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GRAPHIC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(mark one)    

ý

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2009

Or

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                to                               

Commission file number 001-34529

STR Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  27-1023344
(I.R.S. Employer Identification No.)

10 Water Street Enfield, Connecticut
(Address of principal executive offices)

 

06082
(Zip Code)

(860) 749-8371
(Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  o     No  ý

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  o     No  o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  o   Accelerated filer  o   Non-accelerated filer  ý
(Do not check if a smaller
reporting company)
  Smaller reporting company  o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  o     No  ý .

         The number of shares of registrant's common stock outstanding as of November 12, 2009: 41,349,710


Table of Contents

INDEX
STR Holdings, Inc. and Subsidiaries

 
  PAGE
NUMBER
 

PART I. FINANCIAL INFORMATION

       

Item 1. Financial Statements

   
2
 
 

Condensed Consolidated Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008

    2  
 

Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2009 and 2008 (unaudited)

    3  
 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (unaudited)

    4  
 

Notes to Condensed Consolidated Financial Statements

    5  

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

   
32
 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

    47  

Item 4. Controls and Procedures

    48  

PART II. OTHER INFORMATION

       

Item 1A. Risk Factors

   
48
 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

    72  

Item 6. Exhibits

    72  

SIGNATURE

    73  

EXHIBIT INDEX

    74  

1


Table of Contents

Part I. Financial Information

Item 1.    Financial Statements

        


STR Holdings, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

All amounts in thousands except unit amounts

 
  September 30,
2009
  December 31,
2008
 
 
  (unaudited)
   
 

ASSETS

             

CURRENT ASSETS

             
 

Cash and cash equivalents

  $ 49,340   $ 27,868  
 

Short-term investments

    1,000      
 

Accounts receivable, trade, less allowances for doubtful accounts of $2,845 and $3,015 in 2009 and 2008, respectively

    32,453     36,454  
 

Unbilled receivables

    2,737     3,349  
 

Inventories

    10,295     18,771  
 

Prepaid expenses and other current assets

    2,587     2,115  
 

Current deferred tax assets

    1,849     1,681  
           
     

Total current assets

    100,261     90,238  
 

Property, plant and equipment, net

    67,403     62,516  
 

Intangible assets, net

    219,038     227,666  
 

Goodwill

    223,359     223,299  
 

Deferred financing costs

    5,331     6,194  
 

Deferred tax assets

    5,320     5,200  
 

Other noncurrent assets

    6,903     5,809  
           
     

Total assets

  $ 627,615   $ 620,922  
           

LIABILITIES, CONTINGENTLY REDEEMABLE UNITS AND UNITHOLDERS' EQUITY

             

CURRENT LIABILITIES

             
 

Current portion of long-term debt

  $ 2,023   $ 2,015  
 

Book overdraft

    570     571  
 

Interest rate swap liability

    5,110      
 

Accounts payable

    8,437     13,632  
 

Billings in excess of earned revenues

    5,475     5,863  
 

Accrued liabilities

    13,353     14,637  
 

Income taxes payable

    10,015     10,352  
           
     

Total current liabilities

    44,983     47,070  
 

Long-term debt, less current portion

    253,988     255,506  
 

Interest rate swap liability

        6,013  
 

Other long-term liabilities

    3,935     4,621  
 

Deferred tax liabilities

    92,951     92,815  
           
     

Total liabilities

    395,857     406,025  
           

COMMITMENTS AND CONTINGENCIES (Note 15)

             

Contingently redeemable units

    3,776     2,930  

Unitholders' equity

             
 

Units

             
   

Class A—17,864,924 units authorized and outstanding

    178,649     178,649  
   

Class F—588,171 units authorized and outstanding

    1,669     1,456  
 

Retained earnings

    46,346     32,216  
 

Accumulated other comprehensive income (expense)

    1,318     (354 )
           
     

Total unitholders' equity

    227,982     211,967  
           
     

Total liabilities, contingently redeemable units and unitholders' equity

  $ 627,615   $ 620,922  
           

See accompanying notes to these condensed consolidated financial statements.

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Table of Contents


STR Holdings, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME

(unaudited)

All amounts in thousands except shares and per share amounts

 
  Three Months Ended   Nine Months Ended  
 
  September 30,
2009
  September 30,
2008
  September 30,
2009
  September 30,
2008
 

Net sales—Solar

  $ 35,362   $ 48,134   $ 99,192   $ 134,007  

Net sales—Quality Assurance

    31,956     28,333     85,804     79,192  
                   

Total net sales

    67,318     76,467     184,996     213,199  
                   

Cost of sales—Solar

    21,837     26,324     62,904     69,407  

Cost of sales—Quality Assurance

    20,155     18,273     56,259     53,311  
                   

Total cost of sales

    41,992     44,597     119,163     122,718  
                   

Gross profit

    25,326     31,870     65,833     90,481  

Selling, general and administrative expenses

    9,498     11,771     29,760     33,414  

Provision for bad debt expense

    20     129     1,372     726  
                   

Operating income

    15,808     19,970     34,701     56,341  

Interest income

    46     44     116     145  

Interest expense

    (4,195 )   (5,366 )   (12,463 )   (16,019 )

Foreign currency transaction loss

    (133 )   (696 )   (576 )   (468 )

Unrealized gain (loss) on interest rate swap

    316     172     903     (115 )
                   

Income before income tax expense

    11,842     14,124     22,681     39,884  

Income tax expense

    3,955     5,219     8,551     15,006  
                   

Net income

  $ 7,887   $ 8,905   $ 14,130   $ 24,878  

Other Comprehensive Income:

                         

Foreign currency translation adjustments

    1,648     (4,093 )   1,672     (2,548 )
                   

Total comprehensive income

  $ 9,535   $ 4,812   $ 15,802   $ 22,330  
                   

Earnings per share (Note 3):

                         
 

Basic

  $ 0.22   $ 0.25   $ 0.39   $ 0.69  
                   
 

Diluted

  $ 0.21   $ 0.24   $ 0.38   $ 0.67  
                   

Weighted average shares outstanding:

                         
 

Basic

    36,665,586     36,175,080     36,490,833     36,051,405  
                   
 

Diluted

    37,298,120     37,398,417     37,201,579     37,260,225  
                   

See accompanying notes to these condensed consolidated financial statements.

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STR Holdings, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

All amounts in thousands

 
  Nine Months
Ended
September 30,
2009
  Nine Months
Ended
September 30,
2008
 

OPERATING ACTIVITIES

             

Net income

  $ 14,130   $ 24,878  

Adjustments to reconcile net income to net cash provided by operating activities:

             

Depreciation

    8,822     6,304  

Amortization of intangibles

    8,628     8,627  

Amortization of deferred financing costs

    863     878  

Stock-based compensation expense

    1,852     1,346  

Unrealized (gain) loss on interest rate swap

    (903 )   115  

Earnings in equity investments

    (227 )   (74 )

Loss on disposal of property, plant and equipment

    10      

Provision for bad debt expense

    1,372     726  

Provision for deferred taxes

    (573 )   (521 )

Changes in operating assets and liabilities:

             
 

Accounts receivable

    2,629     (10,210 )
 

Inventories

    8,476     (6,172 )
 

Accounts payable

    (5,195 )   5,832  
 

Accrued liabilities

    (2,076 )   2,346  
 

Income taxes payable

    (337 )   728  

Other, net

    (861 )   4,141  
           

Net cash provided by operating activities

    36,610     38,944  
           

INVESTING ACTIVITIES

             

Capital expenditures

    (13,443 )   (22,733 )

Purchase of investments

    (1,000 )    
           

Net cash used in investing activities

    (14,443 )   (22,733 )
           

FINANCING ACTIVITIES

             

Long-term debt repayments

    (1,388 )   (1,388 )

Principal payments on capital lease obligations

    (122 )   (115 )

Other issuance costs

    (893 )   (2,251 )
           

Net cash used in financing activities

    (2,403 )   (3,754 )
           

Effect of exchange rate changes on cash

    1,708     (774 )
           

Net increase in cash and cash equivalents

    21,472     11,683  

Cash and cash equivalents, Beginning of period

    27,868     21,180  
           

Cash and cash equivalents, End of period

  $ 49,340   $ 32,863  
           

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

             
   

Cash paid during the period for:

             
     

Interest

  $ 11,753   $ 15,195  
           
     

Income taxes

  $ 8,912   $ 14,131  
           

See accompanying notes to these condensed consolidated financial statements.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 1—BASIS OF PRESENTATION

Basis of Presentation

        The accompanying condensed consolidated financial statements and the related interim information contained within the notes to the condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the Unites States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information and quarterly reports on the Form 10-Q. Accordingly, they do not include all of the information and the notes required for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2008, included in the Company's prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933 as amended (the "Securities Act"), with the SEC on November 9, 2009. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and in the opinion of management, reflect all adjustments, consisting of only normal and recurring adjustments, necessary for the fair presentation of the Company's financial position, results of operations and cash flows for the interim periods presented. The results for the interim periods presented are not necessarily indicative of future results.

        The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

        The preparation of financial statements in conformity with GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from management's estimates.

        The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. In accordance with Accounting Standards Codification ("ASC") 855 -10, Subsequent Events , which became effective for the quarter ended June 30, 2009, the Company has evaluated for disclosure, events that occurred up to November 17, 2009, the date the Company's financial statements were issued.

        Certain prior periods' disclosures have been reclassified to conform to the current period's presentation.

NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS

        In September 2006, the Financial Accounting Standards Board ("FASB") issued Fair Value Measurements and Disclosures which was codified as ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. ASC 820 was effective for the Company's first quarter ended March 31, 2008. Revisions became effective for the Company's first quarter ended March 31, 2009 and did not impact the Company's condensed consolidated financial statements.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

        In December 2007, the FASB issued Business Combinations which was codified as ASC 805. ASC 805 which applies prospectively to business combinations with an acquisition date on or after January 1, 2009. ASC 805 requires most assets acquired and liabilities assumed in a business combination, contingent consideration and certain acquired contingencies to be measured at their fair value as of the date of the acquisition. ASC 805 also requires acquisition related costs and restructuring costs from the business combination to be expensed as incurred. The adoption of ASC 805 did not impact the Company's condensed consolidated financial statements.

        In December 2007, the FASB issued Noncontrolling Interest in Consolidated Financial Statements which was codified as ASC 810. ASC 810 amends previous accounting literature to establish new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. ASC 810 was effective for the Company's first quarter ended March 31, 2009 and did not have an impact on the Company's condensed consolidated financial statements.

        In March 2008, the FASB issued Derivative Instruments and Hedging Activities which was codified as ASC 815. ASC 815 provides enhanced disclosures with respect to a company's derivative and related activities and was effective for the Company's first quarter ended March 31, 2009. It did not have an impact on the Company's condensed consolidated financial statements.

        In June 2009, the FASB issued a standard related to Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 . The standard requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor's beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. The standard must be applied as of the beginning of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company is assessing the impact of the standard.

        In June 2009, the FASB issued a standard related to Amendments to FASB Interpretation No. 46(R) . The standard requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise's involvement in a variable interest entity. The enhanced disclosures are required for any enterprise that holds a variable interest in a variable interest entity. The standard is effective as of the beginning of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company is assessing the impact of the standard.

        In June 2009, the FASB issued The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FAS No. 162 which was codified as ASC 105. ASC 105 requires that the FASB Accounting Standards Codification (the "Codification") become the source of authoritative U.S. generally accepted accounting principles recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Company adopted the provisions of ASC 105 effective July 1, 2009, which did not have an impact on the Company's results of operations or financial position.

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Table of Contents


STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

        In October 2009, the FASB issued Accounting Standards Update No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements . ASC 605-25 addresses the accounting for these arrangements and enables vendors to account for product and services (deliverables) separately rather than as a combined unit. The amendments will significantly improve the reporting of these transactions to more closely resemble their underlying economics, eliminate the residual method of allocation and improve financial reporting with greater transparency of how a vendor allocates revenue in its arrangements. The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company is assessing the impact of the provisions of ASC 605-25.

NOTE 3—EARNINGS PER SHARE

        In connection with the Company's initial public offering (the "IPO") (see Note 18), existing holders of Class A,B,C,D,E and F units were issued shares of common stock and / or restricted common stock in exchange for their units. Shares of common stock were issued for vested units and restricted common stock for unvested units based upon the equity value of the Company on the IPO date, in accordance with the STR Holdings LLC agreement relating to priority distribution of units for shares.

        The impact of this issuance has been applied on a retrospective basis to determine earnings per share for the periods presented. The number of common shares reflected in the calculation is the total number of shares (vested and unvested) issued to the Company's unitholders based upon their units held on the IPO date. The vesting provisions of the units have applied to the total common shares issued to determine basic earnings per share (based upon vested common shares equivalent to vested units) and diluted earnings per share (based upon the treasury stock method for unvested restricted common shares equivalent to unvested units).

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 3—EARNINGS PER SHARE (Continued)

        The calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2009 and 2008 is as follows:

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2009   2008   2009   2008  

Basic and diluted net income per share

                         
 

Numerator:

                         
   

Net income

  $ 7,887   $ 8,905   $ 14,130   $ 24,878  
                   
 

Denominator:

                         
   

Weighted-average shares outstanding

    36,665,586     36,175,080     36,490,833     36,051,405  
   

Add: dilutive effect of restricted common shares units

    632,534     1,223,337     710,746     1,208,820  
                   
   

Weighted average common shares outstanding with dilution

    37,298,120     37,398,417     37,201,579     37,260,225  
                   
 

Basic earnings per share

  $ 0.22   $ 0.25   $ 0.39   $ 0.69  
 

Diluted earnings per share

  $ 0.21   $ 0.24   $ 0.38   $ 0.67  
                   

NOTE 4—INVENTORIES

        Inventories consist of the following:

 
  September 30,
2009
  December 31,
2008
 

Finished goods

  $ 2,698   $ 2,655  

Raw materials

    7,597     16,116  
           

  $ 10,295   $ 18,771  
           

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 5—PROPERTY, PLANT AND EQUIPMENT

        Property, plant and equipment consist of the following:

 
  Estimated
Useful
Lives
  September 30,
2009
  December 31,
2008
 

Land

        $ 4,696   $ 3,095  

Buildings and improvements

    15 - 40     20,275     6,091  

Machinery and equipment

    5 - 8     44,100     44,711  

Furniture, fixtures and computer equipment

    3 - 5     7,374     3,841  

Automobiles

    5 - 7     308     208  
                 

          76,753     57,946  

Less accumulated depreciation

          (20,251 )   (11,695 )
                 

          56,502     46,251  

Construction in progress

          10,901     16,265  
                 

Property, plant and equipment, net

        $ 67,403   $ 62,516  
                 

        Depreciation expense was $3,062 and $2,203 for the three months ended September 30, 2009 and 2008, respectively and was $8,822 and $6,304 for the nine months ended September 30, 2009 and 2008, respectively.

NOTE 6—INVESTMENTS

Equity Method Investments

        The following is a summary of the Company's equity method investments. The carrying value of all investments accounted for using the equity method is equal to the underlying equity in the net assets of the particular investment at the balance sheet date, unless the Company's share of operating losses has reduced the carrying value of the investment to zero, in which case the investment is carried at zero. There is no readily determinable market value for the Company's equity method investments.

        The Company owns 50% of the shares of CTC-Asia, Ltd., a joint venture with Le Centre Technique Cuir Chaussure Maroquinerie ("CTC"), which operates a laboratory in Hong Kong primarily involved in the testing of leather products. At September 30, 2009 and December 31, 2008, the Company's investment in CTC-Asia, Ltd. was $771 and $544, respectively, and included as other noncurrent assets in the condensed consolidated balance sheets.

        Specialised Technology Resources (UK) Limited ("STR-UK") owns 50% of the shares of STR (France) SAS ("STR France"). STR France, a joint venture with CTC, is incorporated in France for the purpose of carrying out studies, analyses, inspections and other provisions of services related to the manufacture and marketing of nonfood consumer products, primarily leather goods. At September 30, 2009 and December 31, 2008, the Company's investment in STR France was zero as STR-UK's proportionate share of the losses of STR France exceeded the amount invested.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 7—INTANGIBLE ASSETS AND GOODWILL

        The Company has recorded the estimated fair values of intangible assets acquired in connection with acquisitions. The amounts recorded, estimated lives, and amortization methods are as follows:

 
  September 30, 2009   December 31, 2008    
 
  Gross
Carrying
Amount
  Accumulated
Amortization
  Net   Gross
Carrying
Amount
  Accumulated
Amortization
  Net   Useful Lives

Customer relationships

  $ 102,700   $ 11,768   $ 90,932   $ 102,700   $ 7,916   $ 94,784   20 years

Trademarks

    65,800     5,026     60,774     65,800     3,381     62,419   30 years

Proprietary technology

    70,300     8,055     62,245     70,300     5,419     64,881   20 years

Accreditations

    6,600     1,513     5,087     6,600     1,018     5,582   10 years
                             

  $ 245,400   $ 26,362   $ 219,038   $ 245,400   $ 17,734   $ 227,666    
                             

        The Company amortizes its intangible assets utilizing the straight line method as this method approximates the economic benefit derived from these assets. Amortization expense of such assets was $2,876 and $2,875 for the three months ended September 30, 2009 and 2008, respectively. Amortization expense of such assets was $8,628 and $8,627 for the nine months ended September 30, 2009 and 2008, respectively. Estimated future amortization expense at September 30, 2009 is as follows:

2009   $ 2,876  
2010     11,503  
2011     11,503  
2012     11,503  
2013     11,503  
Thereafter     170,150  
       
    $ 219,038  
       

        Goodwill was $223,359 and $223,299 at September 30, 2009 and December 31, 2008, respectively. Goodwill was allocated to the Solar and Quality Assurance ("QA") segments as follows:

 
  Solar   Quality
Assurance
  Consolidated  

Balance at December 31, 2008

  $ 146,432   $ 76,867   $ 223,299  

Purchase price adjustment

    40     20     60  
               

Balance at September 30, 2009

  $ 146,472   $ 76,887   $ 223,359  
               

        Goodwill was increased in 2009 by $60 to record additional amounts payable to the former Specialized Technology Resources, Inc. ("STRI") stockholders. Goodwill is not deductible for tax purposes.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 8—DEBT

        The Company's long-term debt consists of the following:

 
  September 30,
2009
  December 31,
2008
 

First Lien Term Loan

  $ 180,838   $ 182,225  

Second Lien Term Loan

    75,000     75,000  

Capital Leases (Note 8)

    173     296  
           

  $ 256,011   $ 257,521  

Less:

             

Current portion of long-term debt

    (2,023 )   (2,015 )
           

Total long term debt, less current portion

  $ 253,988   $ 255,506  
           

        In connection with the Company's acquisition, on June 15, 2007 (the "Acquisition"), the Company entered into two credit agreements (collectively the "Agreements") with Credit Suisse as administrative and collateral agent. The First Lien Credit Agreement ("First Lien") consists of a $185 million term loan and a $20 million revolving credit facility, which includes a sublimit for issuance of letters of credit up to $15 million. The Second Lien Credit Agreement ("Second Lien") consists of a $75 million term loan. Under the First Lien, the Company also has the ability to request the bank to extend the credit under another term loan facility from time to time in the amount of $10 million. The Company incurred $7,967 of costs relating to these financings, which were deferred and are being amortized utilizing the straight line method over the life of the loans.

        Borrowings under the Agreements are collateralized by substantially all of the Company's current and future acquired assets (as defined in the Agreements). The Company and its subsidiaries are guarantors of the obligations. The Company has no independent operations or assets other than through its interest in its subsidiaries. Accordingly, the ability of the Company to obtain funds from its subsidiaries is restricted by the First Lien and Second Lien Agreements.

        The Agreements contain customary covenants, including, among other things, limits on the Company's and its subsidiaries' ability to incur additional indebtedness, incur liens, prepay subordinated debt, make loans and certain investments, merge or consolidate, sell assets, and restrict the payment of dividends. The Company is required to maintain financial covenants with respect to capital expenditures, an interest coverage ratio, a debt ratio and a maximum total leverage ratio.

First Lien

        Borrowings under both the First Lien term loan and the First Lien revolving credit, at the Company's option, are comprised entirely of Alternate Base Rate ("ABR") or Eurodollar loans. The ABR loans bear interest at a rate equal to an applicable percentage rate plus a base rate of the greater of (1) the lender's prime rate or (2) the federal funds rate plus 1 / 2 of 1%. Eurodollar loans bear interest at an applicable percentage rate plus a London Interbank Offered Rate Reserve Adjusted ("LIBO") rate as determined by the lenders. The initial applicable percentage for borrowings under the term loan facility and the revolving credit facility is 1.5% with respect to ABR borrowings and 2.5% with respect to Eurodollar loans. The weighted average interest rate for the year 2008 was 5.0% and was 2.96% as of December 31, 2008.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 8—DEBT (Continued)

        The weighted average interest rate for the three and nine months ended September 30, 2009 was 2.79% and 2.89%, respectively, and as of September 30, 2009 the interest rate was 2.76%. The applicable percentage for revolving credit facility borrowings may be reduced, subject to the Company attaining certain leverage ratios. Changes in applicable percentage will be determined by the administrative agent on an annual basis. In the event of default, the interest rate increases by 2%. There is a commitment fee of 0.5% on the unused portion of the revolving loan facility. The revolving credit facility of $20 million was not used as of September 30, 2009 and December 31, 2008.

        The Company is required to prepay outstanding First Lien term loans, subject to certain exceptions and conditions, with excess cash flow, or in the event of certain asset sales and a public offering of equity securities. The Company is required to make minimum repayments on the First Lien term loan in quarterly principal amounts of $463. Interest payments are due, depending on the type of loan, either monthly or quarterly. Optional prepayments may be made at any time without premium or penalty and in a minimum amount of $1 million. The First Lien term loan matures on June 15, 2014 and the revolving credit facility expires on June 15, 2012.

Second Lien

        Borrowings under the Second Lien term loan, at the Company's option, are comprised entirely of ABR or Eurodollar loans. The ABR loans bear interest at an applicable percentage rate plus a rate equal to a base rate of the greater of (1) the lender's prime rate or (2) the federal funds rate plus 1 / 2 of 1%. Eurodollar loans bear interest at an applicable percentage rate plus a LIBO rate as determined by the lenders. The initial applicable percentage is 6.0% with respect to base rate borrowings and 7.0% with respect to LIBO borrowings. In the event of default, the interest rate increases by 2%. The Company also has the option to pay interest entirely in cash or by increasing the outstanding principal amount. However, if interest is not paid in cash, the interest rate is increased by an additional 1.5% per annum. Interest payments are made either monthly or quarterly. The weighted average interest rate for the year ended December 31, 2008 was 9.5% and was 7.46% as of December 31, 2008. The weighted average interest rate for the three and nine months ended September 30, 2009 was 7.29% and 7.39%, respectively, and was 7.26% as of September 30, 2009.

        The Second Lien term loan matures on December 15, 2014. A lump sum principal loan repayment is due on the maturity date only after all outstanding First Lien borrowings are repaid in full.

        As of September 30, 2009, the Company was in compliance with all of its covenants and other obligations under the credit Agreements.

        On October 5, 2009, the Company entered into an amendment to the First Lien Agreement and the Second Lien Agreement. The amendments for both Agreements permitted the Company to enter into certain corporate reorganization transactions, including replacing STR Holdings LLC ("Holdings") with STR Holdings (New) LLC as a guarantor under each Agreement.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 8—DEBT (Continued)

Interest Rate Swap

        Effective September 13, 2007, the Company entered into an interest rate swap contract for $200 million notional principal amount of its variable rate debt. The notional principal amount decreased to $130 million on October 1, 2008 and the contract terminates on September 30, 2010. The Company was required under the terms of both First Lien and Second Lien agreement to fix its interest costs on at least 50% of its funded indebtedness for a minimum of three years. The interest rate swap was not designated by the Company as a cash flow hedge under ASC 815-10, Accounting for Derivative Instruments and Hedging Activities , as amended. As a result, changes in the fair value of the swap are recorded in the statement of operations. The fair value of the swap was a liability of $6,013 and $5,110 at December 31, 2008 and September 30, 2009, respectively. The resulting change in fair value has been recorded in the respective consolidated balance sheets and in the consolidated statements of operations and comprehensive income.

Other Debt

        One of the Company's foreign subsidiaries maintains a line of credit in the amount of approximately $483 (CHF500) bearing an interest rate of approximately 4.25% as of September 30, 2009 and 4.75% as of December 31, 2008. The purpose of the credit facility is to provide funding for the subsidiary's working capital as deemed necessary during the normal course of business. The facility was not used as of September 30, 2009 and December 31, 2008.

        Required principal repayments of long-term debt, excluding payments on capital lease obligations, as of September 30, 2009 are as follows:

2009

  $ 463  

2010

    1,850  

2011

    1,850  

2012

    1,850  

2013

    1,850  

Thereafter

    247,975  
       

Total

  $ 255,838  
       

        The fair value of the Company's debt was approximately $216.5 million and $200.0 million, determined by its mid-market bid/ask price as of September 30, 2009 and December 31, 2008, respectively.

        Subsequent to the closing of the Company's IPO of common stock, per the terms of the Company's First Lien Agreement, the Company has paid down $15 million of its debt related to this facility (see Note 18).

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Table of Contents


STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 9—LEASES

        The Company leases certain machinery and equipment under capital leases which extend through 2010. Capital lease assets and related accumulated amortization, which are recorded as part of property, plant and equipment, are as follows:

 
  September 30,
2009
  December 31,
2008
 

Capital lease assets

  $ 556   $ 556  

Accumulated amortization

    (241 )   (162 )
           

Net capital lease assets

  $ 315   $ 394  
           

        Amortization expense on capital lease assets was $26 and $79 for each of the three and nine months ended September 30, 2009 and 2008.

        Future payments on capital leases as of September 30, 2009 are as follows:

Year Ended December 31,

       

2009

  $ 45  

2010

    134  
       

  $ 179  

Less amounts representing interest

    (6 )
       

Total

  $ 173  
       

        The Company leases various production and Quality Assurance laboratories and office space under non-cancelable operating leases. The leases require the Company to pay property taxes, common area maintenance and certain other costs in addition to base rent. The Company also leases certain machinery and equipment and office furniture and equipment under operating leases. Future minimum payments under all non-cancelable operating leases were as follows as of September 30, 2009:

2009

  $ 2,141  

2010

    3,892  

2011

    1,843  

2012

    1,222  

2013

    730  

Thereafter

    92  
       

  $ 9,920  
       

        Rental expense on office space and equipment operating leases was $1,169 and $1,109 for the three months ended September 30, 2009 and 2008, respectively. Rental expense on office space and equipment operating leases was $3,733 and $3,288 for the nine months ended September 30, 2009 and 2008, respectively.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 10—UNITHOLDERS' EQUITY

        Changes in Unitholders' equity for the nine months ended September 30, 2009 are as follows:

 
  A Units   F Units   Accumulated
Other
Comprehensive
(Loss) Income
   
   
 
 
  Retained
Earnings
  Total
Unitholders'
Equity ($)
 
 
  Issued   Amount   Issued   Amount  

Balance at December 31, 2008

    17,865   $ 178,649     392   $ 1,456   $ (354 ) $ 32,216   $ 211,967  

Share based compensation

                213             213  
 

Net income

                        14,130     14,130  
 

Foreign currency translation adjustment

                    1,672         1,672  
                               

Balance at September 30, 2009

    17,865   $ 178,649     392   $ 1,669   $ 1,318   $ 46,346   $ 227,982  
                               

        The Company has authorized a total of 17,864,924 Class A units, 199,766 Class B units, 1,487,750 Class C units, 530,016 Class D units, 530,016 Class E units, and 588,171 Class F units. In connection with the Acquisition, 14,569,690 Class A units were issued in exchange for the initial cash contribution from the investors. In addition, 3,295,234 Class A units were issued to certain STRI rollover stockholders who received merger consideration partly in the form of units in Holdings.

        The Class A, B, C, D, E and F units are subject to a priority distribution in the event of a distribution, conversion to shares of common stock upon an initial public offering, liquidation, partial liquidation, or dissolution of Holdings in three steps: first, 100% to all Class A units until each such unitholder has received an aggregate amount equal to their capital contributions; second, pro rata to each Class A, B, C, D and F unit until each Class A unit has received 2.5 times its capital contributions; third, pro rata to each Class A, B, C, D, E and F unit based upon units held by each unitholder. Such distribution or liquidation may be in the form of cash, securities or other consideration. Dividends on unvested units are deferred and paid only upon vesting. Unvested units vest immediately upon a change of control.

        Each Class A unit has voting rights. The Class B, C, D, E and F units have no voting rights.

        Contingently Redeemable Units.     Under certain circumstances, certain unitholders have the option to sell their units back to the Company at fair value. In addition, the Company has the right to repurchase vested units from a terminated employee at the greater of fair value, as determined by the Board of Managers, and the original purchase price paid to the Company if terminated without cause, or at the original purchase price paid to the Company, if terminated for cause. These contingent rights do not meet the criteria for the units to be "liability" classified under ASC 718-10 or as liabilities under ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity . However, they meet the definition of redeemable equity securities to be classified as temporary equity in accordance with Rule 5-02.27 of SEC Regulation S-X. Contingently redeemable units outstanding as of September 30, 2009 included 199,766 Class B units, 1,134,419 Class C units, 407,796 Class D and 403,833 Class E units. The amount recorded for the contingently redeemable units is the cumulative amortized fair value based upon the fair value on the grant date which is being amortized over the requisite service period.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 10—UNITHOLDERS' EQUITY (Continued)

        In connection with the Company's IPO of common stock, all units have been converted into shares of common stock (see Note 18).

Deferred Offering Costs

        Other noncurrent assets include costs directly associated with the Company's IPO. The Company closed its IPO on November 12, 2009. These costs will be recorded as a reduction of the proceeds received to be recorded in stockholders' equity (see Note 18).

NOTE 11—STOCK-BASED COMPENSATION

        In connection with and subsequent to the Acquisition, Class B, Class C, Class D, Class E and Class F incentive units were issued to employees and certain non-employee investors, each class of which has varying service and/or performance conditions. The following is a summary of the characteristics of each class of units:

Unit
  Service/Performance Condition
Class B   Vests immediately upon issuance.

Class C

 

Vests ratably at month end in 1/60th installments beginning the month following the date of issuance.

Class D

 

Vests ratably in 1/5th annual installments beginning with the year ending on December 31, 2007 if the equity value performance target, as provided in the LLC (new) agreement, is achieved. Equity value performance targets are based on a multiple of management's projections of Consolidated EBITDA for such fiscal year, less estimated net indebtedness. Performance targets are met if the Company's actual equity valuation is 85% or greater of the target equity value.

Class E

 

Vests ratably at month end in 1/60th installments beginning the month following the date of issuance.

Class F

 

Vests 50% immediately upon issuance and the remaining 50% vests one-third each year on the first, second and third anniversary of issuance.

        During the nine months ended September 30, 2009, 144,239 Class C units, 47,552 Class D units and 51,515 Class E units were forfeited by former employees. As of September 30, 2009, 353,331

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 11—STOCK-BASED COMPENSATION (Continued)


Class C units, 122,220 Class D units and 126,183 Class E units remained available for grant. A summary of unit activity during the nine months ended September 30, 2009 is presented below:

Service-Based Awards

 
  Class B
Units
  Class C
Units
  Class E
Units
  Class F
Units
  Total Units   Weighted
Average
Grant-Date
Fair Value
 

Unvested as of December 31, 2008

        906,771     322,919     196,056     1,425,746   $ 2.80  

Granted

   
   
   
   
   
   
 

Vested

        (170,005 )   (60,514 )   (98,028 )   (328,547 ) $ 2.87  

Forfeited

        (144,239 )   (51,515 )       (195,754 ) $ 2.67  
                             

Unvested as of September 30, 2009

        592,527     210,890     98,028     901,445   $ 2.79  
                             

Performance-Based Awards

 
  Class D Units   Weighted Average
Grant-Date
Fair Value
 

Unvested as of December 31, 2008

    274,041   $ 3.28  

Granted

   
   
 

Vested

         

Forfeited

    (47,552 ) $ 3.22  
             

Unvested as of September 30, 2009

    226,489   $ 3.29  
             

        As of September 30, 2009 there was $2,803 of total unrecognized compensation cost related to the unit interests granted above. This cost will be recognized based upon the future vesting periods of the shareholders which are 1.5 years on a weighted average basis.

        Stock-based compensation expense was included in the following consolidated statement of operations and comprehensive income categories:

 
  Three Months
Ended
September 30,
  Nine Months
Ended
September 30,
 
 
  2009   2008   2009   2008  

Selling, general and administrative expense

  $ 859   $ 413   $ 1,852   $ 1,346  

Total recognized tax benefit

  $   $   $   $  
                   

        Included in the stock-based compensation expense is $542 and $792 for the three and nine months ended September 30, 2009, respectively, representing a total of 223,464 Phantom A units that had an estimated grant date fair value of $6.0 million at April 1, 2009 granted to the Company's Chief

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 11—STOCK-BASED COMPENSATION (Continued)


Executive Officer. This grant is being accounted for as a liability—classified award and, accordingly, a liability was recorded of $792 at September 30, 2009 representing the vested portion of the award's fair value of approximately $7.6 million.

NOTE 12—INCOME TAXES

        Income before income tax expense is as follows:

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2009   2008   2009   2008  

Domestic

  $ 4,858   $ 4,526   $ 10,272   $ 13,391  

Foreign

    6,984     9,598     12,409     26,493  
                   
 

Total

  $ 11,842   $ 14,124   $ 22,681   $ 39,884  
                   

        The provision for income taxes (benefit) consists of the following components:

 
  Three Months
Ended
September 30,
  Nine Months
Ended
September 30,
 
 
  2009   2008   2009   2008  

Current tax expense:

                         
   

U.S. federal

  $ 2,662   $ 3,058   $ 4,747   $ 8,112  
   

Foreign

    1,738     1,103     4,136     7,003  
   

State and local

    75     685     241     412  
                   
     

Total expense

    4,475     4,846     9,124     15,527  

Deferred tax (benefit) expense:

                         
   

U.S. federal

    (492 )   465     (479 )   (283 )
   

Foreign

                 
   

State and local

    (28 )   (92 )   (94 )   (238 )
                   
     

Total deferred tax (benefit) expense

    (520 )   373     (573 )   (521 )
                   
 

Total income tax expense

  $ 3,955   $ 5,219   $ 8,551   $ 15,006  
                   

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Table of Contents


STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 12—INCOME TAXES (Continued)

        A tax expense of $887 and a tax benefit of $511 relating to the cumulative translation adjustment of the Company's foreign subsidiaries financial statements are recorded in other comprehensive income for the three months ended September 30, 2009 and 2008, respectively. A tax expense of $900 and a benefit of $591 relating to the cumulative translation adjustment of the Company's foreign subsidiaries financial statements are recorded in other comprehensive income for the nine months ended September 30, 2009 and 2008, respectively.

        Following is a reconciliation of the Company's effective income tax rate to the United States federal statutory tax rate:

 
  Three Months
Ended
September 30,
  Nine Months
Ended
September 30,
 
 
  2009   2008   2009   2008  

Expected tax at U.S. statutory income tax rate

    35.0 %   35.0 %   35.0 %   35.0 %

U.S. state and local income taxes net of federal benefit

    0.3 %   2.0 %   0.5 %   1.6 %

Foreign rate differential

    (12.7 )%   (4.5 )%   (12.7 )%   (5.0 )%

Foreign unremitted earnings

    12.7 %   4.5 %   12.7 %   5.0 %

Non-deductible fees and expenses

    (0.3 )%   0.5 %   1.7 %   0.9 %

Unrecognized tax benefits

    (2.2 )%   (0.1 )%   0.6 %   0.3 %

Other

    0.6 %   (0.4 )%   (0.1 )%   (0.2 )%
                   

Effective tax rate

    33.4 %   37.0 %   37.7 %   37.6 %
                   

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Table of Contents


STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 12—INCOME TAXES (Continued)

        The effect of temporary differences is included in deferred tax accounts as follows:

 
  September 30, 2009   December 31, 2008  

Deferred tax assets:

             
 

State tax loss and credit carryforwards

  $ 25   $ 25  
 

Inventory reserves

    478      
 

Accrued bonuses

    543     538  
 

Accrued vacation

    72      
 

Accrued lease liability

    158     56  
 

Product performance accrual

    1,542     1,542  
 

Bad debt reserves

    465     440  
 

Foreign deferred tax assets

    14     14  
 

Interest rate swap

    2,021     2,212  
 

Deferred compensation

    735     735  
 

Other reserves

    247     761  
 

Stock options

    311      
 

Foreign tax credits

    558     558  
           
   

Total deferred tax assets

    7,169     6,881  

Deferred tax liabilities:

             
 

Fixed assets

    (4,154 )   (3,862 )
 

Intangible assets

    (80,591 )   (83,760 )
 

Foreign unremitted earnings

    (7,625 )   (4,628 )
 

Earnings from equity owned entities

    (181 )   (165 )
 

Foreign deferred tax liabilities

    (400 )   (400 )
           
   

Total deferred tax liabilities

    (92,951 )   (92,815 )
           

Total net deferred tax liabilities

  $ (85,782 ) $ (85,934 )
           

        The Company recognizes interest accrued related to its liability for unrecognized tax benefits and penalties in income tax expense. The Company recorded interest and penalties related to unrecognized tax benefits as a component of income tax expense in the amount of approximately $265 and $(21), for the three months ended September 30, 2009 and 2008, respectively. The Company recorded interest and penalties related to unrecognized tax benefits as a component of income tax expense in the amount of approximately $555 and $160, for the nine months ended September 30, 2009 and 2008, respectively.

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Table of Contents


STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 12—INCOME TAXES (Continued)

        A reconciliation of the beginning and ending amount of the Company's liability for unrecognized tax benefits (excluding interest and penalties) for the nine months ended September 30, 2009 is as follows:

Balance at December 31, 2008

  $ 1,258  

Additions based on tax positions related to the current year

    561  

Additions for tax positions of prior years

    2,083  

Reductions for tax positions of prior years

    (333 )
       

Balance at September 30, 2009

  $ 3,569  
       

        The amount of unrecognized tax benefit that would potentially impact the Company's effective tax rate was $1,296 and $811 (excluding interest and penalties) as of September 30, 2009 and December 31, 2008, respectively.

        The Company conducts its business globally and as a result, the Company and one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is subject to examination by taxing authorities in each of these jurisdictions.

        The Company has open tax years from 2004-2009 with various tax jurisdictions, including the United States. It is reasonably possible that a reduction of unrecognized tax benefits may occur within the next twelve months as a result of reductions of the uncertain tax positions. The Company estimates that unrecognized tax benefits, excluding interest and penalties, at September 30, 2009 could be reduced by approximately $25.

        In connection with the examination of the Company's tax returns, contingencies can arise that generally result from differing interpretations of applicable tax laws and regulations as they relate to the amount, timing or inclusion of revenues or expenses in taxable income, or the sustainability of tax credits to reduce income taxes payable. The Company believes it has sufficient accruals for its contingent tax liabilities. Annual tax provisions include amounts considered sufficient to pay assessments that may result from examination of prior year tax returns, although actual results may differ. The Company does not expect that such differences would have a material effect on its consolidated financial position, results of operations, or cash flows.

        The Company's state tax loss and credit carryforwards total approximately $0.3 million, which if not utilized, will expire at various times through 2012.

NOTE 13—EMPLOYEE BENEFIT PLANS

        The Company maintains two defined contribution plans covering substantially all U.S. domestic employees. The Company makes matching contributions to the plans and can also make discretionary contributions to the plans. The Company expense under these plans was $205 and $199 for the three months ended September 30, 2009 and 2008, respectively. Expense was $640 and $574 for the nine months ended September 30, 2009 and 2008, respectively.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 13—EMPLOYEE BENEFIT PLANS (Continued)

        The Company also maintains a defined contribution plans for certain foreign employees. The expense under these plans was $275 and $240 for the three months ended September 30, 2009 and 2008, respectively. Expense was $778 and $734 for the nine months ended September 30, 2009 and 2008, respectively.

