed of pursuant to such effective registration statement, (ii) such shares

 

13

 

are sold under Rule 144 under the Securities Act or (iii) such shares are otherwise Transferred, the Company has delivered a new certificate or other evidence of ownership for such shares not bearing the legend required pursuant to this Agreement and such shares may be resold without subsequent registration under the Securities Act.

 

Section 1.117.         “ Regulations ” means the Income Tax Regulations promulgated under the Code, as amended.

 

Section 1.118.         “ Repurchase Fair Market Value ” means, the amount that would be distributed in respect of a Class A Unit, Class B Unit, Class C Unit, Class D Unit, Class E Unit or Class F Unit, as applicable, as determined in good faith by the Board of Managers as if the assets of the Company were sold for their fair market value as a going concern and the proceeds distributed in accordance with Article IX.   If the Board of Managers determines that a regular, active public market does not exist for the Units, the Board of Managers shall determine the Repurchase Fair Market Value of the Units in its good faith judgment based on the total number of Class A Units then outstanding, taking into account all outstanding Incentive Units and without application of any minority interest discount or lack of marketability discount.  The Board of Managers shall make its determination of Repurchase Fair Market Value from time to time, but not less than annually (the “ Valuation ”) and such determination shall remain in effect until the Board of Managers makes the next Valuation (provided that, at any relevant date of determination, the Valuation approximates the Repurchase Fair Market Value at that date and, if it does not, the Board of Managers shall make a new determination of Repurchase Fair Market Value which shall apply retroactively at such date of determination).  Notwithstanding the foregoing, if an investment banker or appraiser appointed by the Board of Managers makes a determination of Repurchase Fair Market Value subsequent to a Valuation, such subsequent determination shall supersede the Valuation then in effect and shall establish the Repurchase Fair Market Value until the next Valuation; provided, however, that, notwithstanding the foregoing, in connection with any determination of  Repurchase Fair Market Value required pursuant to Section 8.09(d) , the selling Member, may elect to have Repurchase Fair Market Value evaluated as of the date of determination thereof as required pursuant hereto by an independent valuation consultant or appraiser as may be selected mutually by the Board of Managers and the Member rather than in reliance upon the most recent Valuation (“ Third Party Valuation ”); provided, further, that, if the determination of Repurchase Fair Market Value pursuant to the Third Party Valuation is (A) 110% or greater than the Repurchase Fair Market Value determined by the Board of Managers, the cost of such Third Party Valuation shall be borne by the Company, (B) 90% or less than the Repurchase Fair Market Value determined by the Board of Managers, the cost of such Third Party Valuation shall be borne by the selling Member and (C) more than 90% less than and less than 110% more than the Repurchase Fair Market Value determined by the Board of Managers, the cost of such Third Party Valuation shall be borne equally by the selling Member and the Company.

 

Section 1.119.         “ RFMV Calculation Date ” means, with respect to the application of the provisions of Section 8.09 to a Terminated Member:

 

(i)             With respect to Termination Units that are called by the Company pursuant to Section 8.09(a) , on the Call Notice Date;

 

14

 

(ii)            With respect to Termination Units that are put to the Company by the Terminated Member pursuant to Section 8.09(b) , the Termination Date; and

 

(iii)           With respect to Rollover Units that are acquired by the Company pursuant to Section 8.09(c), the Termination Date.

 

Section 1.120.         “ Reserves ” means the amount of proceeds that the Board of Managers determines in good faith and in its reasonable discretion is necessary to be maintained by the Company for the purpose of paying reasonably anticipated Company Expenses, liabilities and obligations of the Company regardless of whether such Company Expenses, liabilities and obligations are actual or contingent.

 

Section 1.121.         “ Restricted Period ” has the meaning set forth in Section 8.04 .

 

Section 1.122.         “ Rollover Units ” shall mean the Class A Units issued to certain Management Members in exchange for shares of STR pursuant to a Contribution Agreement between such Management Member and the Company executed in connection with the closing of the merger under the Merger Agreement.

 

Section 1.123.         “ Safe Harbor Election ” has the meaning set forth in Section 3.08(b)(i) .

 

Section 1.124.         “ Second Amended Agreement ” has the meaning set forth in the Recitals.

 

Section 1.125.         “ Section 83(b) Election ” has the meaning set forth in Section 3.08(a) .

 

Section 1.126.         “ Securities ” means securities of every kind and nature, including stock, notes, bonds, evidences of indebtedness, options to acquire any of the foregoing, and other business interests of every type, including interests in any Entity.

 

Section 1.127.         “ Securities Act ” means the Securities Act of 1933, as amended from time to time.

 

Section 1.128.         “ STR ” has the meaning set forth in Section 2.05(a) .

 

Section 1.129.         “ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of company, partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more Subsidiaries of such Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if

 

15

 

such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing member, manager, general partner or similar controlling Person of such limited liability company, partnership, association or other business entity.

 

Section 1.130.         “ Syndication ” means the Transfer by the DLJMB Members of up to $15,000,000 of its Units to any Person (who shall be admitted as an Additional Member) within six (6) months of the date of this Agreement at the same price per Unit paid by the applicable DLJMB Member together with interest thereon from the Closing Date.

 

Section 1.131.         “ Tag-Along Date ” has the meaning set forth in Section 8.06(e) .

 

Section 1.132.         “ Tag-Along Notice ” has the meaning set forth in Section 8.06(a) .

 

Section 1.133.         “ Tag-Along Notice Period ” has the meaning set forth in Section 8.06(a) .