NOTE 14—FAIR VALUE MEASUREMENTS

        The Company adopted ASC 820-10, Fair Value Measurements , in the first quarter of 2008. As of September 30, 2009, the Company did not have any significant non-recurring measurements of nonfinancial assets and nonfinancial liabilities. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 classifies the inputs used to measure fair value into the following hierarchy:

  Level 1:   Unadjusted quoted prices in active markets for identical assets or liabilities

 

Level 2:

 

Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability

 

Level 3:

 

Unobservable inputs for the asset or liability

        The following table provides the Company's financial assets and liabilities reported at fair value and measured on a recurring basis as of September 30, 2009 and December 31, 2008:

 
   
  Fair Value Measurement Using  
Description
  Total   Quoted Prices in
Active Market for
Identical Assets
(Level 1)
  Significant Other
Observable Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Interest rate swap liability at December 31, 2008

  $ (6,013 ) $   $ (6,013 ) $  

Unrealized gain included in net income

    903         903      
                   

Interest rate swap liability at September 30, 2009

  $ (5,110 ) $   $ (5,110 ) $  
                   

        The fair value for the Company's interest rate swap is valued using observable current market information as of the reporting date.

NOTE 15—COMMITMENTS AND CONTINGENCIES

        The Company is a party to claims and litigation in the normal course of its operations. Management believes that the ultimate outcome of these matters will not have a material adverse effect on the Company's financial position, results of operations, or cash flows.

        The Company typically does not provide contractual warranties on its products. However, on limited occasions, the Company incurs costs to service its products in connection with specific product performance matters. Prior to 2008, the Company did not experience any material product performance

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 15—COMMITMENTS AND CONTINGENCIES (Continued)


matters. The Company has accrued for specific product performance matters incurred in 2008 and 2009 that are probable and estimable based on its best estimate of ultimate cash expenditures that it will incur for such items. The following table summarizes the Company's product performance liability that is recorded in accrued liabilities in the condensed consolidated balance sheets:

 
  September 30, 2009   December 31, 2008  

Balance as of beginning of period

  $ 4,736   $  

Additions

    502     5,616  

Cash settlements

    (925 )   (880 )
           

Balance as of end of period

  $ 4,313   $ 4,736  
           

        The U.S. Foreign Corrupt Practices Act, or FCPA, makes it unlawful for, among other persons, a U.S. company or its employees or agents to offer or make improper payments to any "foreign official" in order to obtain or retain business or to induce such "foreign official" to use his or her influence with a foreign government or instrumentality thereof for such purpose. Under the FCPA, the Company and the Company's officers, directors, controlling stockholders, employees and agents who knew about (or, in certain circumstances, should have known about) or were otherwise involved with potential violations could be subject to substantial fines, potential criminal prosecution, injunctions against further violations or deferred prosecution arrangements. Other requirements can be imposed on companies that violate the FCPA, including the appointment of a government-approved monitor or the implementation of enhanced compliance procedures.

        In late 2008, in the course of routine monitoring of the Company's internal controls, the Company's internal audit staff discovered certain payments made and expenses for entertainment provided to government officials in India from approximately 2006 to 2008 that may have been in violation of the FCPA as well as Indian law. The payments and entertainment expenses were related to the Company's quality assurance business and totaled approximately $26. Upon discovering such payments and expenses and performing an initial review and evaluation with the assistance of an outside forensic accounting firm, the Company's Audit Committee directed outside legal counsel to perform an investigation. The Company's internal audit staff, outside legal counsel and forensic accounting firm performed investigative procedures in 12 of the Company's foreign locations where major international operations are conducted. In the course of that investigation, the Company discovered up to approximately $74 in additional expenses since 2003 in two other jurisdictions that may also be inconsistent with the requirements of the FCPA. The Company's internal investigation uncovered no evidence that the payments or expenses were related to (i) falsifying, altering or otherwise influencing the conduct of our quality assurance tests or test results or (ii) securing any government contracts.

        After completing the Company's internal investigation, the Company made personnel changes in India and enhanced the Company's FCPA-related policies and procedures, including providing additional ethical and FCPA training to key employees, enhancing the Company's monitoring of expenses and other internal controls and appointing a chief compliance director. It is possible that despite the Company's efforts, additional FCPA issues, or issues under anti-corruption laws of other

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 15—COMMITMENTS AND CONTINGENCIES (Continued)


jurisdictions, could arise in the future. Any failure by the Company to comply with the FCPA or anti-corruption laws in the future could have a material adverse effect on the Company's business, financial condition, results of operations and cash flows.

        During the second quarter of 2009, the Company reported the results of the Company's inquiry to the U.S. Department of Justice ("DOJ") and the enforcement division of the U.S. Securities and Exchange Commission ("SEC"). To the Company's knowledge, the DOJ and SEC were not aware of this matter prior to the Company's report. Shortly after the Company's report, the Company provided additional information requested by the DOJ and SEC. Since providing that additional information, and as of the date of this filing, the DOJ has not responded to the Company's report or requested any additional information from the Company. The DOJ has not informed the Company as to whether it intends to pursue this matter further. In addition, the SEC has advised the Company that because it does not appear that the Company was subject to the SEC's jurisdiction during the relevant period, the SEC does not intend to pursue this matter at this time.

        The outcome of the Company's report to the DOJ and SEC could have a material adverse effect on the Company's business, financial condition, results of operations and cash flows. The Company cannot determine the impact or the materiality of any such impact the conclusion of this matter may have on the Company's business, financial condition, results of operations or cash flows.

NOTE 16—RELATED PARTIES

        Certain of the Company's Class A unitholders with aggregate interests of 11,069,690 in Class A units and a value of $110,697 are affiliated with the Company's First and Second Lien term loan lender. The Company has entered into an interest rate swap agreement with this lender. (See Note 7) One of these Class A unitholders has an advisory services agreement with the Company that provides for the payment of $423 in annual advisory fees. This unitholder has the right to appoint five of the seven Board members of Holdings.

        Two of the Company's Board members have an advisory services agreement with the Company which provided for the payment of $1.4 million in fees related to the Acquisition and provides for $150 in annual advisory fees. These two Board members were also awarded a total 530,016 in Class F units with a fair value of $1,511 in connection with the Acquisition.

        A former Board member and Class A unitholder with 750,000 Class A units had an advisory services agreement with the Company, which was terminated in September 2008 and provided for the payment of $164 in fees related to the Acquisition and annual advisory services fees of $36. This former Board member was also awarded 27,781 in Class F units with a fair value of $79 in connection with the Acquisition.

        Total expense under these advisory services agreements was $149 and $162 for the three months ended September 30, 2009 and 2008, respectively. Total expense under these advisory services agreements was $449 and $487 for the nine months ended September 30, 2009 and 2008, respectively.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 17—REPORTABLE SEGMENTS AND GEOGRAPHICAL INFORMATION

        ASC 280-10-50, Disclosure about Segments of an Enterprise and Related Information , establishes standards for the manner in which companies report information about operating segments, products, services, geographic areas and major customers. The method of determining what information to report is based on the way that management organizes the operating segments within the enterprise for making operating decisions and assessing financial performance. Based on the nature of its products and services, the Company has two reporting segments: Solar and Quality Assurance. Information as to each of these operations is set forth below.

        The accounting policies of the Company's business segments are the same as those described in the summary of significant accounting policies included elsewhere herein.

        Adjusted EBITDA is the main metric used by the management team and the board to plan, forecast and review the Company's business performance. Adjusted EBITDA represents net income before interest income and expense, income tax expense, depreciation, amortization, stock-based compensation expense, transaction fees and certain non-recurring income and expenses from the results of operations.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 17—REPORTABLE SEGMENTS AND GEOGRAPHICAL INFORMATION (Continued)

        The following table sets forth information about the Company's operations by its two reportable segments and by geographic area:


Operations by Reportable Segment

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2009   2008   2009   2008  

Net Sales

                         

Solar

  $ 35,362   $ 48,134   $ 99,192   $ 134,007  

Quality Assurance

    31,956     28,333     85,804     79,192  
                   

Total net sales

  $ 67,318   $ 76,467   $ 184,996   $ 213,199  
                   

Segment Adjusted EBITDA

                         

Solar

  $ 16,485   $ 21,924   $ 43,244   $ 67,614  

Quality Assurance

    7,137     5,550     17,008     12,172  
                   

Segment Adjusted EBITDA

  $ 23,622   $ 27,474   $ 60,252   $ 79,786  
                   

Reconciliation of Adjusted EBITDA to Net income

                         

Segment Adjusted EBITDA

 
$

23,622
 
$

27,474
 
$

60,252
 
$

79,786
 

Corporate Adjusted EBITDA

   
(1,069

)
 
(353

)
 
(6,593

)
 
(2,929

)
                   

Adjusted EBITDA

    22,553     27,121     53,659     76,857  

Depreciation and amortization

    (5,938 )   (5,078 )   (17,450 )   (14,931 )

Interest income

    46     44     116     145  

Interest expense

    (4,195 )   (5,366 )   (12,463 )   (16,019 )

Income taxes

    (3,955 )   (5,219 )   (8,551 )   (15,006 )

Management advisory fees

    (149 )   (162 )   (449 )   (487 )

Unrealized gain (loss) on interest rate swap

    316     172     903     (115 )

Stock-based compensation

    (859 )   (413 )   (1,852 )   (1,346 )

(Loss)/gain on disposal of property, plant and equipment

            (10 )    

Earnings on equity-method investments

   
68
   
74
   
227
   
74
 

Non-recurring items

        (2,268 )       (4,294 )
                   

Net income

  $ 7,887   $ 8,905   $ 14,130   $ 24,878  
                   

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Table of Contents


STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 17—REPORTABLE SEGMENTS AND GEOGRAPHICAL INFORMATION (Continued)


Operations by Geographic Area

 
  Three Months
Ended
September 30,
  Nine Months
Ended
September 30,
 
 
  2009   2008   2009   2008  

Net Sales

                         

United States

  $ 38,098   $ 38,747   $ 108,143   $ 103,136  

Spain

    13,297     23,570     36,160     70,339  

Hong Kong

    8,562     8,551     23,235     22,581  

Other countries

    7,361     5,599     17,458     17,143  
                   

Total net sales

  $ 67,318   $ 76,467   $ 184,996   $ 213,199  
                   


Depreciation and Amortization by Reportable Segment

 
  Three Months
Ended
September 30,
  Nine Months
Ended
September 30,
 
 
  2009   2008   2009   2008  

Depreciation and amortization

                         

Solar

  $ 3,652   $ 2,880   $ 10,259   $ 8,481  

Quality Assurance

    2,255     2,053     6,806     6,073  

Corporate

    31     145     385     377  
                   

Total depreciation and amortization

  $ 5,938   $ 5,078   $ 17,450   $ 14,931  
                   


Capital Expenditures by Reportable Segment

 
  Three Months
Ended
September 30,
  Nine Months
Ended
September 30,
 
 
  2009   2008   2009   2008  

Capital expenditures

                         

Solar

  $ 1,252     5,649   $ 5,597   $ 18,367  

Quality Assurance

    1,570     2,077     7,826     4,128  

Corporate

    10     48     20     238  
                   

Total capital expenditures

  $ 2,832     7,774   $ 13,443   $ 22,733  
                   

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 17—REPORTABLE SEGMENTS AND GEOGRAPHICAL INFORMATION (Continued)


Total Assets by Reportable Segment

 
  September 30, 2009   December 31, 2008  

Assets

             

Solar

  $ 403,993   $ 405,538  

Quality Assurance

    204.964     203,417  

Corporate

    18,658     11,967  
           

Total assets

  $ 627,615   $ 620,922  
           


Long-Lived Assets by Reportable Segment

 
  September 30, 2009   December 31, 2008  

Long-lived assets

             

United States

  $ 241,532   $ 246,983  

Spain

    21,654     19,699  

China

    7,326     4,230  

Hong Kong

    2,224     1,254  

Other countries

    13,705     18,016  
           

Total long-lived assets

  $ 286,441   $ 290,182  
           

        Foreign sales are based on the country in which the sales originated. Solar sales to one of the Company's major customers for the three months ended September 30, 2009 and September 30, 2008 were $9,128 and $9,335, respectively and sales to one of the Company's major customers for the nine months ended September 30, 2009 and September 30, 2008 were $29,250 and $25,243, respectively. Accounts receivable from that customer amounted to $651 and $4,134 as of September 30, 2009 and December 31, 2008, respectively.

NOTE 18—SUBSEQUENT EVENTS

Corporate Reorganization and IPO

        Prior to November 5, 2009 the Company conducted its business through STR Holdings LLC and its subsidiaries. STR Holdings (New) LLC ("NewCo"), a Delaware limited liability company, was formed on September 30, 2009 as an indirect subsidiary of STR Holdings LLC and held no material assets and did not engage in any operations.

        Pursuant to the corporate reorganization on November 5, 2009: STR Holdings LLC liquidated. A subsidiary of NewCo merged with and into STRI and, as a result, STRI became a wholly-owned subsidiary of NewCo. The unitholders of STR Holdings LLC became unitholders of NewCo. NewCo converted from a limited liability company into a Delaware 'C' corporation, named STR Holdings, Inc., and all outstanding units of NewCo converted into a single class of common stock of STR Holdings, Inc. For further information please refer to the Company's prospectus filed pursuant to Rule 424(b) under the Securities Act with the SEC on November 9, 2009.

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 18—SUBSEQUENT EVENTS (Continued)

        On November 12, 2009, the Company closed its IPO of 12,300,000 shares of common stock at an offering price of $10 per share, of which 3,300,000 shares were sold by the Company and 9,000,000 shares were sold by selling stockholders, resulting in net proceeds to the Company of approximately $25.9 million, after deducting $7.8 million of underwriting discounts and $5.0 million of estimated offering costs. Effective with the conversion of NewCo into STR Holdings, Inc., all of the Company's outstanding units were automatically converted into shares of common stock and restricted common stock. In connection with the IPO, the Company repaid $15.0 million of borrowings under its first lien from its credit facilities, and also paid $2.6 million to terminate an advisory services and monitoring agreement it entered into in connection with the Acquisition.

        Under the STR Holdings LLC Agreement, STR Holdings LLC's Class A, B, C, D, E and F units are subject to a priority distribution of shares of common stock in the event of an initial public offering. In connection with the IPO, the priority distribution of shares was based on the Company's equity value as represented by the IPO price. For the units issued in connection with the Acquisition, the shares of common stock were distributed as follows: (i) first, the Class A unitholders received an aggregate amount of common stock equal in value to their aggregate capital contributions; (ii) second, a pro rata distribution was made with respect to the Class A, B, C, D and F units until the Class A unitholders received an aggregate amount of common stock equal in value to 2.5 times their aggregate capital contributions; and (iii) finally, a pro rata distribution was made of the remaining shares to each Class A, B, C, D, E and F unitholder based upon the number of units held by each unitholder. As a result of not meeting the required aggregate value distribution thresholds, Class C and D incentive units that were issued in 2008 did not convert nor did any of the Class E incentive units that were issued in 2007 and 2008.

        The following table presents the number of shares of common stock and unvested restricted common stock issued for the respective units upon conversion. The number of shares of common stock and unvested restricted common stock issuable are based upon the vesting provisions of the outstanding units and reflect the units vested and unvested at the date of conversion:

Class of Units
  Shares of
Common Stock
  Shares of Unvested
Restricted
Common Stock
  Total Shares of
Common Stock
 

A units

    35,352,504     397,491     35,749,995  

B units

    195,053         195,053  

C units

    542,685     553,588     1,096,273  

D units

    176,211     217,884     394,095  

E units

             

F units

    478,578     95,716     574,294  
               
 

Total

    36,745,031     1,264,679     38,009,710  
               

        The Company has retrospectively adjusted its earnings per share to reflect the conversion of units to shares resulting from the reorganization and conversion (See Note 3).

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 18—SUBSEQUENT EVENTS (Continued)

        The pro forma impact of the conversion of units to common shares on the Company's September 30, 2009 balance sheet is as follows:

 
  Pro Forma
September 30,
2009
  September 30,
2009
 

ASSETS

             

CURRENT ASSETS

             
 

Cash and cash equivalents

  $ 49,340   $ 49,340  
 

Short-term investments

    1,000     1,000  
 

Accounts receivable, trade, less allowances for doubtful accounts of $2,845 and $3,015 in 2009 and 2008, respectively

    32,453     32,453  
 

Unbilled receivables

    2,737     2,737  
 

Inventories

    10,295     10,295  
 

Prepaid expenses and other current assets

    2,587     2,587  
 

Current deferred tax assets

    1,849     1,849  
           
     

Total current assets

    100,261     100,261  
 

Property, plant and equipment, net

    67,403     67,403  
 

Intangible assets, net

    219,038     219,038  
 

Goodwill

    223,359     223,359  
 

Deferred financing costs

    5,331     5,331  
 

Deferred tax assets

    5,320     5,320  
 

Other noncurrent assets

    6,903     6,903  
           
     

Total assets

  $ 627,615   $ 627,615  
           

LIABILITIES, CONTINGENTLY REDEEMABLE UNITS AND UNITHOLDERS' EQUITY

             

CURRENT LIABILITIES

             
 

Current portion of long-term debt

  $ 2,023   $ 2,023  
 

Book overdraft

    570     570  
 

Interest rate swap liability

    5,110     5,110  
 

Accounts payable

    8,437     8,437  
 

Billings in excess of earned revenues

    5,475     5,475  
 

Accrued liabilities

    12,561     13,353  
 

Income taxes payable

    10,015     10,015  
           
     

Total current liabilities

    44,191     44,983  
 

Long-term debt, less current portion

    253,988     253,988  
 

Interest rate swap liability

         
 

Other long-term liabilities

    3,935     3,935  
 

Deferred tax liabilities

    92,951     92,951  
           
     

Total liabilities

    395,065     395,857  
           

COMMITMENTS AND CONTINGENCIES (Note 15)

             

Contingently redeemable units

        3,776  

Stockholders' equity

             
 

Pro forma preferred stock, $0.01 par value, 20,000,000 shares authorized; no shares issued and outstanding on a pro forma basis

         
 

Pro forma common stock, $0.01 par value, 200,000,000 shares authorized; 38,009,710 shares issued and outstanding on a pro forma basis

    367      
 

Pro forma additional paid-in capital

    184,519      

Unitholders' equity

             
 

Units

             
   

Class A—17,864,924 units authorized and outstanding

        178,649  
   

Class F—588,171 units authorized and outstanding

        1,669  
 

Retained earnings

    46,346     46,346  
 

Accumulated other comprehensive (expense) income

    1,318     1,318  
           
     

Total stockholders'/unitholders' equity

    232,550     227,982  
           
     

Total liabilities, contingently redeemable units and stockholders'/unitholders' equity

  $ 627,615   $ 627,615  
           

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STR Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All amounts in thousands except per unit / share amounts unless otherwise noted

NOTE 18—SUBSEQUENT EVENTS (Continued)

        On November 6, 2009, the Company's Board of Directors approved the Company's 2009 Equity Incentive Plan (the "2009 Plan") which became effective on the same day. A total of 4,750,000 shares of common stock, subject to increase on an annual basis, are reserved for future issuance under the 2009 Plan. The 2009 Plan is administered by the Board of Directors or any committee designated by the Board of Directors, which have the authority to designate participants and determine the number and type of awards to be granted, the time at which awards are exercisable, the method of payment and any other terms or conditions of the awards. The 2009 Plan provides for the grant of stock options, including incentive stock options and nonqualified stock options, collectively, "options," stock appreciation rights, shares of restricted stock, or "restricted stock," rights to dividend equivalents and other stock-based awards, collectively, the "awards." The Committee will, with regard to each award, determine the terms and conditions of the award, including the number of shares subject to the award, the vesting terms of the award, and the purchase price for the award. Awards may be made in assumption of or in substitution for outstanding awards previously granted by us or our affiliates, or a company acquired by us or with which we combine. Options generally vest monthly over a five-year period and expire ten years from the date of grant. Certain options provide for accelerated vesting if there is a change in control or if an executive terminated his employment for good reason or is terminated by the Company without cause. There were 1,214,315 shares available for grant under the 2009 Plan as of November 6, 2009.

        On November 6, 2009, in connection with the IPO the Company issued 40,000 shares of restricted common stock with a fair value of $400 to four of its directors under the 2009 Plan.

        Also, on November 6, 2009, the Company issued 3,495,685 options to purchase the Company's common stock at exercise prices ranging from $10.00 to $21.50 to certain employees and directors under the 2009 Plan.

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Table of Contents

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

        We were founded in 1944 as a plastics research and development company and evolved into two core businesses—Solar encapsulant manufacturing and Quality Assurance services. We launched our Quality Assurance business in 1973, and we commenced sales of our Solar encapsulant products in the late 1970s.

        We are a leading global provider of encapsulants to the solar module industry. Encapsulants, which are specialty extruded sheets that protect and preserve the embedded semiconductor circuit. Encapsulants are critical to the proper functions of solar modules, as they protect cells from the elements, bond the multiple layers of a module together and provide electrical insulation while allowing light to reach the panel. Our polymeric PhotoCap products consist primarily of ethylene-vinyl-acetate, or EVA, which is modified with additives and put through our proprietary manufacturing process to increase product stability and make the encapsulant suitable for use in extreme, long-term outdoor applications. We supply solar module encapsulants to many of the major solar module manufacturers, including BP Solar, First Solar, Inc., Solarwatt AG, SunPower Corporation and United Solar Ovonic LLC. We believe we were the primary supplier of encapsulants to each of our top 10 customers in the first nine months of 2009, which we believe is due to our superior products and customer service. Our encapsulants are used in both crystalline and thin-film solar modules.

        Our Quality Assurance business is a leader in the consumer products Quality Assurance market, and we believe our Quality Assurance business represents the only global testing service provider exclusively focused on the consumer products market. Our Quality Assurance business provides inspection, testing, auditing and consulting services that enable retailers and manufacturers to determine whether products and facilities meet applicable safety, regulatory, quality, performance and social standards.

CURRENT BUSINESS OUTLOOK AND STRATEGIC FOCUS

        The macro business environment continues to show gradual signs of improvement from the global economic recessionary conditions that have persisted since mid to late 2008. It appears as though the banking industry and housing markets have begun to stabilize helping to improve credit markets that are still primarily only accessible by investment grade corporate entities. The stock market has recovered some of its earlier losses and many economic indicators are indicating that the global economy is beginning to recover. However, the shape of or extent to which any recovery occurs, if at all, is not determinable as unemployment remains high and consumer spending remains relatively weak. As such, difficult economic conditions could negatively impact both of our businesses over the near term.

        Prior to 2009, our Solar business experienced rapid growth as net sales increased from $9.9 million in 2003 to $182.3 million in 2008, representing a compound annual growth rate ("CAGR") of 79.1%. During 2009, the entire solar industry has been negatively impacted by an oversupply of solar modules that was caused by a number of factors. For one, Spain, which represented the second largest photovoltaic market in 2008, initiated a legislative change in the latter part of the same year that capped the amount of solar module installations eligible for its feed-in tariff incentive at 500 megawatts ("MW"). Second, the on-going global recession and worldwide credit crisis reduced the amount of capital available to fund solar projects. Last, low-cost solar module manufacturers, primarily from China, emerged and continue to penetrate the solar module market, which has increased overall industry competition. Based on these industry events, net sales in our Solar segment decreased by 26% for the nine months ended September 30, 2009 compared to the corresponding 2008 period.

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        During the third quarter of 2009, overall solar industry fundamentals began to shows signs of improvement as the oversupply of inventory in the solar module chain continued to decline and government incentive plans surrounding renewable energy programs have emerged. For one, the American Recovery and Reinvestment Act was passed in the United States in February 2009 and provides financial incentives for the development of renewable energy. China, France, Taiwan, Italy, Japan and other countries have also announced significant plans to increase their use of renewable energy, including solar. As a result, our third quarter 2009 Solar net sales have increased 19% on a sequential basis from the second quarter of 2009 due to increased end user demand for our customers' solar modules, primarily in the United States, Germany and Italy. In order for the favorable sales trend to continue, previously announced renewable energy programs need to continue to be adopted and applied by the governments in the markets that we serve and financing must be available to fund solar projects. We anticipate that the speed and extent to which such government programs are adopted, along with seasonal impacts associated with upcoming winter weather conditions, will impact our future solar sales in the short and medium term.

        Our focus in 2009 has been to continue to strengthen our customer relationships, drive product innovation and optimize our production capacity to match shifting global demand. As of September 30, 2009, we have entered into formal contractual relationships with five of our top ten solar customers. These contracts provide for better operational and capital efficiency as well as improved manufacturing visibility that we believe should help offset lower unit pricing. In August 2009, we began shipping encapsulants from our new Malaysian facility. This facility has two 500 MW production lines and provides us with a global manufacturing and distribution footprint, as we believe we are the only encapsulant provider to possess such capabilities in North America, Europe and Asia. As of September 30, 2009, our encapsulant manufacturing capacity was 5,250 MW which we expect to increase to 6,350 MW by the end of 2009. Our focus for the remainder of 2009 and 2010 will be to continue to enter into contracts with our largest customers and expand our customer base in China and throughout Asia.

        During 2009, our Quality Assurance business continued to grow in the recessionary environment as net sales increased 8% for the nine months ended September 30, 2009 compared to the corresponding 2008 period. Manufacturers and consumer products companies continue to seek to determine whether the products designed or manufactured by them or on their behalf meet applicable safety, regulatory, quality, performance and social standards. This growth has been the result of shorter product life-cycles, the continued migration of mass production to low cost countries, adverse publicity relating to product recalls and increased regulatory oversight. In February 2009, provisions of the Consumer Product Safety Improvement Act of 2008 became effective with respect to certain children's products, requiring manufacturers of such products to have independent testing performed prior to distribution. Additional provisions of this legislation are expected to become effective by early 2010. Our strategy is to continue to focus on leveraging our global footprint, technical and industry knowledge, breath of service offerings and customer service to grow in our Quality Assurance business.

CRITICAL ACCOUNTING POLICIES

        Our discussion and analysis of our condensed consolidated financial condition and results of operations are based upon our interim condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, valuation of inventory, long-lived intangible and tangible assets, goodwill, product performance matters, income taxes and stock-based compensation. We base our estimates on historical experience and various other assumptions that we believe to be reasonable

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under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies we believe to be most critical to understand our financial results and condition and that require complex and subjective management judgments are discussed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies" in our prospectus filed pursuant to Rule 424(b) under the Securities Act with the SEC on November 9, 2009.

        There have been no changes in such policies during the quarter ended September 30, 2009.

RESULTS OF OPERATIONS

Condensed Consolidated Results of Operations

Net Sales

 
  Three Months Ended September 30,   Nine Months Ended September 30,  
 
  2009   2008   Change   2009   2008   Change  
 
  Amount   % of
Total
Revenue
  Amount   % of
Total
Revenue
  Amount   %   Amount   % of
Total
Revenue
  Amount   % of
Total
Revenue
  Amount   %  

Net sales—Solar

  $ 35,362     53 % $ 48,134     63 % $ (12,772 )   (27 )% $ 99,192     54 % $ 134,007     63 % $ (34,815 )   (26 )%

Net sales—QA

  $ 31,956     47 % $ 28,333     37 % $ 3,623     13 % $ 85,804     46 % $ 79,192     37 % $ 6,612     8 %
                                                   
 

Total net sales

  $ 67,318     100 % $ 76,467     100 % $ (9,149 )   (12 )% $ 184,996     100 % $ 213,199     100 % $ (28,203 )   (13 )%
                                                   

        Net sales decreased $9.1 million, or 12%, to $67.3 million for the three months ended September 30, 2009 from $76.5 million for the same period in 2008 as a result of a decrease in our Solar sales, partially offset by increased sales in our Quality Assurance business. Our Solar segment accounted for 53% of our total net sales for the three months ended September 30, 2009 compared to 63% for our total net sales for the three months ended September 30, 2008.

        Net sales decreased $28.2 million, or 13%, to $185.0 million for the nine months ended September 30, 2009 from $213.2 million for the same period in 2008 as a result of a decrease in our Solar sales, partially offset by increased sales in our Quality Assurance business. Our Solar segment accounted for 54% of our total net sales for the nine months ended September 30, 2009 compared to 63% for our total net sales for the nine months ended September 30, 2008.

Net Sales—Solar

        Our Solar net sales are derived from the sale of encapsulants to both crystalline and thin-film solar module manufacturers. We expect that our results of operations, for the foreseeable future, will depend primarily on the sale of encapsulants to a relatively small number of customers. The top five customers in our Solar segment accounted for approximately 53% and 46% of our Solar net sales in the three months ended September 30, 2009 and 2008, respectively and approximately 61% and 46% of our Solar net sales in the nine months ended September 30, 2009 and 2008, respectively.

        Net sales in our Solar segment decreased $12.8 million, or 27%, to $35.4 million for the three months ended September 30, 2009 from $48.1 million for the same period in 2008. Volume decreased approximately 18% as our European operations were negatively impacted by the change in Spanish feed-in tariff policy in late 2008. Pricing decreased approximately 8% due to overall industry competition and in conjunction with the signing of contracts with five of our customers, which formalized our business relationships and gave us improved visibility. The strengthening of the Euro against the U.S. dollar negatively impacted our third quarter 2009 results by approximately 1%.

        Net sales in our Solar segment decreased $34.8 million, or 26%, to $99.2 million for the nine months ended September 30, 2009 from $134.0 million for the same period in 2008. The decrease in sales was driven by a volume reduction of approximately 18%; and reduced pricing of approximately

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8%. The year to date performance drivers are due to the factors discussed above pertaining to the third quarter results.

        Although 2009 net sales in our Solar segment have decreased compared to 2008 net sales on a quarter over quarter and year over year basis, third quarter 2009 net sales have increased by $5.7 million or 19% on a sequential basis from second quarter 2009 net sales of $29.6 million. The majority of such increase was volume driven by improved user demand for solar modules relating to the residential and utility end markets in California, Germany and Italy. We believe overall solar industry conditions are stabilizing as economic conditions continue to improve, project financing becomes more available and overall solar module over-supply continues to be reduced.

Net Sales—Quality Assurance

        We generate net sales in our Quality Assurance segment from our contracts to provide inspection, testing and audit services to our clients. We enter into contracts on a fixed price, time and material, or a cost-plus fixed fee basis. We also provide services on a non-contract basis pursuant to a fixed price list. We have a broad client base, serving over 6,000 clients in 2009 and 2008, with our top five customers in our Quality Assurance segment accounting for approximately 22% and 18% of our Quality Assurance net sales in the three months ended September 30, 2009 and 2008, respectively and approximately 23% and 18% of our Quality Assurance net sales in the nine months ended September 30, 2009 and 2008, respectively.

        Net sales in our Quality Assurance segment increased $3.6 million, or 13%, to $32.0 million for the three months ended September 30, 2009 from $28.3 million for the same period in 2008, primarily as a result of increased volume in the United States and Asia, partially offset by a decline in Europe. U.S. Quality Assurance sales growth was driven by increased testing of private label products as such retailers are ensuring their products possess the same or higher level of quality as compared to premium brands. In addition, toy-related testing increased as new U.S. safety regulations became effective in February 2009. Net sales in Asia also increased due to a higher level of testing performed for toy manufacturers that distribute their products in the United States to comply with the new U.S. safety regulations.

        Net sales in our Quality Assurance segment increased $6.6 million, or 8%, to $85.8 million for the nine months ended September 30, 2009 from $79.2 million for the same period in 2008 primarily as a result of the factors discussed above pertaining to the third quarter results.

Cost of Sales

 
  Three Months Ended September 30,   Nine Months Ended September 30,  
 
  2009   2008   Change   2009   2008   Change  
 
  Amount   % of
Total
Revenue
  Amount   % of
Total
Revenue
  Amount   %   Amount   % of
Total
Revenue
  Amount   % of
Total
Revenue
  Amount   %  

Cost of sales—Solar

  $ 21,837     32 % $ 26,324     34 % $ (4,487 )   (17 )% $ 62,904     34 % $ 69,407     33 % $ (6,503 )   (9 )%

Cost of sales—QA

  $ 20,155     30 % $ 18,273     24 % $ 1,882     10 % $ 56,259     30 % $ 53,311     25 % $ 2,948     6 %
                                                   
 

Total cost of sales

  $ 41,992     62 % $ 44,597     58 % $ (2,605 )   (7 )% $ 119,163     64 % $ 122,718     58 % $ (3,555 )   (3 )%
                                                   

        Cost of sales decreased $2.6 million, or 7%, to $42.0 million for the three months ended September 30, 2009 from $44.6 million for the same period in 2008 mainly as a result of the decrease in our Solar net sales as noted above in Net sales, partially offset by increased net sales in our Quality Assurance business. Our Solar segment accounted for 52% of our total cost of sales for the three months ended September 30, 2009 compared to 59% for our total cost of sales for the three months ended September 30, 2008.

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        Cost of sales decreased $3.6 million, or 3%, to $119.2 million for the nine months ended September 30, 2009 from $122.7 million for the same period in 2008 as a result of a decrease in our Solar net sales as noted above, partially offset by increased net sales in our Quality Assurance business. Our Solar segment accounted for 53% of our total cost of sales for the nine months ended September 30, 2009 compared to 57% of our total cost of sales for the nine months ended September 30, 2008.

Cost of Sales—Solar

        Cost of sales in our Solar segment decreased $4.5 million, or 17%, to $21.8 million for the three months ended September 30, 2009 from $26.3 million for the same period in 2008. The decrease in our Solar segment's cost of sales was mainly due to reduced European sales volume and lower raw material costs, partially offset by $0.8 million of increased depreciation expense associated with the 2008 capital expenditures and $0.9 million of incremental operating costs associated with our recently opened Malaysian facility which did not occur in 2008.

        Cost of sales in our Solar segment decreased $6.5 million, or 9%, to $62.9 million for the nine months ended September 30, 2009 from $69.4 million for the same period in 2008. The decrease in our Solar segment's cost of sales was mainly due to reduced European sales volume and lower raw material costs, partially offset by $1.8 million of increased depreciation expense associated with the 2008 capital expenditures, $1.4 million of incremental operating costs associated with our recently opened Malaysian facility which did not occur in 2008, $1.0 million of inventory write-offs and $1.3 million of increased labor and benefit costs to support our manufacturing infrastructure.

        Non-cash intangible asset amortization expense of $2.1 million and $6.3 million was included in cost of sales for the three and nine month periods in 2009 and 2008, respectively.

Cost of Sales—Quality Assurance

        Cost of sales in our Quality Assurance segment increased $1.9 million, or 10%, to $20.2 million for the three months ended September 30, 2009 from $18.3 million for the same period in 2008. The increase in our Quality Assurance's cost of sales was due to $0.2 million of increased depreciation expense and $1.6 million of increased direct costs and labor expense to support our sales volume growth.

        Cost of sales in our Quality Assurance segment increased $2.9 million, or 6%, to $56.3 million for the nine months ended September 30, 2009 from $53.3 million for the same period in 2008. The increase in our Quality Assurance's cost of sales was due to $0.8 million for increased depreciation expense, $0.3 million for increased rent expense and $1.9 million for increased direct costs and labor expense mainly due to sales volume growth.

        Non-cash intangible asset amortization expense of $0.8 million and $2.3 million was included in cost of sales for the three and nine month periods in 2009 and 2008, respectively.

Gross Profit

 
  Three Months Ended September 30,   Nine Months Ended September 30,  
 
  2009   2008   Change   2009   2008   Change  
 
  Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %   Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %  

Gross profit

  $ 25,326     38 % $ 31,870     42 % $ (6,545 )   (21 )% $ 65,833     36 % $ 90,481     42 % $ (24,648 )   (27 )%

        Gross profit decreased $6.5 million, or 21%, to $25.3 million for the three months ended September 30, 2009 from $31.9 million for the same period in 2008 and $24.6 million, or 27%, to $65.8 million for the nine months ended September 30, 2009 from $90.5 million for the same period in

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2008, primarily due to the sales decline in our Solar segment. As a percentage of sales, gross profit decreased 400 basis points from 42% for the three months ended September 30, 2008 to 38% for the three months ended September 30, 2009 and decreased 600 basis points from 42% for the nine months ended September 30, 2008 to 36% for the nine months ended September 30, 2009.

        The decrease in gross profit as a percentage of sales was primarily due to lower pricing and reduction in operating leverage of fixed costs associated with our Solar sales volume decline. Also, we generated a lower mix of net sales in our higher margin Solar business, which accounted for 53% and 63% of our consolidated net sales for the three months ended September 30, 2009 and 2008, respectively.

        For the nine months ended September 30, 2009, gross profit decreased as a percentage of sales primarily due to lower pricing and a reduction in operating leverage of fixed costs associated with our Solar sales volume decline. Also, we generated a lower mix of net sales in our higher margin Solar business, which accounted for 54% and 63% of our consolidated net sales for the nine months ended September 30, 2009 and 2008, respectively. Lastly, $1.0 million of inventory write-offs were incurred in our Solar segment during the second quarter of 2009. These negative impacts to the nine months of 2009 gross margin percentage more than offset a 170 basis point gross margin expansion for the nine month period ended September 30, 2009 in our Quality Assurance business resulting from improved labor cost efficiency based on better operating leverage associated with the sales growth and efforts to streamline our Quality Assurance testing processes and improve turn-around time.

        Non-cash intangible asset amortization expense of $2.9 million and $8.6 million reduced gross profit for the three and nine month periods in 2009 and 2008, respectively.

Selling, General and Administrative Expenses ("SG&A")

 
  Three Months Ended September 30,   Nine Months Ended September 30,  
 
  2009   2008   Change   2009   2008   Change  
 
  Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %   Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %  

SG&A

  $ 9,498     14 % $ 11,771     15 % $ (2,273 )   (19 )% $ 29,760     16 % $ 33,414     16 % $ (3,654 )   (11 )%

        SG&A decreased 19% in the current three month period as compared to the corresponding period in the prior year. The decrease reflected lower professional fees of $2.4 million compared to the same period in 2008 due to the non-recurrence of legal fees associated with protecting our propriety technology and re-audits of our financial statements, incurred in preparation for the filing of our initial Form S-1 with the SEC made during the third quarter of 2008, and $0.6 million of reduced incentive bonus expense associated with applicable performance measures. Such favorable items were partially offset by $0.4 million of increased stock-based compensation cost for the three month period ended September 30, 2009.

        SG&A decreased 11% in the current nine month period as compared to the corresponding period in the prior year. The decrease reflected lower professional fees of $4.0 million compared to the same period in 2008 due to the non-recurrence of legal fees associated with protecting our propriety technology and re-audits of our financial statements, incurred in preparation for the filing of our initial Form S-1 with the SEC made during the second and third quarter of 2008, $0.5 million of reduced incentive bonus expense associated with applicable performance measures. Such favorable items were partially offset by $0.5 million of increased stock-based compensation cost for the nine month period ended September 30, 2009.

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Interest Expense

 
  Three Months Ended September 30,   Nine Months Ended September 30,  
 
  2009   2008   Change   2009   2008   Change  
 
  Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %   Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %  

Interest expense

  $ (4,195 )   (6 )% $ (5,366 )   (7 )% $ 1,171     (22 )% $ (12,463 )   (7 )% $ (16,019 )   (8 )% $ 3,556     (22 )%

        Interest expense consists primarily of interest on borrowings under our credit facilities entered into in connection with our 2007 acquisition. See Credit Facilities below. Interest expense decreased 7% and 22% in the current three month period and nine month period as compared to the corresponding periods in the prior year. The reductions were primarily the result of decreases in applicable interest rates on our variable rate debt.