 

Section 1.134.         “ Tag-Along Portion ” means for any Tagging Person in a Tag-Along Sale, the total number of Class A Units owned by the Tagging Person immediately prior to such Tag-Along Sale multiplied by the Tag-Along Pro Rata Share.

 

Section 1.135.         “ Tag-Along Pro Rata Share ” means a fraction, the numerator of which is the maximum number of Class A Units proposed to be sold by the applicable Tag-Along Seller in such Tag-Along Sale and the denominator of which is the total number of Class A Units owned by such Tag-Along Seller at such time.

 

Section 1.136.         “ Tag-Along Offer ” has the meaning set forth in Section 8.06(a) .

 

Section 1.137.         “ Tag-Along Response Notice ” has the meaning set forth in Section 8.06(a) .

 

Section 1.138.         “ Tag-Along Right ” has the meaning set forth in Section 8.06(a) .

 

Section 1.139.         “ Tag-Along Sale ” has the meaning set forth in Section 8.06(a) .

 

Section 1.140.         “ Tag-Along Seller ” has the meaning set forth in Section 8.06(a) .

 

Section 1.141.         “ Tagging Person ” has the meaning set forth in Section 8.06(a) .

 

Section 1.142.         “ Tax Distribution ” has the meaning set forth in Section 5.04(b) .

 

Section 1.143.         “ Tax Matters Member ” has the meaning set forth in Section 7.04 .

 

Section 1.144.         “ Terminated Member ” has the meaning set forth in Section 8.09(a).

 

Section 1.145.         “ Termination Date ” has the meaning set forth in Section 3.06 .

 

Section 1.146.         “ Termination Event ” has the meaning set forth in Section 8.09(a) .

 

16

 

Section 1.147.         “ Termination Price ” has the meaning set forth in Section 8.09(d) .

 

Section 1.148.         “ Termination Units ” has the meaning set forth in Section 8.09(a).

 

Section 1.149.         “ Third Party ” means a prospective purchaser (other than a Permitted Transferee of the prospective selling Member) of Units in a bona fide arm’s-length transaction.

 

Section 1.150.         “ Transfer ” means, as a noun, any voluntary or involuntary transfer, sale, pledge, assignment, hypothecation or other disposition and, as a verb, to voluntarily or involuntarily transfer, sell, pledge, assign, hypothecate or otherwise dispose of, including by way of merger, consolidation or otherwise.

 

Section 1.151.         “ Units ” means, collectively, the Class A Units, the Class B Units, the Class C Units, the Class D Units, Class E Units and the Class F Units.

 

Section 1.152.         “ Unreturned Capital Contributions ” means, with respect to each Class A Member, at any time of determination, the aggregate amount of such Class A Member’s Capital Contributions less the amount of distributions received by such Class A Member (or its predecessors in interest) under Section 5.02(a)  of this Agreement.

 

Section 1.153.         “ Unvested Fiscal Year ” has the meaning set forth in Section 3.05(c) .

 

Section 1.154.         “ Unvested Unit ” has the meaning set forth in Section 5.03 .

 

Section 1.155.         “ Unwinding Event ” has the meaning set forth in Section 8.03 .

 

Section 1.156.         “ Whitney Manager ” has the meaning set forth in Section 4.01(a) .

 

Section 1.157.         “ Whitney Members ” means Castleman 2007 GRAT, MRS Trust, Harrington Sound, LLC and Paul Vigano.

 

Section 1.158.         “ Whitney Observer ” has the meaning set forth in Section 4.01(a) .

 

Section 1.159.         “ Yearly Amount ” shall mean a Class D Unit’s 1/5th vesting installment.

 

ARTICLE II

 

ORGANIZATION

 

Section 2.01.           Formation of Company .  The Company has previously been formed pursuant to the Act.  The rights and liabilities of the Members shall be as provided for in the Act if not otherwise expressly provided for in this Agreement.

 

Section 2.02.           Name .  The name of the Company is “STR Holdings LLC”.  The business of the Company shall be conducted under such name or under such other names as the

 

17

 

Board of Managers may deem appropriate.  No value shall be placed upon the name or the goodwill attached thereto for the purpose of determining the fair market value of any Member’s Capital Account or Units.

 

Section 2.03.           Office; Agent for Service of Process .  The address of the Company’s registered office in Delaware is c/o the Corporation Service Company, 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle, Delaware 19808.  The name and address of the registered agent in Delaware for service of process is the Corporation Service Company, 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle, Delaware 19808.  The Board of Managers may change the registered office and the registered agent of the Company from time to time.  The Company shall maintain a principal place of business and office(s) at such place or places as the Board of Managers may from time to time designate.

 

Section 2.04.           Term .  The Company commenced on the date of the filing of the Certificate, and the term of the Company shall continue until the dissolution of the Company in accordance with the provisions of Article IX or as otherwise provided by law.

 

Section 2.05.           Purpose and Scope .

 

(a)            The purpose and business of the Company is to, directly or indirectly, hold and exercise rights with respect to the capital stock of Specialized Technology Resources, Inc. (“ STR ”) and to engage in any and all activities that are incidental or ancillary thereto (the “ Company Business ”).

 

(b)            The Company shall have the power to do any and all acts reasonably necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the Company Business and for the protection and benefit of the Company, and shall have, without limitation, any and all of the powers that may be exercised on behalf of the Company by the Board of Managers pursuant to this Agreement, including pursuant to Section 2.06 .

 

Section 2.06.           Authorized Acts .  In furtherance of the Company Business, but subject to all other provisions of this Agreement, the Board of Managers, on behalf of the Company, is hereby authorized and empowered:

 

(a)            to do any and all things and perform any and all acts necessary or incidental to the Company Business;

 

(b)            to enter into, and take any action under, any contract, agreement or other instrument as the Board of Managers shall determine to be necessary or desirable to further the objects and purposes of the Company, including contracts or agreements with any Member or prospective Member;

 

(c)            to open, maintain and close bank accounts and draw checks or other orders for the payment of money and open, maintain and close brokerage, money market fund and similar accounts;

 

18

 

Equity Security as reasonably determined by the Board of Managers, taking into account such financial data and projections and such other factors as the Board of Managers may deem relevant.  For the avoidance of doubt, Class A Units or other Equity Securities shall be issued to the Members pursuant to this Section 3.02(a)  on the same date in which such Members make Capital Contributions to the Company.

 

(ii)           Upon the Board of Managers’ decision to raise additional capital under Section 3.02(a)(i) , the Board of Managers may seek new members to provide such capital or the remainder thereof, on substantially the same terms and conditions (including purchase price per Class A Unit or other Equity Security) as offered to the Members under Section 3.02(a)(i) , and one or more Additional Members may be admitted into the Company at any time with the written consent of the Board of Managers and payment of such capital or portion thereof.

 

(b)           Each Additional Member shall execute and deliver a written instrument satisfactory to the Board of Managers, whereby such Additional Member shall become a party to this Agreement, as well as any other documents required by the Board of Managers.  Upon execution and delivery of a counterpart of this Agreement, contribution of capital to the Company and acceptance thereof by the Board of Managers, such Person shall be admitted as a Member.  Each such Additional Member shall thereafter be entitled to all the rights and subject to all the obligations of a Member as set forth herein.

 

(c)           Schedule II shall be amended by the Board of Managers from time to time to reflect Additional Capital Contributions, issuances, transfers or assignments of Units or other Equity Securities permitted by this Agreement and admissions, resignations or withdrawals of Members pursuant to the terms of this Agreement.

 

Section 3.03.          Interest Payments .  No interest shall be paid to any Member on any Capital Contributions.  All Capital Contributions shall be denominated and payable in U.S. dollars.

 

Section 3.04.          Ownership and Issuance of Units .

 

(a)           (i)  Subject to the terms and conditions of this Agreement, the Company shall have the authority to issue an unlimited number of Class A Units (the “ Class A Units ”) for such consideration as the Board of Managers deems appropriate.  Each Class A Member owns that number of Class A Units as appears next to its name on Schedule II hereto, as the same may be amended or restated from time to time.

 

(ii)           Subject to the terms and conditions of this Agreement, the Company shall have the authority to issue in consideration for the provision of services to or for the benefit of the Company up to the number of Class B Units (the “ Class B Units ”) permitted under Schedule II .  Each Class B Member owns that number of Class B Units as appears next to its name on Schedule II , as the same may be amended or restated from time to time.

 

(iii)          Subject to the terms and conditions of this Agreement, the Company shall have the authority to issue in consideration for the provision of services to or for the benefit of the Company up to the number of Class C Units (the “ Class C Units ”) permitted

 

20

 

under Schedule II .  Each Class C Member owns that number of Class C Units as appears next to its name on Schedule II , as the same may be amended or restated from time to time.

 

(iv)          Subject to the terms and conditions of this Agreement, the Company shall have the authority to issue in consideration for the provision of services to or for the benefit of the Company up to the number of Class D Units (the “ Class D Units ”) permitted under Schedule II .  Each Class D Member owns that number of Class D Units as appears next to its name on Schedule II , as the same may be amended or restated from time to time.

 

(v)           Subject to the terms and conditions of this Agreement, the Company shall have the authority to issue in consideration for the provision of services to or for the benefit of the Company up to the number of Class E Units (the “ Class E Units ”) permitted under Schedule II .  Each Class E Member owns that number of Class E Units as appears next to its name on Schedule II , as the same may be amended or restated from time to time.

 

(vi)          Subject to the terms and conditions of this Agreement, the Company shall have the authority to issue in consideration for the provision of services to or for the benefit of the Company up to the number of Class F Units (the “ Class F Units ”) permitted under Schedule II .  Each Class F Member owns that number of Class F Units as appears next to its name on Schedule II , as the same may be amended or restated from time to time.

 

(b)           The Board of Managers, subject to the terms and conditions of this Agreement, shall have the authority to increase the number of authorized Incentive Units, in such amounts as determined by the Board of Managers.

 

(c)           The Company shall reserve all of the Incentive Units for issuance to employees of, or service providers to, the Company and its Subsidiaries, on the terms set forth in this Article III .  Incentive Units may be awarded from time to time to employees of, or service providers to, the Company and its Subsidiaries by the Board of Managers or any committee established by the Board of Managers; provided that the Company will not issue any Incentive Units after the date hereof to (i) Evergreen Capital Partners, LLC or its principals without the prior consent of Whitney Members holding more than fifty percent (50%) of the total Class A Units then held by the Whitney Members or (ii) the DLJMB Members without the prior consent of a majority of the Other Class A Members.  Incentive Units may not be Transferred (other than as contemplated or required by Article VIII ).  All Incentive Units will be issued subject to the applicable Distribution Threshold, which, with respect to Class B Units, Class C Units, Class D Units and Class F Units issued prior to the date hereof, shall be $178,649,240, with respect to Class E Units issued prior to the date hereof, shall be $484,214,750 and, with respect to subsequent Incentive Units, shall be set forth in an exhibit to the applicable Incentive Unit grant agreement at the time of issuance.

 

Section 3.05.       Vesting .

 

(a)           Class B Units shall be fully vested at issuance.