Other Income (Expense) Items

 
  Three Months Ended September 30,   Nine Months Ended September 30,  
 
  2009   2008   Change   2009   2008   Change  
 
  Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %   Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %  

Other income (expense)

  $ 229     % $ (480 )   % $ 709     1 % $ 443     % $ (438 )   % $ 881     2 %

        Other income (expense) for the three months ended September 30, 2009 was mainly due to $0.3 million of unrealized gains on our interest rate swap entered into during 2007 as a requirement under our credit facilities and $0.1 million of foreign currency transaction losses. During the three months ended September 30, 2008 we incurred $0.2 million of unrealized gains and $0.7 million of foreign currency transaction losses.

        Other income (expense) for the nine months ended September 30, 2009 was mainly due to $0.9 million of unrealized gains on our interest rate swap and $0.6 million of foreign currency transaction losses. During the three months ended September 30, 2008 we incurred $0.1 million of unrealized losses and $0.5 million of foreign currency transaction losses.

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Income Taxes

 
  Three Months Ended September 30,   Nine Months Ended September 30,  
 
  2009   2008   Change   2009   2008   Change  
 
  Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %   Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %  

Income taxes

  $ 3,955     6 % $ 5,219     7 % $ (1,264 )   (24 )% $ 8,551     5 % $ 15,006     7 % $ (6,455 )   (43 )%

        Income tax expense decreased 24% in the current three month period compared to the corresponding period in the prior year. Our effective tax rate for the three months ended September 30, 2009 was 33% compared to the federal statutory rate of 35% and our effective tax rate for the three months ended September 30, 2008 was 37%. The decrease in our third quarter 2009 effective tax rate was mainly due to the recording of uncertain tax positions in foreign jurisdictions in 2008.

        Income tax expense decreased 43% in the current nine month period compared to the corresponding period in the prior year. Our effective tax rate for the nine months ended September 30, 2009 was 38% compared to the federal statutory rate of 35% and our effective tax rate for the nine months ended September 30, 2008 was 38%.

Net Income

 
  Three Months Ended September 30,   Nine Months Ended September 30,  
 
  2009   2008   Change   2009   2008   Change  
 
  Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %   Amount   % of
Product
Revenue
  Amount   % of
Product
Revenue
  Amount   %  

Net income

  $ 7,887     12 % $ 8,904     12 % $ (1,017 )   (11 )% $ 14,130     8 % $ 24,878     12 % $ (10,748 )   (43 )%

        Net income decreased $1.0 million to $7.9 million for the three months ended September 30, 2009 from net income of $8.9 million for the three months ended September 30, 2008 primarily due to the reduction in net sales, and increased stock-based compensation and depreciation expense, partially offset by decreased lower cost of goods sold, interest expense and a lower effective tax rate.

        Net income decreased $10.8 million to $14.1 million for the nine months ended September 30, 2009 from net income of $24.9 million for the nine months ended September 30, 2008 primarily due to the factors discussed above pertaining to the third quarter results plus the unfavorable impact of $1.0 million of inventory write-offs in the second quarter of 2009.

Segment Results of Operations

        We report our business as two segments: Solar and Quality Assurance. The accounting policies of the segments are the same as those described in the footnotes to the accompanying Condensed Consolidated Financial Statements included in our prospectus filed pursuant to Rule 424(b) under the Securities Act with the SEC on November 9, 2009. We measure segment performance based on total revenues and have historically utilized Adjusted EBITDA. See Note 17-Reportable Segments and Geographical Information located in the Notes to the Condensed Consolidated Financial Statements for further information. Revenues for each of these segments are described in further detail above. Corporate overhead is not allocated to our segments and includes expenses associated with corporate headquarters, the executive management team and certain centralized functions that benefit us but are not attributable to the segments such as finance and certain legal costs. The discussion that follows is a summary analysis of total revenues and the primary changes in Adjusted EBITDA by segment.

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Solar

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2009   2008   Change   2009   2008   Change  
 
  Amount   Amount   Amount   %   Amount   Amount   Amount   %  

Net Sales

  $ 35,362   $ 48,134   $ (12,772 )   (27 )% $ 99,192   $ 134,007   $ (34,815 )   (26 )%
                                   

Adjusted EBITDA

  $ 16,485   $ 21,924   $ (5,439 )   (25 )% $ 43,244   $ 67,614   $ (24,370 )   (36 )%
                                   

Adjusted EBITDA as % of Segment Net Sales

    46.6 %   45.5 %               43.6 %   50.5 %            
                                           

        Adjusted EBITDA as percentage of net sales for this business segment decreased in the current three month period compared to the corresponding 2008 period due to lower gross margin driven by the reduction in net sales, and lower absorption of fixed costs as discussed above. Partially offsetting the negative impact of lower gross margins was a reduction to SG&A expenses of $1.6 million based on improved bad debt expense of $0.4 million due to favorable cash collections and $1.5 million of lower professional fees related to legal costs.

        Adjusted EBITDA for this business segment decreased in the current nine month period compared to the corresponding period in the prior year primarily due to reduced gross margins driven by the reduction in net sales, lower absorption of fixed costs and $1.0 million of inventory write-offs. SG&A expenses improved by $1.9 million mainly driven by $2.7 million of lower legal fees and partially offset by $0.6 million of increased bad debt expense.

Quality Assurance

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2009   2008   Change   2009   2008   Change  
 
  Amount   Amount   Amount   %   Amount   Amount   Amount   %  

Net Sales

  $ 31,956   $ 28,333   $ 3,623     13 % $ 85,804   $ 79,192   $ 6,612     8 %
                                   

Adjusted EBITDA

  $ 7,137   $ 5,550   $ 1,587     29 % $ 17,008   $ 12,172   $ 4,836     40 %
                                   

Adjusted EBITDA as % of Segment Net Sales

    22.3 %   19.6 %               19.8 %   15.4 %            
                                           

        Adjusted EBITDA as a percentage of net sales for this business segment increased in the current three month period compared to the corresponding 2008 period due to higher gross margin driven by the increase in sales volume. SG&A expenses increased by $0.4 million primarily driven by $0.3 million of increased bad debt expense.

        Adjusted EBITDA as a percentage of net sales for this business segment increased in the current nine month period compared to the corresponding 2008 period due to higher gross margin driven by the increase in sales volume as discussed above. SG&A expenses improved by $0.9 million primarily driven by overall operating efficiencies.

Corporate Overhead

        Corporate overhead expense was $1.2 million for the three months ended September 30, 2009 compared to $2.8 million for the corresponding period in the prior year. The reduction was driven by lower professional fees partially offset by increased corporate staffing costs to support becoming a public company.

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        Corporate overhead expense was $7.0 million for the three months ended September 30, 2009 compared to $7.7 million for the corresponding period in the prior year. The reduction was driven by lower professional fees and reduced incentive bonuses partially offset by increased corporate staffing costs to support becoming a public company.

Financial Condition, Liquidity and Capital Resources

        We have financed our operations primarily through cash provided by operations. From 2003 through 2008, net cash provided by operating activities has been sufficient to fund our working capital needs and capital expenditures. As of September 30, 2009, our principal sources of liquidity consisted of $49.3 million of cash and cash equivalents, $1.0 million of short-term investments and $20.0 million of availability under the $20.0 million revolving portion of our first lien credit facilities. Our total indebtedness was $255.8 million as of September 30, 2009.

        Our principal needs for liquidity have been, and for the foreseeable future will continue to be, for capital expenditures, debt service and working capital. The main portion of our capital expenditures has been and is expected to continue to be for expansion of our Solar manufacturing capacity and information technology improvements. Working capital requirements have increased as a result of our overall growth from prior years and the need to fund higher accounts receivable and inventory. We believe that our cash flow from operations, available cash and cash equivalents and available borrowings under the revolving portion of our credit facilities will be sufficient to meet our liquidity needs, including for capital expenditures, through at least the next 12 months. We anticipate that to the extent that we require additional liquidity, it will be funded through borrowings under our credit facilities, the incurrence of other indebtedness, additional equity financings or a combination of these potential sources of liquidity. The credit markets in late 2008 and 2009 have experienced extreme volatility and disruption that reached unprecedented levels. In many cases, the market for new debt financing is extremely limited and in some cases not available at all. In addition, the markets have increased the uncertainty that lenders will be able to comply with their previous commitments. As such, we cannot assure you that we will be able to obtain this additional liquidity on reasonable terms, or at all. Additionally, our liquidity and our ability to meet our obligations and fund our capital requirements are also dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control. Accordingly, we cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available under our credit facilities or otherwise to meet our liquidity needs.

        Although we have no specific current plans to do so, if we decide to pursue one or more significant strategic acquisitions, we may incur additional debt or sell additional equity to finance the purchase of those businesses.

        As discussed in Note 18-Subsequent Events in the Notes to the Condensed Consolidated Financial Statements, we completed an initial public offering of our common stock as of November 12, 2009. In connection with the initial public offering, we received $25.9 million of net proceeds, after deducting underwriting discounts and estimated offering costs and repaid $15.0 million of borrowings under our first lien from credit facility and also paid $2.6 million to terminate an advisory services and monitoring agreement we entered into in connection with the Acquisition in 2007. In connection with our initial public offering, all of our outstanding units were automatically converted into 36,745,031 shares of common stock and 1,264,679 shares of restricted common stock. Our common stock is now traded on the New York Stock Exchange ("NYSE") under the ticker symbol "STRI".

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Cash Flows

Cash Flow from Operating Activities

        Net cash provided by operating activities was $36.6 million for the nine months ended September 30, 2009 compared to $38.9 million for the nine months ended September 30, 2008. The decrease was driven by lower cash earnings partially offset by improved working capital. Cash collections were extremely strong in the third quarter of 2009 and we have continued to reduce our raw material inventory to within levels consistent with current revenues.

Cash Flow from Investing Activities

        Net cash used for investing activities was $14.4 million for the nine months ended September 30, 2009 compared to $22.7 million for the nine months ended September 30, 2008, as we reduced our capital expenditure activity due to the current negative economic conditions. We expect remaining 2009 consolidated capital expenditures to be approximately $5.8 million, of which Solar capital expenditures represent approximately $0.9 million and Quality Assurance capital expenditures represent approximately $4.9 million. We also have a certificate of deposit in the amount of $1.0 million that matures over 90 days.

Cash Flow from Financing Activities

        Net cash used in financing activities was $2.4 million for the nine months ended September 30, 2009 compared to $3.8 million for the nine months ended September 30, 2008, due to lower equity issuance costs of $0.9 million. Debt repayments remained consistent period over period.

Credit Facilities

        In connection with the Acquisition, we entered into a first lien credit facility and a second lien credit facility on June 15, 2007, which we refer to collectively as our "credit facilities," in each case with Credit Suisse, as administrative agent and collateral agent. The first lien credit facility consists of a $185.0 million term loan facility, which matures on June 15, 2014, and a $20.0 million revolving credit facility, none of which was outstanding at September 30, 2009, which matures on June 15, 2012. The second lien credit facility consists of a $75.0 million term loan facility, which matures on December 15, 2014. The revolving credit facility includes a sublimit of $15.0 million for letters of credit.

        The obligations under each credit facility are unconditional and are guaranteed by us and substantially all of our existing and subsequently acquired or organized domestic subsidiaries. The first lien credit facility and related guarantees are secured on a first-priority basis, and the second lien credit facility and related guarantees are secured on a second-priority basis, in each case, by security interests (subject to liens permitted under the credit agreements governing the credit facilities) in substantially all tangible and intangible assets owned by us, the obligors under the credit facilities, and each of our other domestic subsidiaries, subject to certain exceptions, including limiting pledges of voting stock of foreign subsidiaries to 66% of such voting stock.

        Borrowings under the first lien credit facility bear interest at a rate equal to (1) in the case of term loans, at our option (i) the greater of (a) the rate of interest per annum determined by Credit Suisse, from time to time, as its prime rate in effect at its principal office in the City of New York, and (b) the federal funds rate plus 0.50% per annum (the "base rate"), and in each case plus 1.50% per annum or (ii) the LIBO plus 2.50% and (2) in the case of the revolving loans, at our option (subject to certain exceptions) (i) the base rate plus 1.50% when our total leverage ratio (as defined in the first lien credit facility) is greater than or equal to 5.25 to 1.00 ("leverage level 1"), the base rate plus 1.25% when our total leverage ratio is greater than or equal to 4.50 to 1.00 but less than 5.25 to 1.00 ("leverage level 2") and the base rate plus 1.00% when our total leverage ratio is less than 4.50 to 1.00 ("leverage

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level 3") or (ii) the LIBO plus 2.50% in the case of leverage level 1, 2.25% in the case of leverage level 2 and 2.00% in the case of leverage level 3. Borrowings under the second lien credit facility bear interest at a rate equal to, at our option (i) the base rate plus 6.00% or (ii) the LIBO plus 7.00%. For the first five years of the second lien credit facility, we have the option to pay interest in cash or in kind, by increasing the outstanding principal amount of the loans by the amount of accrued interest. Interest paid in kind on the second lien credit facility will be at the rate of interest applicable to such loan described above plus an additional 1.50% per annum. If we default on the payment of any principal, interest, or any other amounts due under the credit facilities, we will be obligated to pay default interest. The default interest rate on principal payments will equal the interest rate applicable to such loan plus 2.00% per annum, and the default interest rate on all other payments will equal the interest rate applicable to base rate loans plus 2.00% per annum.

        As of September 30, 2009 and December 31, 2008, the weighted average interest rate under our credit facilities was 4.14% and 4.27%, respectively, before the effect of our interest rate swap. At the rate in effect on September 30, 2009 and assuming an outstanding balance of $256.3 million as of September 30, 2009, our annual debt service obligations would be $12.5 million, consisting of $10.6 million of interest and $1.9 million of scheduled principal payments.

        In addition to paying interest on outstanding principal under the credit facilities, we are required to pay a commitment fee at a rate equal to 0.50% per annum on the daily unused commitments available to be drawn under the revolving portion of the first lien credit facility. We are also required to pay letter of credit fees, with respect to each letter of credit issued, at a rate per annum equal to the applicable LIBO margin for revolving credit loans on the average daily amount of undrawn letters of credit plus the aggregate amount of all letter of credit disbursements that have not been repaid by us. We are also required to pay fronting fees, with respect to each letter of credit issued, at a rate specified by the issuer of the letters of credit and to pay Credit Suisse certain administrative fees from time to time, in its role as administrative agent. The term loans under the first lien credit facilities amortize in quarterly installments of 0.25% of the principal amount. Under certain circumstances, we may be required to reimburse the lenders under our credit facilities for certain increased fees and expenses caused by a change of law.

        We are generally required to prepay term loan borrowings under the credit facilities with (1) 100% of the net cash proceeds we receive from non-ordinary course asset sales or as a result of a casualty or condemnation, (2) 100% of the net cash proceeds we receive from the issuance of debt obligations other than debt obligations permitted under the credit agreements, (3) 50% of the net cash proceeds of a public offering of equity (including this offering) and (4) 50% (or, if our leverage ratio is less than 5.25 to 1.00 but greater than or equal to 4.50 to 1.00, 25%) of excess cash flow (as defined in the credit agreements). Under the credit facilities, we are not required to prepay borrowings with excess cash flow if our leverage ratio is less than 4.50 to 1.00. Subject to a limited exception, all mandatory prepayments will first be applied to the first lien credit facility until all first lien obligations are paid in full and then to the second lien facility.

        The first lien credit facility requires us to maintain certain financial ratios, including a maximum first lien debt ratio (based upon the ratio of indebtedness under the first lien credit facility to consolidated EBITDA, as defined in the first lien credit facility), a maximum total leverage ratio (based upon the ratio of total indebtedness, net of unrestricted cash and cash equivalents, to consolidated EBITDA) and a minimum interest coverage ratio (based upon the ratio of consolidated EBITDA to consolidated interest expense), which are tested quarterly. Based on the formulas set forth in the first lien credit agreement, as of September 30, 2009, we were required to maintain a maximum first lien debt ratio of 4.25 to 1.00, a maximum total leverage ratio of 6.25 to 1.00 and a minimum interest coverage ratio of 1.65 to 1.00. The second lien credit facility requires us to maintain a maximum total leverage ratio tested quarterly. Based on the formulas set forth in the second lien credit agreement, as of September 30, 2009, we were required to maintain a maximum total leverage ratio of 6.50 to 1.00.

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As of September 30, 2009, our first lien debt ratio was 1.74 to 1.00, our total leverage ratio was 2.74 to 1.00 and our interest coverage ratio was 4.77 to 1.00.

        The financial ratios required under the first and second lien facilities become more restrictive over time. Based on the formulas set forth in the first lien credit agreement, as of March 31, 2010 and March 31, 2012, we are required to maintain a maximum first lien debt ratio of 4.00 to 1.00 and 3.00 to 1.00, respectively, a maximum total leverage ratio of 6.00 to 1.00 and 5.00 to 1.00, respectively, and a minimum interest coverage ratio of 1.80 to 1.00 and 2.00 to 1.00, respectively. Based on the formulas set forth in the second lien credit agreement, as of March 31, 2010 and March 31, 2011, we are required to maintain a maximum total leverage ratio of 6.25 to 1.00 and 5.25 to 1.00, respectively.

        The credit agreements also contain a number of affirmative and restrictive covenants including limitations on mergers, consolidations and dissolutions; sales of assets; sale-leaseback transactions; investments and acquisitions; indebtedness; liens; affiliate transactions; the nature of our business; a prohibition on dividends and restrictions on other restricted payments; modifications or prepayments of our second lien credit facility or other material subordinated indebtedness; and issuing redeemable, convertible or exchangeable equity securities. Under the credit agreements, we are permitted maximum annual capital expenditures of $12.0 million in the fiscal year ending December 31, 2009, with such limit increasing by $1.0 to $2.0 million for each fiscal year thereafter. Capital expenditure limits in any fiscal year may be increased by 40.0% of the excess of consolidated EBITDA for such fiscal year over baseline EBITDA for that year, which is defined as $50.0 million for the fiscal year ending December 31, 2009 and increasing by $5.0 million per year thereafter. The capital expenditure limitations are subject to a two-year carry-forward of the unused amount from the previous fiscal year.

        The credit agreements contain events of default that are customary for similar facilities and transactions, including a cross-default provision with respect to other material indebtedness (which, with respect to the first lien credit agreement, would include the second lien credit agreement and with respect to the second lien credit agreement, would include the first lien credit agreement) and an event of default that would be triggered by a change of control, as defined in the credit agreements, and which is not expected to be triggered by this offering. As of September 30, 2009, we were in compliance with all of our covenants and other obligations under the credit agreements.

        On October 5, 2009, we entered into an amendment to the first lien credit agreement and an amendment to the second lien credit agreement. The amendments for both credit agreements permitted us to enter into certain corporate reorganization transactions, including replacing STR Holdings LLC with STR Holdings (New) LLC as a guarantor under each credit agreement. STR Holdings, Inc. became a guarantor under each credit agreement as corporate successor to STR Holdings (New) LLC on November 6, 2009.

        We are required under the terms of both our first lien and second lien credit facilities to fix our interest costs on at least 50% of the principal amount of our funded indebtedness for a minimum of three years. To manage our interest rate exposure and fulfill the requirements under our credit facilities, effective September 13, 2007, we entered into a $200.0 million notional principal amount interest rate swap agreement with Credit Suisse International that effectively converted a portion of our debt under our credit facilities from a floating interest rate to a fixed interest rate. The notional principal amount decreased to $130.0 million on October 1, 2008 and will remain at that amount until the agreement terminates on September 30, 2010. Under the interest rate swap agreement, we pay interest at 4.622% and receive the floating three-month LIBOR rate from Credit Suisse International on the notional principal amount.

        In addition, one of our foreign subsidiaries maintains a line of credit facility in the amount of $0.5 million (0.5 million Swiss francs) bearing an interest rate of approximately 4.25% and 4.75% as of September 30, 2009 and December 31, 2008, respectively. The purpose of the credit facility is to

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provide funding for the subsidiary's working capital as deemed necessary during the normal course of business. The facility was not utilized as of September 30, 2009 and December 31, 2008.

Off-Balance Sheet Arrangements

        We have no off-balance sheet financing arrangements.

Recently Issued Accounting Standards

        In September 2006, the FASB issued Fair Value Measurements and Disclosures which was codified as ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 was effective for our first quarter ended March 31, 2008. Revisions became effective for our first quarter ended March 31, 2009 and did not have an impact on our condensed consolidated financial statements.

        In December 2007, the FASB issued Business Combinations which was codified as ASC 805. ASC 805 which applies prospectively to business combinations with an acquisition date on or after January 1, 2009. ASC 805 requires most assets acquired and liabilities assumed in a business combination, contingent consideration and certain acquired contingencies to be measured at their fair value as of the date of the acquisition. ASC 805 also requires acquisition related costs and restructuring costs from the business combination to be expensed as incurred. The adoption of ASC 805 did not have an impact on our condensed consolidated financial statements.

        In December 2007, the FASB issued Noncontrolling Interest in Consolidated Financial Statements which was codified as ASC 810. ASC 810 amends previous accounting literature to establish new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. ASC 810 was effective for our first quarter ended March 31, 2009 and did not have an impact on our condensed consolidated financial statements.

        In March 2008, the FASB issued Derivative Instruments and Hedging Activities which was codified as ASC 815. ASC 815 provides enhanced disclosures with respect to a company's derivative and related activities and was effective for our first quarter ended March 31, 2009. It did not have an impact on our condensed consolidated financial statements.

        In June 2009, the FASB issued a standard related to Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 . The standard requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor's beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. The standard must be applied as of the beginning of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. We are assessing the impact of the standard.

        In June 2009, the FASB issued a standard Amendments to FASB Interpretation No. 46(R) . The standard requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise's involvement in a variable interest entity. The enhanced disclosures are required for any enterprise that holds a variable interest in a variable interest entity. The standard is effective as of the beginning of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. We are assessing the impact of the standard.

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        In June 2009, the FASB issued The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FAS No. 162 which was codified as ASC 105. ASC 105 requires that the FASB Accounting Standards Codification (the "Codification") become the source of authoritative U.S. generally accepted accounting principles recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative generally accepted accounting principles for SEC registrants. We adopted the provisions of ASC 105 effective July 1, 2009, which did not have an impact on our results of operations or financial position.

        In October 2009, the FASB issued Accounting Standards Update No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements . ASC 605-25 addresses the accounting for these arrangements and enables vendors to account for product and services (deliverables) separately rather than as a combined unit. The amendment will significantly improve the reporting of these transactions to more closely resemble their underlying economics, eliminate the residual method of allocation and improve financial reporting with greater transparency of how a vendor allocates revenue in its arrangements. The amendment in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. We are assessing the impact of the provisions of ASC 605-25.

Forward-Looking Statements

         This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "should," "can have," "likely" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

         The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. We believe these factors include, but are not limited to, those described in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 1A.-Risk Factors." Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements.

         Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

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Item 3.    Quantitative and Qualitative Disclosure About Market Risk.

Foreign Exchange Risk Management

        We have foreign currency exposure related to our operations outside of the United States. This foreign currency exposure arises primarily from the translation or re-measurement of our foreign subsidiaries' financial statements into U.S. dollars. Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies could adversely affect our consolidated results of operations. For the nine months ended September 30, 2009 and 2008, approximately $76.9 million, or 41.5%, and $110.1 million, or 51.6%, respectively, of our net sales were denominated in foreign currencies. We expect that the percentage of our net sales denominated in foreign currencies will increase in the foreseeable future as we expand our international operations. Selling, marketing and general costs related to these foreign currency net sales are largely denominated in the same respective currency, thereby partially offsetting our foreign exchange risk exposure. However, for net sales not denominated in U.S. dollars, if there is an increase in the rate at which a foreign currency is exchanged for U.S. dollars, it will require more of the foreign currency to equal a specified amount of U.S. dollars than before the rate increase. In such cases and if we price our products in the foreign currency, we will receive less in U.S. dollars than we did before the rate increase went into effect. If we price our products or services in U.S. dollars and competitors price their products in local currency, an increase in the relative strength of the U.S. dollar could result in our price not being competitive in a market where business is transacted in the local currency.

        In addition, our assets and liabilities of foreign operations are recorded in foreign currencies and translated into U.S. dollars. If the U.S. dollar increases in value against these foreign currencies, the value in U.S. dollars of the assets and liabilities recorded in these foreign currencies will decrease. Conversely, if the U.S. dollar decreases in value against these foreign currencies, the value in U.S. dollars of the assets and liabilities originally recorded in these foreign currencies will increase. Thus, increases and decreases in the value of the U.S. dollar relative to these foreign currencies have a direct impact on the value in U.S. dollars of our foreign currency denominated assets and liabilities, even if the value of these items has not changed in their original currency.

        We do not engage in any hedging activities related to this exchange rate risk. A 10% change in the U.S. dollar exchange rates in effect as of September 30, 2009 would cause a change in consolidated net assets of approximately $10.5 million and a change in net sales of approximately $7.6 million.

Interest Rate Risk

        We are exposed to interest rate risk in connection with our first lien term loan facility, our second lien term loan facility and any borrowings under our revolving credit facility. Our first lien and second lien facilities bear interest at floating rates based on the LIBOR or the greater of the prime rate or the federal funds rate plus an applicable borrowing margin. Borrowings under our revolving credit facility bear interest at floating rates based on the LIBOR or a base rate plus an applicable borrowing margin. For variable rate debt, interest rate changes generally do not affect the fair value of the debt instrument, but do impact future earnings and cash flows, assuming other factors are held constant.

        To manage our interest rate exposure and fulfill requirements under our credit facilities, effective September 13, 2007, we entered into an interest rate swap with Credit Suisse International that effectively converted a portion of our debt under our credit facilities from a floating interest rate to a fixed interest rate. As of September 30, 2009 and December 31, 2008, our interest rate swap agreement was for a $130.0 million notional principal amount under our credit facilities and had a fair value of a liability of $5.1 million and $6.0 million, respectively. Based on the amount outstanding under our first lien and second lien facilities at September 30, 2009, a change of one percentage point in the applicable interest rate, before the effect of our interest rate swap, would cause an increase or decrease in interest expense of approximately $2.6 million on an annual basis. For further information on the

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interest rate swap agreement, see Note 8-Debt located in the Notes to the Condensed Consolidated Financial Statements for further information.

Commodity Price Risk

        The major raw material that we purchase for production of our encapsulants for our Solar segment is resin, and paper liner is the second largest raw material cost. The price and availability of these materials are subject to market conditions affecting supply and demand. In particular, the price of many of our goods can be impacted by fluctuations in petrochemical and paper prices. Additionally, our distribution costs can be impacted by fluctuations in diesel prices. We currently do not have a hedging program in place to manage fluctuations in commodity prices.

Item 4.    Controls and Procedures.

Disclosure Controls and Procedures

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934, as amended ("Exchange Act") reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

        As of September 30, 2009, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Controls

        There have not been any changes in our internal controls over financial reporting during the three months ended September 30, 2009 that materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1A.    Risk Factors.

         An investment in our common stock involves a high degree of risk. You should carefully consider the following risks, as well as the other information in this Quarterly Report on Form 10-Q, before making an investment in our company. If any of the following risks actually occurs, our business, results of operations or financial condition may be adversely affected. In such an event, the trading price of our common stock could decline and you could lose part or all of your investment.

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Risks Related to Our Solar Business

If demand for solar energy in general and solar modules in particular does not continue to develop or takes longer to develop than we anticipate, sales in our Solar business may not grow or may decline, which would negatively affect our financial condition and results of operations.

        We expect that a significant amount of the growth in our overall business will come from the sale of encapsulants by our Solar business. Because our encapsulants are used in the production of solar modules, our financial condition and results of operations and future growth are tied to a significant extent to the overall demand for solar energy and solar modules. The solar energy market is at a relatively early stage of development and the extent to which solar modules will be widely adopted is uncertain. Many factors may affect the viability and widespread adoption of solar energy technology and demand for solar modules, and in turn, our encapsulants, including:

    cost-effectiveness of solar modules compared to conventional and non-solar renewable energy sources and products;

    performance and reliability of solar modules compared to conventional and non-solar renewable energy sources and products;

    availability and amount of government subsidies and incentives to support the development and deployment of solar energy technology;

    rate of adoption of solar energy and other renewable energy generation technologies, such as wind, geothermal and biomass;

    seasonal fluctuations related to economic incentives and weather patterns;

    fluctuations in economic and market conditions that affect the viability of conventional and non-solar renewable energy sources, such as increases or decreases in the prices of fossil fuels and corn or other biomass materials;

    the current worldwide economic recession as well as volatility and disruption in the credit markets, which may continue to slow the growth of the solar industry, may continue to cause our customers to experience a reduction in demand for their products and related financial difficulties and may continue to adversely impact our Solar business;

    fluctuations in capital expenditures by end users of solar modules, which tend to decrease when the overall economy slows down;

    the extent to which the electric power and broader energy industries are deregulated to permit broader adoption of solar electricity generation; and

    the cost and availability of polysilicon and other key raw materials for the production of solar modules.

        For example, in the first nine months of 2009, we experienced a decline in our Solar business mainly due to decreased global demand for solar energy as a result of legislative changes, such as the cap in feed-in tariffs in Spain implemented in 2008, the ongoing global recession and the ongoing worldwide credit crisis.

        If demand for solar energy and solar modules fails to develop sufficiently, demand for our customers' products as well as demand for our encapsulants will decrease, and we may not be able to grow our business or Solar net sales and our financial condition and results of operations will be harmed.

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A significant reduction or elimination of government subsidies and economic incentives or a change in government policies that promote the use of solar energy could have a material adverse effect on our business and prospects.

        Demand for our encapsulants depends on the continued adoption of solar energy and the resultant demand for solar modules. Demand for our products depends, in large part, on government incentives aimed to promote greater use of solar energy. In many countries in which solar modules are sold, solar energy would not be commercially viable without government incentives. This is because the cost of generating electricity from solar energy currently exceeds, and we believe will continue to exceed for the foreseeable future, the costs of generating electricity from conventional energy sources.

        The scope of government incentives for solar energy depends, to a large extent, on political and policy developments relating to environmental and energy concerns in a given country that are subject to change, which could lead to a significant reduction in, or a discontinuation of, the support for renewable energy in such country. Federal, state and local governmental bodies in many of the target markets for our Solar business, including Germany, Italy, Spain, the United States, France, Japan and South Korea, have provided subsidies and economic incentives in the form of feed-in tariffs, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of solar energy products to promote the use of solar energy and to reduce dependency on other forms of energy. These government economic incentives could be reduced or eliminated earlier than anticipated. For example, in June 2008, the German parliament adopted new legislation that will decrease the feed-in tariff for solar energy between 8% and 10% in 2010 and 9% annually thereafter. Also, in September 2008, the Spanish parliament adopted new legislation that will decrease the feed-in tariff for solar energy by approximately 27% and capped its subsidized PV installations at 500 MW for 2009.

        Moreover, electric utility companies, or generators of electricity from fossil fuels or other renewable energy sources, could also lobby for changes in the relevant legislation in their markets to protect their revenue streams. Reduced growth in or the reduction, elimination or expiration of government subsidies and economic incentives for solar energy, especially those in our target markets, could cause our Solar net sales to decline and harm our business.

Our Solar business is dependent on a limited number of customers, which may cause significant fluctuations or result in declines in our Solar net sales.

        The solar module industry is relatively concentrated. As a result, we sell substantially all of our encapsulants to a limited number of solar module manufacturers. We expect that our results of operations will, for the foreseeable future, continue to depend on the sale of encapsulants to a relatively small number of customers. Sales to First Solar accounted for 29% and 19% of our Solar net sales in the nine months ended September 30, 2009 and the year ended December 31, 2008, respectively. In addition, the top five customers in our Solar segment accounted for approximately 61% and 47% of our Solar net sales in the nine months ended September 30, 2009 and the year ended December 31, 2008, respectively. Furthermore, participants in the solar industry, including our customers, are experiencing pressure to reduce their costs. Because we are part of the overall supply chain to our customers, any cost pressures experienced by them may affect our business and results of operations. Our customers may not continue to generate significant Solar net sales for us. Conversely, we may be unable to meet the production demands of our customers or maintain these customer relationships. Also, new entrants into the solar module manufacturing industry, primarily from China, could negatively impact the demand for, and pricing of, our customers' products, which could reduce the demand for our encapsulants. We believe our European customers have lost market share to low-cost module manufacturers, primarily from China, that continue to penetrate the European solar market and whom we do not sell encapsulants to. We have lost market share in the European market due to emerging low-cost solar module manufacturers, primarily from China, and if we are not able to

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supply encapsulants to these new entrants in the future, we could lose further market share and also face competition from new encapsulant manufacturers.

        In addition, a significant portion of our outstanding accounts receivable is derived from sales to a limited number of customers. The accounts receivable from our top five Solar customers with the largest receivable balances represented 27% and 35% of our accounts receivable balance as of September 30, 2009 and December 31, 2008, respectively. Moreover, many solar companies are facing and may continue to face significant liquidity and capital expenditure requirements, and as a result, our customers may have trouble making payments owed to us, which could affect our business, financial condition and results of operations. Any one of the following events may cause material fluctuations or declines in our Solar net sales and have a material adverse effect on our business, financial condition and results of operations:

    reduction, postponement or cancellation of orders from one or more of our significant customers;

    reduction in the price one or more significant solar customers are willing to pay for our encapsulants;

    selection by one or more solar customers of products competitive with our encapsulants;

    loss of one or more significant solar customers and failure to obtain additional or replacement customers; and

    failure of any of our significant solar customers to make timely payment for products.

Our Solar business's growth is dependent upon the growth of our key Solar customers and our ability to keep pace with our customers' growth.

        In addition to relying on a small number of customers, we believe we were the primary supplier to each of our top 10 Solar customers in the first nine months of 2009. The future growth and success in our Solar business depends on the ability of such customers to grow their businesses and our ability to meet any such growth, principally through the addition of manufacturing capacity. If our Solar customers do not increase production of solar modules, there will be no corresponding increase in encapsulant orders. Alternatively, in the event such customers grow their businesses, we may not be able to meet their increased demands, which would require such customers to find alternative sources for encapsulants. In addition, it is possible that customers for whom we are the exclusive supplier of encapsulants will seek to qualify and establish a secondary supplier of encapsulants, which would reduce our share with such customers and could increase that customer's pricing leverage. If our Solar customers do not grow their businesses or they find alternative sources for encapsulants to meet their demands, it could limit our ability to grow our business and increase our Solar net sales.

Technological changes in the solar energy industry or our failure to develop and introduce or integrate new technologies could render our encapsulants uncompetitive or obsolete, which would adversely affect our business.

        The solar energy market is rapidly evolving and competitive and is characterized by continually changing technology requiring continuous improvements in solar modules to increase efficiency and power output and improve aesthetics. This requires us and our customers to continuously invest significant financial resources to develop new solar module technology and enhance existing solar modules to keep pace with evolving industry standards and changing customer requirements and to compete effectively in the future. Our failure to further refine our encapsulant technology and develop and introduce new or enhanced encapsulants or other products, or our competitors' development of products and technologies that perform better or are more cost effective than our products, could cause our encapsulants to become uncompetitive or obsolete, which would adversely affect our business,

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financial condition and results of operations. Product development activities are inherently uncertain, and we could encounter difficulties in commercializing new technologies. As a result, our product development expenditures in our Solar business may not produce corresponding benefits.

        Moreover, we produce a component utilized in the manufacturing of solar modules. New solar technologies may emerge or existing technologies may gain market share that do not require encapsulants as we produce them, or at all. Such changes could result in decreased demand for our encapsulants or render them obsolete, which would adversely affect our business, financial condition and results of operations.

We rely upon trade secrets and contractual restrictions, and not patents, to protect our proprietary rights. Failure to protect our intellectual property rights may undermine our competitive position and protecting our rights or defending against third-party allegations of infringement may be costly.

        Protection of proprietary processes, methods, documentation and other technology is critical to our business. Failure to protect, monitor and control the use of our existing intellectual property rights could cause us to lose our competitive advantage and incur significant expenses. We rely on trade secrets, trademarks, copyrights and contractual restrictions to protect our intellectual property rights and currently do not hold any patents related to our Solar business. However, the measures we take to protect our trade secrets and other intellectual property rights may be insufficient. While we enter into confidentiality agreements with our Solar employees and third parties to protect our intellectual property rights, such confidentiality provisions related to our trade secrets could be breached and may not provide meaningful protection for our trade secrets. Also, others may independently develop technologies or products that are similar or identical to ours. In such case, our trade secrets would not prevent third parties from competing with us.

        Third parties or employees may infringe or misappropriate our proprietary technologies or other intellectual property rights, which could harm our business and operating results. Policing unauthorized use of intellectual property rights can be difficult and expensive, and adequate remedies may not be available.

        We are currently in litigation with a former employee, James P. Galica, in our Solar business and his current employer, JPS Elastomerics Corp., for the misappropriation and theft of our trade secrets. In August 2008, the jury determined that the technology for our polymeric sheeting product line is a trade secret. The jury also determined that our former employee and his current employer had not misappropriated our trade secrets. We have not decided if we will appeal the jury's determination. The jury also found that our former employee had breached his confidentiality agreement with us. Subsequently, the judge determined that JPS and Galica had violated the Massachusetts Unfair and Deceptive Trade Practices Act, finding that the technology for our polymeric sheeting product is a trade secret and that JPS and Galica had misappropriated our trade secrets. The judge awarded us compensatory and punitive damages, attorneys' fees and costs and issued a temporary injunction preventing JPS from manufacturing, marketing or selling the competing products, which are substantially similar to some of our encapsulants. The final amount of damages to be awarded to us, as well as the scope of a permanent injunction, is still pending before the court and will be determined by the presiding judge. JPS has filed a motion for reconsideration of the court's decision that JPS and Galica had violated the Massachusetts Unfair and Deceptive Trade Practices Act. Final judgment will not be entered until these pending matters are resolved. The court has ordered each party to brief the remaining issues. Upon entry of final judgment, JPS will have the right to appeal the judge's ruling, and we will have the right to appeal the jury's verdict. If JPS or Galica is successful on the appeals from both the jury's verdict and the judge's rulings, the result may be a new trial or a final determination that JPS may compete with us by continuing to sell a product that is substantially similar to some of our encapsulants. JPS may also be allowed to compete with us on some encapsulant products based on the court's ruling on the scope and duration of the permanent injunction. Even if we are ultimately

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successful, this lawsuit and any future lawsuits to protect our intellectual property rights or defend against third-party infringement claims may be costly and may divert management attention and other resources away from our business.

We face competition in our Solar business from other companies producing encapsulants for solar modules.

        The market for encapsulants is highly competitive and continually evolving. We compete with a number of encapsulant manufacturers, some of which are large, global companies with substantial financial, manufacturing and logistics resources and strong customer relationships. If we fail to attract and retain customers for our current and future products, we will be unable to increase our revenues and market share. Our primary encapsulant competitors include Bridgestone Corporation, ETIMEX Primary Packaging GmbH and Mitsui Chemicals, Inc. We also expect to compete with new entrants to the encapsulant market, including those that may offer more advanced technological solutions or that have greater financial resources than we do. Further, as the China solar market matures, we expect other encapsulant providers from China and the greater Asian markets will compete with us. Our competitors may develop and produce or may be currently producing encapsulants that offer advantages over our products. A widespread adoption of any of these technologies could result in a rapid decline in our position in the encapsulant market and our revenues and adversely affect our margins.

Our failure to build and operate new manufacturing facilities and increase production capacity at our existing facilities to meet our customers' requirements could harm our business and damage our customer relationships in the event demand for encapsulants increases. Conversely, expanding our production in times of overcapacity could have an adverse impact on our results of operations.