 

(b)           Class C Units shall be unvested at issuance and, unless provided otherwise herein, shall vest in equal 1/60th installments as of the last day of each of the 60 successive calendar months beginning after the date of issuance of such Class C Units; provided , however ,

 

21

 

that all outstanding but unvested Class C Units shall vest in full upon the occurrence of a Change of Control (other than an Initial Public Offering).

 

(i)            Upon the occurrence of an Initial Public Offering, each Class C Member shall be eligible to receive shares of restricted stock of STR (or any corporate successor to the Company by way of conversion or such other corporation owned by the Company which effects the Initial Public Offering) that are equivalent in value to the unvested portion of such Class C Member’s Class C Units, which shares shall continue to vest in accordance with this Section 3.05(b) , provided that such shares shall vest in their entirety following the date upon which the DLJMB Members have sold or otherwise Transferred to Third Parties fifty percent (50%) or more of their original beneficial ownership of STR (or any corporate successor to the Company by way of conversion or such other corporation owned by the Company which effects the Initial Public Offering).

 

(ii)           Upon any Class C Member’s termination for Good Reason or termination by the Company without Cause, the unvested Class C Units shall vest in such additional installments as such Class C Units would have vested had the Class C Member been employed for an additional twelve (12) months.

 

(c)           Class D Units shall be unvested at issuance and, unless provided otherwise in the applicable Incentive Unit grant agreement for a Class D Member, shall vest in equal 1/5th installments following the five successive Fiscal Years, beginning with the Fiscal Year ending on December 31, 2007 (for the 2007 Fiscal Year) if the Equity Valuation, measured as of the end of such Fiscal Year, is no less than the Performance Target for such Fiscal Year; provided , however , that all outstanding but unvested Class D Units for that year, all subsequent years and one Unvested Fiscal Year (as defined below), if one exists, shall vest in full upon the occurrence of a Change of Control (other than an Initial Public Offering).  “ Unvested Fiscal Year ” shall mean a year in which the Performance Target was not met for any given Fiscal Year.

 

(i)            If the Performance Target for any of the first four Fiscal Years referred to above is not attained, the Yearly Amount for the previous Unvested Fiscal Year which is not then vested (or, if the Yearly Amount for the previous Fiscal Year has vested, then the Yearly Amount for any one prior Unvested Fiscal Year) shall become vested and exercisable at the end of the first Fiscal Year thereafter in which the Equity Valuation for such Fiscal Year is no less than the Performance Target for such Fiscal Year.  For purposes of illustration of the previous sentence: if the Performance Target is not achieved for the 2007 and 2008 Fiscal Years but is achieved for the 2009 Fiscal Year, in 2009, the Yearly Amounts for both 2009 and 2008 would become vested.  Further, if the Performance Target for 2010 was then achieved, the Yearly Amounts for both 2010 and 2007 would become vested.

 

(ii)           Upon the occurrence of an Initial Public Offering, each Class D Member shall be eligible to receive shares of restricted stock of STR (or any corporate successor to the Company by way of conversion or such other corporation owned by the Company which effects the Initial Public Offering) that are equivalent in value to the unvested portion of such Class D Member’s Class D Units, which shares shall continue to vest in accordance with this Section 3.05(c) , provided that such shares shall vest in their entirety following the date upon which the DLJMB Members have sold or otherwise Transferred to Third Parties fifty percent

 

22

 

(50%) or more of their original beneficial ownership of STR (or any corporate successor to the Company by way of conversion or such other corporation owned by the Company which effects the Initial Public Offering).

 

(d)           Class E Units shall be unvested at issuance and, unless provided otherwise herein, shall vest in equal 1/60th installments as of the last day of each of the 60 successive calendar months beginning after the date of issuance of such Class E Units; provided , however , that all outstanding but unvested Class E Units shall vest in full upon the occurrence of a Change of Control (other than an Initial Public Offering).

 

(i)            Upon the occurrence of an Initial Public Offering, each Class E Member’s Class E Units shall be eligible to receive shares of restricted stock of STR (or any corporate successor to the Company by way of conversion or such other corporation owned by the Company which effects the Initial Public Offering) that are equivalent in value to the unvested portion of such Class E Member’s Class E Units, which shares shall continue to vest in accordance with this Section 3.05(d) , provided that such shares shall vest in their entirety following the date upon which the DLJMB Members have sold or otherwise Transferred to Third Parties fifty percent (50%) or more of their original beneficial ownership shares of common stock of STR (or any corporate successor to the Company by way of conversion or such other corporation owned by the Company which effects the Initial Public Offering).

 

(ii)           Upon any Class E Member’s termination for Good Reason or termination by the Company without Cause, the unvested Class E Units shall vest in such additional installments as such Class E Units would have vested had the Class E Member been employed for an additional twelve (12) months.

 

(e)           Class F Units shall be fifty percent (50%) vested at issuance and, unless provided otherwise herein, thirty-three and one-third percent (33 1 / 3 %) per annum of such Class F Member’s unvested Class F Units shall vest on each of the first, second and third anniversaries of the date of issuance; provided , however , that all outstanding but unvested Class F Units shall vest in full upon the occurrence of a Change of Control (other than an Initial Public Offering).

 

(i)            Upon the occurrence of an Initial Public Offering, each Class F Member shall be eligible to receive shares of restricted stock of STR (or any corporate successor to the Company by way of conversion or such other corporation owned by the Company which effects the Initial Public Offering) that are equivalent in value to the unvested portion of such Class F Member’s Class F Units, which shares shall continue to vest in accordance with this Section 3.05(e) , provided that such shares shall vest in their entirety following the date upon which the DLJMB Members have sold or otherwise Transferred to Third Parties fifty percent (50%) or more of their original beneficial ownership of STR (or any corporate successor to the Company by way of conversion or such other corporation owned by the Company which effects the Initial Public Offering).

 

(ii)           The Board of Managers is hereby authorized and empowered, without further vote or action of the Members, to accelerate the vesting of any Class F Member’s Class F Units; provided , however , that any such acceleration shall equally apply to all Class F Members.

 

23

 

Section 3.06.          Termination .  Notwithstanding Section 3.05 and unless otherwise agreed by the Company and a Member, all unvested Incentive Units held by a Member shall be forfeited on the date such Member’s employment with or provision of services to the Company and its Subsidiaries terminates (a “ Termination Date ”) for any reason; provided, however, that if such Member is terminated under circumstances constituting a termination for Cause, all Incentive Units (vested and unvested) held by such Member shall be forfeited as of such Termination Date.  Any Incentive Units that are forfeited pursuant to the terms of this Agreement shall be cancelled by the Company and shall no longer be outstanding unless and until they are reissued by the Company.

 

Section 3.07.          Members with Employment or Consulting Agreements .  The application of the vesting provisions of Sections 3.05 and 3.06 to a Member who is a party to an employment, consulting, award or similar agreement with the Company or any of its Subsidiaries that is entered into after the Effective Date shall be subject to the terms of such employment, consulting or similar agreement, and to the extent that any provision of Sections 3.05 and 3.06 conflicts with such employment, consulting, award or similar agreement in respect of vesting, the provisions of such employment, consulting, award or similar agreement shall supersede and control the provisions of Sections 3.05 and 3.06 as they apply to such vesting provisions.

 

Section 3.08.          Profits Interests .  (a)  The Company and each Member agree to treat each Incentive Member’s Incentive Units (such interest, a “ Profits Interest ”) as a separate “Profits Interest” within the meaning of Rev. Proc. 93-27, 1993-2 C.B. 343, and it is the intention of the Company and the Members that distributions to each Incentive Member (including any additional Incentive Members, if any) pursuant to Section 5.02 be limited to the extent necessary so that the Profits Interest of such Incentive Member qualifies as a “Profits Interest” under Rev. Proc. 93-27, and this Agreement shall be interpreted accordingly.  In the event that distributions to a Member pursuant to Section 5.02 are limited as a result of the first sentence of this Section 3.08 , the Board of Managers is authorized to adjust future distributions to the Members in whatever manner it reasonably deems appropriate so that, after such adjustments are made, each Member receives, to the maximum extent possible, an amount of distributions equal to the amount of distributions such Member would have received were such sentence not part of this Agreement.  Additionally, in accordance with Rev. Proc. 2001-43, 2001-2 CB 191, the Company shall treat a Member holding an Incentive Unit as the owner of such Unit from the date it is granted, and shall file its IRS Form 1065, and issue appropriate Schedule K-1s to such Member, allocating to such Member its distributive share of all items of income, gain, loss, deduction and credit associated with such Profits Interest as if it were fully vested.  Each Incentive Member agrees to take into account such distributive share in computing its federal income tax liability for the entire period during which it holds the Profits Interest.  The Company and each Member agree not to claim a deduction (as wages, compensation or otherwise) for the fair market value of such Profits Interest issued to an Incentive Member, either at the time of grant of the Profits Interest or at the time the Profits Interest becomes substantially vested.  The undertakings contained in this Section 3.08 shall be construed in accordance with Section 4 of Rev. Proc. 2001-43.  Each Incentive Member shall be required to file an election pursuant to Section 83(b) of the Code (a “ Section 83(b) Election ”) with respect to its Incentive Units no later than ten days after receipt of such Incentive Units.  The provisions of this Section 3.08 shall apply regardless of whether or not an Incentive Member files a Section 83(b) Election with respect to its Incentive Units.

 

24

 

(b)           (i)  The Board of Managers is hereby authorized and directed to cause the Company to make an election to value any Incentive Units issued by the Company as compensation for services to the Company (collectively, “ Compensatory Interests ”) at liquidation value (the “ Safe Harbor Election ”), as the same may be permitted pursuant to or in accordance with the finally promulgated successor rules to Proposed Regulations Section 1.83-3(l) and IRS Notice 2005-43 (collectively, the “ Proposed Rules ”).  The Board of Managers shall cause the Company to make any allocations of items of income, gain, deduction, loss or credit (including forfeiture allocations and elections as to allocation periods) necessary or appropriate to effectuate and maintain the Safe Harbor Election.

 

(ii)           Any such Safe Harbor Election shall be binding on the Company and on all of its Members with respect to all Transfers of Compensatory Interests thereafter made by the Company while a Safe Harbor Election is in effect.  A Safe Harbor Election once made may be revoked by the Board of Managers as permitted by the Proposed Rules or any applicable rule.

 

(iii)          Each Member (including any person to whom a Compensatory Interest is Transferred in connection with the performance of services), by signing this Agreement or by accepting such Transfer, hereby agrees to comply with all requirements of the Safe Harbor Election with respect to all Compensatory Interests transferred while the Safe Harbor Election remains effective.

 

(iv)          The Board of Managers shall file or cause the Company to file all returns, reports and other documentation as may be required to perfect and maintain the Safe Harbor Election with respect to Transfers of Compensatory Interests covered by such Safe Harbor Election.

 

(v)           The Board of Managers is hereby authorized and empowered, without further vote or action of the Members, to amend this Agreement as necessary to comply with the Proposed Rules or any rule, in order to provide for a Safe Harbor Election and the ability to maintain or revoke the same, and shall have the authority to execute any such amendment by and on behalf of each Member; provided that such amendment is not materially adverse to such Member.  Any undertakings by the Members necessary to enable or preserve a Safe Harbor Election may be reflected in such amendments and to the extent so reflected shall be binding on each Member, respectively.