        Prior to the fourth quarter of 2008, our manufacturing facilities generally operated at full production capacity, which constrained our ability to meet increased demand from our customers. The future success of our Solar business depends, in part, on our ability to increase production capacity to satisfy any increased demand from our customers. We may be unable to expand our Solar business, satisfy customer requirements, maintain our competitive position and improve profitability if we are unable to build and operate new manufacturing facilities and increase production capacity at our existing facilities to meet any increased demand for our Solar products. For example, if there are delays in our new Malaysian facility achieving target yields and output, we will not meet our target for adding capacity, which would limit our ability to increase encapsulant sales and result in lower than expected Solar net sales and higher than expected costs and expenses. Moreover, we may experience delays in receiving equipment and be unable to meet any increases in customer demand. Failure to satisfy customer demand may result in a loss of market share to competitors and may damage our relationships with key customers.

        In addition, due to the lead time required to produce the equipment used in our encapsulant manufacturing process, it can take up to a year to obtain new machines after they are ordered. Accordingly, we are required to order production equipment well in advance of expanding our facilities or opening new facilities and in advance of accepting additional customer orders. If such facilities are not expanded or completed on a timely basis or if anticipated customer orders do not materialize, we may not be able to generate sufficient Solar net sales to offset the costs of new production equipment, which could have an adverse impact on our results of operations. Furthermore, we rely on longer-term forecasts from our Solar customers to plan our capital expenditures. If these forecasts prove to be inaccurate, either we may have spent too much on capacity growth, which could require us to consolidate facilities, in which case our financial results would be adversely affected, or we may have spent too little on capital expenditures, in which case we may be unable to satisfy customer demand, which could adversely affect our business. Furthermore, our ability to establish and operate new

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manufacturing facilities and expand production capacity is subject to significant risks and uncertainties, including:

    restrictions in the agreements governing our indebtedness that restrict the amount of capital that can be spent on manufacturing facilities;

    inability to raise additional funds or generate sufficient cash flow from operations to purchase raw material inventory and equipment or to build additional manufacturing facilities;

    delays and cost overruns as a result of a number of factors, many of which are beyond our control, such as increases in raw material prices and long lead times or delays with equipment vendors;

    delays or denials of required approvals by relevant government authorities;

    diversion of significant management attention and other resources;

    inability to hire qualified personnel; and

    failure to execute our expansion plan effectively.

        If we are unable to establish or successfully operate additional manufacturing facilities or to increase production capacity at our existing facilities, as a result of the risks described above or otherwise, we may not be able to expand our business as planned and our Solar net sales may be lower than expected. Alternatively, if we build additional manufacturing facilities or increase production capacity at our existing facilities, we may not be able to generate sufficient customer demand for our encapsulants to support the increased production levels, which would adversely affect our business and operating margins.

Our Solar business is exposed to risks related to running our facilities at full production capacity from time to time that could result in decreased Solar net sales and affect our ability to grow our business in future periods.

        Prior to the fourth quarter of 2008, our manufacturing facilities generally operated at full production capacity. If any of our current or future production lines or equipment were to experience any problems or downtime, such as in 2005 when one of our plants was without electricity for five days following a hurricane, we may not be able to shift production to new lines and may not be able to meet our production targets, which would result in decreased Solar net sales and adversely affect our customer relationships. As a result, our per-unit manufacturing costs would increase, we would be unable to increase sales as planned and our earnings would likely be negatively impacted. In addition, when our encapsulant production lines are running at full capacity, they are generally used solely to meet current customers' orders. As such, there is very limited production line availability to test new technologies or further refine existing technologies that are important for keeping pace with evolving industry standards and changing customer requirements and competing effectively in the future. Limitations in our ability to test new products or enhancements to our existing products could cause our encapsulants to become uncompetitive or obsolete, which would adversely affect our business.

We may be subject to claims that we have infringed, misappropriated or otherwise violated the patent or other intellectual property rights of a third party. The outcome of any such claims is uncertain and any unfavorable result could adversely affect our business, financial condition and results of operations.

        We may be subject to claims by third parties that we have infringed, misappropriated or otherwise violated their intellectual property rights. These claims may be costly to defend, and we ultimately may not be successful. An adverse determination in any such litigation could subject us to significant liability to third parties (potentially including treble damages), require us to seek licenses from third parties (which may not be available on reasonable terms, or at all), make substantial one-time or ongoing

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royalty payments, redesign our products or subject us to temporary or permanent injunctions prohibiting the manufacture and sale of our products, the use of our technologies or the conduct of our business. Protracted litigation could also result in our customers or potential customers deferring or limiting their purchase or use of our products until resolution of such litigation. In addition, we may have no insurance coverage in connection with such litigation and may have to bear all costs arising from any such litigation to the extent we are unable to recover them from other parties. Any of these outcomes could have a material adverse effect on our business, financial condition and results of operations.

We generally operate on a purchase order basis with our Solar customers, and their ability to cancel, reduce, or postpone orders could reduce our Solar net sales and increase our costs.

        Sales to our Solar customers are typically made through non-exclusive, short-term purchase order arrangements that specify prices and delivery parameters. The timing of placing these orders and the amounts of these orders are at our customers' discretion. Customers may cancel, reduce or postpone purchase orders with us prior to production on relatively short notice. If customers cancel, reduce or postpone existing orders or fail to make anticipated orders, it could result in the delay or loss of anticipated sales, which could lead to excess inventory and unabsorbed overhead costs. Because our encapsulants have a limited shelf life from the time they are produced until they are incorporated into a solar module, we may be required to sell any excess inventory at a reduced price, or we may not be able to sell it at all and incur an inventory write-off, which could reduce our Solar net sales and increase our costs. In the first nine months of 2009, we experienced postponements and cancellations in orders and, as a result, incurred approximately $1.0 million of inventory write-offs.

We may be unable to manage the expansion of our Solar operations effectively.

        We expect to expand our existing facilities and add new facilities to meet future demand for encapsulants. We recently completed expansions in our facilities in Connecticut and Spain. The production line qualification on our Malaysian facility has been completed, and we began shipping production quantities of encapsulants from that facility in the third quarter of 2009. To manage the potential growth of our operations, we will be required to improve operational and financial systems, procedures and controls, increase manufacturing capacity and output and expand, train and manage our growing employee base. Furthermore, management will be required to maintain and expand our relationships with our customers, suppliers and other third parties. Our Solar business's current and planned operations, personnel, systems, internal procedures and controls may not be adequate to support our future growth. If we are unable to manage the growth of our Solar business effectively, we may not be able to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.

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Our dependence on a limited number of third-party suppliers for raw materials for our encapsulants and other significant materials used in our process could prevent us from timely delivering encapsulants to our customers in the required quantities, which could result in order cancellations and decreased revenues.

        We purchase resin and paper liner, the two main components used in our manufacturing process, from a limited number of third-party suppliers. If we fail to develop or maintain our relationships with these suppliers or our other suppliers, or if the suppliers' facilities are affected by events beyond our control, we may be unable to manufacture our encapsulants or our encapsulants may be available only for customers in lesser quantities, at a higher cost or after a long delay. We may be unable to pass along any price increases relating to materials costs to our customers, in which case our margins could be reduced. In addition, we do not maintain long-term supply contracts with our suppliers. Our inventory of raw materials for our encapsulants, including back-up supplies of resin, may not be sufficient in the event of a supply disruption. In 2005, we encountered a supply disruption when one of our resin suppliers had its facilities damaged by a hurricane, and another supplier had a reactor fire at the same time. This forced us to use our back-up supplies of resin. The failure of a supplier to supply materials and components, or a supplier's failure to supply materials that meet our quality, quantity and cost requirements in a timely manner, could impair our ability to manufacture our products to specifications, particularly if we are unable to obtain these materials and components from alternative sources on a timely basis or on commercially reasonable terms. If we are forced to change suppliers, our customers may require us to undertake testing to ensure that our encapsulants meet the customer's specifications.

Our Solar gross margins and profitability may be adversely affected by rising commodity costs.

        We are dependent on certain raw and other materials, particularly resin and paper, for the manufacture of our encapsulants. In addition, the cost of equipment used to manufacture our encapsulants is affected by steel prices. The prices for resin, paper and steel have been volatile over the past few years and could increase. If the prices for the commodities and equipment we use in our Solar business increase, our gross margins and results of operations may be adversely affected.

As a supplier to solar module manufacturers, disruptions in any other component of the supply chain to solar module manufacturers may adversely affect our customers and consequently limit the growth of our business and revenue.

        We supply a component to solar module manufacturers. As such, if there are disruptions in any other area of the supply chain for solar module manufacturers, it could affect the overall demand for our encapsulants. For example, the increased demand for polysilicon due to the rapid growth of the solar energy and computer industries and the significant lead time required for building additional capacity for polysilicon production led to an industry-wide shortage of polysilicon from 2005 through 2008, which is an essential raw material in the production of most of the solar modules produced by many of our customers. This and other disruptions to the supply chain may force our customers to reduce production, which in turn would decrease customer demand for our encapsulants and could adversely affect our Solar net sales. In addition, reduced orders for our encapsulants could result in underutilization of our production facilities and cause an increase of our marginal production cost. In 2009, we experienced postponements and cancellations in orders and, as a result, incurred approximately $1.0 million of inventory write-offs.

The sales cycle for our encapsulants can be lengthy, which could result in uncertainty and delays in generating Solar net sales.

        The integration and testing of our encapsulants with prospective customers' solar modules or enhancements to existing customers' solar modules requires a substantial amount of time and resources. A Solar customer may need up to one year to test, evaluate and adopt our encapsulants and qualify a

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new solar module, before ordering our encapsulants. Our Solar customers then need additional time to begin volume production of solar modules that incorporate our encapsulants. As a result, the complete sales cycle for our Solar business can be lengthy. We may experience a significant delay between the time we increase our expenditures for product development, sales and marketing efforts and inventory for our Solar business and the time we generate Solar net sales, if any, from these expenditures. In addition, because we typically do not have long-term commitments from our Solar customers, we must repeat the sales process on a continual basis even for existing customers that develop new solar modules or enhancements to their existing solar modules.

Our Solar business could be adversely affected by seasonal trends and construction cycles.

        We may be subject to industry-specific seasonal fluctuations in the future, particularly in climates that experience colder weather during the winter months, such as Germany. For example, in the first nine months of 2009, we experienced a decline in our Solar business mainly due to decreased global demand for solar energy as a result of legislative changes, such as the cap in feed-in tariffs in Spain implemented in 2008, the ongoing global recession and the ongoing worldwide credit crisis. There are various reasons for seasonality fluctuations, mostly related to economic incentives and weather patterns. In Germany, the construction of solar energy systems is concentrated in the second half of the calendar year, largely due to the annual reduction of the applicable minimum feed-in tariff. In the United States, solar module customers will sometimes make purchasing decisions towards the end of the year in order to take advantage of tax credits or for budgetary reasons. In addition, construction levels are typically slower in colder months. Accordingly, our business and quarterly results of operations could be affected by seasonal fluctuations in the future.

Problems with product quality or product performance, including defects, could result in a decrease in customers and Solar net sales, unexpected expenses and loss of market share.

        Our encapsulants are complex and must meet stringent quality requirements. Products as complex as our encapsulants may contain undetected defects, especially when first introduced. For example, our encapsulants may contain defects that are not detected until after they are shipped or are installed because we cannot test for all possible scenarios. These defects could cause us to incur significant costs, including costs to service or replace products, divert the attention of our engineering personnel from product development efforts and significantly affect our customer relations and business reputation. If we deliver products with defects, or if there is a perception that our products contain errors or defects, our credibility and the market acceptance and sales of our encapsulants could materially decline. In addition, we could be subject to product liability claims and could experience increased costs and expenses related to significant product liability claims or other legal judgments against us, or a widespread product recall by us or a solar module manufacturer. For example, during the second half of 2008, we recorded an accrual of $5.6 million relating to specific product performance matters, which amount represents management's best estimate of the costs to repair or replace such product. The majority of this accrual relates to a quality claim by one of our customers in connection with a non-encapsulant product that we purchased from a vendor in 2005 and 2006 and resold. We stopped selling this product in 2006 and are currently attempting to resolve this matter. We may increase our accruals in future periods or incur charges in excess of that amount, which would result in increased expenses in future periods that adversely affect our results of operations.

        The manufacturing process for our encapsulants is highly complex. Minor deviations in the manufacturing process can cause substantial decreases in yield and, in some cases, cause production to be suspended. We have from time to time experienced lower than anticipated manufacturing yields. This typically occurs during the production of new encapsulants or the installation and start-up of new process technologies or equipment. As we expand our production capacity, we may experience lower yields initially as is typical with any new equipment or process. If we do not achieve planned yields, our

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costs of sales could increase, and product availability would decrease resulting in lower Solar net sales than expected.

Changes to existing regulations in the utility sector and the solar energy industry may present technical, regulatory and economic barriers to the purchase and use of solar modules, which in turn may significantly reduce demand for our products.

        The market for power generation products is heavily influenced by government regulations and policies concerning the electric utility industry, as well as the internal policies of electric utility companies. These regulations and policies often relate to electricity pricing and technical interconnection of end user-owned power generation. In a number of countries, these regulations and policies are being modified and may continue to be modified. End users' purchases of alternative energy sources, including solar modules, could be deterred by these regulations and policies. For example, utility companies sometimes charge fees to larger, industrial customers for disconnecting from the electricity transmission grid or relying on the electricity transmission grid for back-up purposes. Such fees could increase the costs of using solar modules, which may lead to reduced demand for solar modules and, in turn, our encapsulants.

        We anticipate that solar modules and their installation will continue to be subject to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters in various countries. Any new government regulations or utility policies pertaining to solar modules may result in significant additional expenses to our Solar customers, and their distributors and end users, which could cause a significant reduction in demand for solar modules and, in turn, our encapsulants.

Risks Related to Our Quality Assurance Business

The quality assurance testing markets are highly competitive, and many of the companies with which we compete have substantially greater resources and geographical presence than us.

        The quality assurance industry is highly competitive, and our Quality Assurance business competes in the United States and internationally with many well-established quality assurance and certification companies on the basis of technical and industry knowledge, pricing, geographic proximity, client service, timeliness, accuracy, marketing, breadth of service offering, level of consultation and actionable information and technical excellence in a given product category. Our global competitors operate in multiple geographic areas while other competitors operate locally. In addition, we compete with non-profit certification companies and in-house quality assurance programs maintained and operated by manufacturers and retailers themselves. The ability to increase or maintain our Quality Assurance net sales or gross margins in the global market or in various local markets may be limited as a result of actions by competitors.

        Our competitors may be able to provide clients with different or greater capabilities or benefits than we can provide in areas such as geographical presence, technical qualifications, price and the availability of human resources. The inability of our Quality Assurance business to compete effectively with respect to any of these or other factors could have a material adverse effect on our business, financial condition or results of operations. In order to remain competitive in the quality assurance testing industry, we must also keep pace with changing technologies and client preferences. If we are unable to expand our geographic presence and testing capacity, maintain or enter into strategic partnerships or differentiate our services from those of our competitors, our Quality Assurance business may not be able to obtain new clients or it may lose existing clients. Competitors may in the future adopt aggressive pricing policies and diversify their service offerings. In addition, new competitors or alliances among competitors may emerge and compete more effectively than our Quality Assurance business can. There is also a trend towards consolidation in certain markets that our Quality Assurance

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business serves, which may result in the emergence of new or bigger competitors. If we cannot offer prices, services or a quality of service at least comparable to those offered by our competitors, we could lose market share or our profitability may be affected. These competitive pressures could materially and adversely affect our business, financial condition and results of operations.

Failure to maintain professional accreditations and memberships may affect our Quality Assurance business's ability to compete or generate net sales.

        Our Quality Assurance clients rely on our numerous professional accreditations and memberships, including ISO 9000, ISO 17025, SA 8000 and Underwriters Laboratories, to ensure continued compliance with their quality assurance and social audit standards. Certain accreditations are granted for limited periods of time and are subject to periodic renewal. Any failure to meet our ongoing professional responsibilities could lead us to lose, either temporarily or on a permanent basis, one or more of such accreditations or memberships. In addition, a public authority or professional organization that has granted one or more accreditations or memberships to us could decide to unilaterally withdraw such accreditations and memberships. If our accreditations and memberships with these or other professional organizations are suspended or revoked, our clients may decrease the amount of business that they do with our Quality Assurance business, or stop doing business with us altogether, which would negatively affect our business, financial condition and results of operations.

Damage to the professional reputation of our Quality Assurance business would adversely affect our Quality Assurance net sales and the growth prospects of our Quality Assurance business.

        Our Quality Assurance business depends on longstanding relationships with our clients, including leading global retailers and consumer product manufacturers, for a significant portion of our Quality Assurance net sales. Product liability claims, poor performance, lax standards, violations of laws or regulations, employee misconduct, information security breaches or other action affecting our Quality Assurance business could damage our reputation. Providing quality assurance services for products for human use or consumption involves inherent legal and reputational risks and our success depends on the ability of our Quality Assurance business to maintain service quality for our existing clients. Service quality issues, real or alleged, or allegations of product defects, contamination, tampering, misbranding, spoliation, or other adulteration, even when false or unfounded, could tarnish the image of our Quality Assurance business and may cause our clients to choose other quality assurance providers. We also provide our clients with limited indemnities for our failure to meet applicable standards. Quality assurance testing protocols only identify known risks, and we have cleared products in the past that later were determined to present a previously unknown risk. No testing protocol can discern unknown risks but we may nevertheless be held liable for those risks. A significant product liability or other legal judgment against our Quality Assurance business, or a widespread product recall of a tested product, may adversely affect our profitability. Moreover, even if a product liability or consumer fraud claim is unsuccessful, has no merit or is not pursued, the negative publicity surrounding assertions against products or processes that our Quality Assurance business tested could adversely affect our reputation, which in turn could lead to a loss of existing clients or make it more difficult to attract new clients. If our Quality Assurance business's reputation is damaged, our net sales and growth prospects could be adversely affected.

Our Quality Assurance business's growth depends on our ability to expand our operations and capacity and manage such expansion effectively.

        In order to maintain our current clients and grow our Quality Assurance business, we must be able to meet increasing client demand, which requires additional space, equipment and human resources. The future success of our Quality Assurance business depends on our ability to increase our service capacity, and if we are unable to expand our operations, obtain testing equipment and hire additional

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qualified personnel, we may be unable to expand our Quality Assurance business and satisfy client demands. The testing equipment our Quality Assurance business uses is highly customized and is built to order, which results in significant lead times. Therefore, it can take several months to obtain, install and calibrate new equipment once ordered, and we must have the facilities available to accommodate it. Building a new testing facility can take up to a year.

        We have recently expanded our Quality Assurance operations and plan to continue to expand such operations, which can result in significant demands on administrative, operational and financial personnel and other resources. Additional expansion in existing or new markets could strain these resources and increase capital needs, and our personnel, systems, procedures, controls and existing space may not be adequate to support further expansion. Additionally, international growth in our Quality Assurance business may be limited by the fact that in some countries we are required to operate with a local strategic partner. Finding these partners may be difficult or impossible, and our arrangements with them may negatively affect our Quality Assurance net sales.

        Moreover, we have a limited number of laboratories in which to process engagements and a limited number of trained personnel to conduct inspections and audits. When these laboratories or our personnel resources are at capacity, we cannot accept more engagements. Our Quality Assurance clients may require capacity and resources greater than that which we can provide. If we cannot process engagements in the time our clients require due to capacity or other resource constraints, we may lose clients or experience a decline in engagements.

Our Quality Assurance business may lose money or experience reduced margins if we do not adequately estimate the cost of our Quality Assurance engagements.

        We perform the majority of our Quality Assurance engagements on a fixed-price basis. Fixed-price contracts require us to price our contracts by predicting expenditures in advance. In addition, some engagements obligate our Quality Assurance business to provide ongoing and other supporting or ancillary services on a fixed-price basis or with limitations on our ability to increase prices. When making proposals for engagements on a fixed-price basis, we rely on our estimates of costs and timing for completing the projects. These estimates reflect management's best judgment regarding our Quality Assurance business's capability to complete the task efficiently. Any increased or unexpected costs or unanticipated delays in connection with the performance of fixed-price contracts, including delays caused by factors outside our control, such as increased energy and labor costs, could result in losses or reduced margins. Unexpected costs and unanticipated delays may cause our Quality Assurance business to incur losses or reduced margins on fixed-price contracts. In addition, some of our Quality Assurance engagements are on a time-and-material basis. While these types of contracts are generally subject to less uncertainty than fixed-price contracts, to the extent that actual labor and other costs are higher than the contract rates, these contracts may be less profitable or unprofitable.

Our failure to establish and maintain partnerships and other strategic alliances with other quality assurance providers may delay the expansion or provision of our services, harm our reputation and cause us to lose clients or prevent us from growing our Quality Assurance business.

        Our Quality Assurance business serves a diverse and global client base, which requires us to operate where such clients operate. We are required to work with a partner in certain countries either because of local laws and regulations or because such arrangements are customary to doing business in such countries. Also, we enter into and will continue to enter into strategic alliances with other quality assurance services in order to meet client demands in countries in which it may not be practicable for us to operate on a stand-alone basis. We do not generally have long-term contracts with our strategic partners, so they may cease doing business with us on relatively short or no notice. Yet if performance issues arise with respect to a strategic partner's services, such issues could damage our Quality Assurance business's reputation and exclusivity arrangements with such partners could prevent us from

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engaging in new strategic alliances for certain testing and inspection services in particular markets. In addition, we have also entered into joint venture agreements that restrict our ability to enter into certain product testing markets in specified geographic markets, either with another strategic partner or on our own. If we are unable to establish or maintain relationships with strategic partners, if such partners damage our reputation or if contract arrangements with such partners prevent us from entering certain testing markets, we could lose quality assurance clients or may not be able to expand our Quality Assurance business, either of which could have an adverse effect on our results of operations.

Our Quality Assurance business's failure to develop and protect its proprietary systems of design reviews and research processes could negatively affect its business and future growth.

        Similar to our Solar business, our Quality Assurance business does not rely on any patents and relies primarily on trade secrets, trademarks, copyrights and other contractual restrictions to protect our intellectual property. In addition to breaching confidentiality agreements, former employees and others may obtain knowledge of our Quality Assurance business's trade secrets through independent development or other legal means. Policing unauthorized use of proprietary technology can be difficult and expensive, and adequate remedies may not be available in the event of unauthorized use or disclosure of trade secrets. Any lawsuits to protect our Quality Assurance business's intellectual property may be costly and may divert management attention and other resources away from our business, and any such litigation may not be resolved in our favor. An adverse determination in any such litigation will impair our Quality Assurance business's intellectual property rights and may harm our business, prospects and competitive position. In addition, we have no insurance coverage against such litigation costs and have to bear all costs arising from such litigation to the extent we are unable to recover them from other parties.

Our Quality Assurance business may be subject to professional liability claims and may not have adequate insurance coverage.

        Quality assurance testing protocols are only designed to identify known risks. In the past, our Quality Assurance business has cleared products that only later were determined to present a previously unknown risk. Testing protocols cannot discern unknown risks, for which we nevertheless may be held liable. Also, there may be a significant delay between the provision of services and the making of a related claim. While we maintain insurance for our Quality Assurance business to protect against losses from professional liability claims, such insurance may not be available, is subject to deductibles and may not be adequate to cover all the costs and expenses related to a significant professional liability or other legal judgment against us, which could adversely affect the results of operations of our Quality Assurance business.

        In addition, the insurance market could evolve in a manner unfavorable to us, resulting in increased premiums or making it impossible or much more expensive to obtain adequate insurance coverage. These factors could result in a substantial increase in our insurance costs, cause us to operate without insurance or cause us to withdraw from certain markets, which could have a significant adverse effect on our Quality Assurance business and related results of operations.

Changes in regulations applicable to our Quality Assurance business could have a significant effect on our business, financial condition, results of operations or future growth.

        Our Quality Assurance business conducts operations in a heavily regulated environment, with regulations differing, sometimes substantially, from one country to another. Regulations applicable to our Quality Assurance business may change either favorably or unfavorably for us. The strengthening or enforcement of regulations, while in some cases creating new business opportunities, may also create operating conditions that increase our operating costs, limit our business areas or more generally slow

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the development of our Quality Assurance business. In extreme cases, such changes in the regulatory environment could lead us to exit certain markets where we consider the regulation to be overly burdensome. In general, rapid and/or important changes in regulations could have a significant adverse effect on our business, financial condition, results of operations or future growth.

Risks Related to Our Businesses

We have reported potential violations of the U.S. Foreign Corrupt Practices Act to the U.S. Department of Justice, or the DOJ, and the U.S. Securities and Exchange Commission, or the SEC, which could result in criminal prosecution, fines, penalties or other sanctions and could have a material adverse effect on our business, financial condition, results of operations and cash flows. As of the date of this filing, the DOJ has not indicated whether it intends to pursue this matter, and the SEC has advised us that because it does not appear that we were subject to the SEC's jurisdiction during the relevant period, the SEC does not intend to pursue this matter at this time. We cannot predict the outcome of this matter.

        The U.S. Foreign Corrupt Practices Act, or FCPA, makes it unlawful for, among other persons, a U.S. company or its employees or agents to offer or make improper payments to any "foreign official" in order to obtain or retain business or to induce such "foreign official" to use his or her influence with a foreign government or instrumentality thereof for such purpose. Under the FCPA, we and our officers, directors, controlling stockholders, employees and agents who knew about (or, in certain circumstances, should have known about) or were otherwise involved with potential violations could be subject to substantial fines, potential criminal prosecution, injunctions against further violations or deferred prosecution arrangements. Other requirements can be imposed on companies that violate the FCPA, including the appointment of a government-approved monitor or the implementation of enhanced compliance procedures.

        In late 2008, in the course of routine monitoring of our internal controls, our internal audit staff discovered certain payments made and expenses for entertainment provided to government officials in India from approximately 2006 to 2008 that may have been in violation of the FCPA as well as Indian law. The payments and entertainment expenses were related to our Quality Assurance business and totaled approximately $26,000. Upon discovering such payments and expenses and performing an initial review and evaluation with the assistance of an outside forensic accounting firm, our Audit Committee directed outside legal counsel to perform an investigation. Our internal audit staff, outside legal counsel or forensic accounting firm performed investigative procedures in 12 of our foreign locations where major international operations are conducted. In the course of that investigation, we discovered up to approximately $74,000 in additional expenses since 2003 in two other jurisdictions that also may be inconsistent with the requirements of the FCPA. Our internal investigation uncovered no evidence that the payments or expenses were related to (i) falsifying, altering or otherwise influencing the conduct of our quality assurance tests or test results or (ii) securing any government contracts.

        After completing our internal investigation, we made personnel changes in India and enhanced our FCPA-related policies and procedures, including providing additional ethical and FCPA training to key employees, enhancing our monitoring of expenses and other internal controls and appointing a chief compliance director. It is possible that despite our efforts, additional FCPA issues, or issues under anti-corruption laws of other jurisdictions, could arise in the future. Any failure by us to comply with the FCPA or anti-corruption laws in the future could have a material adverse effect on our business, financial condition, results of operations and cash flows.

        In early June 2009, we self-reported the results of our inquiry to the U.S. Department of Justice, or the DOJ, and the enforcement division of the U.S. Securities and Exchange Commission, or the SEC. To our knowledge, the DOJ and SEC were not aware of this matter prior to our report. Shortly after our report, we provided additional information requested by the DOJ and SEC. Since providing that additional information, and as of the date of this filing, the DOJ has not responded to our report

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or requested any additional information from us. The DOJ has not informed us as to whether it intends to pursue this matter further. In addition, the SEC has advised us that because it does not appear that we were subject to the SEC's jurisdiction during the relevant period, the SEC does not intend to pursue this matter at this time. We cannot predict the outcome resulting from our report to the DOJ. Any criminal prosecution would be costly and time-consuming to defend and such defense may not be successful and would have a material adverse effect on our business, result in harm to our reputation and negatively impact our results of operations. In addition, any fines or penalties imposed by the DOJ could be substantial and any requirements imposed upon us by the DOJ could be difficult, time-consuming and expensive to implement and comply with and could result in difficulties in conducting business in foreign jurisdictions and maintaining existing and attracting new customer relationships. Any failure to comply with any such requirements could result in further prosecution, fines or penalties. Any adverse determination by the DOJ, if material, could also be deemed to be a breach of covenants and an event of default under our credit facilities, which could result in our being required to immediately repay the principal amount outstanding under such facilities and prevent us from borrowing under our revolving credit facility, and adversely affect our liquidity and financial condition.

The ongoing global financial crisis and adverse worldwide economic conditions may have significant effects on our business, financial condition and results of operations.

        The ongoing global financial crisis—which has included, among other things, significant reductions in available capital and liquidity, substantial reductions and/or fluctuations in equity and currency values and a worldwide recession, the extent of which is likely to be significant and prolonged—may materially adversely affect both our Solar and Quality Assurance businesses. We have already begun to experience some weakening in demand for our products and services. Factors such as lack of consumer spending, business investment and government spending, the volatility and weakness of the capital markets, and inflation all affect the business and economic environment and, ultimately, the amount and profitability of our business. In an economic downturn like the current one, which is characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our products and services may be adversely affected. Continued market disruptions and broader economic downturns may affect our and our customers' access to capital, lead to lower demand for our products and services, increase our exposure to losses from bad debts or result in our customers ceasing operations, any of which could materially adversely affect our business, financial condition and results of operations.

        The credit markets have been experiencing unprecedented levels of volatility and disruption since August 2007. In many cases, the markets have limited credit capacity for certain issuers, and lenders have requested more restrictive terms. The market for new debt financing is extremely limited and in some cases not available at all. In addition, the markets have increased the uncertainty that lenders will be able to comply with their previous commitments. If current levels of market disruption and volatility continue or worsen, we may not be able to refinance our existing debt, draw upon our revolving credit facility or incur additional debt, which may require us to seek other funding sources to meet our liquidity needs or to fund planned expansion. As such, we may not be able to obtain debt or other financing on reasonable terms, or at all. Furthermore, the tightening of credit in financial markets may delay or prevent our customers from securing funding adequate to operate their businesses and purchase our products and services and could lead to an increase in our bad debt levels.

Our future success depends on our ability to retain our key employees.

        We are dependent on the services of Dennis L. Jilot, our Chairman, President and Chief Executive Officer, Barry A. Morris, our Executive Vice President and Chief Financial Officer, Robert S. Yorgensen, our Vice President and President of STR Solar, Mark A. Duffy, who was appointed as our

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Vice President and President of STR Quality Assurance in August 2009, and other members of our senior management team. The loss of any member of our senior management team could have a material adverse effect on us. Members of our senior management team may terminate their employment with us upon little or no notice. There is a risk that we will not be able to retain or replace these key employees.

If we are unable to attract, train and retain technical personnel, our businesses may be materially and adversely affected.

        Our future success depends, to a significant extent, on our ability to attract, train and retain qualified technical personnel. There is substantial competition for qualified technical personnel for both our Solar and Quality Assurance businesses, and we may be unable to attract or retain our technical personnel. If we are unable to attract and retain qualified employees, our businesses may be materially and adversely affected.

Our substantial international operations subject us to a number of risks.

        We operate in 37 countries worldwide, we have encapsulant manufacturing facilities operating in Spain and Malaysia, and our Quality Assurance business annually conducts audits or inspections in over 100 countries. Of our total net sales, 51.6% and 49.3% were generated from outside the United States in the nine months ended September 30, 2009 and the year ended December 31, 2008, respectively, and we expect that our international operations will continue to grow. As such, our international operations are subject to a number of risks, including:

    difficulty in enforcing agreements in foreign legal systems;

    foreign countries may impose additional withholding taxes or otherwise tax our foreign income, impose tariffs or adopt other restrictions on foreign trade and investment, including currency exchange controls;

    potentially adverse tax consequences;

    fluctuations in exchange rates may affect product demand and may adversely affect our profitability in U.S. dollars;

    potential noncompliance with a wide variety of laws and regulations, including the FCPA and similar non-U.S. laws and regulations;

    inability to obtain, maintain or enforce intellectual property rights;

    labor strikes, especially those affecting transportation and shipping;

    risk of nationalization of private enterprises;

    changes in general economic and political conditions in the countries in which we operate, including changes in the government incentives our Solar module manufacturing customers and their customers are relying on;

    unexpected adverse changes in foreign laws or regulatory requirements, including those with respect to environmental protection, export duties and quotas;

    difficulty with staffing and managing widespread operations; and

    difficulty of and costs relating to compliance with the different commercial and legal requirements of the international markets in which we operate.

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Fluctuations in exchange rates could have an adverse effect on our results of operations, even if our underlying business results improve or remain steady.

        Our reporting currency is the U.S. dollar, and we are exposed to foreign exchange rate risk because a significant portion of our net sales and costs are currently denominated in a number of foreign currencies, primarily Euros, Hong Kong dollars, Chinese renminbi and British pounds sterling, which we convert to U.S. dollars for financial reporting purposes. We do not engage in any hedging activities with respect to currency fluctuations. Changes in exchange rates on the translation of the earnings in foreign currencies into U.S. dollars are directly reflected in our financial results. As such, to the extent the value of the U.S. dollar increases against these foreign currencies, it will negatively impact our net sales, even if our results of operations have improved or remained steady. While the currency of our net sales and costs are generally matched, to the extent our costs and net sales are not denominated in the same currency for a particular location, we could experience further exposure to foreign currency fluctuations. We cannot predict the impact of future exchange rate fluctuations on our results of operations and may incur net foreign currency losses in the future.

Our indebtedness could adversely affect our financial health, harm our ability to react to changes to our business and prevent us from fulfilling our obligations under our indebtedness.

        As a result of the DLJ Transactions, we have a significant amount of indebtedness. As of September 30, 2009, after giving effect to the completion of our initial public offering and application of our estimated net proceeds therefrom, we would have had total indebtedness of approximately $241.3 million. Based on that level of indebtedness and interest rates applicable at September 30, 2009, our annual interest expense, excluding the effect of interest rate swaps, would have been $10.2 million. Although we believe that our current cash flows will be sufficient to cover our annual interest expense, any increase in the amount of our indebtedness or any decline in the amount of cash available to make interest payments could require us to divert funds identified for other purposes for debt service and impair our liquidity position.

        Our indebtedness could also have other significant consequences. For example, it could:

    increase our vulnerability to general economic downturns and adverse competitive and industry conditions;

    require us to dedicate a substantial portion, if not all, of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate expenditures;

    limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate, including our ability to build new facilities or acquire new equipment;

    place us at a competitive disadvantage compared to competitors that have less debt;

    limit our ability to raise additional financing on satisfactory terms or at all; and

    adversely impact our ability to comply with the financial and other restrictive covenants in the agreements governing our credit facilities, which could result in an event of default under such agreements.

Increases in interest rates could increase interest payable under our variable rate indebtedness.

        We are subject to interest rate risk in connection with our variable rate indebtedness. Interest rate changes could increase the amount of our interest payments and thus negatively impact our future earnings and cash flows. We currently estimate that our annual interest expense on our floating rate indebtedness would increase by approximately $2.6 million, before giving effect to our interest rate swap, for each increase in interest rates of 1%. If we do not have sufficient earnings, we may be

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required to refinance all or part of our existing debt, sell assets, borrow more money or sell more securities, none of which we can guarantee we will be able to do. Although we have hedging arrangements for a portion of our variable rate debt, they may prove inadequate or ineffective.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.

        We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the agreements governing our credit facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. For example, we had $20.0 million of borrowings available under our revolving credit facility as of September 30, 2009. If we incur additional debt above the levels currently in effect, the risks associated with our substantial leverage would increase.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

        Our ability to make payments on and to refinance our indebtedness and to fund our operations will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Specific events that might adversely affect our cash flow include the loss of a key customer or declines in orders for our products or decreased use of our services. Accordingly, we may not be able to generate cash to service our indebtedness, which could lead to a default under our credit agreements and adversely affect our financial condition.

We are a holding company with no business operations of our own and depend on our subsidiaries for cash.

        We are a holding company with no significant business operations of our own. Our operations are conducted through our subsidiaries. Dividends from, and cash generated by, our subsidiaries are our principal sources of cash to repay indebtedness, fund operations and pay dividends, if any, which such payment is prohibited under the terms of our credit facilities. Accordingly, our ability to repay our indebtedness, fund operations and pay any dividends to our stockholders is dependent on the earnings and the distributions of funds from our subsidiaries. The agreements governing our credit facilities significantly restrict our subsidiaries from paying dividends and otherwise transferring cash or other assets to us. In addition, our subsidiaries are permitted under the agreements governing our credit facilities to incur additional indebtedness that may severely restrict or prohibit the making of distributions, the payment of dividends or the making of loans by our subsidiaries to us.

Restrictive covenants in the agreements governing our credit facilities may restrict our ability to pursue our business strategies.

        The agreements governing our credit facilities contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to pursue our business strategies or undertake actions that may be in our best interests. Our credit facilities include covenants restricting, among other things, our ability to:

    incur or guarantee additional debt;

    incur liens;

    make loans and investments and complete acquisitions;

    make capital expenditures;

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    declare or pay dividends, which such payment is prohibited under the terms of our credit facilities, redeem or repurchase capital stock or make certain other restricted payments;

    complete mergers, consolidations and dissolutions;

    modify or prepay our second lien credit facility or other material subordinated indebtedness;

    issue redeemable, convertible or exchangeable equity securities;

    sell assets and engage in sale-leaseback transactions;

    enter into transactions with affiliates; and

    alter the nature of our business.

Compliance with environmental and health and safety regulations can be expensive, and noncompliance with these regulations may result in adverse publicity, potentially significant liabilities and monetary damages and fines.

        We are required to comply with federal, state, local and foreign laws and regulations regarding protection of the environment and health and safety. If more stringent laws and regulations are adopted in the future, the costs of compliance with these new laws and regulations could be substantial. If we do not comply with such present or future laws and regulations or related permits, we may be required to pay substantial fines, suspend production or cease operations. We use, generate and discharge hazardous substances, chemicals and wastes in our product development, testing and manufacturing activities. Any failure by us to control the use of, to remediate the presence of, or to restrict adequately the discharge of, such substances, chemicals or wastes could subject us to potentially significant liabilities, clean-up costs, monetary damages and fines or suspensions in our business operations.

We may undertake acquisitions, investments, joint ventures or other strategic alliances, which may have a material adverse effect on our ability to manage our business, and such undertakings may be unsuccessful.

        Acquisitions, joint ventures and strategic alliances may expose us to new operational, regulatory, market and geographic risks as well as risks associated with additional capital requirements.

        These risks include:

    our inability to integrate new operations, personnel, products, services and technologies;

    unforeseen or hidden liabilities, including exposure to lawsuits associated with newly acquired companies;

    the diversion of resources from our existing businesses;

    disagreement with joint venture or strategic alliance partners;

    contravention of regulations governing cross-border investment;

    failure to comply with laws and regulations, as well as industry or technical standards of the overseas markets into which we expand;

    our inability to generate sufficient net sales to offset the costs and expenses of acquisitions, strategic investments, joint venture or other strategic alliances;

    potential loss of, or harm to, employees or customer relationships;

    diversion of our management's time; and

    disagreements as to whether opportunities belong to us or the joint venture.

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        Any of these events could disrupt our ability to manage our business, which in turn could have a material adverse effect on our financial condition and results of operations. Such risks could also result in our failure to derive the intended benefits of the acquisitions, strategic investments, joint ventures or strategic alliances, and we may be unable to recover our investment in such initiatives.

Risks Related to Owning Our Common Stock

As a public company, we are subject to additional financial and other reporting and corporate governance requirements that may be difficult for us to satisfy.

        We have historically operated our business as a private company. In connection with our initial public offering, we are required to file with the SEC annual and quarterly information and other reports that are specified in Section 13 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We are required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis. We are also subject to other reporting and corporate governance requirements, including the requirements of the NYSE, and certain provisions of the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder, which impose significant compliance obligations upon us. As a public company, we are required to:

    prepare and distribute periodic public reports and other stockholder communications in compliance with our obligations under the federal securities laws and NYSE rules;

    create or expand the roles and duties of our board of directors and committees of the board;

    institute more comprehensive financial reporting and disclosure compliance functions;

    supplement our internal accounting and auditing function, including hiring additional staff with expertise in accounting and financial reporting for a public company;

    enhance and formalize closing procedures at the end of our accounting periods;

    enhance our internal audit and tax functions;

    enhance our investor relations function;

    establish new internal policies, including those relating to disclosure controls and procedures; and

    involve and retain to a greater degree outside counsel and accountants in the activities listed above.

        These changes require a significant commitment of additional resources. We may not be successful in implementing these requirements and implementing them could adversely affect our business or operating results. In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our operating results on a timely and accurate basis could be impaired.

Our independent registered public accounting firm reported to us that, at December 31, 2008, we had significant deficiencies in our internal controls.

        Our independent registered public accounting firm reported to us that at December 31, 2008, we had significant deficiencies in our internal controls with respect to our tax function, our overall control structure and our information technology general computer controls. Our independent accounting firm previously reported to us that at December 31, 2007, we had material weaknesses and significant deficiencies in our internal controls over financial reporting, which are necessary in order to produce Public Company Accounting Oversight Board, or PCAOB, compliant financial statements. Under standards established by the PCAOB, a "material weakness" is a deficiency, or a combination of

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deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis, and a "significant deficiency" is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant's financial reporting. For the year ended December 31, 2008, we remediated the material weakness related to our financial accounting and reporting function and partially remediated the material weakness related to our tax function such that for 2008, we have a significant deficiency related to our tax function. The 2007 significant deficiencies related to the documentation of our information technology systems, general computer controls, policies and procedures and documentation of our overall internal control environment continued to be significant deficiencies in 2008. We are in the process of remediating the significant deficiencies identified at December 31, 2008. Our remediation efforts include hiring additional qualified personnel, providing additional training, implementing additional financial accounting controls and procedures and hiring a consultant to assist us in our procedure documentation and development of key controls with respect to our information technology systems. However, these and other remediation efforts may not enable us to remedy the significant deficiencies or avoid material weaknesses or other significant deficiencies in the future. In addition, these significant deficiencies, any material weaknesses and any other significant deficiencies will need to be addressed as part of the evaluation of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and may impair our ability to comply with Section 404.

Our internal control over financial reporting does not currently meet the standards required by Section 404 of the Sarbanes-Oxley Act of 2002, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on us.

        Our internal control over financial reporting does not currently meet the standards required by Section 404, standards that we will be required to meet in the course of preparing our 2010 financial statements. We do not currently have comprehensive documentation of our internal controls, nor do we document or test our compliance with these controls on a periodic basis in accordance with Section 404. Furthermore, we have not tested our internal controls in accordance with Section 404 and, due to our lack of documentation, such a test would not be possible to perform at this time.

        We are in the early stages of addressing our internal control procedures to satisfy the requirements of Section 404, which requires an annual management assessment of the effectiveness of our internal control over financial reporting. If, as a public company, we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to attest to the effectiveness of our internal control over financial reporting. If we are unable to maintain adequate internal control over financial reporting, we may be unable to report our financial information on a timely basis, may suffer adverse regulatory consequences or violations of applicable stock exchange listing rules and may breach the covenants under our credit facilities. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

        In addition, we will incur additional costs in order to improve our internal control over financial reporting and comply with Section 404, including increased auditing and legal fees and costs associated with hiring additional accounting and administrative staff.

Insiders have substantial control over us, which could limit your ability to influence the outcome of key transactions, including a change of control.

        Our principal stockholders, directors and executive officers and entities affiliated with them own approximately 59.9% of the outstanding shares of our common stock following our initial public

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offering. As a result, these stockholders, if acting together, would be able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other extraordinary transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. In addition, we have elected to opt out of Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder," and we will be able to enter into transactions with our principal stockholders. The concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

We expect that our stock price will fluctuate significantly, which could cause the value of your investment to decline, and you may not be able to resell your shares at or above the initial public offering price.

        Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our common stock regardless of our operating performance. The trading price of our common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including:

    market conditions in the broader stock market;

    actual or anticipated fluctuations in our quarterly financial and operating results;

    introduction of new products or services by us or our competitors;

    issuance of new or changed securities analysts' reports or recommendations;

    investor perceptions of us and the solar energy industry or quality assurance industry;

    sales, or anticipated sales, of large blocks of our stock;

    additions or departures of key personnel;

    regulatory or political developments;

    litigation and governmental investigations; and

    changing economic conditions.

        These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.

If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our common stock could decline.

        If our stockholders prior to the initial public offering sell substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decrease significantly. The perception in the public market that such stockholders might sell shares of common stock could also depress the market price of our common stock. We have 41,349,710 shares of common

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stock outstanding. Our directors, executive officers, the selling stockholders in our initial public offering and substantially all of our other stockholders prior to the initial public offering are subject to the lock-up agreements and are subject to the Rule 144 holding period requirements. After these lock-up agreements have expired and holding periods have elapsed and the lock-up periods set forth in our registration rights agreement to be entered into in connection with this offering have expired, 29,049,710 additional shares, some of which will be subject to vesting, will be eligible for sale in the public market. The market price of shares of our common stock may drop significantly when the restrictions on resale by these stockholders lapse. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our stock or if our results of operations do not meet their expectations, our stock price and trading volume could decline.

        The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.

Some provisions of Delaware law and our certificate of incorporation and bylaws may deter third parties from acquiring us and diminish the value of our common stock.

        Our certificate of incorporation and bylaws provide for, among other things:

    restrictions on the ability of our stockholders to call a special meeting and the business that can be conducted at such meeting;

    restrictions on the ability of our stockholders to remove a director or fill a vacancy on the board of directors;

    our ability to issue preferred stock with terms that the board of directors may determine, without stockholder approval;

    the absence of cumulative voting in the election of directors;

    a prohibition of action by written consent of stockholders unless such action is recommended by all directors then in office; and

    advance notice requirements for stockholder proposals and nominations.

        These provisions in our certificate of incorporation and bylaws may discourage, delay or prevent a transaction involving a change of control of our company that is in the best interest of our minority stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts.

We do not anticipate paying any cash dividends for the foreseeable future.

        We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of our business. We do not intend to pay any dividends to holders of our common stock and the agreements governing our credit facilities prohibit our payment of dividends. As a result, capital appreciation in the price of our common stock, if any, will be your only source of gain on an investment in our common stock.

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Our certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities.

        Our certificate of incorporation provides for the allocation of certain corporate opportunities between us and DLJ Merchant Banking Partners IV, L.P. and its affiliated investment funds, or DLJMB. Under these provisions, neither DLJMB, its affiliates and subsidiaries, nor any of their officers, directors, agents, stockholders, members or partners will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. For instance, a director of our company who also serves as a director, officer or employee of DLJMB or any of its subsidiaries or affiliates may pursue certain acquisition or other opportunities that may be complementary to our business and, as a result, such acquisition or other opportunities may not be available to us. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are allocated by DLJMB to itself or its subsidiaries or affiliates instead of to us.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

(b)
Use of Proceeds from Public Offering of Common Stock

        On November 12, 2009, we closed our IPO, in which 12,300,000 shares of common stock were sold at a price to the public of $10 per share. We sold 3,300,000 shares of our common stock in the offering and selling stockholders sold 9,000,000 of the shares of common stock in the offering. The aggregate offering price for all shares sold in the offering, including shares sold by us and the selling stockholders, was $123.0 million. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-162376), which was declared effective by the SEC on November 6, 2009. The offering commenced as of November 6, 2009 and did not terminate before all of the securities registered in the registration statement were sold. Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co. acted as representatives of the underwriters. We raised approximately $25.9 million in net proceeds after deducting underwriting discounts and commissions of $7.8 million and other estimated offering costs of $5.0 million. We made final payments with a portion of the proceeds from our IPO to DLJ Merchant Banking, Inc. and to Dennis L. Jilot, our Chairman, President and Chief Executive Officer, of $2.4 million and $0.2 million, respectively, in connection with the termination of an advisory services agreement. No other payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors as compensation for board or board committee service, or as a result of sales of shares of common stock by selling stockholders in the offering. We also repaid $15.0 million of borrowings under our credit facilities. We intend to use the remaining net proceeds for working capital and general corporate purposes. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC pursuant to Rule 424(b) on November 9, 2009.

Item 6.    Exhibits.

        The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed (other than Exhibits 32.1 and 32.2) as part of this Quarterly Report on Form 10-Q and such Exhibit Index is incorporated herein by reference.

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SIGNATURE

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

    STR HOLDINGS, INC.
(Registrant)

 

 

By:

 

/s/ BARRY A. MORRIS

Date: November 17, 2009       Barry A. Morris, Executive Vice President and
Chief Financial Officer (Duly Authorized Officer
and Principal Financial Officer)

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EXHIBIT INDEX

  2.1   Agreement and Plan of Merger, dated as of November 5, 2009, among STR Holdings (New) LLC, STR Merger, Inc. and Specialized Technology Resources, Inc.

 

2.2

 

Second and Amended and Restated Limited Liability Company Agreement of STR Holdings (New) LLC, dated as of November 5, 2009.

 

2.3

 

Plan of Conversion of STR Holdings (New) LLC, dated as of November 6, 2009.

 

3.1

 

Certificate of Incorporation of STR Holdings, Inc.

 

3.2

 

Bylaws of the STR Holdings, Inc.

 

4.1

 

Form of Common Stock Certificate.

 

4.2

 

Registration Rights Agreement, dated as of November 6, 2009, among STR Holdings, Inc. and the stockholders party thereto.

 

10.1

 

Form of Indemnification Agreement between STR Holdings, Inc. and each of its directors and executive officers.

 

10.2

 

2009 Equity Incentive Plan.

 

10.3

 

Employment Agreement, dated as of July 18, 2008, between Specialized Technology Resources, Inc. and Dennis L. Jilot.

 

10.4

 

Amendment to the Employment Agreement, dated as of September 3, 2009, between Specialized Technology Resources, Inc. and Dennis L. Jilot.

 

10.5

 

Employment Agreement, dated as of June 15, 2007, between Specialized Technology Resources, Inc. and Barry A. Morris.

 

10.6

 

Employment Agreement, dated as of June 15, 2007, between Specialized Technology Resources, Inc. and Robert S. Yorgensen.

 

10.7

 

Employment Agreement, dated as of August 17, 2009, between Specialized Technology Resources, Inc. and Mark A. Duffy.

 

10.8

 

First Lien Credit Agreement, dated as of June 15, 2007, by and among Specialized Technology Resources, Inc., STR Holdings LLC, the lenders party thereto, and Credit Suisse.

 

10.9

 

Amendment No. 1 to the First Lien Credit Agreement, dated as of October 5, 2009, by and among Specialized Technology Resources, Inc., STR Holdings LLC, the lenders party thereto, and Credit Suisse.

 

10.10

 

First Lien Guarantee and Collateral Agreement, dated as of June 15, 2007, by and among Specialized Technology Resources, Inc., STR Holdings LLC, the subsidiaries of the borrower from time to time party thereto, and Credit Suisse.

 

10.11

 

Supplement No. 1, dated as of November 5, 2009, to the First Lien Guarantee and Collateral Agreement dated as of June 15, 2007, among Specialized Technology Resources, Inc., the subsidiaries of Specialized Technology Resources, Inc. party thereto, and Credit Suisse.

 

10.12

 

Second Lien Credit Agreement, dated as of June 15, 2007, by and among Specialized Technology Resources, Inc., STR Holdings LLC, the lenders party thereto, and Credit Suisse.

 

10.13

 

Amendment No. 1 to the Second Lien Credit Agreement, dated as of October 5, 2009, by and among Specialized Technology Resources, Inc., STR Holdings LLC, the lenders party thereto, and Credit Suisse.

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  10.14   Second Lien Guarantee and Collateral Agreement, dated as of June 15, 2007, by and among Specialized Technology Resources, Inc., STR Holdings LLC, the subsidiaries of the borrower from time to time party thereto, and Credit Suisse.

 

10.15

 

Supplement No. 1, dated as of November 5, 2009, to the Second Lien Guarantee and Collateral Agreement dated as of June 15, 2007, among Specialized Technology Resources, Inc., the subsidiaries of Specialized Technology Resources, Inc. party thereto, and Credit Suisse.

 

10.16

 

Intercreditor Agreement, dated as of June 15, 2007, by and between Specialized Technology Resources, Inc., STR Holdings LLC and Credit Suisse.

 

10.17

 

Assignment and Assumption Agreement, dated as of November 5, 2009, between STR Holdings LLC and STR Holdings (New) LLC.

 

10.18

 

Form of STR Holdings, Inc. Restricted Stock Agreement for executive officers that held incentive units in STR Holdings (New) LLC.

 

10.19

 

Form of STR Holdings, Inc. Restricted Stock Agreement for other holders that held units in STR Holdings (New) LLC.

 

10.20

 

Class A Unit Grant Agreement, dated as of November 5, 2009, between STR Holdings (New) LLC and Dennis L. Jilot.

 

10.21

 

Restricted Stock Agreement, dated as of November 6, 2009, between STR Holdings, Inc. and Dennis L. Jilot.

 

10.22

 

Form of Restricted Stock Agreement of STR Holdings, Inc.

 

10.23

 

Specialized Technology Resources, Inc. Management Incentive Plan.

 

10.24

 

Form of STR Holdings, Inc. Option Award Agreement for executive officers.

 

10.25

 

Form of STR Holdings, Inc. Incentive Stock Option Award Agreement.

 

10.26

 

Form of STR Holdings, Inc. Non Qualified Stock Option Award Agreement.

 

10.27

 

Subscription Agreement, dated as of September 30, 2009, by and between Specialized Technology Resources, Inc. and STR Holdings (New) LLC.

 

11.1

 

Statement Regarding Computation of Per Share Earnings (incorporated by reference to the Notes to the Condensed Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q).

 

31.1

 

Certification of Chief Executive Officer pursuant to Rule 13a-14 Securities Exchange Act Rules 13a-14(a) and 15d-14(a), pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2

 

Certification of Chief Financial Officer pursuant to Rule 13a-14 Securities Exchange Act Rules 13a-14(a) and 15d-14(a), pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1

+

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2

+

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

+
This certification shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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Exhibit 2.1

 

AGREEMENT AND PLAN OF MERGER

 

This AGREEMENT AND PLAN OF MERGER, dated as of November 5, 2009 (this “ Agreement ”), is among STR Holdings (New) LLC, a Delaware limited liability company, (“ Parent ”), STR Merger, Inc., a Delaware corporation (“ Merger Co. ”), and Specialized Technology Resources, Inc., a Delaware Corporation (the “ Company ”).

 

WHEREAS, Parent is a Delaware limited liability company organized and existing under the laws of the State of Delaware, all of the membership interests of which are owned by the Company;

 

WHEREAS, the Company has caused Parent to form Merger Co. and all of the outstanding capital stock of Merger Co. is owned by Parent;

 

WHEREAS, the Board of Directors of the Company deems it advisable and in the best interests of its stockholders (i) for Merger Co. to merge with and into the Company (the “ Merger ”) and (ii) that, pursuant to the Merger, the Company become a subsidiary of Parent, in each case as provided for in this Agreement;

 

WHEREAS, the Board of Directors of Merger Co. deems the Merger advisable and in the best interests of its stockholder;

 

WHEREAS, as of the date hereof, the Board of Directors of each of the Company and Merger Co., and the Board of Managers of Parent have submitted this Agreement and the transactions contemplated hereby to its stockholder or member, as the case may be, for approval;

 

WHEREAS, immediately following the execution and delivery of this Agreement and prior to the Liquidation and Dissolution (as hereinafter defined), STR Holdings LLC (the “ Predecessor LLC ”), as the sole stockholder of the Company, will execute and deliver a written consent approving this Agreement (the “ Company Stockholder Approval ”);

 

WHEREAS, immediately following the execution and delivery of this Agreement and prior to the Liquidation and Dissolution, Parent, as the sole stockholder of Merger Co., will execute and deliver a written consent approving this Agreement (the “ Merger Co. Stockholder Approval ”);

 

WHEREAS, in connection with this Agreement and as a condition to receive the Merger Consideration (as hereinafter defined) hereunder, the stockholders of the Company must execute the Second Amended and Restated Limited Liability Company Agreement of Parent, dated of even date herewith and attached hereto as Exhibit A (the “ Parent LLC Agreement ”);

 

WHEREAS, immediately prior to the Effective Time (as hereinafter defined), the Predecessor LLC will file a Certificate of Cancellation and liquidate

 



 

pursuant to the Plan of Complete Liquidation and Dissolution, dated as of November 5, 2009 (the “ Liquidation and Dissolution ”); and

 

WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, and that this Agreement constitutes a plan of reorganization;

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, Parent, Merger Co. and the Company hereby agree as follows:

 

ARTICLE I

 

The Merger

 

Section 1.1.             The Merger .  Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), at the Effective Time, Merger Co. shall be merged with and into the Company, and each share of common stock, par value $0.01 per share, of the Company (the “ Company Common Stock ”) not directly owned by the Company and issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive membership units of Parent as set forth in Section 2.1 .  Following the Effective Time, the separate corporate existence of Merger Co. shall cease and the Company shall be the surviving corporation in the Merger (the “ Surviving Corporation ”) and shall become a wholly-owned subsidiary of Parent.  The Company shall succeed to and assume all the rights and obligations of Merger Co. in accordance with the DGCL.

 

Section 1.2.             Closing .  The closing of the Merger (the “ Closing ”) shall take place at 10:00 a.m. (New York City time) on the date of the satisfaction or waiver of the conditions to closing set forth in Article V (the “ Closing Date ”), at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, unless another time, date or place is agreed to by the parties hereto.

 

Section 1.3.             Effective Time .  Subject to the provisions of this Agreement, as soon as practicable on the Closing Date the parties shall file with the Secretary of State of the State of Delaware a certificate of merger, executed in accordance with the relevant provisions of the DGCL (the “ Certificate of Merger ”).  The Merger shall become effective upon the filing of the Certificate of Merger or at such later time as is agreed to by the parties hereto and specified in the Certificate of Merger (the time at which the Merger becomes effective is herein referred to as the “ Effective Time ”).

 

Section 1.4.             Effects of the Merger .  The Merger shall have the effects set forth in the DGCL.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and

 



 

franchises of the Company and Merger Co. shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Co. shall become the debts, liabilities and duties of the Surviving Corporation.

 

Section 1.5.             Certificate of Incorporation and By-laws of the Surviving Corporation .

 

(a)           The amended and restated certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided therein or by applicable law.

 

(b)           The bylaws of Company, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation until thereafter amended as provided therein or by applicable law.

 

Section 1.6.             Directors and Officers of the Surviving Corporation .

 

(a)           The directors of the Company immediately prior to the Effective Time shall be the directors of the Surviving Corporation immediately following the Effective Time, to serve as such until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

 

(b)           The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation until their respective successors are duly appointed and qualified or their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

 

ARTICLE II

 

Effect of the Merger on the Capital Stock of the Constituent Corporations

 

Section 2.1.             Effect on Company Stock .  At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Co. or Parent or the holders of any securities of the Company, Merger Co. or Parent:

 

(a)           Cancellation of Treasury Stock .  Each share of Company Common Stock that is owned directly by the Company immediately prior to the Effective Time, if any, shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

 

(b)           Conversion of Company Common Stock .  Each share (or portion thereof) of Company Common Stock (other than shares to be cancelled in accordance with Section 2.1(a) ) issued and outstanding immediately prior to the Effective Time shall be converted into the number of membership units of Parent to be allocated as set forth on Schedule I hereto and Parent shall assume any residual liabilities of the Predecessor

 



 

LLC owed by the holder of the Company Common Stock as a result of the liquidation and dissolution of the Predecessor LLC (the “ Merger Consideration ”).  As of the Effective Time and without any action on the part of the holders thereof, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of Company Common Stock shall cease to have any rights with respect thereto.  As a condition to the issuance of the Merger Consideration to each stockholder of the Company entitled thereto, such stockholder must execute the Parent LLC Agreement and Parent will hold the Merger Consideration for the benefit of such stockholder pending such execution.

 

Section 2.2.             Effect on Merger Co. Stock .  At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Co. or Parent or the holders of any securities of the Company, Merger Co. or Parent, each share of common stock, par value $0.01 per share, of Merger Co. issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and non-assessable share of common stock of the Surviving Corporation.

 

Section 2.3.             Effect on Parent Membership Units .  At the Effective Time, all membership units of Parent held by the Company shall be cancelled for no consideration.

 

ARTICLE III

 

Representations and Warranties of the Company

 

The Company represents and warrants to Parent and Merger Co. as follows:

 

Section 3.1.             Organization .

 

(a)           The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.

 

Section 3.2.             Authority; Noncontravention .

 

(a)           The Company has all necessary corporate power and authority to execute and deliver this Agreement and, subject to obtaining the Company Stockholder Approval, to perform its obligations hereunder and to consummate the Merger.  The execution, delivery and performance by the Company of this Agreement, and the consummation of the Merger, have been duly authorized and approved by its Board of Directors, and except for obtaining the Company Stockholder Approval, no other corporate action on the part of the Company is necessary to authorize the execution, delivery and performance by the Company of this Agreement and the consummation by it

 



 

of the Merger.  This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws of general application affecting or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity, whether considered in a proceeding at law or in equity (the “ Bankruptcy and Equity Exception ”).

 

(b)           Neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the Merger, nor compliance by the Company with any of the terms or provisions hereof, will (i) conflict with or violate any provision of the amended and restated certificate of incorporation or bylaws of the Company or (ii) violate any law, judgment, writ or injunction of any governmental authority applicable to the Company or any of its properties or assets.  Except for the Company Stockholder Approval, no consent, waiver, approval, order, permit or authorization of, or declaration or filing with, or notification to, any person or governmental body is required on the part of the Company in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

 

Section 3.3.             Company Capitalization .

 

(a)           The authorized capital stock of the Company. consists of 1000 shares of Company Common Stock (the “ Merger Co. Common Stock ”).  As of the date hereof there is 1 share of Company Common Stock issued and outstanding, all of which is owned of record and beneficially by the Predecessor LLC, and no shares of Company. Common Stock are held by the Company as treasury stock.  All of the issued and outstanding shares of Company Common Stock were duly authorized for issuance and are validly issued, fully paid and non-assessable.

 

(b)           Except as set forth in Section 3.3(a)  above, the Company has no authorized, issued and outstanding or reserved capital stock and there is no existing option, warrant, call, right, or contract of any character to which the Company is a party requiring, and there are no securities of the Company outstanding which upon conversion or exchange would require, the issuance of any shares of capital stock of the Company or other securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase shares of capital stock of the Company.  The Company is not a party to any voting trust or other contract with respect to the voting, redemption, sale, transfer or other disposition of Company Common Stock.

 

ARTICLE IV

 

Representations and Warranties of Merger Co. and Parent

 

Merger Co. and Parent, jointly and severally, represent and warrant to the Company as follows:

 



 

Section 4.1.             Organization .

 

(a)           Merger Co. is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.

 

(b)           Parent is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite limited liability company power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.

 

Section 4.2.             Merger Co. Authority; Noncontravention .

 

(a)           Merger Co. has all necessary corporate power and authority to execute and deliver this Agreement and, subject to obtaining the Merger Co. Stockholder Approval, to perform its obligations hereunder and to consummate the Merger.  The execution, delivery and performance by Merger Co. of this Agreement, and the consummation of the Merger, have been duly authorized and approved by its Board of Directors, and except for obtaining the Merger Co. Stockholder Approval, no other corporate action on the part of Merger Co. is necessary to authorize the execution, delivery and performance by Merger Co. of this Agreement and the consummation by it of the Merger.  This Agreement has been duly executed and delivered by Merger Co. and, assuming due authorization, execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding obligation of Merger Co., enforceable against Merger Co. in accordance with its terms, except that such enforceability may be limited by the Bankruptcy and Equity Exception.

 

(b)           Neither the execution and delivery of this Agreement by Merger Co. nor the consummation by Merger Co. of the Merger, nor compliance by Merger Co. with any of the terms or provisions hereof, will (i) conflict with or violate any provision of the certificate of incorporation or bylaws of Merger Co. or (ii) violate any law, judgment, writ or injunction of any governmental authority applicable to Merger Co. or any of its properties or assets.  Except for the Merger Co. Stockholder Approval, no consent, waiver, approval, order, permit or authorization of, or declaration or filing with, or notification to, any person or governmental body is required on the part of Merger Co. in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

 

Section 4.3.             Parent Authority; Noncontravention .

 

(a)           Parent has all necessary limited liability company power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby.  The execution, delivery and performance by Parent of this Agreement have been duly authorized and approved by its Board of Managers and no other action on the part of the Board of Managers of Parent is necessary to authorize the execution, delivery and performance by Parent of this Agreement and the consummation

 



 

by it of the transactions contemplated hereby.  This Agreement has been duly executed and delivered by Parent and, assuming due authorization, execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except that such enforceability may be limited by the Bankruptcy and Equity Exception,

 

(b)           Neither the execution and delivery of this Agreement by Parent nor compliance by Parent with any of the terms or provisions hereof, will (i) conflict with or violate any provision of the limited liability company agreement of Parent or (ii) violate any law, judgment, writ or injunction of any governmental authority applicable to Parent or any of its properties or assets.  No consent, waiver, approval, order, permit or authorization of, or declaration or filing with, or notification to, any person or governmental body is required on the part of Parent in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

 

Section 4.4.             Merger Co. Capitalization .

 

(a)           The authorized capital stock of Merger Co. consists of 1,000 shares of Merger Co. Common Stock (the “ Merger Co. Common Stock ”).  As of the date hereof, there are, and as of the Closing Date, there will be, 10 shares of Merger Co. Common Stock issued and outstanding, all of which are owned of record and beneficially by Parent, and no shares of Merger Co. Common Stock are held by Merger Co. as treasury stock.  All of the issued and outstanding shares of Merger Co. Common Stock were duly authorized for issuance and are validly issued, fully paid and non-assessable.

 

(b)           Except as set forth in Section 4.4(a)  above, Merger Co. has no authorized, issued and outstanding or reserved capital stock and there is no existing option, warrant, call, right, or contract of any character to which Merger Co. is a party requiring, and there are no securities of Merger Co. outstanding which upon conversion or exchange would require, the issuance of any shares of capital stock of Merger Co. or other securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase shares of capital stock of Merger Co.  Merger Co. is not a party to any voting trust or other contract with respect to the voting, redemption, sale, transfer or other disposition of the Merger Co. Common Stock.

 

Section 4.5.             Parent Capitalization .

 

(a)           As of the date hereof, there are, and as of the Closing Date, there will be, 10 membership units issued and outstanding, all of which are owned by the Company.  All of the issued and outstanding membership units of Parent were duly authorized for issuance and are validly issued, fully paid and non-assessable.

 

(b)           Except as set forth in Section 4.5(a)  above, Parent has no authorized, issued and outstanding or reserved membership units and there is no existing option, warrant, call, right, or contract of any character to which Parent is a party requiring, and there are no securities of Parent outstanding which upon conversion or exchange would require, the issuance of any membership units of Parent or other

 



 

securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase membership units of Parent.  Parent is not a party to any voting trust or other contract with respect to the voting, redemption, sale, transfer or other disposition of the membership units of Parent.

 

ARTICLE V

 

Conditions Precedent

 

Section 5.1.             Conditions to Each Party’s Obligation to Effect the Merger .  The respective obligations of each party hereto to effect the Merger shall be subject to the satisfaction on or prior to the Closing Date of the following conditions:

 

(a)           Company Stockholder Approval .  The Company Stockholder Approval shall have been obtained in accordance with applicable law and the amended and restated certificate of incorporation and bylaws of the Company.

 

(b)           Merger Co. Stockholder Approval .  The Merger Co. Stockholder Approval shall have been obtained in accordance with applicable law and the amended and restated certificate of incorporation and bylaws of Merger Co.

 

(c)           Liquidation of the Predecessor LLC .  (i) The certificate of cancellation of the certificate of formation of the Predecessor LLC, executed in accordance with the relevant provisions of the Delaware Limited Liability Company Act, shall have been filed with the Secretary of State of the State of Delaware and (ii) the liquidation and dissolution of the Predecessor LLC shall have been completed.

 

ARTICLE VI

 

Miscellaneous

 

Section 6.1.             Entire Agreement .  This Agreement and the other documents referred to herein represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof.

 

Section 6.2.             Amendments and Waivers .  This Agreement can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought.  No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, or agreement contained herein.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach.  No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such

 



 

party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

 

Section 6.3.             Binding Effect; Assignment .  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.  Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity not a party to this Agreement except as expressly contemplated by this Agreement.  No assignment of this Agreement or of any rights or obligations hereunder may be made by any of the parties hereto without the prior written consent of the other parties and any attempted assignment without the required consents shall be void.  No assignment of any obligations hereunder shall relieve the parties hereto of any such obligations.

 

Section 6.4.             Counterparts.   This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

 

Section 6.5.             Governing Law; Jurisdiction; Waiver of Jury Trial .  This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), shall be governed by and construed in accordance with the internal laws of the State of Delaware.  Any action against any party relating to the foregoing shall be brought in any federal or state court of competent jurisdiction located within the State of Delaware, and the parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the State of Delaware over any such action.  The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection that they may now or hereafter have to the laying of venue of any such action brought in such court or any defense of inconvenient forum for the maintenance of such action.

 

Section 6.6.             Notices .  All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, facsimiled (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:

 

If to Parent or Merger Co., to:

 

STR Holdings (New) LLC or STR Merger, Inc.

c/o Specialized Technology Resources, Inc.
10 Water Street
Enfield, CT 06082
Attention:  Barry  A. Morris
Facsimile:  (860) 749-9158

 



 

If to the Company, to:

 

Specialized Technology Resources, Inc.
10 Water Street
Enfield, CT 06082
Attention:  Barry  A. Morris
Facsimile:  (860) 749-9158

 

In each case with a copy to:

 

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Attention:  Douglas P. Warner, Esq.

Facsimile:  (212) 310-8007

 

or such other address or facsimile number as such party may hereafter specify by like 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. in the place of receipt and such day is a business day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt.

 

Section 6.7.             Severability .  If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any law or public policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect 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 determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto 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 greatest extent possible.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

 


 

IN WITNESS WHEREOF, the undersigned have executed this Agreement and Plan of Merger as of the date first written above.

 

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.

 

 

 

 

 

 

By:

/s/ Barry A. Morris

 

Name:

Barry A. Morris

 

Title:

Executive Vice President and Chief Financial Officer

 

 

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

 



 

 

STR HOLDINGS (NEW) LLC

 

 

 

 

 

 

 

By

/s/ Barry A. Morris

 

Name:

Barry A. Morris

 

Title:

Executive Vice President and Chief Financial Officer

 

 

 

 

 

 

 

STR MERGER, INC.

 

 

 

 

 

 

By:

/s/ Barry A. Morris

 

Name:

Barry A. Morris

 

Title:

Executive Vice President and Chief Financial Officer

 

 

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]

 



 

Exhibit A

 

[EXHIBIT A TO AGREEMENT AND PLAN OF MERGER]

 


 

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY

 

AGREEMENT

 

OF

 

STR HOLDINGS (NEW) LLC

 

This SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “ Agreement ”) of STR Holdings (New) LLC (the “ Company ”) is made and entered into as of this [      ] day of [            ], 2009 (the “ Effective Date ”), by and among the Company and each of the Persons listed on the signature pages hereof as Members.

 

W I T N E S S E T H :

 

WHEREAS, the Company was formed as a limited liability company pursuant to the Delaware Limited Liability Company Act (6 Del . C. § 18-101, et seq ., as amended and in effect from time to time) (the “ Act ”) by filing a Certificate of Formation with the Office of the Secretary of State of the State of Delaware on September 30, 2009, and entering into a Limited Liability Company Agreement (the “ Initial Agreement ”);

 

WHEREAS, the Initial Agreement was amended and restated on [          ], 2009 (the “ First Amended and Restated Agreement ”);

 

WHEREAS, the parties hereto were members of STR Holdings LLC (the “ Predecessor LLC ”) pursuant to the Third Amended and Restated Limited Liability Company Agreement of STR Holdings LLC, dated as of March 20, 2008 (the “ Predecessor LLC Agreement ”);

 

WHEREAS, the parties hereto desire to effect the following: (a) the amendment and restatement of the First Amended and Restated Agreement in connection with a reorganization as set forth below; and (b) the continuation of the Company on the terms set forth herein;

 

WHEREAS, the Predecessor LLC filed a Certificate of Cancellation on [          ], 2009, and was liquidated pursuant to the Plan of Complete Liquidation and Dissolution, dated as of [          ], 2009;

 

WHEREAS, in connection with the liquidation of the Predecessor LLC, the Company desires to assume the obligations and liabilities of the Predecessor LLC;

 

WHEREAS, Specialized Technology Resources, Inc. (“ STR ”) caused the Company to form STR Merger, Inc. (“ Merger Co. ”);

 

WHEREAS, STR, the Company and Merger Co. entered into an Agreement and Plan of Merger, dated as of [          ], 2009 (the “ Company Merger Agreement ”), pursuant to which (a) the First Amended and Restated Agreement shall be amended and restated and (b) STR will become a wholly-owned subsidiary of the Company;

 

WHEREAS, pursuant to the Merger Agreement, each stockholder of STR (previously the members of the Predecessor LLC) shall receive the number of Units set forth in a schedule to the

 



 

Merger Agreement and in accordance with the percentage ownership set forth on Schedule I hereto (the “ Merger Consideration ”) and shall become Members of the Company; and

 

WHEREAS, as a condition to each Member’s receipt of the Merger Consideration, each Member must execute this Agreement.

 

NOW, THEREFORE, in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01.          “ Act ” has the meaning set forth in the Recitals.

 

Section 1.02.          “ Additional Capital Contribution ” means, with respect to each Member, any Capital Contributions made by such Member in excess of the Initial Capital Contribution of such Member.

 

Section 1.03.          “ Additional Member ” means any additional member admitted to the Company pursuant to Section 3.02 .

 

Section 1.04.          “ 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 1.05.          “ 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 1.06.          “ Agreement ” means this Second 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 1.07.          “ 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 1.08.          “ Board of Managers ” has the meaning set forth in Section 4.01(a)(i) .

 

 

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Section 1.09.          “ 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 1.10.          “ Call Notice Date ” has the meaning set forth in Section 7.09(a).

 

Section 1.11.          “ 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 1.12.          “ Capital Contribution ” means, with respect to any Member, the amount set forth opposite such Member’s name on Schedule I under the heading “Capital Contributions”.

 

Section 1.13.          “ 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 1.14.          “ CEO Manager ” has the meaning set forth in Section 4.01(a)(i)(3) .

 

Section 1.15.          “ 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 1.16.          “ Certificate of Conversion ” has the meaning set forth in Section 10.17 .

 

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Section 1.17.          “ 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 1.18.          “ 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 1.19.          “ Class A Units ” has the meaning set forth in Section 3.04(a)(i) .

 

Section 1.20.          “ 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 1.21.          “ Class B Units ” has the meaning set forth in Section 3.04(a)(ii) .

 

Section 1.22.          “ 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 1.23.          “ Class C Units ” has the meaning set forth in Section 3.04(a)(iii) .

 

Section 1.24.          “ 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

 

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Units, then such Class D Member shall be treated as a Class D Member only with respect to its Class D Units.

 

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

 

Section 1.26.          “ 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 1.27.          “ Class E Units ” has the meaning set forth in Section 3.04(a)(v) .

 

Section 1.28.          “ 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 1.29.          “ Class F Units ” has the meaning set forth in Section 3.04(a)(vi) .

 

Section 1.30.          “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

 

Section 1.31.          “ Company ” has the meaning specified in the introductory paragraph hereof.

 

Section 1.32.          “ Company Business ” has the meaning set forth in Section 2.05(a) .

 

Section 1.33.          “ Company Expenses ” has the meaning set forth in Section 4.04(a) .

 

Section 1.34.          “ Company Merger Agreement ” has the meaning set forth in the Recitals.

 

Section 1.35.          “ Company Register ” has the meaning set forth in Section 3.01 .

 

Section 1.36.          “ Confidential Information ” has the meaning set forth in Section 6.06(b) .

 

Section 1.37.          “ Consolidated EBITDA ” means Consolidated EBITDA as defined in and calculated pursuant to the Credit Facilities.

 

Section 1.38.          “ 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.

 

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Section 1.39.          “ 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 1.40.          “ 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 1.41.          “ 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 1.42.          “ Distribution Threshold ” means, with respect to all Incentive Units issued pursuant to Section 3.04(c) , an amount determined by the Board of Managers.

 

Section 1.43.          “ DLJMB ” means DLJ Merchant Banking Partners IV, L.P.

 

Section 1.44.          “ DLJMB Managers ” has the meaning set forth in Section 4.01(a)(i)(1) .

 

Section 1.45.          “ 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 1.46.          “ 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 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 1.47.          “ Drag-Along Rights ” has the meaning set forth in Section 7.07(a) .

 

Section 1.48.          “ Drag-Along Sale ” has the meaning set forth in Section 7.07(a) .

 

Section 1.49.          “ Drag-Along Sale Notice ” has the meaning set forth in Section 7.07(b) .

 

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Section 1.50.          “ Drag-Along Sale Notice Period ” has the meaning set forth in Section 7.07(b) .

 

Section 1.51.          “ Drag-Along Sale Price ” has the meaning set forth in Section 7.07(b) .

 

Section 1.52.          “ Drag-Along Seller ” has the meaning set forth in Section 7.07(a) .

 

Section 1.53.          “ Drag-Along Transferee ” has the meaning set forth in Section 7.07(a) .

 

Section 1.54.          “ Effective Date ” has the meaning specified in the introductory paragraph hereof.

 

Section 1.55.          “ Electing Call Member ” has the meaning set forth in Section  7.09(a)(iii) .

 

Section 1.56.          “ Electing Put Member ” has the meaning set forth in Section  7.09(b)(iii) .

 

Section 1.57.          “ Entity ” means any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association or other entity.

 

Section 1.58.          “ Equity Securities ” has the meaning set forth in Section 3.02(a)(i) .

 

Section 1.59.          “ 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 1.60.          “ Excess Portion ” has the meaning set forth in Section 7.06(d) .

 

Section 1.61.          “ Excess Units ” has the meaning set forth in Section 7.10(c) .

 

Section 1.62.          “ Exchange Act ” means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.

 

Section 1.63.          “ 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;

 

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(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 1.64.          “ Existing Members ” means each of the Members other than the Management Members.

 

Section 1.65.          “ First Amended and Restated Agreement ” has the meaning set forth in the Recitals.

 

Section 1.66.          “ Fiscal Year ” has the meaning set forth in Section 2.07 .

 

Section 1.67.          “ Fully Participating Member ” has the meaning set forth in Section 7.10(c) .

 

Section 1.68.          “ Fully Participating Tagging Person ” has the meaning set forth in Section 7.06(d).

 

Section 1.69.          “ GAAP ” means generally accepted accounting principles as formulated and interpreted by the Financial Accounting Standards Board in the United States of America.

 

Section 1.70.          “ 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);

 

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(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 1.71.          “ Incentive Members ” means the Class B Members, Class C Members, Class D Members, Class E Members and/or Class F Members.

 

Section 1.72.          “ Incentive Units ” means the Class B Units, Class C Units, Class D Units, Class E Units and/or Class F Units.

 

Section 1.73.          “ Incentive Unit Grant Agreement ” means an Incentive Unit Grant Agreement entered into by the Predecessor LLC with certain Members.