 

(vi)          Each Member agrees to cooperate with the Board of Managers to perfect and maintain any Safe Harbor Election, and to timely execute and deliver any documentation with respect thereto reasonably requested by the Board of Managers.

 

(vii)         Without limitation of any other provision herein, no Transfer of any Profits Interest in the Company by a Member, to the extent permitted by this Agreement, shall be effective unless prior to such Transfer, the transferee, assignee or intended recipient of such Profits Interest shall have agreed in writing to be bound by the provisions of this Section 3.08 , in form satisfactory to the Board of Managers.

 

25

 

Section 3.09.       Voting Rights

 

(a)           Voting Rights .  Except as otherwise provided in the Act or as otherwise provided herein, Members shall not be entitled to any vote or consent right with respect to Incentive Units.  All Class A Members shall be entitled to one vote for each Class A Unit held.

 

(b)           Irrevocable Proxy .  Other than the specific Member approval rights expressly set forth herein (including those in Section 11.05 ), each Other Member hereby grants to the DLJMB Members, to the extent permitted by law, an irrevocable proxy coupled with an interest to vote, including in any action by written consent, such Other Member’s Class A Units, on all matters submitted to the Members, for as long as the DLJMB Members in the aggregate hold more Class A Units than any Other Member.

 

Section 3.10.          Withdrawals .  Except as explicitly provided elsewhere herein, no Member shall have any right (i) to withdraw as a Member from the Company, (ii) to withdraw from the Company all or any part of such Member’s Capital Contributions, (iii) to receive property other than cash in return for such Member’s Capital Contributions or (iv) to receive any distribution from the Company, except in accordance with Article V and Article IX .

 

Section 3.11.          Liability of the Members Generally .  Except as explicitly provided elsewhere herein or in the Act, no Member shall be liable for any debts, liabilities, contracts or obligations of the Company whatsoever.  Each of the Members acknowledges that its Capital Contributions are subject to the claims of any and all creditors of the Company to the extent provided by the Act and other applicable law.

 

Section 3.12.          Capital Accounts .  There shall be established and maintained for each Member a separate capital account (“ Capital Account ”).  There shall be added to the Capital Account of each Member (i) such Member’s Capital Contributions, (ii) such Member’s distributive share of Net Income and any item in the nature of income or gain that is specially allocated to the Member pursuant to Section 6.03 , and (iii) the amount of any Company liabilities assumed by such Member or which are secured by any property distributed to such Member.  There shall be subtracted from the Capital Account of each Member (i) the amount of any money, and the Gross Asset Value of any other property, distributed to such Member, (ii) such Member’s distributive share of Net Loss and any item in the nature of loss or expense that is specially allocated to such Member pursuant to Section 6.03 , and (iii) the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member of the Company.  The foregoing provision and other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Regulations.  In determining the amount of any liability for purposes of this Section 3.12 , there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.

 

Section 3.13.          No Deficit Restoration Obligation .  Except as explicitly provided elsewhere herein, at no time during the term of the Company or upon dissolution and liquidation thereof shall a Member with a negative balance in its Capital Account have any obligation to the Company or the other Members to restore such negative balance, except as may be required by law or in respect of any negative balance resulting from a withdrawal of capital or dissolution in contravention of this Agreement.

 

26

 

ARTICLE IV

 

MANAGEMENT

 

Section 4.01.          Management and Control of the Company .

 

(a)           (i)  The Members have established the Company as a “board of managers-managed” limited liability company and have agreed to designate a board of managers (the “ Board of Managers ”) of seven (7) Persons to manage the Company and its business and affairs.  Each of the Managers appointed to the Board of Managers is referred to herein as a “ Manager .”  The Class A Members shall have the exclusive right to designate the members of the Board of Managers, and the Board of Managers shall be comprised, as follows:

 

(1)           up to five (5) Managers shall be designated by DLJMB (the “ DLJMB Managers ”)

 

(2)           one (1) Manager shall be designated by the Whitney Members, who shall initially be Michael Stone (the “ Whitney Manager ”); and

 

(3)           the then current Chief Executive Officer of the Company (the “ CEO Manager ”).

 

(ii)           If at any time any Manager other than the CEO Manager ceases to serve on the Board of Managers (whether due to resignation, removal or otherwise), the Class A Member responsible for the designation of such Manager pursuant to Section 4.01(a)(i)  above shall designate a replacement for such Manager by written notice to the Board of Managers and to each of the other Class A Members.  In the event the Whitney Members designate a Manager, other than Michael Stone, pursuant to Section 4.01(a)(i)(2)  above, DLJMB’s consent must be obtained, which consent may not be unreasonably withheld.  Any Class A Member entitled to designate a specific Manager may remove such Manager, at any time and from time to time, with or without cause (subject to applicable law), in such Class A Member’s sole discretion, and such Class A Member shall give written notice of such removal to each of the other Class A Members and to the Board of Managers.  If at any time the CEO Manager dies, becomes disabled, resigns or is otherwise removed from the office of Chief Executive Officer of the Company, such CEO Manager shall be concurrently removed as a Manager and the next duly appointed or elected Chief Executive Officer of the Company shall be designated the CEO Manager.  In the event that the Whitney Members cease to own at least fifty percent (50%) but not less than twenty-five (25%) of the Whitney Members’ Class A Units owned on the date hereof, the Whitney Manager shall resign within 180 days thereafter, subsequent to which the Whitney Members shall no longer have the right to designate a Manager and in the event that the Whitney Members cease to own at least twenty-five (25%) of the Whitney Members Class A Units owned on the date hereof, the Whitney Manager shall immediately resign; provided that so long as the Whitney Members own any Units, the Whitney Members shall be entitled to designate an observer (the “ Whitney Observer ”), without voting rights, to the Board of Managers.  If (x) Dennis Jilot is no longer the CEO Manager, (y) he continues to own any Units and (z) in the reasonable discretion of the Board of Managers, his presence is not detrimental to meetings of the Board of Managers, he shall be entitled to be an observer (the “ Jilot Observer ”), without voting rights, to the Board of

 

27

 

Managers.  Northwestern shall have the right to designate an observer (the “ Northwestern Observer ”), without voting rights, to the Board of Managers so long as it owns at least fifty percent (50%) of its Class A Units owned on the date hereof.

 

(1)           Each Observer shall be entitled to notice of any written actions in lieu of meetings of the Board of Managers, to the financial reports set forth in Section 7.02 and to information provided to Managers in connection with topics to be discussed at any meeting of the Board of Managers.  The Company reserves the right to withhold any information and to exclude any Observer from any meeting or portion thereof if access to such information or attendance at such meeting or portion of such meeting would (A) in the reasonable judgment of the Company’s outside counsel, adversely affect the attorney-client privilege between the Company and its counsel or cause the Board of Managers to breach its fiduciary duties or (B) in the good faith determination of a majority of the members of the Board of Managers, result in a conflict of interest with the Company.  Each Observer agrees, and each of Northwestern and the Whitney Members agree to cause its respective designated Observer to agree, to be bound by the confidentiality provisions set forth in Section 7.07 hereof.  Each Observer agrees, and each of Northwestern and the Whitney Members agree to cause its respective designated Observer to agree, that, except with the prior written permission of the Company, he will maintain confidential information of the Company to which such Observer has been or shall become privy by reason of its observation rights consistent with such Observer’s duties if he were a Manager of the Company.

 

(iii)          The rights of any Person to designate Managers pursuant to this Section 4.01 are personal rights and shall not be exercised by or on behalf of, or assignable to, any transferee other than a Permitted Transferee unless otherwise approved in writing by DLJMB or its respective Permitted Transferees.

 

(iv)          Subject to the terms and conditions of this Agreement, the Board of Managers shall have the exclusive right to manage and control the Company.  Except as otherwise specifically provided herein, the Board of Managers shall have the right to perform all actions necessary, convenient or incidental to the accomplishment of the purposes and authorized acts of the Company, as specified in Sections 2.05 and 2.06 , and each Manager shall possess and may enjoy and exercise all of the rights and powers of a “manager” as provided in and under the Act, and each Manager shall be a “manager” for purposes of the Act; provided , however , that no individual Manager shall have the authority to act for or bind the Company without the requisite consent of the Board of Managers.

 

(v)           Any action, consent, approval, election, decision or determination to be made by the Board of Managers under or in connection with this Agreement (including any act by the Board of Managers within its “discretion” under this Agreement and the execution and delivery of any documents or agreements on behalf of the Company), shall be in the sole and absolute discretion of the majority of the Board of Managers.

 

(vi)          Meetings of the Board of Managers are expected to be held on approximately a quarterly basis, when called by any Manager, upon not less than two Business Days advance written notice to the other Managers.  Attendance at any meeting of the Board of Managers shall constitute waiver of notice of such meeting.  Additionally, a waiver of such

 

28

 

notice in writing signed by a Manager entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.  The quorum for a meeting of the Board of Managers shall be a simple majority of the Managers.  Members of the Board of Managers may participate in any meeting of the Board of Managers by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other.  All actions taken by the Board of Managers shall be by a vote of a simple majority of the Managers.  The Board of Managers shall conduct its business in such manner and by such procedures as a majority of the Managers deems appropriate.

 

(vii)         The Board of Managers may also take action without any meeting of the Managers by written consent of a majority of the Managers.

 

(viii)        Each Manager shall be entitled to receive the financial reports set forth in Section 7.02 , the Company’s annual budget and all board materials.

 

(b)           The consent of the Other Members holding more than fifty percent (50%) of the then outstanding Class A Units held by all Other Members shall be required prior to the Company or any of its Subsidiaries entering into a transaction with any of the DLJMB Members or any of their respective Affiliates that is on terms which in the aggregate are less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm’s-length transaction with a person that is not an Affiliate of the Company, except for (i) customary employment arrangements, agreements with independent directors and benefit programs on reasonable terms, including reasonable fees and compensation to, and indemnity provided on behalf of, the officers, managers, directors and employees of the Company or any of its Subsidiaries, (ii) as contemplated by (A) that certain Advisory Services Agreement, dated as of December 7, 2006, by and between the Company and DLJMB, (B) that certain Advisory Services and Monitoring Agreement, dated as of the Effective Date, by and between STR and DLJMB, (C) that certain Advisory Services and Monitoring Agreement, dated as of the Effective Date, by and between STR and Evergreen Capital Partners, LLC and (D) that certain Advisory Services and Monitoring Agreement, dated as of the Effective Date, by and between STR, DLJMB, Westwind STR Advisors, LLC and Dennis L. Jilot, (iii) as contemplated by the Credit Facilities, (iv) the payment of the Company Expenses and Manager Expenses contemplated by Section 4.04 and (v) the issuance of any Equity Securities in compliance with Section 3.02 .  Notwithstanding the foregoing, the Company may not engage the investment banking unit of Credit Suisse as financial advisor on a merger and acquisition transaction if such engagement is opposed by MRS Trust and either of AXA Equitable Life Insurance Company or The Northwestern Mutual Life Insurance Company.  For the avoidance of doubt, distributions made pursuant to Article V or Article IX or Transfers or purchases of Units made pursuant to Article VIII and, in each case, the transactions related thereto shall neither be considered affiliate transactions nor be subject to the provisions of this Section 4.01(b) .