 

Section 1.74.          “ Indebtedness ” means, without duplication, the sum of:  (a) all principal and accrued (but unpaid) interest owing by the Company and its Subsidiaries for debt for borrowed money owed to any third party (specifically excluding intercompany debt between the Company and any of its Subsidiaries and any Subsidiary of the Company and another Subsidiary of the Company); plus (b) all obligations of the Company and its Subsidiaries under leases that have been recorded as capital leases under GAAP; plus (c) indebtedness of any person other than the Company or any of its Subsidiaries that is guaranteed by the Company or any of its Subsidiaries.

 

Section 1.75.          “ Indemnified Party ” has the meaning set forth in Section 4.06(a) .

 

Section 1.76.          “ Indemnity Obligations ” has the meaning set forth in Section 4.07 .

 

Section 1.77.          “ Initial Capital Contributions ” has the meaning set forth in Section 3.01 .

 

Section 1.78.          “ Initial Agreement ” has the meaning set forth in the Recitals.

 

Section 1.79.          “ Initial Members ” means the Members, as of the Effective Date.

 

Section 1.80.          “ Initial Public Offering ” means any underwritten initial public offering of Securities of a corporate successor to the Company by way of conversion, pursuant to an effective registration statement filed under the Securities Act.

 

Section 1.81.          “ Issuance Notice ” has the meaning set forth in Section 7.10(a).

 

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Section 1.82.          “ Investor Parties ” has the meaning set forth in Section 4.07 .

 

Section 1.83.          “ Jilot Observer ” has the meaning set forth in Section 4.01(a) .

 

Section 1.84.          “ Joinder Agreement ” has the meaning set forth in Section 7.03 .

 

Section 1.85.          “ Liquidator ” has the meaning set forth in Section 8.03(b) .

 

Section 1.86.          “ Management Member ” means any Member who is an employee of the Company or any of its Subsidiaries.  In no event shall any DLJMB Member be deemed to be a Management Member.

 

Section 1.87.          “ Manager ” has the meaning set forth in Section 4.01(a)(i) .

 

Section 1.88.          “ Manager Expenses ” has the meaning set forth in Section 4.04(b) .

 

Section 1.89.          “ 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 1.90.          “ Members Representative ” has the meaning set forth in Section 10.01 .

 

Section 1.91.          “ Merger Co. ” has the meaning set forth in the Recitals.

 

Section 1.92.          “ Merger Consideration ” has the meaning set forth in the Recitals.

 

Section 1.93.          “ 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 1.94.          “ Non-competition Period ” has the meaning set forth in Section 6.07(a) .

 

Section 1.95.          “ Observer ” means each of the Whitney Observer and the Jilot Observer.

 

Section 1.96.          “ Officer ” has the meaning set forth in Section 4.03 .

 

Section 1.97.          “ Other Business ” has the meaning set forth in Section 6.08 .

 

Section 1.98.          “ Other Class A Members ” means all Class A Members other than the DLJMB Members.

 

Section 1.99.          “ Other Members ” means all Members other than the DLJMB Members.

 

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Section 1.100.        Performance Target ” means the Equity Valuation target for each Fiscal Year as set forth on Schedule II 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 1.101.        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 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 1.102.        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 1.103.        Plan ” has the meaning set forth in Section 10.17 .

 

Section 1.104.        Predecessor LLC ” has the meaning set forth in the Recitals.

 

Section 1.105.        Predecessor LLC Agreement ” has the meaning set forth in the Recitals.

 

Section 1.106.        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.

 

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Section 1.107.         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 7.10 , 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 1.108.         Put Notice Date ” has the meaning set forth in Section 7.09(b).

 

Section 1.109.         Put Units ” has the meaning set forth in Section 7.09(b).

 

Section 1.110.         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 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 1.111.         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 VIII.   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 7.09(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

 

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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 1.112.        RFMV Calculation Date ” means, with respect to the application of the provisions of Section 7.09 to a Terminated Member:

 

(i)             With respect to Termination Units that are called by the Company pursuant to Section 7.09(a) , on the Call Notice Date;

 

(ii)            With respect to Termination Units that are put to the Company by the Terminated Member pursuant to Section 7.09(b) , the Termination Date; and

 

(iii)           With respect to Rollover Units that are acquired by the Company pursuant to Section 7.09(c) , the Termination Date.

 

Section 1.113.        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 1.114.        Restricted Period ” has the meaning set forth in Section 7.04 .

 

Section 1.115.        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 1.116.        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 1.117.        Securities Act ” means the Securities Act of 1933, as amended from time to time.

 

Section 1.118.        STR ” has the meaning set forth in the Recitals.

 

Section 1.119.        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

 

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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 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 1.120.         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 1.121.         Tag-Along Date ” has the meaning set forth in Section 7.06(e) .

 

Section 1.122.         Tag-Along Notice ” has the meaning set forth in Section 7.06(a) .

 

Section 1.123.         Tag-Along Notice Period ” has the meaning set forth in Section 7.06(a).

 

Section 1.124.         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 1.125.         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 1.126.         Tag-Along Offer ” has the meaning set forth in Section 7.06(a) .

 

Section 1.127.         Tag-Along Response Notice ” has the meaning set forth in Section 7.06(a).

 

Section 1.128.         Tag-Along Right ” has the meaning set forth in Section 7.06(a) .

 

Section 1.129.         Tag-Along Sale ” has the meaning set forth in Section 7.06(a) .

 

Section 1.130.         Tag-Along Seller ” has the meaning set forth in Section 7.06(a) .

 

Section 1.131.         Tagging Person ” has the meaning set forth in Section 7.06(a) .

 

Section 1.132.         Terminated Member ” has the meaning set forth in Section 7.09(a).

 

Section 1.133.         Termination Date ” has the meaning set forth in Section 3.06 .

 

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Section 1.134.         Termination Event ” has the meaning set forth in Section 7.09(a) .

 

Section 1.135.         Termination Price ” has the meaning set forth in Section 7.09(d) .

 

Section 1.136.         Termination Units ” has the meaning set forth in Section 7.09(a).

 

Section 1.137.         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 1.138.         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 1.139.         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 1.140.         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 1.141.         Unvested Fiscal Year ” has the meaning set forth in Section 3.05(c) .

 

Section 1.142.         Unvested Unit ” has the meaning set forth in Section 5.03 .

 

Section 1.143.         Unwinding Event ” has the meaning set forth in Section 7.03 .

 

Section 1.144.         Whitney Members ” means Prairie Fire Trust, MRS Trust, Michael R. Stone 2008 GRAT, Michael R. Stone, Harrington Sound, LLC and Paul Vigano.

 

Section 1.145.         Whitney Observer ” has the meaning set forth in Section 4.01(a) .

 

Section 1.146.         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 (New) LLC”.  The business of the Company shall be conducted under such name or under such other names as

 

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the 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 VIII 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 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;

 

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(d)            to hire, for usual and customary payments and expenses, consultants, brokers, attorneys, accountants and such other agents for the Company as it may deem necessary or advisable, and authorize any such agent to act for and on behalf of the Company;

 

(e)            to incur expenses and other obligations on behalf of the Company in accordance with this Agreement, and, to the extent that funds of the Company are available for such purpose, pay all such expenses and obligations;

 

(f)             to bring and defend actions and proceedings at law or in equity and before any governmental, administrative or other regulatory agency, body or commission;

 

(g)            to establish Reserves in accordance with this Agreement or the Act for contingencies and for any other purpose of the Company;

 

(h)            to prepare and file all necessary returns and statements, pay all taxes, assessments and other impositions applicable to the assets of the Company, and withhold amounts with respect thereto from funds otherwise distributable to any Member;

 

(i)             to determine the accounting methods and conventions to be used in the preparation of any accounting or financial records of the Company, which, in any case, must be consistent with GAAP; and

 

(j)             to act for and on behalf of the Company in all matters incidental to the foregoing.

 

Section 2.07.          Fiscal Year .  The fiscal year (the “ Fiscal Year ”) of the Company shall end on the last day of each calendar year unless, for federal income tax purposes, another Fiscal Year is required.  The Company shall have the same Fiscal Year for federal income tax purposes and for accounting purposes.

 

ARTICLE III

 

CONTRIBUTIONS AND MEMBERS

 

Section 3.01.          Initial Capital Contributions .  Each Class A Member should be deemed to have made initial Capital Contributions (the “ Initial Capital Contributions ”) in the amount set forth opposite its name on Schedule I and as reflected in a register of the Company, maintained by the Company in accordance with Article VI (the “ Company Register ”).

 

Section 3.02.          Additional Capital Contributions .

 

(a)            (i)             No Member shall be required to make any Additional Capital Contributions to the Company.  In addition, no Member shall be permitted to make any Additional Capital Contributions to the Company without the written consent of the Board of Managers.  The Board of Managers, subject to the preemptive rights provided for in Section 7.10 , shall have the authority to issue Class A Units or other equity securities of the Company, including any security or instrument convertible into equity securities of the Company (“ Equity Securities ”) in such amounts and at such purchase price per Class A Unit or other

 

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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 I 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 I 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 I .  Each Class B Member owns that number of Class B Units as appears next to its name on Schedule I , 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

 

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under Schedule I .  Each Class C Member owns that number of Class C Units as appears next to its name on Schedule I , 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 I .  Each Class D Member owns that number of Class D Units as appears next to its name on Schedule I , 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 I .  Each Class E Member owns that number of Class E Units as appears next to its name on Schedule I , 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 I .  Each Class F Member owns that number of Class F Units as appears next to its name on Schedule I , 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 VII ).  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)            Any unvested Class A Units issued to Dennis L. Jilot shall vest in accordance with the Unit Grant Agreement to be entered into between Dennis L. Jilot and the corporate successor to the Company by way of conversion.

 

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

 

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(c)            Class C Units granted pursuant to the Predecessor LLC Agreement shall vest, unless provided otherwise herein or in the applicable Incentive Unit Grant Agreement for a Class C Member, 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 , 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(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 (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.

 

(d)            Class D Units granted pursuant to the Predecessor LLC Agreement shall vest, unless provided otherwise in the applicable Incentive Unit Grant Agreement for a Class D Member, 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

 

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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(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 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).

 

(e)            Class E Units granted pursuant to the Predecessor LLC Agreement shall vest, unless provided otherwise herein or in the applicable Incentive Unit Grant Agreement for a Class E Member, 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(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 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.

 

(f)             Class F Units granted pursuant to the Predecessor LLC Agreement shall vest fifty percent (50%) at issuance and, unless provided otherwise herein or in the applicable Incentive Unit Grant Agreement for a Class F Member, sixteen and two-third percent (16 2 / 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(f) , 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

 

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(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.

 

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.          Voting Rights .  Except as otherwise provided herein, all Class A Members shall be entitled to ten (10) votes for each Class A Unit held and each Member (other than the Class A Members) shall be entitled to one (1) vote for each Unit held.

 

Section 3.09.          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 VIII .

 

Section 3.10.          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.

 

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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 six (6) Persons to manage the Company and its business and affairs.  Each of the Managers on the Board of Managers is referred to herein as a “ Manager .”  The Board of Managers shall be comprised, as follows:

 

(1)            up to four (4) Managers shall be designated by DLJMB (the “ DLJMB Managers ”)

 

(2)            the then current Chief Executive Officer of the Company (the “ CEO Manager ”); and

 

(3)            one (1) Manager shall be elected by the Members.

 

(ii)            If at any time any Manager other than the CEO Manager and the Manager elected by the Members 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.  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.  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 L. 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 Managers.

 

(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 6.02 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

 

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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 the Whitney Members agree to cause its designated Observer to agree, to be bound by the confidentiality provisions set forth in Section 6.06 hereof.  Each Observer agrees and the Whitney Members agree to cause its 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 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.

 

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(viii)         Each Manager shall be entitled to receive the financial reports set forth in Section 6.02 , 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 VIII or Transfers or purchases of Units made pursuant to Article VII 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.

 

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

 

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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

 

(vii)          all expenses incurred in connection with the dissolution and liquidation of the Company.

 

(b)            The Company shall reimburse each Manager for any reasonable and documented costs and expenses incurred by such Manager in connection with attending any meetings of the Board of Managers or any committees thereof (collectively, the “ Manager Expenses ”).

 

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Section 4.05.           Exculpation .

 

(a)            Subject to applicable law, no Indemnified Party shall be liable, in damages or otherwise, to the Company, the Members or any of their Affiliates for any act or omission performed or omitted by any of them in good faith (including any act or omission performed or omitted by any of them in reliance upon and in accordance with the opinion or advice of experts, including, legal counsel as to matters of law, accountants as to matters of accounting, or investment bankers or appraisers as to matters of valuation), except (i) for 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 or employee of the Company or any of its Affiliates, any act or omission with respect to which such officer or employee was grossly negligent or engaged in willful misconduct.

 

(b)            To the extent that, at law or in equity, any Indemnified Party has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any Member, such Indemnified Party acting under this Agreement or approval of the Board of Managers shall not be liable to the Company or to any Member for its good faith reliance on the provisions of this Agreement or approval of the Board of Managers, as appropriate.  The provisions of this Agreement, to the extent that they restrict the duties and liabilities of an Indemnified Party otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Party, to the maximum extent permitted by applicable law.

 

Section 4.06.           Indemnification .

 

(a)            To the fullest extent permitted by applicable law, the Company shall and does hereby agree to indemnify and hold harmless and pay all judgments and claims against the Board of Managers, each current or former Manager, each current or former Class A Member (including DLJ Merchant Banking Partners IV, L.P., in its role as Tax Matters Member), any Affiliate thereof, their respective officers, directors, trustees, employees, shareholders, partners, managers and members and each officer of the Company and each officer and director of its Subsidiaries (each, an “ Indemnified Party ”, each of which shall be a third-party beneficiary of this Agreement solely for purposes of Section 4.05 and this Section 4.06 ), from and against any loss or damage incurred by an Indemnified Party or by the Company for any act or omission taken or suffered by such Indemnified Party in good faith (including any act or omission taken or suffered by any of them in reliance upon and in accordance with the opinion or advice of experts, including, legal counsel as to matters of law, accountants as to matters of accounting, or investment bankers or appraisers as to matters of valuation) by reason of the fact that such Indemnified Party is or was a member, Manager, director or officer of the Company or any of its 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.

 

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(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.

 

Section 4.07.          Primary Obligation .  With respect to any Indemnified Party who is employed, retained or otherwise associated with, or appointed or nominated by, DLJ Merchant Banking, Inc., DLJMB or any of their respective Affiliates and who acts or serves as a director, officer, manager, fiduciary, employee, consultant, advisor or agent of, for or to the Company or any of its Subsidiaries, the Company or its Subsidiaries shall be primarily liable for all indemnification, reimbursements, advancements or similar payments (the “Indemnity Obligations”) afforded to such Indemnified Party acting in such capacity or capacities on behalf or at the request of the Company or any of its Subsidiaries, in such capacity, whether the Indemnity Obligations are created by law, organizational or constituent documents, contract (including this Agreement) or otherwise.  Notwithstanding the fact that DLJ Merchant Banking, Inc., DLJMB and/or any of their respective Affiliates, other than the Company and its Subsidiaries (such persons, together with its and their heirs, successors and assigns, the “Investor Parties”), may have concurrent liability to an Indemnified Party with respect to the Indemnity Obligations, the Company hereby agrees that in no event shall the Company or any of its Subsidiaries have any right or claim against any of the Investor Parties for contribution or have rights of subrogation against any Investor Parties through an Indemnified Party for any payment made by the Company or any of its Subsidiaries with respect to any Indemnity Obligation.  For the avoidance of doubt, any insurance coverage for any indemnity obligation provided by, obtained by or paid for by the Company or any of its Subsidiaries on the one hand and any Investor Party on the other hand shall be subject to the same primary and secondary liability hierarchy set forth in this Section 4.07.  In addition, the Company hereby agrees that in the event that any Investor Parties pay or advance to an Indemnified Party any amount with respect to an Indemnity Obligation, the Company will, or will cause its Subsidiaries to, as applicable, promptly reimburse such Investor Parties for such payment or advance upon request.  The Company and the Indemnified Parties agree that the Investor Parties are express third party beneficiaries of the terms hereof.

 

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 , 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

 

(b)            thereafter, to the Class A Members, Class B Members, Class C Members, Class D Members, Class E Members and Class F Members pro rata in proportion to the number of Class A Units, Class B Units, Class C Units, Class D Units, Class E Units and Class F Units held by such Members.

 

With respect to those Units that were issued as Incentive Units pursuant to Section 3.04(c) , the holder of such Incentive Unit shall only be entitled to share in distributions under this Section 5.02 after such time as the aggregate amount of distributions pursuant to this Section  

 

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5.02 from and after the date of issuance of such Incentive Unit is equal to the Distribution Threshold.

 

Section 5.03.           Adjustment to Distributions on Account of Unvested Units .  Notwithstanding the distribution priority and entitlements set forth in Section 5.02 , no distribution shall be made to an Incentive Member on account of an Incentive Unit held by such Incentive Member that has not vested pursuant to Section 3.05 (such Unit an “ Unvested Unit ”).  Any amount that would otherwise be distributed to an Incentive Member pursuant to Section 5.02 but for the application of the preceding sentence shall instead be retained in a segregated Company account to be distributed in accordance with this Article V by the Company and paid to such Incentive Member if, as and when the Unvested Unit to which such retained amount relates vests pursuant to Section 3.05 .  Items of income, gain, loss and deduction attributable to amounts retained by the Company pursuant to this Section 5.03 shall be allocated among the Incentive Members holding Unvested Units in a manner, determined in the Board of Managers’ discretion, that equitably reflects each such Incentive Member’s share of the amounts to which such items relate.  If any Unvested Units are forfeited, amounts retained by the Company pursuant to this Section 5.03 on account of such Unvested Units shall be distributed in accordance with Section 5.02 .

 

Section 5.04.           Distributions of Securities .  The Board of Managers is authorized, in its sole discretion, to make distributions to the Members in the form of Securities or other property received or otherwise held by the Company; provided , however , that, in the event of any such non-cash distribution, such Securities or other property shall be valued at the fair market value and shall be distributed to the Members in the same proportion that cash received upon the sale of such Securities or other property at such fair market value would have been distributed pursuant to Section 5.02 .  In the event that the Company distributes shares of capital stock of STR to the Members and either simultaneously with or shortly thereafter liquidates the Company, the Members shall enter into a shareholders agreement that contains, to the extent applicable, substantially similar terms and provisions as this Agreement such that the rights of the Members hereunder are not materially adversely altered, including without limitation the rights of the Members (a) under Article VII and (b) to exercise their registration rights in accordance with Annex A .

 

Section 5.05.           Withholding of Certain Amounts .

 

(a)            Subject to Section 5.07(c)  but notwithstanding any other provision contained herein to the contrary, the Board of Managers may withhold from any distribution to any Member contemplated by this Agreement any amounts due and payable by such Member to the Company or to any other Person in connection with the Company Business to the extent not otherwise paid.  Any amount withheld pursuant to this Section 5.05(a)  shall be applied or paid by the Company to discharge the obligation in respect of which such amount was withheld.

 

(b)            Notwithstanding anything to the contrary contained herein, all amounts withheld by the Board of Managers pursuant to Section 5.05(a)  with respect to a Member shall be treated as if such amounts were distributed to such Member under this Agreement.

 

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Section 5.06.           Restricted Distributions .  Notwithstanding anything to the contrary contained herein, the Company, and the Board of Managers on behalf of the Company, shall not make a distribution to any Member on account of its Units if such distribution would violate the Act or other applicable law.

 

Section 5.07.           Withholding Tax Payments and Obligations .  In the event that withholding taxes are paid or required to be paid in respect of amounts distributed by the Company, such payments or obligations shall be treated as follows:

 

(a)            Payments by the Company .  The Company is authorized to withhold from any payment made to, or any distributive share of, a Member, any taxes required by law to be withheld, and in such event, such taxes shall be treated as if an amount equal to such withheld taxes had been paid to the Member rather than paid over to the taxing authority.

 

(b)            Overwithholding .  Neither the Company nor the Board of Managers shall be liable for any excess taxes withheld in respect of any Member’s interest in the Company, and, in the event of overwithholding, a Member’s sole recourse shall be to apply for a refund from the appropriate governmental authority.

 

(c)            Certain Withheld Taxes Treated as Demand Loans .  Any taxes withheld pursuant to Section 5.07(a)  shall be treated as if distributed to the relevant Member to the extent an amount equal to such withheld taxes would then be distributable to such Member and, to the extent in excess of such distributable amounts, as a demand loan payable by the Member to the Company with interest at the lesser of (i) the Prime Rate in effect from time to time plus 2%, compounded quarterly, and (ii) the highest rate per annum permitted by law.  The Board of Managers may, in its discretion, either demand payment of the principal and accrued interest on such demand loan at any time, and enforce payment thereof by legal process, or may withhold from one or more distributions to a Member amounts sufficient to satisfy such Member’s obligations under any such demand loan.

 

(d)            Indemnity .  In the event that the Company, or the Board of Managers or any Affiliate thereof, becomes liable as a result of a failure to withhold and remit taxes in respect of any Member, then, in addition to, and without limiting, any indemnities for which such Member may be liable under Section 4.05 , such Member shall indemnify and hold harmless the Company, or the Board of Managers, as the case may be, in respect of all taxes, including interest and penalties, and any expenses incurred in any examination, determination, resolution and payment of such liability.  The provisions contained in this Section 5.07(d)  shall survive the termination of the Company and the withdrawal of any Member.

 

ARTICLE VI

 

ACCOUNTING AND TAX MATTERS

 

Section 6.01.           Books and Records .  At all times during the existence of the Company, the Company shall maintain, at its principal place of business, separate books of account for the Company, including the Company Register.  Subject to reasonable confidentiality restrictions established by the Board of Managers (including as set forth in Section 18-305(c) of

 

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the Act), each Member and its respective agents and representatives shall be afforded access to the Company’s books and records applicable to such Member for any proper purpose (as determined by the Board of Managers in its reasonable discretion), at any reasonable time during regular business hours upon reasonable written notice to the Board of Managers.

 

Section 6.02.           Reports to Members .

 

(a)            Annual Reports .  The Company shall prepare and deliver to each Manager and each Class A Member, as soon as available and in any event within 120 days following the end of each Fiscal Year, an audited consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year, and audited consolidated statements of income, retained earnings and cash flows of the Company and its Subsidiaries for such year, prepared in accordance with GAAP and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accompanied by the opinion of independent public accountants of recognized national standing selected by the Company.

 

(b)            Quarterly Reports .  The Company shall prepare and deliver to each Manager and each Class A Member that owns at least two percent (2%) of the outstanding Class A Units, as soon as available and in any event within 45 days following the end of each Company fiscal quarter (other than the last quarter of any Fiscal Year), commencing with the first full quarter ending after the date hereof, a consolidated balance sheet of the Company and its Subsidiaries as of the end of each such quarterly period, and consolidated statements of income, retained earnings and cash flows of the Company and its Subsidiaries for such period and for the current fiscal year to date, prepared in accordance with GAAP (subject to normal year-end audit adjustments and the absence of notes thereto) and setting forth in comparative form the figures for the corresponding periods of the previous fiscal year, all in reasonable detail and certified by the principal financial or accounting officer of the Company.

 

(c)            Monthly Reports .  The Company shall prepare and deliver to each Manager and each Class A Member that owns at least two percent (2%) of the outstanding Class A Units, as soon as available and in any event within 30 days following the end of each month (other than the last month of any Company fiscal quarter), commencing with the first full month ending after the date hereof, a consolidated balance sheet of the Company and its Subsidiaries as of the end of such month and consolidated statements of operations, income, cash flows, retained earnings and Members’ equity of the Company and its Subsidiaries, for each month and for the current fiscal year of the Company to date, prepared in accordance with GAAP (subject to normal year-end audit adjustments and the absence of notes thereto).

 

(d)            All Units held by the Whitney Members shall be aggregated together for purposes of determining the two percent (2%) ownership level set forth in Sections 6.02(b)  and (c)  above, and, if such ownership level is met, each Whitney Member shall be entitled to receive quarterly and monthly reports in accordance with this Section 6.02 ; provided , however , that if any Whitney Member becomes Affiliated with an Adverse Person, such relevant Whitney Member shall no longer be eligible to receive such reports but its Units shall nonetheless be aggregated with the other Whitney Members for purposes of determining the remaining Whitney Members’ eligibility.

 

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(e)            Audit . The Company shall engage a reputable firm of independent certified public accountants to provide annual audit reports of the Company’s consolidated financial statements, prepared in accordance with GAAP.

 

Section 6.03.           Tax Returns .  The Board of Managers, at the expense of the Company, shall endeavor to cause the preparation and timely filing (including extensions) of all tax returns required to be filed by the Company pursuant to the Code as well as all other required tax returns in each jurisdiction in which the Company or its Subsidiaries, as applicable, owns property or does business.

 

Section 6.04.           Accounting Methods; Elections .  The Board of Managers shall determine the accounting methods and conventions to be used in the preparation of the Company’s tax returns and shall make any and all elections under the tax laws of the United States and any other relevant jurisdictions as to the treatment of items of income, gain, loss, deduction and credit of the Company, or any other method or procedure related to the preparation of the Company’s tax returns.

 

Section 6.05.           Tax Status .  It is intended that the Company be classified as a corporation for federal income tax purposes.  The Company has filed an election pursuant to Treasury Regulation Section 301.7701-3(c) to be treated as a corporation.  Except as provided in this Section 6.05 relating to the tax classification of the Company, the Board of Managers may cause the Company to make or refrain from making any and all elections permitted by such tax laws, and the Board of Managers shall not be liable for any consequences to any previously admitted or subsequently admitted Members resulting from their making or failing to make any such elections.

 

Section 6.06.           Confidentiality .  (a)   Each Other Member agrees that Confidential Information (as defined below) furnished and to be furnished to him or her was and shall be made available in connection with such Other Member’s investment in the Company.  Such Other Member acknowledges that the Confidential Information which such Other Member has obtained or will obtain is the property of the Company and its Subsidiaries.  Each Other Member agrees that he or she will not disclose any Confidential Information to any other Person (other than its directors, employees, counsel, auditors, agents, partners, advisers and representatives so long as such Persons are made aware of the confidential nature of the Confidential Information and agree or are otherwise obligated to keep it confidential), except that Confidential Information may be disclosed: (i) to the extent required by applicable law, rule or regulation (including complying with any oral or written questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process to which a such Other Member is subject); provided that such Other Member gives the Company prompt notice of such requests, to the extent practicable, so that the Company may at its own cost and expense seek an appropriate protective order or similar relief (and the Other Member shall cooperate with such efforts by the Company, and shall in any event make only the minimum disclosure required by such law, rule or regulation), (ii) if the prior written consent of the Board shall have been obtained, (iii) by Additional Members, on a confidential basis, to current and prospective limited partners or members or lenders in connection with a loan or prospective loan to such Additional Member and to their respective legal counsel, auditors, agents and representatives, (iv) to any Other Member, (v) upon prior written notice to the Board of Managers, to any institutional

 

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investor which is not an Adverse Person to which it Transfers or offers to Transfer its Units or any part thereof (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 6.06 and has delivered to the Company a confidentiality agreement reasonably acceptable to the Company) or (vi) to any federal or state regulatory authority having jurisdiction over such Other Member, the National Association of Insurance Commissioners or the National Association of Insurance Commissioners Securities Valuation Office or any similar organization, or any nationally recognized rating agency that requires access to information about such Other Member’s investment portfolio, in each case, in the ordinary course.  The obligations with respect to Confidential Information in this Section 6.06 shall terminate three (3) years after a Person ceases to be a Member;  provided, however, that the obligation to maintain the confidentiality of “trade secrets” shall not terminate.

 

(b)            Confidential Information ” shall mean any information relating to the business or affairs of the Company or any of its Subsidiaries, including, but not limited to, information relating to financial statements, customer identities, potential customers, potential acquisitions, employees, sales representatives, suppliers, servicing methods, equipment programs, strategies and information, analyses, profit margins or other proprietary information used by the Company or any of its Affiliates; provided, however, that Confidential Information does not include any information which is in the public domain or becomes known in the industry through no wrongful act on the part of such Other Member; provided further that Confidential Information shall not include information that (i) is or becomes generally known to the public other than as a result of a disclosure by such Other Member in violation of this Agreement or, (ii) is or was available to such Other Member on a non-confidential basis prior to its disclosure to such Other Member.

 

(c)            Except as otherwise agreed by the Company, in the event of a conflict between this Section 6.06 and the terms of a Management Member’s employment or consulting agreement, the terms of such employment or consulting agreement shall be controlling.

 

Section 6.07.           Restrictive Covenants .

 

(a)            During the term of employment or consultancy and for a period of one (1) year after the termination thereof (which the Company may elect to extend in accordance with the Management Member’s consulting or employment agreement, if applicable) (the “ Non-Competition Period ”), each Management Member shall not, without the prior written consent of the Company, and whether as employee, principal, agent, shareholder, partner, consultant, advisor, limited liability company manager or member, director, or otherwise, directly or indirectly, compete with the Company or any subsidiary of the Company in the business of manufacturing solar panel encapsulant or providing consumer product quality assurance services to third parties, (the “ Restricted Business ”).  The making or guarantying of a loan, lease or any other financial arrangement to, with, or for any person or entity that engages in a Restricted Business shall be deemed a breach of this covenant.  However, such Management Member may purchase or own up to 1% of the outstanding stock of a publicly traded corporation that competes with the Company or any Subsidiary, but such Management Member may not be employed by or otherwise participate in the activities of such corporation.

 

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(b)            During the Non-Competition Period, such Management Member will not, and will not permit any of his or her affiliates to, directly or indirectly, (i) recruit or otherwise solicit or induce any employee, customer, subscriber or supplier of the Company or any of its Subsidiaries to terminate its employment or arrangement with the Company or any of its Subsidiaries, otherwise change its relationship with the Company or any of its Subsidiaries or establish any relationship with such Management Member or any of his or her affiliates to compete in the Restricted Business or (ii) without the Company’s prior written consent, hire (A) any employee of the Company or any of its Subsidiaries or (B) any person whose employment with the Company or such Subsidiary is terminated by such person without Good Reason during the six-month period ending on the date of such hire; provided, that with respect to former employees of the Company or any of its Subsidiaries, the Company’s consent shall not be unreasonably withheld.

 

(c)            The parties hereto agree that, if any court of competent jurisdiction in a final nonappealable judgment determines that a specified time period, a specified geographical area, a specified business limitation or any other relevant feature of this Section 6.07 is unreasonable, arbitrary or against public policy, then a lesser time period, geographical area, business limitation or other relevant feature which is determined to be reasonable, not arbitrary and not against public policy may be enforced against the applicable party.

 

(d)            In the event of a conflict between this Section 6.07 and the terms of a Management Member’s employment or consulting agreement the terms of such employment or consulting agreement shall be controlling.

 

Section 6.08.           Investment Opportunities and Conflicts of Interest .  The parties hereto expressly acknowledge and agree that (i) the DLJMB Members and their respective Affiliates are permitted to have, and may presently or in the future have, investments or other business relationships, ventures, agreements or arrangements with entities engaged in the Restricted Business other than through the Company and its Subsidiaries (an “ Other Business ”), (ii) the DLJMB Members and their respective Affiliates have or may develop a strategic relationship with businesses that are or may be competitive with the Company and its Subsidiaries, (iii) none of the DLJMB Members or their respective Affiliates will be prohibited by virtue of their investment in the Company or any of its Subsidiaries from pursuing and engaging in any such activities, (iv) none of the DLJMB Members or their respective Affiliates will be obligated to inform the Company or any Other Member of any such opportunity, relationship or investment, (v) the Other Members will not acquire, be provided with an option or opportunity to acquire or be entitled to any interest or participation in any Other Business as a result of the participation therein of any of the DLJMB Members or their respective Affiliates.  The Members expressly authorize and consent to the involvement of the DLJMB Members and/or their respective Affiliates in any Other Business; provided that any transactions between the Company and its Subsidiaries and an Other Business will be on terms no less favorable to the Company and its Subsidiaries than would be obtainable in a comparable arm’s-length transaction, and expressly waive, to the fullest extent permitted by applicable law, any rights to assert any claim that such involvement breaches any duty owed to any other Member or to assert that such involvement constitutes a conflict of interest by such Persons with respect to any Member and (vi) nothing contained herein shall limit, prohibit or restrict any designee of any

 

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DLJMB Members or any representative of any of its Affiliates from serving on the board of directors or other governing body or committee of any Other Business.

 

Section 6.09.           Conflicting Agreements .  Each Member represents and agrees that it shall not (a) grant any proxy or enter into or agree to be bound by any voting trust or agreement with respect to the Units, except as expressly contemplated by this Agreement, (b) enter into any agreement or arrangement of any kind with any Person with respect to its Units inconsistent with the provisions of this Agreement or for the purpose or with the effect of denying or reducing the rights of any other Member under this Agreement, including agreements or arrangements with respect to the Transfer or voting of its Units or (c) act, for any reason, as a member of a group or in concert with any other Person in connection with the Transfer or voting of its Units in any manner that is inconsistent with the provisions of this Agreement.

 

ARTICLE VII

 

TRANSFERS

 

Section 7.01.           General Restrictions on Transfer .  (a)   Each Member understands and agrees that the Units held by it on the date hereof have not been and will not be registered under the Securities Act and are restricted securities under the Securities Act and the rules and regulations promulgated thereunder.  Each Member agrees that it shall not Transfer any Units (or solicit any offers in respect of any Transfer of any Units), except in compliance with the Securities Act, any other applicable securities or “blue sky” laws and any restrictions on Transfer contained in this Agreement.  No Member shall Transfer any Units to any Person if such Transfer would result in adverse regulatory consequences to the Company, including, without limitation, obligations of the Company to file periodic reports with the SEC under the Exchange Act.

 

(b)            Notwithstanding anything in this Agreement to the contrary, other than pursuant to a Drag Along Sale pursuant to Section 7.07 , no Member shall Transfer any Units to an Adverse Person without the prior written consent of the Company.

 

(c)            Any attempt to Transfer any Units not in compliance with this Agreement shall be null and void, and the Company shall not, and shall cause any transfer agent not to, give any effect in the Company’s records to such attempted Transfer.

 

Section 7.02.           [Reserved]

 

Section 7.03.           Permitted Transferees .

 

(a)            Subject to Section 7.01 , any Member may at any time Transfer any or all of its Units to a Permitted Transferee without the consent of any Person and without compliance with Sections 7.04 , 7.06 and 7.07 , as the case may be, so long as (i) such Permitted Transferee shall have agreed in writing to be bound by the terms of this Agreement by executing a joinder agreement in the form of Exhibit A attached hereto (“ Joinder Agreement ”); (ii) the Transfer is in compliance with the Securities Act, any other applicable securities or “blue sky” laws and any other restrictions on Transfer contained in this Agreement; and (iii) the Transfer does not trigger any registration obligation under Section 12(g) of the Securities Act.  Such Member must give

 

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written prior notice to the Company of any proposed Transfer to a Permitted Transferee, including the identity of such proposed Permitted Transferee and such other information reasonably requested by the Company to ensure compliance with the terms of this Agreement and the Company shall be entitled to condition any such Transfer on receipt of an opinion of counsel reasonably acceptable to the Company that such Transfer is exempt from the registration requirements of the Securities Act.

 

(b)            If, while a Permitted Transferee holds any Units, a Permitted Transferee ceases to qualify as a Permitted Transferee in relation to the initial transferor Member from whom or which such Permitted Transferee or any previous Permitted Transferee of such initial transferor Member received such shares or becomes an Adverse Person (an “ Unwinding Event ”), then the relevant initial transferor Member:

 

(i)             shall forthwith notify the other Members and the Company of the pending occurrence of such Unwinding Event; and

 

(ii)            shall take all actions necessary, prior to such Unwinding Event, to effect a Transfer of all the Units held by the relevant Permitted Transferee either back to such Member or, pursuant to this Section 7.03 , to another Person which qualifies as a Permitted Transferee of such initial transferring Member.

 

Notwithstanding the foregoing, the provisions of this Section 7.03(b)  will not be applicable if, prior to any Transfer, the initial transferor Member receives from the Permitted Transferee its agreement not to undertake any actions that would be reasonably likely to result in an Unwinding Event.

 

Section 7.04.          Restrictions on Transfers by Other Members .  Until the date when the DLJMB Members cease to own fifteen percent (15%) or more of the then outstanding Class A Units (the “ Restricted Period ”), no Other Member may Transfer any of their Units, except (A) to a Permitted Transferee in accordance with Section 7.03 , or (B) in a Transfer of Units in a Tag-Along Sale, Drag-Along Sale or Repurchase pursuant to Sections 7.06 , 7.07 or 7.09.

 

Section 7.05.          Restrictions on Transfers by DLJMB Members .  Any DLJMB Member may at any time Transfer any Units (i) to a Permitted Transferee in compliance with Section 7.03 , (ii) in connection with the exercise of its Drag-Along Rights pursuant to Section 7.07 , (iii) in the Syndication or (iv) to any other Person so long as (A) the transferee agrees to be bound by this Agreement and (B) the transferor complies with Section 7.06 hereof to the extent applicable to such Transfer.

 

Section 7.06.          Tag-Along Rights .  (a)  Subject to Sections 7.06(g)  and 7.08 , if any DLJMB Members (collectively, the “ Tag-Along Seller ”) propose to Transfer any Class A Units to any Third Party or Third Parties in a single transaction or in a series of related transactions (a “ Tag-Along Sale ”):

 

(i)             the Tag-Along Seller shall provide each Other Class A Member written notice of the terms and conditions of such proposed Transfer (“ Tag-Along Notice ”) and offer each Other Class A Member the opportunity to participate in such Transfer in accordance with this Section 7.06 , and

 

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(ii)            each Other Class A Member may elect, at its option, to participate in the proposed Transfer in accordance with this Section 7.06 (each such electing Other Class A Member, a “ Tagging Person ”).

 

The Tag-Along Notice shall identify the number of Class A Units proposed to be sold by the Tag-Along Seller and all other Units subject to the offer (“ Tag-Along Offer ”), the consideration for which the Transfer is proposed to be made, and all other material terms and conditions of the Tag-Along Offer, including the form of the proposed agreement, if any, and a firm offer by the proposed Third Party transferee to purchase Class A Units from the Class A Members in accordance with this Section 7.06 .  If the economic terms of the Tag-Along Offer are changed in a manner that is beneficial to the Tag-Along Seller as compared to those set forth in the Tag-Along Notice, the Tag-Along Seller shall deliver a new Tag-Along Notice to each Other Class A Member setting forth the revised terms of the Tag-Along Offer, and the time periods in this Section 7.06 shall be calculated based upon the Other Class A Members’ receipt of such revised Tag-Along Notice.

 

From the date of its receipt of the Tag-Along Notice, each Tagging Person shall have the right (a “ Tag-Along Right ”), exercisable by notice (“ Tag-Along Response Notice ”) given to the Tag-Along Seller within ten (10) Business Days after its receipt of the Tag-Along Notice (the “ Tag-Along Notice Period ”), to request and require that the Tag-Along Seller include in the proposed Transfer up to the number of Class A Units constituting its Tag-Along Portion of Class A Units and the Tag-Along Seller shall include the number of Class A Units proposed to be Transferred by such Tag-Along Seller as set forth in the Tag-Along Notice.  Each Tag-Along Response Notice shall include wire transfer instructions for payment of the purchase price for the Class A Units to be sold in such Tag-Along Sale.  Each Tagging Person that exercises its Tag-Along Rights hereunder shall deliver to the Tag-Along Seller, with its Tag-Along Response Notice, the certificate or certificates representing the Units of such Tagging Person to be included in the Tag-Along Sale, together with a limited power-of-attorney authorizing the Tag-Along Seller to Transfer such Units on the terms set forth in the Tag-Along Notice.  Delivery of the Tag-Along Response Notice with such certificate or certificates and limited power-of-attorney shall constitute an irrevocable acceptance of the Tag-Along Offer by such Tagging Persons.

 

If, at the end of a 120-day period after the Tag-Along Date (which 120-day period shall be extended if any of the transactions contemplated by the Tag-Along Offer are subject to regulatory approval until the expiration of five (5) Business Days after all such approvals have been received, but in no event later than 180 days following the Tag-Along Date by the Tag-Along Seller), the Tag-Along Seller has not completed the Transfer of all such Class A Units on substantially the same terms and conditions set forth in the Tag-Along Notice, the Tag-Along Seller shall (i) promptly return to each Tagging Person the limited power-of-attorney (and all copies thereof and any other documents in the possession of the Tag-Along Seller executed by the Tagging Persons in connection with the proposed Tag-Along Sale, and (ii) not conduct any Transfer of Class A Units without again complying with this Section 7.06(a) .

 

(b)            Concurrently with the consummation of the Tag-Along Sale, the Tag-Along Seller shall (i) notify the Tagging Persons thereof, (ii) remit or cause to be remitted to the Tagging Persons the total consideration to be paid at the closing of the Tag-Along Sale for the

 

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Units of the Tagging Persons Transferred pursuant thereto, with the cash portion of the purchase price paid by wire transfer of immediately available funds in accordance with the wire transfer instructions in the applicable Tag-Along Response Notices and (iii) promptly after the consummation of such Tag-Along Sale, furnish such other evidence of the completion and the date of completion of such Transfer and the terms thereof as may be reasonably requested by the Tagging Persons.

 

(c)            If at the termination of the Tag-Along Notice Period any Other Member shall not have elected to participate in the Tag-Along Sale, such Other Member shall be deemed to have waived its rights under Section 7.06(a)  with respect to, and only with respect to, the Transfer of its Class A Units pursuant to such Tag-Along Sale.

 

(d)            If (i) any Other Member declines to exercise its Tag-Along Rights or (ii) any Tagging Person elects to exercise its Tag-Along Rights with respect to less than such Tagging Person’s Tag-Along Portion (the aggregate amount of Units subject to all such unexercised Tag-Along Portions, the “ Excess Portion ”), the Tag-Along Seller shall notify the Tagging Persons who desire to sell their Tag-Along Portion (but not less than such amount) (a “ Fully Participating Tagging Person ”) and the Tag-Along Seller and any Fully Participating Tagging Person shall be entitled to Transfer, pursuant to the Tag-Along Offer, in addition to any Units already being Transferred, a number of Units held by it equal to the product of (i) the Excess Portion and (ii) a fraction, the numerator of which is the total number of the relevant class of Class A Units owned by the Tag-Along Seller or Fully Participating Tagging Person, as the case may be, and the denominator of which is equal to the sum of the total number Class A Units owned by the Tag-Along Seller and all Fully Participating Tagging Persons.

 

(e)            The Tag-Along Seller shall Transfer, on behalf of itself and any Tagging Person, the Class A Units subject to the Tag-Along Offer and elected to be Transferred on the terms and conditions set forth in the Tag-Along Notice within 120 days (or such longer period as extended under Section 7.06(a) ) of the date on which all Tag-Along Rights shall have been waived, exercised or expired (the “ Tag-Along Date ”).

 

(f)             Notwithstanding anything contained in this Section 7.06 , there shall be no liability on the part of the Tag-Along Seller to the Tagging Persons (other than the obligation to return limited powers- of-attorney received by the Tag-Along Seller) if the Transfer of Class A Units pursuant to Section 7.06 is not consummated for whatever reason.  The decision to effect a Transfer of Class A Units pursuant to this Section 7.06 by the Tag-Along Seller is in the sole and absolute discretion of the Tag-Along Seller.

 

(g)            If the consummation of the Tag-Along Sale would result in a Change of Control, Incentive Members shall be entitled to participate in such Tag-Along Sale to the extent that their Incentive Units have vested and all references to “Class A Units” in this Section 7.06 shall mean “Units” and all references to “Class A Members” or “Other Class A Members” shall mean “Members.”

 

(h)            The provisions of this Section 7.06 shall not apply to any Transfer of Units: (i) to any Permitted Transferees of the Tag-Along Seller, (ii) in a Drag-Along Sale for

 

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which the Drag-Along Seller shall have elected to exercise its rights under Section 7.07 , or (iii) in connection with the Syndication.

 

Section 7.07.           Drag-Along Rights .  (a)   Subject to Section 7.08 , if one or more of the DLJMB Members (collectively, the “ Drag-Along Seller ”) propose to Transfer Units to any Third Party or Parties (the “ Drag-Along Transferee ”) in a single transaction or in a series of related transactions and the Units to be Transferred by the Drag-Along Seller represent not less than 50% of Units then owned by the DLJMB Members in the aggregate (any such Transfer, a “ Drag-Along Sale ”), the Drag-Along Seller may at its option require each Other Member to Transfer, and each other Member hereby agrees to Transfer, the Drag-Along Portion of the Units (“ Drag-Along Rights ”) then held by such Other Member.  All Other Members shall cooperate in, and shall take all actions that the Drag-Along Seller deems reasonably necessary or desirable to consummate the Drag-Along Sale, including, without limitation, (i) voting their respective Units (or executing and delivering any written consents in lieu thereof) in favor of the Drag-Along Sale, including voting to approve a Drag-Along Sale if such Drag-Along Sale is structured as a merger or a sale of all or substantially all of the assets of the Company, and against any action or proposal that may prevent, hinder or impede the consummation of the Drag-Along Sale, (ii) to the extent permitted by applicable law, not exercising any dissenters’ or appraisal rights to which they may be entitled in connection with the Drag-Along Sale, and (iii) subject to Section 7.07(b) , entering into agreements with the Drag-Along Transferee on terms substantially identical to those (if any) entered into between the Drag-Along Transferee and the Drag-Along Seller.  Each Other Member hereby grants to the Drag-Along Seller, an irrevocable proxy coupled with an interest to vote, including in any action by written consent, such Other Member’s Units in accordance with such Other Member’s agreements in this Section 7.07 and a power of attorney to execute and deliver in the name and on behalf of such Other Member all such agreements, instruments and other documentation (including any written consents of Members) as is required to Transfer the Units held by such Other Member to the Drag-Along Transferee.  The Drag-Along Seller shall provide notice to each Other Member that sets forth the circumstances in which such proxy or power of attorney was used immediately following the exercise of the Drag-Along Seller’s rights as set forth above.

 

(b)            The Drag-Along Seller shall provide notice of such Drag-Along Sale to the Other Members (a “ Drag-Along Sale Notice ”) not later than ten (10) Business Days prior to the proposed Drag-Along Sale.  The Drag-Along Sale Notice shall identify the Drag-Along Transferee, the number of Units subject to the Drag-Along Sale, the consideration for which a Transfer is proposed to be made (the “ Drag-Along Sale Price ”) and all other material terms and conditions of the Drag-Along Sale.  The number of Units to be sold by each Other Member shall be the Drag-Along Portion of the Units that such Other Member owns.  Each Other Member shall be required to participate in the Drag-Along Sale on the terms and conditions set forth in the Drag-Along Sale Notice and to tender the Drag-Along Portion of its Units as set forth below.  The price payable in such Transfer shall be the Drag-Along Sale Price.  Not later than five (5) Business Days after the date of the Drag-Along Sale Notice (the “ Drag-Along Sale Notice Period ”), each of the Other Members shall deliver to a representative of the Drag-Along Seller designated in the Drag-Along Sale Notice the certificate (if then certificated) and other applicable instruments representing the Units of such Other Member to be included in the Drag-Along Sale, together with a limited power-of-attorney authorizing the Drag-Along Seller or such representative to Transfer such Units on the terms set forth in the Drag-Along Notice and wire

 

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transfer instructions for payment of the cash portion of the consideration to be received in such Drag-Along Sale, or, if such delivery is not permitted by applicable law, an unconditional agreement to deliver such Units pursuant to this Section 7.07 (b)  at the closing for such Drag-Along Sale against delivery to such Other Member of the consideration therefor.  If an Other Member should fail to deliver such certificates (if then certificated) or instruments to the Drag-Along Seller and the Drag-Along Sale is consummated, the Company shall cause the books and records of the Company to show that such Units are bound by the provisions of this Section 7.07 (b)  and that such Units shall be Transferred to the Drag-Along Transferee immediately upon surrender for Transfer by the holder thereof.

 

(c)            The Drag-Along Seller shall have a period of 120 days from the date of receipt of the Drag-Along Sale Notice to consummate the Drag-Along Sale on the terms and conditions set forth in such Drag-Along Sale Notice, provided that, if such Drag-Along Sale is subject to regulatory approval, such 120-day period shall be extended until the expiration of five (5) Business Days after all such approvals have been received, but in no event later than 180 days following the date of receipt of the Drag-Along Sale Notice.  If the Drag-Along Sale shall not have been consummated during such period, the Drag-Along Seller shall promptly return to each of the Other Members the limited power-of-attorney (and all copies thereof) and all certificates and other applicable instruments representing Units that such Other Members delivered for Transfer pursuant hereto, together with any other documents in the possession of the Drag-Along Seller executed by the Other Members in connection with such proposed Transfer, and all the restrictions on Transfer contained in this Agreement or otherwise applicable at such time with respect to such Units owned by the Other Members shall again be in effect.

 

(d)            Concurrently with the consummation of the Drag-Along Sale, the Drag-Along Seller shall give notice thereof to the Other Members, shall remit or cause to be remitted to each of the Other Members the total consideration to be paid at the closing of the Drag-Along Sale (the cash portion of which is to be paid by wire transfer of immediately available funds in accordance with such Other Member’s wire transfer instructions) for the Units Transferred pursuant hereto and shall furnish such other evidence of the completion and time of completion of such Transfer and the terms thereof as may be reasonably requested by such Other Members.

 

(e)            Notwithstanding anything contained in this Section 7.07 , there shall be no liability on the part of the Drag-Along Seller to the Other Members (other than the obligation to return the limited power-of-attorney and the certificates (if then certificated) and other applicable instruments representing Units received by the Drag-Along Seller) if the Transfer of Units pursuant to this Section 7.07 is not consummated for whatever reason, regardless of whether the Drag-Along Seller has delivered a Drag-Along Sale Notice.  The decision to effect a Transfer of Units pursuant to this Section 7.07 by the Drag-Along Seller is in the sole and absolute discretion of the Drag-Along Seller.

 

Section 7.08.           Additional Conditions to Tag-Along Sales and Drag-Along Sales .  Notwithstanding anything contained in Sections 7.06 or 7.07 , in connection with a Tag-Along Sale under Section 7.06 or a Drag-Along Sale under Section 7.07 :

 

(a)            the DLJMB Members shall ensure (i) that upon the consummation of such Tag-Along Sale, all of the Members participating therein will receive the same form and amount

 

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of consideration per Unit, or, if any Members are given an option as to the form and amount of consideration to be received, all Members participating therein will be given the same option and (ii) if the Tag-Along Sale is a transaction that results in a Change of Control such that the Incentive Members participate in such Tag-Along Sale as set forth in Section 7.06(g) , the DLJMB Members shall ensure that upon the consummation of such Tag-Along Sale, all of the Incentive Members participating therein will receive the amount that would be distributed to them in respect of their Units included in the Tag-Along Sale as if the assets of the Company were sold for their fair market value (based upon the sale price per Unit) and the proceeds were distributed as consideration payable in accordance with Article VIII ;

 

(b)           the DLJMB Members shall ensure that upon the consummation of such Drag-Along Sale, all of the Members participating therein will receive the amount that would be distributed to them in respect of their Units included in the Drag-Along Sale as if the assets of the Company were sold for their fair market value (based upon the Drag-Along Sale Price) and the proceeds were distributed as consideration payable in accordance with Article VIII ; and

 

(c)           each Other Member shall (i) make such customary representations and warranties, including as to due organization and good standing, corporate power and authority, due approval, no conflicts and ownership and transfer of Units, and covenants and enter into such definitive agreements as are customary for transactions of the nature of the proposed Transfer, provided, that no Other Member shall be required to make any representation or warranty or agree to any covenant that is more extensive or burdensome than those made by the Tag-Along Seller or Drag-Along Seller or enter into any agreements not also executed by the Tag-Along Seller or the Drag-Along Seller, (ii) benefit from and be subject to all of the same provisions of the definitive agreements as the Tag-Along Seller or Drag-Along Seller, as the case may be, and (iii) be required to bear their proportionate share of any escrows, holdbacks or adjustments in respect of the purchase price or indemnification obligations; provided that no Other Member shall be obligated (A) to provide indemnification with respect to any other Member or the representations, warranties, covenants or agreements of any other Member, (B) to incur liability to any Person in connection with such Tag-Along Sale or Drag-Along Sale, as the case may be, including without limitation under any indemnity, in excess of the lesser of (1) its pro rata share of such liability and (2) the proceeds realized by such Other Member in such sale, or (C) to agree not to compete with or solicit employees of any Person; provided that any Management Member who is offered continued employment with the Company or any of its Subsidiaries after such Tag-Along Sale or Drag-Along Sale on reasonably similar or better terms may be required to agree with all the provisions in Sections 7.07 and 7.08 hereof.

 

Section 7.09.          Repurchase Rights .

 

(a)           Call Right .

 

(i)            Except as otherwise agreed to by the Company, upon any Management Member ceasing to be employed by the Company or its Subsidiaries (a “ Terminated Member ”) for any reason (a “ Termination Event ”), subject to the provisions of Sections 7.09(a)(ii), (iii)  and (iv) , 7.09(a)(iii) , 7.09(b)  and 7.09(c)  hereof, the Company shall have the option to purchase, and if such option is exercised, such Terminated Member shall sell, and shall cause any Permitted

 

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Transferees of such Terminated Member to sell, to the Company all or any portion of the Units owned by such Management Member and such Permitted Transferees designated by the Company (the “ Termination Units ”) on the date of the occurrence of such Termination Event at a price per Termination Unit equal to the Termination Price (as determined pursuant to Section 7.09(d)  below) of the Termination Units.

 

(ii)           With respect to each Termination Unit (other than Rollover Units in the event that the Terminated Member terminates for Good Reason or the Company terminates the Terminated Member without Cause, in which case Section 7.09(c)  shall apply), the Company shall notify a Terminated Member in writing, within the Call Period with respect to such Termination Units, whether the Company will exercise its right to purchase such Termination Units (the date on which a Terminated Member is so notified, the “ Call Notice Date ”).

 

(iii)          The Company shall have the option to assign its right to purchase all or any portion of the Termination Units under this Section 7.09 to the Class A Members on a pro rata basis in proportion to the number of Units held by such Class A Member and any such Class A Member may exercise the Company’s rights under this Section 7.09 in the same manner in which the Company could exercise such rights.  In the event that the Company determines that it will assign its right to purchase Termination Units under this Section 7.09 , it shall give the Class A Members written notice of the number of Termination Units, the Termination Price and the terms and conditions of the proposed sale.  Each Class A Member shall have ten (10) days from the date of receipt of any such notice to agree to purchase up to its pro rata share of such Termination Units, for the Termination Price and upon the terms and conditions specified in the notice, by giving written notice to the Company stating therein the quantity of Termination Units to be purchased up to such Class A Member’s pro rata share.  If any Class A Member fails to agree to purchase its full pro rata share within such ten (10) day period, the Company will give the Class A Members who did so agree (the “ Electing Call Members ”) notice of the number of Termination Units not subscribed for.  The Electing Call Members shall have five (5) days from the date of such second notice to agree to purchase their pro rata share (or such greater amount as the Electing Call Members agree upon) of all or any part of the Termination Units not purchased by such other Class A Members.

 

(iv)          The closing of the purchase by the Company of Termination Units pursuant to Section 7.09(a)  shall take place at the principal office of the Company on the date chosen by the Company, which date shall, except as may be reasonably necessary to determine the Termination Price, in no event be more than 45 days after the Call Notice Date; provided, that in the event the Terminated Member has not held the Termination Units for a period of 180 days after the date of grant, the closing shall occur immediately following the expiration of such 180 day period (for purposes hereof each Permitted Transferee shall be considered to have held the Termination Units to the same extent as the original transferee).  At such closing, (i) the Company shall pay the Terminated Member and/or such

 

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Terminated Member’s Permitted Transferees, as applicable, against delivery of duly endorsed certificates described below representing such Termination Units, the aggregate Termination Price by wire transfer of immediately available federal funds and (ii) the Terminated Member and/or such Terminated Member’s Permitted Transferees, as applicable, shall deliver to the Company a certificate or certificates representing the Termination Units to be purchased by the Company duly endorsed, or with unit powers duly endorsed, for transfer with signature guaranteed, free and clear of any lien or encumbrance, with any necessary stock transfer tax stamps affixed. The delivery of a certificate or certificates for the Termination Units by any Person selling such Termination Units pursuant to this Section 7.09 shall be deemed a representation and warranty by such Person that: (1) such Person has full right, title and interest in and to such Termination Units; (2) such Person has all necessary power and authority and has taken all necessary action to sell such Termination Units as contemplated; (3) such Termination Units are free and clear of any and all liens or encumbrances, and (4) there is no adverse claim with respect to such Termination Units.

 

(b)          Put Right .

 

(i)            Upon any Management Member’s termination for Good Reason, termination by the Company without Cause, or upon the death or Disability of the Management Member, such Management Member (or his or her legal representative) shall have the option to sell and if such option is exercised the Company shall purchase, all or any portion of such Terminated Member’s Termination Units designated by such Management Member (in each case other than Rollover Units, which shall be subject to Section 7.09(c) ) owned on the Termination Date (collectively, the “ Put Units ”) for a purchase price equal to the Termination Price of the Put Units.

 

(ii)           The Terminated Member (or such Terminated Member’s Permitted Transferees) shall notify the Company in writing, within 90 days of the Termination Date, whether such Terminated Member (or such Permitted Transferee) will exercise its option pursuant to Section 7.09(b)(i)  (the date on which the Company is so notified, the “ Put Notice Date ”).

 

(iii)          The Company may offer to the Class A Members the opportunity to participate in the purchase of all or any portion of the Put Units under this Section 7.09(b)  on a pro rata basis in proportion to the number of Units held by such Class A Member and any such Class A Member electing to participate may act under this Section 7.09(b)  in the same manner in which the Company could act.  In the event that the Company determines that it will offer the opportunity to purchase Termination Units under this Section 7.09 , it shall give the Class A Members written notice of the number of Put Units, the Termination Price and the terms and conditions of the proposed sale.  Each Class A Member shall have ten (10) days from the date of receipt of any such notice to agree to purchase up to its pro rata share of such Put Units, for the Termination Price and upon the terms and conditions specified in the notice, by giving written notice to the Company stating

 

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therein the quantity of Put Units to be purchased up to such Class A Member’s pro rata share.  If any Class A Member fails to agree to purchase its full pro rata share within such ten (10) day period, the Company will give the Class A Members who did so agree (the “ Electing Put Members ”) notice of the number of Put Units not subscribed for.  The Electing Put Members shall have five (5) days from the date of such second notice to agree to purchase their pro rata share (or such greater amount as the Electing Put Members agree upon) of all or any part of the Put Units not purchased by such other Class A Members.

 

(iv)          Any notice delivered pursuant to Section 7.09(b)(ii)  shall set forth the closing date chosen by such Management Member, which date shall in no event be less than 90 days nor more than 120 days after the Put Notice Date; provided that in the event the Terminated Member has not held the Termination Units for a period of 180 days after the date of grant, the closing shall occur immediately following the expiration of such 180 day period (for purposes hereof each Permitted Transferee shall be considered to have held the Termination Units to the same extent as the original transferee).  The closing of the purchase by the Company of Put Units pursuant to Section 7.09(b)  shall take place at the principal office of the Company on or before the closing date set forth in such notice.  At such closing, (i) the Company shall pay the Terminated Member and/or such Terminated Member’s Permitted Transferees, as applicable, against delivery of duly endorsed certificates described below representing such Termination Units, the aggregate Termination Price by wire transfer of immediately available federal funds and (ii) the Terminated Member and/or such Terminated Member’s Permitted Transferees, as applicable, shall deliver to the Company a certificate or certificates representing the Put Units to be purchased by the Company duly endorsed, or with unit powers duly endorsed, for transfer with signature guaranteed, free and clear of any lien or encumbrance, with any necessary stock transfer tax stamps affixed. The delivery of a certificate or certificates for the Put Units by any Person selling such Termination Units pursuant to this Section 7.09(b)  shall be deemed a representation and warranty by such Person that: (i) such Person has full right, title and interest in and to such Put Units; (ii) such Person has all necessary power and authority and has taken all necessary action to sell such Put Units as contemplated; (iii) such Put Units are free and clear of any and all liens or encumbrances, and (iv) there is no adverse claim with respect to such Put Units.

 

(c)           Rollover Units .

 

(i)            Except as otherwise agreed by the Company, upon any Management Member’s termination for Good Reason or termination by the Company without Cause, the Company and the Terminated Member shall each seriously and in good faith consider a proposal, which may be made by either party, for the Company to acquire the Rollover Units from the Terminated Member for the Termination Price but neither party shall be obligated to make or accept any offer.

 

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(ii)           Any closing of the purchase by the Company of Rollover Units pursuant to this Section 7.09(c)  shall take place at the principal office of the Company on the date chosen by the Company, which date shall, except as may be reasonably necessary to determine the Termination Price, in no event be more than 45 days after receipt of the acceptance; provided, that in the event the Terminated Member has not held the Termination Units for a period of 180 days after the date of grant, the closing shall occur immediately following the expiration of such 180 day period (for purposes hereof each Permitted Transferee shall be considered to have held the Termination Units to the same extent as the original transferee).  At such closing, (i) the Company shall pay the Terminated Member and/or such Terminated Member’s Permitted Transferees, as applicable, against delivery of duly executed option assignment documentation or duly endorsed certificates described below representing such Termination Units, the aggregate Termination Price by wire transfer of immediately available federal funds and (ii) the Terminated Member and/or such Terminated Member’s Permitted Transferees, as applicable, shall deliver to the Company an assignment(s) of option grant or certificate(s) representing the Termination Units to be purchased by the Company duly endorsed, or with unit powers duly endorsed, for transfer with signature guaranteed, free and clear of any lien or encumbrance, with any necessary stock transfer tax stamps affixed, as applicable. The delivery of an assignment(s) or certificate(s) for the Termination Units by any Person selling such Termination Units pursuant to this Section 7.09 shall be deemed a representation and warranty by such Person that: (1) such Person has full right, title and interest in and to such Termination Units; (2) such Person has all necessary power and authority and has taken all necessary action to sell such Termination Units as contemplated; (3) such Termination Units are free and clear of any and all liens or encumbrances, and (4) there is no adverse claim with respect to such Termination Units.

 

(d)          Termination Price .  For purposes of this Section 7.09 , if the employment or other service arrangement of a Management Member is terminated (i) by the Company or a Subsidiary thereof for Cause, the “ Termination Price ” shall be an amount per Termination Unit equal to the original purchase price paid to the Company for such Termination Unit, and (ii) if the employment or other service arrangement of a Management Member is terminated for any reason other than for Cause, the “ Termination Price ” shall be (x) in the case of a Call, an amount per Termination Unit equal to the greater of Repurchase Fair Market Value on the RFMV Calculation Date and original purchase price paid to the Company and (y) in the case of a Put, an amount per Put Unit equal to the Repurchase Fair Market Value on the RFMV Calculation Date.

 

(e)           Payment .  The Company shall pay the Termination Price in cash; provided , however , that in the event of the exercise of a Put Right under Section 7.09(b) , the Termination Price may be paid by the execution and delivery by the Company of a promissory note, secured by the underlying repurchased Termination Units, bearing interest at the prime rate, per annum, as published in The Wall Street Journal , eastern edition, with principal and accrued interest and payable in sixteen (16) equal quarterly installments on the first day of each calendar quarter, commencing with the first calendar quarter beginning after the closing date (or at such other time as is required in order to address the issue set forth in clauses (i) or (ii) below) if (i) 

 

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restrictive covenants or other provisions contained in the documents evidencing the Company’s indebtedness for borrowed money do not permit the Company to make such payments in cash (or to the extent partial cash payment is permitted, the balance to be represented by such a note); or (ii) the cash payment of the Termination Price would materially and adversely affect the Company’s financial condition as reasonably determined by the Board of Managers.  The Company will provide payment of the Termination Price in cash to the extent that the Board of Managers reasonably determines that such cash payment may be made subject to clauses (i) or (ii) above.

 

Section 7.10.          Preemptive Rights .  (a)  The Company shall give each Other Class A Member written notice (an “ Issuance Notice ”) of any proposed issuance by the Company of any Units (other than Excluded Units) at least ten (10) Business Days prior to the proposed issuance date.  The Issuance Notice shall specify the number and class of such Units and the price at which such Units are to be issued and the other material terms and conditions of the issuance.  Subject to Section 7.10(e)  below, each Other Class A Member shall be entitled to purchase such Other Class A Member’s Pro Rata Share of the Units proposed to be issued at the price and on the other terms and conditions specified in the Issuance Notice.

 

(b)           Each Other Class A Member may exercise his or her rights under this Section 7.10 by delivering notice of his or her election to purchase such Units to the Company and to each other within ten (10) Business Days of receipt of the Issuance Notice.  A delivery of such notice (which notice shall specify the number (or amount) of Units to be purchased by such Other Class A Member submitting such notice) by such Other Class A Member shall constitute a binding agreement of such Other Class A Member to purchase, at the price and on the terms and conditions specified in the Issuance Notice, the number (or amount) of Units specified in such Other Class A Member’s notice.  If, at the termination of such ten (10) Business Day period, any Other Class A Member shall not have exercised his or her rights to purchase any of such Other Class A Member’s Pro Rata Share of such Units, such Other Member shall be deemed to have waived all of its rights under this Section 7.10 with respect to, and only with respect to, the purchase of such Units.

 

(c)           If any Other Class A Member declines to exercise his or her preemptive rights under this Section 7.10 or elects to exercise such rights with respect to less than such Other Class A Member’s Pro Rata Share of such Units (the aggregate amount of Units subject to all such unexercised preemptive rights, the “ Excess Units ”), any participating Other Class A Member electing to exercise its rights with respect to its full Pro Rata Share (a “ Fully Participating Member ”) shall be entitled to purchase an additional number of Units equal to the product of (i) the number of Excess Units and (ii) a fraction, the numerator of which is the Aggregate Ownership of the Class A Units owned by the Fully Participating Member, and the denominator of which is equal to the sum of the Aggregate Ownership of that class of Units of all Fully Participating Members.

 

(d)           The Company shall have ninety (90) days from the date of the Issuance Notice to consummate the proposed issuance of any or all of such Units that each Other Class A Member has elected not to purchase at the price and upon terms and conditions that are not materially less favorable to the Company than those specified in the Issuance Notice, provided that, if such issuance is subject to regulatory approval, such 90-day period shall be extended until

 

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the expiration of five (5) Business Days after all such approvals have been received, but in no event later than 120 days from the date of the Issuance Notice.  At the consummation of such issuance, the Company will register the Units to be purchased by each Other Class A Member exercising preemptive rights pursuant to this Section 7.10   in the name of such Other Class A Member, against payment by such Other Class A Member of the purchase price for such Units.  If the Company proposes to issue any class of Units after such 90-day period or on other terms materially less favorable to the issuer, it shall again comply with the procedures set forth in this Section 7.10 .

 

(e)           The Company shall not be under any obligation to consummate any proposed issuance of Units, nor shall there be any liability on the part of the Company to any Other Class A Member if the Company has not consummated any proposed issuance of Units pursuant to this Section 7.10 for whatever reason, regardless of whether it shall have delivered an Issuance Notice in respect of such proposed issuance.

 

(f)            The Company may offer and sell Units to the prospective investor subject to the preemptive rights under this Section 7.10 without first offering such Units to each Other Class A Member or complying with the procedures of this Section 7.10 , so long as the Board of Managers has determined in good faith that the procedures in this Section 7.10 cannot be complied with prior to the offer and sale of Units and each Other Class A Member receives prompt written notice of such sales and thereafter is given the opportunity to purchase its Pro Rata Share of such Units within forty-five (45) days after the close of such sale and in any event no later than ten (10) Business Days from receipt of the notice referred to herein on substantially the same terms and conditions and for the identical price as such sale to the prospective investor.

 

ARTICLE VIII

 

DISSOLUTION; LIQUIDATION

 

Section 8.01.          Dissolution .  The Company shall be dissolved and its affairs wound up on the first to occur of any of the following events:

 

(a)           the decision, following the occurrence of a Change of Control or consummation of an Initial Public Offering, of a majority of the Board of Managers to dissolve the Company;

 

(b)           the unanimous decision, at any time, of the Board of Managers, to dissolve the Company; or

 

(c)           any other event sufficient under the Act (other than action of the Board of Managers or the Members) to cause the dissolution of the Company.

 

Section 8.02.          Final Accounting .  Upon the dissolution of the Company, a proper accounting shall be made from the date of the last previous accounting to the date of dissolution.

 

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Section 8.03.         Liquidation .

 

(a)           Dissolution of the Company shall be effective as of the date on which the event occurs giving rise to the dissolution and all Members shall be given prompt notice thereof in accordance with Article VIII , but the Company shall not terminate until the assets of the Company have been distributed as provided for in Section 8.03(c) .  Notwithstanding the dissolution of the Company, prior to the termination of the Company, the business, assets and affairs of the Company shall continue to be governed by this Agreement.

 

(b)           Upon the dissolution of the Company, the Board of Managers or, if there is no Board of Managers, a person selected by the affirmative vote of Class A Members holding Class A Units that represent more than 50% of the issued and outstanding Class A Units, shall act as the liquidator (the “ Liquidator ”) of the Company to wind up the Company.  The Liquidator shall have full power and authority to sell, assign and encumber any or all of the Company’s assets and to wind up and liquidate the affairs of the Company in an orderly and business-like manner.

 

(c)           The Liquidator shall distribute all proceeds from liquidation in the following order of priority:

 

(i)            first , to creditors of the Company (including creditors who are Members) in satisfaction of the liabilities of the Company (whether by payment or the making of reasonable provision for payment thereof); and

 

(ii)           second , to the Members in the same manner in which non-liquidating distributions are made pursuant to Section 5.02 .

 

(d)          The Liquidator shall determine whether any assets of the Company shall be liquidated through sale or shall be distributed in kind.  A distribution in kind of an asset to a Member shall be considered, for the purposes of this Article VIII , a distribution in an amount equal to the fair market value of the assets so distributed as determined in good faith by the Liquidator in its reasonable discretion.

 

Section 8.04.         Cancellation of Certificate .  Upon the completion of the distribution of Company assets as provided in Section 8.03 , the Company shall be terminated and the Person acting as Liquidator shall cause the cancellation of the Certificate and shall take such other actions as may be necessary or appropriate to terminate the Company.

 

ARTICLE IX

 

REPRESENTATIONS

 

Section 9.01.         Investment Purpose .  Each Member hereby represents and warrants to the Company, the Board of Managers and each other Member that such Member (i) is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act, (ii) has acquired its Units for itself for investment purposes only, and not with a view to any resale or distribution of such Units, (iii) HAS BEEN ADVISED AND UNDERSTANDS THAT SUCH UNITS HAVE NOT BEEN AND SHALL NOT BE REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS AND, THEREFORE, CANNOT BE RESOLD UNLESS SUCH UNITS

 

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ARE REGISTERED UNDER THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS, OR UNLESS EXEMPTIONS FROM REGISTRATION ARE AVAILABLE, and (iv) has, either alone or with its “purchaser representatives” as that term is defined in Rule 501(h) under the Securities Act, such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Company.  Each Member further acknowledges that the Company has made available to such Member, at a reasonable time prior to its acquisition of its Units, the opportunity to ask questions and receive answers concerning the terms and conditions of such acquisition and to obtain any additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information furnished by the Company in connection with such acquisition.  Each Member further represents and warrants to the Company and each other Member that, as of the signing of this Agreement:

 

(a)           if other than an individual, it is duly organized, validly existing and in good standing under the laws of the jurisdiction where it purports to be organized;

 

(b)           it has full power and authority to enter into and perform this Agreement;

 

(c)           all actions necessary to authorize the signing and delivery of this Agreement, and the performance of obligations under it, have been duly taken;

 

(d)           this Agreement has been duly signed and delivered by a duly authorized officer or other representative of such Member (if such Member is not an individual) and constitutes the legal, valid and binding obligation of such Member enforceable in accordance with its terms (except as such enforceability may be affected by applicable bankruptcy, insolvency or other similar laws affecting creditors’ rights generally, and except that the availability of equitable remedies is subject to judicial discretion);

 

(e)           no consent or approval of any other Person is required in connection with the signing, delivery and performance of this Agreement by such Member; and

 

(f)            the signing, delivery and performance of this Agreement do not violate the organizational documents of such Member (if such Member is not an individual) or any material agreement to which such Member is a party or by which it is bound unless such violation would not have a material adverse effect on the ability of the Member to fulfill and perform its obligations under this Agreement.

 

Section 9.02.          Independent Inquiry .  Each Member acknowledges, agrees, represents and warrants that it has completed its own independent inquiry and has relied fully upon the advice of its own legal counsel, accountant, financial and other advisors in determining the legal, tax, financial and other consequences of this Agreement and the transactions contemplated hereby and the suitability of this Agreement and the transactions contemplated hereby for such Member and its particular circumstances and has not relied upon any representations or advice by any other Member or the Board of Managers.  Without limiting the generality of the foregoing, each Member acknowledges, agrees, represents and warrants that (i) it has completed its own independent inquiry as to the investment risks associated with its respective Units, (ii) any projections or assumptions as to potential returns that have previously

 

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been submitted to such Member by the Company or any other person Affiliated with the Company are not guarantees of actual returns and (iii) no representations, warranties or guarantees have been made to such Member as to the returns or performance of the Company by any of the Board of Managers, the Company or any other person Affiliated with the Company.

 

ARTICLE X

 

GENERAL PROVISIONS

 

Section 10.01.        Members Representative .  For purposes of this Agreement, the DLJ Members hereby consent to the appointment of DLJMB, as representative of the DLJ Members (the “ Members Representative ”), and as attorney-in-fact for and on behalf of the DLJ Members, and, subject to the express limitations set forth below, the taking by the Members Representative of any and all actions and the making of any decisions required or permitted to be taken by the DLJ Members under this Agreement.  The Members Representative will have unlimited authority and power to act on behalf of the DLJ Members with respect to this Agreement and the disposition, settlement or other handling of all claims, rights or obligations arising under this Agreement so long as all DLJ Members are treated in the same manner.  The DLJ Members will be bound by all actions taken by the Members Representative in connection with this Agreement.  In performing its functions hereunder, the Members Representative will not be liable to the DLJ Members in the absence of gross negligence or willful misconduct.

 

Section 10.02.        Aggregation of Shares .  All Units held by a Member and its Affiliates shall be aggregated together for purposes of determining the availability of any rights under this Agreement; provided, however, for purposes of this Section 10.02 , none of the DLJ Members shall be deemed an Affiliate of any Other Member.

 

Section 10.03.        Binding Effect; Assignability; Benefit .  (a)   This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, legal representatives and permitted assigns.  Any Member that ceases to own beneficially any Units shall cease to be bound by the terms hereof (other than (i) the provisions of Annex A applicable to such Member with respect to any offering of Registrable Securities completed before the date such Member ceased to own any Units, (ii)  Sections 6.08 , 6.07 , 6.08 and 6.09 and (iii)  Article X ).

 

(b)           Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

Section 10.04.        Notices .  All notices, requests and other communications to any party shall be in writing and shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by facsimile transmission,

 

If to the Company, to:

 

STR Holdings (New) LLC

c/o DLJ Merchant Banking Partners

 

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One Madison Avenue, 11th Floor
New York, NY  10010
Attention:  Kenneth Lohsen
Facsimile:  (212) 538-0619

 

If to the DLJ Members, to:

 

c/o DLJ Merchant Banking, Inc.
One Madison Avenue, 11th Floor
New York, NY 10010
Attention:  Kenneth Lohsen
Facsimile:  (212) 538-0619

 

In each case with a copy to:

 

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention:  Douglas P. Warner, Esq.
Facsimile:  (212) 310-8007

 

If to an Other Member, to the address or facsimile number provided by such Other Member to the Company for the purposes of notices hereunder;

or, in each case, at such other address or fax number as such party may hereafter specify for the purpose of notices hereunder by written notice to the other parties hereto.  Notice shall be sent by United States Mail, first class postage prepaid, return receipt requested, by Federal Express or other nationally recognized overnight parcel delivery service for next day delivery; or by hand delivery with a receipt confirmation requested.  Notice given in accordance with this paragraph shall be presumed to have been delivered and received three (3) days after mailing if sent by United States Mail, first class, one day after mailing if sent for next day deliver by Federal Express or equivalent; and on the day of delivery if hand delivered.  Notice may also be given by fax or electronic mail, but such notice will not be effective unless the notice provider obtains a confirmation of receipt of the fax or electronic mail signed by the notice recipient.

 

Any Person that hereafter becomes a Member shall provide its address and fax number to the Company, which shall promptly provide such information to each other Member.

 

Section 10.05.        Waiver; Amendment .  (a) No provision of this Agreement may be waived except by an instrument in writing executed by the party against whom the waiver is to be effective.  No provision of this Agreement may be amended or otherwise modified except by an instrument in writing executed by (1) the Company; (2) Members holding at least 51% of the votes represented by the outstanding Units; and (3) if any such amendment will disproportionately and materially adversely affect the Other Class A Members differently than the DLJMB Members, the consent of such Other Class A Members, as the case may be, holding at least 51% of the outstanding Class A Units held by the Other Class A Members, as applicable, at the time of such proposed amendment or modification will be required; provided , however , that this Section 10.05 may not be amended without the written consent of Other Class A

 

51



 

Members holding at least 51% of the outstanding Class A Units held by the Other Class A Members and Section 10.02 may not be amended in any manner that materially and adversely affects a Member without the prior written consent of such Member so adversely affected.

 

Section 10.06.        Transfer of All Securities .  Upon the permitted Transfer by any Member, executor or other entity of all Units owned or held by him, her or it and, upon payment of any consideration to which such Member is entitled, such Member shall have no further rights or privileges under this Agreement or otherwise be entitled to the benefits hereof.  However, such Transfer shall not relieve a Member, his or her executor or his, her or its successors or assigns from liability hereunder in the event of a breach by any such Member of his, her or its duties hereunder prior to such Transfer.

 

Section 10.07.        Fees and Expenses .  Except as provided herein or otherwise agreed in writing, each party shall pay its own costs and expenses incurred in connection with the preparation and execution of this Agreement, or any amendment or waiver hereof, and the transactions contemplated hereby and all matters related hereto.

 

Section 10.08.        Governing Law .  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the conflicts of laws rules of such state.

 

Section 10.09.        Jurisdiction .  The parties hereby 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 in contract, tort or otherwise, shall be brought in the United States District Court for the District of Delaware or in the Court of Chancery of the State of Delaware (or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Delaware), so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any case of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Delaware, 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 which is brought in any such court has been brought in an inconvenient form.  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.

 

Section 10.10.        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 10.11.        Specific Enforcement; Cumulative Remedies .  The parties hereto acknowledge that money damages may not be an adequate remedy for violations of this Agreement and that any party, in addition to any other rights and remedies which the parties may have hereunder or at law or in equity, may, in his or its sole discretion, apply to a court of competent jurisdiction for specific performance or injunction or such other relief as such court

 

52



 

may deem just and proper in order to enforce this Agreement or prevent any violation hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such relief.  All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such rights, powers or remedies by such party.

 

Section 10.12.        Entire Agreement .  This Agreement and any exhibits and other documents referred to herein constitute the entire agreement and understanding among the parties hereto in respect of the subject matter hereof and thereof and supersede all prior and contemporaneous agreements and understandings, both oral and written, among the parties hereto, or between any of them, with respect to the subject matter hereof and thereof.

 

Section 10.13.        Captions .  The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

 

Section 10.14.        Pronouns .  Any masculine personal pronoun shall be considered to mean the corresponding feminine or neuter personal pronoun, and vice versa, as the context requires.