 

(c)           No Member, in its capacity as such, shall participate in or have any control over the Company Business.  Each such Member hereby consents to the exercise by the Board of Managers of the powers conferred upon the Board of Managers by this Agreement.  The Members, in their capacities as such, shall not participate in the control, management, direction or operation of the activities or affairs of the Company and shall not have any authority or right, in their capacities as Members of the Company, to act for or bind the Company.

 

29

 

Section 4.02.          Actions by the Board of Managers .  Except as may be expressly limited by the provisions of this Agreement, including Section 4.01(a)(iii)  and Section 4.01(a)(v) , any Manager is specifically authorized to execute, sign, seal and deliver in the name and on behalf of the Company any and all agreements, certificates, instruments or other documents requisite to carrying out the intentions and purposes of this Agreement and of the Company.

 

Section 4.03.          Officers .  The Board of Managers may, from time to time as it deems advisable, appoint officers of the Company (each, an “ Officer ”) and assign in writing titles to any such Person.  Unless the Board of Managers decides otherwise, if the title is one commonly used for officers of a corporation formed under the Delaware General Corporation Law, the assignment of such title shall constitute the delegation to such Person of the authorities and duties that are normally associated with that office.  Any delegation pursuant to this Section 4.03 may be revoked at any time by the Board of Managers. In addition, the Board of Managers is authorized to employ, engage and dismiss, on behalf of the Company, any Person, including an Affiliate of any Member, to perform services for, or furnish goods to, the Company.

 

Section 4.04.          Expenses .

 

(a)           The Company shall pay for any and all expenses, costs and liabilities incurred in the conduct of the business of the Company and its Subsidiaries in accordance with the provisions hereof (collectively, “ Company Expenses ”), including by way of example and not limitation:

 

(i)            all expenses incurred by the Company and the DLJMB Members in connection with the negotiation and consummation of the Merger Agreement and the other transactions contemplated thereby;

 

(ii)           all expenses incurred by the Company, and its respective Affiliates in connection with any acquisitions and financings approved, whether prior to or following the Effective Date, by the Board of Managers;

 

(iii)          all routine administrative and overhead expenses of the Company, including fees of auditors, attorneys and other professionals, expenses incurred by the Tax Matters Member and expenses associated with the maintenance of books and records of the Company and communications with Members;

 

(iv)          all expenses incurred in connection with any litigation involving the Company and the amount of any judgment or settlement paid in connection therewith;

 

(v)           all expenses for indemnity or contribution payable by the Company to any Person, whether payable under this Agreement or otherwise and whether payable in connection with any litigation involving the Company or any of its Subsidiaries, or otherwise;

 

(vi)          all expenses incurred in connection with any indebtedness of the Company; and

 

30

 

Subsidiaries or is or was serving as a director, officer or agent of another corporation, partnership, joint venture, trust or other enterprise at the request of the Company, including costs and reasonable attorneys’ fees and any amount expended in the settlement of any claims of loss or damage, except with respect to (i) any act taken by such Indemnified Party purporting to bind the Company that has not been authorized pursuant to this Agreement or by the Board of Managers, as appropriate, or (ii) in the case of any officer, director, manager or employee of the Company or any of its Affiliates, any act or omission with respect to which such officer, director, manager or employee was grossly negligent or engaged in willful misconduct.

 

(b)           The satisfaction of any indemnification obligation pursuant to Section 4.06(a)  shall be from and limited to Company assets (including insurance and any agreements pursuant to which the Company, its officers or employees are entitled to indemnification) and no Member, in such capacity, shall be subject to personal liability therefor.

 

(c)           Expenses reasonably incurred by an Indemnified Party in defense or settlement of any claim that may be subject to a right of indemnification hereunder shall be advanced by the Company prior to the final disposition thereof upon receipt of an undertaking by or on behalf of such Indemnified Party to repay such amount to the extent that it shall be determined upon final adjudication after all possible appeals have been exhausted that such Indemnified Party is not entitled to be indemnified hereunder.

 

(d)           The Company may purchase and maintain insurance on behalf of one or more Indemnified Parties and other Persons against any liability which may be asserted against, or expense which may be incurred by, any such Person in connection with the Company’s activities.

 

ARTICLE V

 

DISTRIBUTIONS

 

Section 5.01.          Distributions Generally .  The Members shall be entitled to receive distributions, including distributions in connection with the liquidation, dissolution or winding up of the affairs of the Company, when and as determined by the Board of Managers, out of funds of the Company legally available therefor, net of any Reserves, payable on such payment dates to Members on such record date as shall be determined by the Board of Managers.  All determinations made pursuant to this Article V shall be made by the Board of Managers in its sole discretion.  To the extent that the Board of Managers determines that any distributions shall be made to the Members, such distributions shall be made in accordance with the provisions of this Article V .

 

Section 5.02.          Priority of Distributions .  Subject to Section 5.03 and Section 5.04 , distributions to the Members shall be made as follows:

 

(a)           first, 100% to the Class A Members pro rata in proportion to their Unreturned Capital Contributions, until each Class A Member has received, pursuant to this Section 5.02(a) , an aggregate amount equal to such Class A Member’s Capital Contributions; and

 

32

 

(b)           thereafter, to the Class A Members, Class&n