 

Section 10.15.        Severability .  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other 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.  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 so that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

Section 10.16.        Counterparts; Effectiveness .  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement shall become automatically effective upon the execution of this Agreement by the Company and the Members holding at least 51% of the vote represented by the outstanding Units.

 

Section 10.17.        Initial Public Offering .  Notwithstanding anything to the contrary contained herein, (i) the Board of Managers deems it advisable and in the best interests of the Company that the Company be converted into a corporation pursuant to the Plan of Conversion in substantially the same form attached hereto as Exhibit B (the “ Plan ”), the Certificate of Incorporation attached as an exhibit to the Plan and the Certificate of Conversion in substantially the same form attached hereto as Exhibit C (the “ Certificate of Conversion ”) in connection with any Initial Public Offering and in accordance with the Act, and (ii) the Members hereby consent to such conversion of the Company into a corporation in connection with any Initial Public Offering and in accordance with the Act and the Plan and authorize, approve and adopt the Plan, the Certificate of Incorporation attached as an exhibit to the Plan and the Certificate of Conversion.

 

53



 

Notwithstanding anything to the contrary contained herein, in connection with any Initial Public Offering, and upon the request of the Board of Managers, each of the Members hereby agrees that it will, at the expense of the Company, take such action and execute such documents as may reasonably be necessary to effect such Initial Public Offering.  Either in connection with an Initial Public Offering or prior to the expiration of the later of (i) 180 days following the consummation of the Initial Public Offering or (ii) the expiration of any underwriter lock-up period, the Board of Managers will liquidate the Company and distribute to the Members shares of common stock of the corporate successor of the Company which effects the Initial Public Offering; provided that (a) fifty percent (50%) of the shares of common stock held by each Member shall become eligible for sale by such Member on the date that is 180 days following the expiration of any underwriter lock-up period applicable to such Member and the remaining fifty percent (50%) of such Member’s shares shall become eligible for sale by such Member on the date that is 271 days following the expiration of such underwriter lock-up period and (b) the Members have entered into an agreement acceptable to the Company not to sell such shares of common stock except as set forth in clause (a) above or pursuant to the exercise of registration rights (as set forth in Annex A).  The number of shares of common stock of the corporate successor of the Company to be received by each Member shall be determined in accordance with Section 8.03 hereof.  In connection with any such distribution or in the event that the Company is converted into a corporation that effects the Initial Public Offering, the Members shall be entitled to the registration rights set forth on Annex A hereto.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

 

54



 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

 

STR HOLDINGS (NEW) LLC

 

 

 

By:

 

 

Name:

Barry A. Morris

 

Title:

Executive Vice President and Chief Financial Officer

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 


 

 

DLJ MERCHANT BANKING PARTNERS IV, L.P.

 

 

 

 

By:

DLJ Merchant Banking IV, L.P., its General Partner

 

 

 

 

By:

DLJ Merchant Banking, Inc., its General Partner

 

 

 

 

By:

 

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

 

 

 

 

DLJ OFFSHORE PARTNERS IV, L.P.

 

 

 

 

By:

DLJ Merchant Banking IV, L.P., its General Partner

 

 

 

 

By:

DLJ Merchant Banking, Inc., its General Partner

 

 

 

 

By:

 

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

 

 

 

 

DLJ MERCHANT BANKING PARTNERS IV (PACIFIC), L.P.

 

 

 

 

By:

MBP IV Pacific, LLC, its General Partner

 

 

 

 

By:

DLJ Merchant Banking IV, L.P., its Managing Member

 

 

 

 

By:

DLJ Merchant Banking, Inc., its General Partner

 

 

 

 

By:

 

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

MBP IV PLAN INVESTORS, L.P.

 

 

 

 

By:

DLJ LBO Plans Management Corporation, its General Partner

 

 

 

 

By:

 

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

 

By:

DLJ LBO Plans Management Corporation III, its General Partner

 

 

 

 

By:

 

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

AXA EQUITABLE LIFE INSURANCE COMPANY

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

CREDIT SUISSE/CFIG STR INVESTORS SPV, LLC

 

 

 

 

By: DLJ MB Advisors, Inc., its Managing Member

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

Authorized Representative

 

 

 

 

PRAIRIE FIRE TRUST

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

MRS TRUST

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

MICHAEL R. STONE 2008 GRAT

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

HARRINGTON SOUND, LLC

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

 

 

Michel R. Stone

 

 

 

 

 

 

 

John A. Janitz

 

 

 

 

 

 

 

Dominick J. Schiano

 

 

 

 

 

 

 

Paul Vigano

 

 

 

 

 

 

 

John F. Gual

 

 

 

 

 

 

 

Robert S. Yorgensen

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

 

 

Barry A. Morris

 

 

 

 

 

 

 

Wei Hung Kwok

 

 

 

 

 

 

 

The Dennis L. and Linda L. Jilot Family Trust

 

 

 

 

 

 

 

Dennis L. Jilot

 

 

 

 

 

 

 

Thomas D. Vitro

 

 

 

 

 

 

 

Gregory G. Gardner

 

 

 

 

 

 

 

Richard Ian Saunderson

 

 

 

 

 

 

 

Michael Choukas

 

 

 

 

 

 

 

Varchala Abrol

 

 

 

 

 

 

 

Robert J. Cammilleri

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

 

 

Russell Childrey

 

 

 

 

 

 

 

Susan E. DeRagon

 

 

 

 

 

 

 

Francis J. Donino

 

 

 

 

 

 

 

Ann Marie Glica

 

 

 

 

 

 

 

Thomas J. Harney

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

 

 

Chi Kim Kam

 

 

 

 

 

 

 

Edward F. Kozloski

 

 

 

 

 

 

 

Senon Kruczkowski

 

 

 

 

 

 

 

Roy C. Lamothe

 

 

 

 

 

 

 

Carina Maceira

 

 

 

 

 

 

 

Alyce E. Mayer

 

 

 

 

 

 

 

Donald O. Montanari

 

 

 

 

 

 

 

Victor Ovadia

 

 

 

 

 

 

 

Alex Sanchez

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

 

 

Ryan T. Tucker

 

 

 

 

 

 

 

Hans-Hermann Vogel

 

 

 

 

 

 

 

Jack D. Warren

 

 

 

 

 

 

 

Lam Sing Yim

 

 

 

 

 

 

 

Kwok Wai Yu

 

 

 

 

 

 

 

Bernardo Alvarez

 

 

 

 

 

 

 

David Espina

 

 

 

 

 

 

 

Eugene Damon

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 




Exhibit 2.2

 

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY

 

AGREEMENT

 

OF

 

STR HOLDINGS (NEW) LLC

 

This SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “ Agreement ”) of STR Holdings (New) LLC (the “ Company ”) is made and entered into as of this 5 th  day of November, 2009 (the “ Effective Date ”), by and among the Company and each of the Persons listed on the signature pages hereof as Members.

 

W I T N E S S E T H :

 

WHEREAS, the Company was formed as a limited liability company pursuant to the Delaware Limited Liability Company Act (6 Del . C. § 18-101, et seq ., as amended and in effect from time to time) (the “ Act ”) by filing a Certificate of Formation with the Office of the Secretary of State of the State of Delaware on September 30, 2009, and entering into a Limited Liability Company Agreement (the “ Initial Agreement ”);

 

WHEREAS, the Initial Agreement was amended and restated on November 5 th , 2009 (the “ First Amended and Restated Agreement ”);

 

WHEREAS, the parties hereto were members of STR Holdings LLC (the “ Predecessor LLC ”) pursuant to the Third Amended and Restated Limited Liability Company Agreement of STR Holdings LLC, dated as of March 20, 2008 (the “ Predecessor LLC Agreement ”);

 

WHEREAS, the parties hereto desire to effect the following: (a) the amendment and restatement of the First Amended and Restated Agreement in connection with a reorganization as set forth below; and (b) the continuation of the Company on the terms set forth herein;

 

WHEREAS, the Predecessor LLC filed a Certificate of Cancellation on November 5, 2009, and was liquidated pursuant to the Plan of Complete Liquidation and Dissolution, dated as of November 5, 2009;

 

WHEREAS, in connection with the liquidation of the Predecessor LLC, the Company desires to assume the obligations and liabilities of the Predecessor LLC;

 

WHEREAS, Specialized Technology Resources, Inc. (“ STR ”) caused the Company to form STR Merger, Inc. (“ Merger Co. ”);

 

WHEREAS, STR, the Company and Merger Co. entered into an Agreement and Plan of Merger, dated as of November 5, 2009 (the “ Company Merger Agreement ”), pursuant to which (a) the First Amended and Restated Agreement shall be amended and restated and (b) STR will become a wholly-owned subsidiary of the Company;

 

WHEREAS, pursuant to the Merger Agreement, each stockholder of STR (previously the members of the Predecessor LLC) shall receive the number of Units set forth in a schedule to the

 



 

Merger Agreement and in accordance with the percentage ownership set forth on Schedule I hereto (the “ Merger Consideration ”) and shall become Members of the Company; and

 

WHEREAS, as a condition to each Member’s receipt of the Merger Consideration, each Member must execute this Agreement.

 

NOW, THEREFORE, in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01.          “ Act ” has the meaning set forth in the Recitals.

 

Section 1.02.          “ Additional Capital Contribution ” means, with respect to each Member, any Capital Contributions made by such Member in excess of the Initial Capital Contribution of such Member.

 

Section 1.03.          “ Additional Member ” means any additional member admitted to the Company pursuant to Section 3.02 .

 

Section 1.04.          “ 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 1.05.          “ 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 1.06.          “ Agreement ” means this Second 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 1.07.          “ 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 1.08.          “ Board of Managers ” has the meaning set forth in Section 4.01(a)(i) .

 

 

2



 

Section 1.09.          “ 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 1.10.          “ Call Notice Date ” has the meaning set forth in Section 7.09(a).

 

Section 1.11.          “ 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 1.12.          “ Capital Contribution ” means, with respect to any Member, the amount set forth opposite such Member’s name on Schedule I under the heading “Capital Contributions”.

 

Section 1.13.          “ 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 1.14.          “ CEO Manager ” has the meaning set forth in Section 4.01(a)(i)(3) .

 

Section 1.15.          “ 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 1.16.          “ Certificate of Conversion ” has the meaning set forth in Section 10.17 .

 

3



 

Section 1.17.          “ 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 1.18.          “ 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 1.19.          “ Class A Units ” has the meaning set forth in Section 3.04(a)(i) .

 

Section 1.20.          “ 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 1.21.          “ Class B Units ” has the meaning set forth in Section 3.04(a)(ii) .

 

Section 1.22.          “ 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 1.23.          “ Class C Units ” has the meaning set forth in Section 3.04(a)(iii) .

 

Section 1.24.          “ 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

 

4



 

Units, then such Class D Member shall be treated as a Class D Member only with respect to its Class D Units.

 

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

 

Section 1.26.          “ 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 1.27.          “ Class E Units ” has the meaning set forth in Section 3.04(a)(v) .

 

Section 1.28.          “ 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 1.29.          “ Class F Units ” has the meaning set forth in Section 3.04(a)(vi) .

 

Section 1.30.          “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

 

Section 1.31.          “ Company ” has the meaning specified in the introductory paragraph hereof.

 

Section 1.32.          “ Company Business ” has the meaning set forth in Section 2.05(a) .

 

Section 1.33.          “ Company Expenses ” has the meaning set forth in Section 4.04(a) .

 

Section 1.34.          “ Company Merger Agreement ” has the meaning set forth in the Recitals.

 

Section 1.35.          “ Company Register ” has the meaning set forth in Section 3.01 .

 

Section 1.36.          “ Confidential Information ” has the meaning set forth in Section 6.06(b) .

 

Section 1.37.          “ Consolidated EBITDA ” means Consolidated EBITDA as defined in and calculated pursuant to the Credit Facilities.

 

Section 1.38.          “ 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.

 

5



 

Section 1.39.          “ 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 1.40.          “ 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 1.41.          “ 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 1.42.          “ Distribution Threshold ” means, with respect to all Incentive Units issued pursuant to Section 3.04(c) , an amount determined by the Board of Managers.

 

Section 1.43.          “ DLJMB ” means DLJ Merchant Banking Partners IV, L.P.

 

Section 1.44.          “ DLJMB Managers ” has the meaning set forth in Section 4.01(a)(i)(1) .

 

Section 1.45.          “ 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 1.46.          “ 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 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 1.47.          “ Drag-Along Rights ” has the meaning set forth in Section 7.07(a) .

 

Section 1.48.          “ Drag-Along Sale ” has the meaning set forth in Section 7.07(a) .

 

Section 1.49.          “ Drag-Along Sale Notice ” has the meaning set forth in Section 7.07(b) .

 

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Section 1.50.          “ Drag-Along Sale Notice Period ” has the meaning set forth in Section 7.07(b) .

 

Section 1.51.          “ Drag-Along Sale Price ” has the meaning set forth in Section 7.07(b) .

 

Section 1.52.          “ Drag-Along Seller ” has the meaning set forth in Section 7.07(a) .

 

Section 1.53.          “ Drag-Along Transferee ” has the meaning set forth in Section 7.07(a) .

 

Section 1.54.          “ Effective Date ” has the meaning specified in the introductory paragraph hereof.

 

Section 1.55.          “ Electing Call Member ” has the meaning set forth in Section  7.09(a)(iii) .

 

Section 1.56.          “ Electing Put Member ” has the meaning set forth in Section  7.09(b)(iii) .

 

Section 1.57.          “ Entity ” means any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association or other entity.

 

Section 1.58.          “ Equity Securities ” has the meaning set forth in Section 3.02(a)(i) .

 

Section 1.59.          “ 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 1.60.          “ Excess Portion ” has the meaning set forth in Section 7.06(d) .

 

Section 1.61.          “ Excess Units ” has the meaning set forth in Section 7.10(c) .

 

Section 1.62.          “ Exchange Act ” means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.

 

Section 1.63.          “ 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;

 

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(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 1.64.          “ Existing Members ” means each of the Members other than the Management Members.

 

Section 1.65.          “ First Amended and Restated Agreement ” has the meaning set forth in the Recitals.

 

Section 1.66.          “ Fiscal Year ” has the meaning set forth in Section 2.07 .

 

Section 1.67.          “ Fully Participating Member ” has the meaning set forth in Section 7.10(c) .

 

Section 1.68.          “ Fully Participating Tagging Person ” has the meaning set forth in Section 7.06(d).

 

Section 1.69.          “ GAAP ” means generally accepted accounting principles as formulated and interpreted by the Financial Accounting Standards Board in the United States of America.

 

Section 1.70.          “ 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);

 

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(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 1.71.          “ Incentive Members ” means the Class B Members, Class C Members, Class D Members, Class E Members and/or Class F Members.

 

Section 1.72.          “ Incentive Units ” means the Class B Units, Class C Units, Class D Units, Class E Units and/or Class F Units.

 

Section 1.73.          “ Incentive Unit Grant Agreement ” means an Incentive Unit Grant Agreement entered into by the Predecessor LLC with certain Members.

 

Section 1.74.          “ Indebtedness ” means, without duplication, the sum of:  (a) all principal and accrued (but unpaid) interest owing by the Company and its Subsidiaries for debt for borrowed money owed to any third party (specifically excluding intercompany debt between the Company and any of its Subsidiaries and any Subsidiary of the Company and another Subsidiary of the Company); plus (b) all obligations of the Company and its Subsidiaries under leases that have been recorded as capital leases under GAAP; plus (c) indebtedness of any person other than the Company or any of its Subsidiaries that is guaranteed by the Company or any of its Subsidiaries.

 

Section 1.75.          “ Indemnified Party ” has the meaning set forth in Section 4.06(a) .

 

Section 1.76.          “ Indemnity Obligations ” has the meaning set forth in Section 4.07 .

 

Section 1.77.          “ Initial Capital Contributions ” has the meaning set forth in Section 3.01 .

 

Section 1.78.          “ Initial Agreement ” has the meaning set forth in the Recitals.

 

Section 1.79.          “ Initial Members ” means the Members, as of the Effective Date.

 

Section 1.80.          “ Initial Public Offering ” means any underwritten initial public offering of Securities of a corporate successor to the Company by way of conversion, pursuant to an effective registration statement filed under the Securities Act.

 

Section 1.81.          “ Issuance Notice ” has the meaning set forth in Section 7.10(a).

 

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Section 1.82.          “ Investor Parties ” has the meaning set forth in Section 4.07 .

 

Section 1.83.          “ Jilot Observer ” has the meaning set forth in Section 4.01(a) .

 

Section 1.84.          “ Joinder Agreement ” has the meaning set forth in Section 7.03 .

 

Section 1.85.          “ Liquidator ” has the meaning set forth in Section 8.03(b) .

 

Section 1.86.          “ Management Member ” means any Member who is an employee of the Company or any of its Subsidiaries.  In no event shall any DLJMB Member be deemed to be a Management Member.

 

Section 1.87.          “ Manager ” has the meaning set forth in Section 4.01(a)(i) .

 

Section 1.88.          “ Manager Expenses ” has the meaning set forth in Section 4.04(b) .

 

Section 1.89.          “ 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 1.90.          “ Members Representative ” has the meaning set forth in Section 10.01 .

 

Section 1.91.          “ Merger Co. ” has the meaning set forth in the Recitals.

 

Section 1.92.          “ Merger Consideration ” has the meaning set forth in the Recitals.

 

Section 1.93.          “ 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 1.94.          “ Non-competition Period ” has the meaning set forth in Section 6.07(a) .

 

Section 1.95.          “ Observer ” means each of the Whitney Observer and the Jilot Observer.

 

Section 1.96.          “ Officer ” has the meaning set forth in Section 4.03 .

 

Section 1.97.          “ Other Business ” has the meaning set forth in Section 6.08 .

 

Section 1.98.          “ Other Class A Members ” means all Class A Members other than the DLJMB Members.

 

Section 1.99.          “ Other Members ” means all Members other than the DLJMB Members.

 

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Section 1.100.        Performance Target ” means the Equity Valuation target for each Fiscal Year as set forth on Schedule II 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 1.101.        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 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 1.102.        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 1.103.        Plan ” has the meaning set forth in Section 10.17 .

 

Section 1.104.        Predecessor LLC ” has the meaning set forth in the Recitals.

 

Section 1.105.        Predecessor LLC Agreement ” has the meaning set forth in the Recitals.

 

Section 1.106.        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.

 

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Section 1.107.         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 7.10 , 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 1.108.         Put Notice Date ” has the meaning set forth in Section 7.09(b).

 

Section 1.109.         Put Units ” has the meaning set forth in Section 7.09(b).

 

Section 1.110.         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 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 1.111.         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 VIII.   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 7.09(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

 

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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 1.112.        RFMV Calculation Date ” means, with respect to the application of the provisions of Section 7.09 to a Terminated Member:

 

(i)             With respect to Termination Units that are called by the Company pursuant to Section 7.09(a) , on the Call Notice Date;

 

(ii)            With respect to Termination Units that are put to the Company by the Terminated Member pursuant to Section 7.09(b) , the Termination Date; and

 

(iii)           With respect to Rollover Units that are acquired by the Company pursuant to Section 7.09(c) , the Termination Date.

 

Section 1.113.        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 1.114.        Restricted Period ” has the meaning set forth in Section 7.04 .

 

Section 1.115.        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 1.116.        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 1.117.        Securities Act ” means the Securities Act of 1933, as amended from time to time.

 

Section 1.118.        STR ” has the meaning set forth in the Recitals.

 

Section 1.119.        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

 

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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 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 1.120.         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 1.121.         Tag-Along Date ” has the meaning set forth in Section 7.06(e) .

 

Section 1.122.         Tag-Along Notice ” has the meaning set forth in Section 7.06(a) .

 

Section 1.123.         Tag-Along Notice Period ” has the meaning set forth in Section 7.06(a).

 

Section 1.124.         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 1.125.         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 1.126.         Tag-Along Offer ” has the meaning set forth in Section 7.06(a) .

 

Section 1.127.         Tag-Along Response Notice ” has the meaning set forth in Section 7.06(a).

 

Section 1.128.         Tag-Along Right ” has the meaning set forth in Section 7.06(a) .

 

Section 1.129.         Tag-Along Sale ” has the meaning set forth in Section 7.06(a) .

 

Section 1.130.         Tag-Along Seller ” has the meaning set forth in Section 7.06(a) .

 

Section 1.131.         Tagging Person ” has the meaning set forth in Section 7.06(a) .

 

Section 1.132.         Terminated Member ” has the meaning set forth in Section 7.09(a).

 

Section 1.133.         Termination Date ” has the meaning set forth in Section 3.06 .

 

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Section 1.134.         Termination Event ” has the meaning set forth in Section 7.09(a) .

 

Section 1.135.         Termination Price ” has the meaning set forth in Section 7.09(d) .

 

Section 1.136.         Termination Units ” has the meaning set forth in Section 7.09(a).

 

Section 1.137.         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 1.138.         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 1.139.         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 1.140.         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 1.141.         Unvested Fiscal Year ” has the meaning set forth in Section 3.05(c) .

 

Section 1.142.         Unvested Unit ” has the meaning set forth in Section 5.03 .

 

Section 1.143.         Unwinding Event ” has the meaning set forth in Section 7.03 .

 

Section 1.144.         Whitney Members ” means Prairie Fire Trust, MRS Trust, Michael R. Stone 2008 GRAT, Michael R. Stone, Harrington Sound, LLC and Paul Vigano.

 

Section 1.145.         Whitney Observer ” has the meaning set forth in Section 4.01(a) .

 

Section 1.146.         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 (New) LLC”.  The business of the Company shall be conducted under such name or under such other names as

 

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the 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 VIII 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 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;

 

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(d)            to hire, for usual and customary payments and expenses, consultants, brokers, attorneys, accountants and such other agents for the Company as it may deem necessary or advisable, and authorize any such agent to act for and on behalf of the Company;

 

(e)            to incur expenses and other obligations on behalf of the Company in accordance with this Agreement, and, to the extent that funds of the Company are available for such purpose, pay all such expenses and obligations;

 

(f)             to bring and defend actions and proceedings at law or in equity and before any governmental, administrative or other regulatory agency, body or commission;

 

(g)            to establish Reserves in accordance with this Agreement or the Act for contingencies and for any other purpose of the Company;

 

(h)            to prepare and file all necessary returns and statements, pay all taxes, assessments and other impositions applicable to the assets of the Company, and withhold amounts with respect thereto from funds otherwise distributable to any Member;

 

(i)             to determine the accounting methods and conventions to be used in the preparation of any accounting or financial records of the Company, which, in any case, must be consistent with GAAP; and

 

(j)             to act for and on behalf of the Company in all matters incidental to the foregoing.

 

Section 2.07.          Fiscal Year .  The fiscal year (the “ Fiscal Year ”) of the Company shall end on the last day of each calendar year unless, for federal income tax purposes, another Fiscal Year is required.  The Company shall have the same Fiscal Year for federal income tax purposes and for accounting purposes.

 

ARTICLE III

 

CONTRIBUTIONS AND MEMBERS

 

Section 3.01.          Initial Capital Contributions .  Each Class A Member should be deemed to have made initial Capital Contributions (the “ Initial Capital Contributions ”) in the amount set forth opposite its name on Schedule I and as reflected in a register of the Company, maintained by the Company in accordance with Article VI (the “ Company Register ”).

 

Section 3.02.          Additional Capital Contributions .

 

(a)            (i)             No Member shall be required to make any Additional Capital Contributions to the Company.  In addition, no Member shall be permitted to make any Additional Capital Contributions to the Company without the written consent of the Board of Managers.  The Board of Managers, subject to the preemptive rights provided for in Section 7.10 , shall have the authority to issue Class A Units or other equity securities of the Company, including any security or instrument convertible into equity securities of the Company (“ Equity Securities ”) in such amounts and at such purchase price per Class A Unit or other

 

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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 I 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 I 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 I .  Each Class B Member owns that number of Class B Units as appears next to its name on Schedule I , 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

 

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under Schedule I .  Each Class C Member owns that number of Class C Units as appears next to its name on Schedule I , 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 I .  Each Class D Member owns that number of Class D Units as appears next to its name on Schedule I , 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 I .  Each Class E Member owns that number of Class E Units as appears next to its name on Schedule I , 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 I .  Each Class F Member owns that number of Class F Units as appears next to its name on Schedule I , 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 VII ).  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)            Any unvested Class A Units issued to Dennis L. Jilot shall vest in accordance with the Unit Grant Agreement to be entered into between Dennis L. Jilot and the corporate successor to the Company by way of conversion.

 

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

 

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(c)            Class C Units granted pursuant to the Predecessor LLC Agreement shall vest, unless provided otherwise herein or in the applicable Incentive Unit Grant Agreement for a Class C Member, 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 , 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(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 (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.

 

(d)            Class D Units granted pursuant to the Predecessor LLC Agreement shall vest, unless provided otherwise in the applicable Incentive Unit Grant Agreement for a Class D Member, 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

 

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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(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 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).

 

(e)            Class E Units granted pursuant to the Predecessor LLC Agreement shall vest, unless provided otherwise herein or in the applicable Incentive Unit Grant Agreement for a Class E Member, 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(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 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.

 

(f)             Class F Units granted pursuant to the Predecessor LLC Agreement shall vest fifty percent (50%) at issuance and, unless provided otherwise herein or in the applicable Incentive Unit Grant Agreement for a Class F Member, sixteen and two-third percent (16 2 / 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(f) , 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

 

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(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.

 

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.          Voting Rights .  Except as otherwise provided herein, all Class A Members shall be entitled to ten (10) votes for each Class A Unit held and each Member (other than the Class A Members) shall be entitled to one (1) vote for each Unit held.

 

Section 3.09.          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 VIII .

 

Section 3.10.          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.

 

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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 six (6) Persons to manage the Company and its business and affairs.  Each of the Managers on the Board of Managers is referred to herein as a “ Manager .”  The Board of Managers shall be comprised, as follows:

 

(1)            up to four (4) Managers shall be designated by DLJMB (the “ DLJMB Managers ”)

 

(2)            the then current Chief Executive Officer of the Company (the “ CEO Manager ”); and

 

(3)            one (1) Manager shall be elected by the Members.

 

(ii)            If at any time any Manager other than the CEO Manager and the Manager elected by the Members 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.  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.  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 L. 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 Managers.

 

(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 6.02 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

 

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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 the Whitney Members agree to cause its designated Observer to agree, to be bound by the confidentiality provisions set forth in Section 6.06 hereof.  Each Observer agrees and the Whitney Members agree to cause its 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 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.

 

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(viii)         Each Manager shall be entitled to receive the financial reports set forth in Section 6.02 , 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 VIII or Transfers or purchases of Units made pursuant to Article VII 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.

 

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

 

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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

 

(vii)          all expenses incurred in connection with the dissolution and liquidation of the Company.

 

(b)            The Company shall reimburse each Manager for any reasonable and documented costs and expenses incurred by such Manager in connection with attending any meetings of the Board of Managers or any committees thereof (collectively, the “ Manager Expenses ”).

 

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Section 4.05.           Exculpation .

 

(a)            Subject to applicable law, no Indemnified Party shall be liable, in damages or otherwise, to the Company, the Members or any of their Affiliates for any act or omission performed or omitted by any of them in good faith (including any act or omission performed or omitted by any of them in reliance upon and in accordance with the opinion or advice of experts, including, legal counsel as to matters of law, accountants as to matters of accounting, or investment bankers or appraisers as to matters of valuation), except (i) for 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 or employee of the Company or any of its Affiliates, any act or omission with respect to which such officer or employee was grossly negligent or engaged in willful misconduct.

 

(b)            To the extent that, at law or in equity, any Indemnified Party has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any Member, such Indemnified Party acting under this Agreement or approval of the Board of Managers shall not be liable to the Company or to any Member for its good faith reliance on the provisions of this Agreement or approval of the Board of Managers, as appropriate.  The provisions of this Agreement, to the extent that they restrict the duties and liabilities of an Indemnified Party otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Party, to the maximum extent permitted by applicable law.

 

Section 4.06.           Indemnification .

 

(a)            To the fullest extent permitted by applicable law, the Company shall and does hereby agree to indemnify and hold harmless and pay all judgments and claims against the Board of Managers, each current or former Manager, each current or former Class A Member (including DLJ Merchant Banking Partners IV, L.P., in its role as Tax Matters Member), any Affiliate thereof, their respective officers, directors, trustees, employees, shareholders, partners, managers and members and each officer of the Company and each officer and director of its Subsidiaries (each, an “ Indemnified Party ”, each of which shall be a third-party beneficiary of this Agreement solely for purposes of Section 4.05 and this Section 4.06 ), from and against any loss or damage incurred by an Indemnified Party or by the Company for any act or omission taken or suffered by such Indemnified Party in good faith (including any act or omission taken or suffered by any of them in reliance upon and in accordance with the opinion or advice of experts, including, legal counsel as to matters of law, accountants as to matters of accounting, or investment bankers or appraisers as to matters of valuation) by reason of the fact that such Indemnified Party is or was a member, Manager, director or officer of the Company or any of its 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.

 

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(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.

 

Section 4.07.          Primary Obligation .  With respect to any Indemnified Party who is employed, retained or otherwise associated with, or appointed or nominated by, DLJ Merchant Banking, Inc., DLJMB or any of their respective Affiliates and who acts or serves as a director, officer, manager, fiduciary, employee, consultant, advisor or agent of, for or to the Company or any of its Subsidiaries, the Company or its Subsidiaries shall be primarily liable for all indemnification, reimbursements, advancements or similar payments (the “Indemnity Obligations”) afforded to such Indemnified Party acting in such capacity or capacities on behalf or at the request of the Company or any of its Subsidiaries, in such capacity, whether the Indemnity Obligations are created by law, organizational or constituent documents, contract (including this Agreement) or otherwise.  Notwithstanding the fact that DLJ Merchant Banking, Inc., DLJMB and/or any of their respective Affiliates, other than the Company and its Subsidiaries (such persons, together with its and their heirs, successors and assigns, the “Investor Parties”), may have concurrent liability to an Indemnified Party with respect to the Indemnity Obligations, the Company hereby agrees that in no event shall the Company or any of its Subsidiaries have any right or claim against any of the Investor Parties for contribution or have rights of subrogation against any Investor Parties through an Indemnified Party for any payment made by the Company or any of its Subsidiaries with respect to any Indemnity Obligation.  For the avoidance of doubt, any insurance coverage for any indemnity obligation provided by, obtained by or paid for by the Company or any of its Subsidiaries on the one hand and any Investor Party on the other hand shall be subject to the same primary and secondary liability hierarchy set forth in this Section 4.07.  In addition, the Company hereby agrees that in the event that any Investor Parties pay or advance to an Indemnified Party any amount with respect to an Indemnity Obligation, the Company will, or will cause its Subsidiaries to, as applicable, promptly reimburse such Investor Parties for such payment or advance upon request.  The Company and the Indemnified Parties agree that the Investor Parties are express third party beneficiaries of the terms hereof.

 

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 , 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

 

(b)            thereafter, to the Class A Members, Class B Members, Class C Members, Class D Members, Class E Members and Class F Members pro rata in proportion to the number of Class A Units, Class B Units, Class C Units, Class D Units, Class E Units and Class F Units held by such Members.

 

With respect to those Units that were issued as Incentive Units pursuant to Section 3.04(c) , the holder of such Incentive Unit shall only be entitled to share in distributions under this Section 5.02 after such time as the aggregate amount of distributions pursuant to this Section  

 

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5.02 from and after the date of issuance of such Incentive Unit is equal to the Distribution Threshold.

 

Section 5.03.           Adjustment to Distributions on Account of Unvested Units .  Notwithstanding the distribution priority and entitlements set forth in Section 5.02 , no distribution shall be made to an Incentive Member on account of an Incentive Unit held by such Incentive Member that has not vested pursuant to Section 3.05 (such Unit an “ Unvested Unit ”).  Any amount that would otherwise be distributed to an Incentive Member pursuant to Section 5.02 but for the application of the preceding sentence shall instead be retained in a segregated Company account to be distributed in accordance with this Article V by the Company and paid to such Incentive Member if, as and when the Unvested Unit to which such retained amount relates vests pursuant to Section 3.05 .  Items of income, gain, loss and deduction attributable to amounts retained by the Company pursuant to this Section 5.03 shall be allocated among the Incentive Members holding Unvested Units in a manner, determined in the Board of Managers’ discretion, that equitably reflects each such Incentive Member’s share of the amounts to which such items relate.  If any Unvested Units are forfeited, amounts retained by the Company pursuant to this Section 5.03 on account of such Unvested Units shall be distributed in accordance with Section 5.02 .

 

Section 5.04.           Distributions of Securities .  The Board of Managers is authorized, in its sole discretion, to make distributions to the Members in the form of Securities or other property received or otherwise held by the Company; provided , however , that, in the event of any such non-cash distribution, such Securities or other property shall be valued at the fair market value and shall be distributed to the Members in the same proportion that cash received upon the sale of such Securities or other property at such fair market value would have been distributed pursuant to Section 5.02 .  In the event that the Company distributes shares of capital stock of STR to the Members and either simultaneously with or shortly thereafter liquidates the Company, the Members shall enter into a shareholders agreement that contains, to the extent applicable, substantially similar terms and provisions as this Agreement such that the rights of the Members hereunder are not materially adversely altered, including without limitation the rights of the Members (a) under Article VII and (b) to exercise their registration rights in accordance with Annex A .

 

Section 5.05.           Withholding of Certain Amounts .

 

(a)            Subject to Section 5.07(c)  but notwithstanding any other provision contained herein to the contrary, the Board of Managers may withhold from any distribution to any Member contemplated by this Agreement any amounts due and payable by such Member to the Company or to any other Person in connection with the Company Business to the extent not otherwise paid.  Any amount withheld pursuant to this Section 5.05(a)  shall be applied or paid by the Company to discharge the obligation in respect of which such amount was withheld.

 

(b)            Notwithstanding anything to the contrary contained herein, all amounts withheld by the Board of Managers pursuant to Section 5.05(a)  with respect to a Member shall be treated as if such amounts were distributed to such Member under this Agreement.

 

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Section 5.06.           Restricted Distributions .  Notwithstanding anything to the contrary contained herein, the Company, and the Board of Managers on behalf of the Company, shall not make a distribution to any Member on account of its Units if such distribution would violate the Act or other applicable law.

 

Section 5.07.           Withholding Tax Payments and Obligations .  In the event that withholding taxes are paid or required to be paid in respect of amounts distributed by the Company, such payments or obligations shall be treated as follows:

 

(a)            Payments by the Company .  The Company is authorized to withhold from any payment made to, or any distributive share of, a Member, any taxes required by law to be withheld, and in such event, such taxes shall be treated as if an amount equal to such withheld taxes had been paid to the Member rather than paid over to the taxing authority.

 

(b)            Overwithholding .  Neither the Company nor the Board of Managers shall be liable for any excess taxes withheld in respect of any Member’s interest in the Company, and, in the event of overwithholding, a Member’s sole recourse shall be to apply for a refund from the appropriate governmental authority.

 

(c)            Certain Withheld Taxes Treated as Demand Loans .  Any taxes withheld pursuant to Section 5.07(a)  shall be treated as if distributed to the relevant Member to the extent an amount equal to such withheld taxes would then be distributable to such Member and, to the extent in excess of such distributable amounts, as a demand loan payable by the Member to the Company with interest at the lesser of (i) the Prime Rate in effect from time to time plus 2%, compounded quarterly, and (ii) the highest rate per annum permitted by law.  The Board of Managers may, in its discretion, either demand payment of the principal and accrued interest on such demand loan at any time, and enforce payment thereof by legal process, or may withhold from one or more distributions to a Member amounts sufficient to satisfy such Member’s obligations under any such demand loan.

 

(d)            Indemnity .  In the event that the Company, or the Board of Managers or any Affiliate thereof, becomes liable as a result of a failure to withhold and remit taxes in respect of any Member, then, in addition to, and without limiting, any indemnities for which such Member may be liable under Section 4.05 , such Member shall indemnify and hold harmless the Company, or the Board of Managers, as the case may be, in respect of all taxes, including interest and penalties, and any expenses incurred in any examination, determination, resolution and payment of such liability.  The provisions contained in this Section 5.07(d)  shall survive the termination of the Company and the withdrawal of any Member.

 

ARTICLE VI

 

ACCOUNTING AND TAX MATTERS

 

Section 6.01.           Books and Records .  At all times during the existence of the Company, the Company shall maintain, at its principal place of business, separate books of account for the Company, including the Company Register.  Subject to reasonable confidentiality restrictions established by the Board of Managers (including as set forth in Section 18-305(c) of

 

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the Act), each Member and its respective agents and representatives shall be afforded access to the Company’s books and records applicable to such Member for any proper purpose (as determined by the Board of Managers in its reasonable discretion), at any reasonable time during regular business hours upon reasonable written notice to the Board of Managers.

 

Section 6.02.           Reports to Members .

 

(a)            Annual Reports .  The Company shall prepare and deliver to each Manager and each Class A Member, as soon as available and in any event within 120 days following the end of each Fiscal Year, an audited consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year, and audited consolidated statements of income, retained earnings and cash flows of the Company and its Subsidiaries for such year, prepared in accordance with GAAP and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accompanied by the opinion of independent public accountants of recognized national standing selected by the Company.

 

(b)            Quarterly Reports .  The Company shall prepare and deliver to each Manager and each Class A Member that owns at least two percent (2%) of the outstanding Class A Units, as soon as available and in any event within 45 days following the end of each Company fiscal quarter (other than the last quarter of any Fiscal Year), commencing with the first full quarter ending after the date hereof, a consolidated balance sheet of the Company and its Subsidiaries as of the end of each such quarterly period, and consolidated statements of income, retained earnings and cash flows of the Company and its Subsidiaries for such period and for the current fiscal year to date, prepared in accordance with GAAP (subject to normal year-end audit adjustments and the absence of notes thereto) and setting forth in comparative form the figures for the corresponding periods of the previous fiscal year, all in reasonable detail and certified by the principal financial or accounting officer of the Company.

 

(c)            Monthly Reports .  The Company shall prepare and deliver to each Manager and each Class A Member that owns at least two percent (2%) of the outstanding Class A Units, as soon as available and in any event within 30 days following the end of each month (other than the last month of any Company fiscal quarter), commencing with the first full month ending after the date hereof, a consolidated balance sheet of the Company and its Subsidiaries as of the end of such month and consolidated statements of operations, income, cash flows, retained earnings and Members’ equity of the Company and its Subsidiaries, for each month and for the current fiscal year of the Company to date, prepared in accordance with GAAP (subject to normal year-end audit adjustments and the absence of notes thereto).

 

(d)            All Units held by the Whitney Members shall be aggregated together for purposes of determining the two percent (2%) ownership level set forth in Sections 6.02(b)  and (c)  above, and, if such ownership level is met, each Whitney Member shall be entitled to receive quarterly and monthly reports in accordance with this Section 6.02 ; provided , however , that if any Whitney Member becomes Affiliated with an Adverse Person, such relevant Whitney Member shall no longer be eligible to receive such reports but its Units shall nonetheless be aggregated with the other Whitney Members for purposes of determining the remaining Whitney Members’ eligibility.

 

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(e)            Audit . The Company shall engage a reputable firm of independent certified public accountants to provide annual audit reports of the Company’s consolidated financial statements, prepared in accordance with GAAP.

 

Section 6.03.           Tax Returns .  The Board of Managers, at the expense of the Company, shall endeavor to cause the preparation and timely filing (including extensions) of all tax returns required to be filed by the Company pursuant to the Code as well as all other required tax returns in each jurisdiction in which the Company or its Subsidiaries, as applicable, owns property or does business.

 

Section 6.04.           Accounting Methods; Elections .  The Board of Managers shall determine the accounting methods and conventions to be used in the preparation of the Company’s tax returns and shall make any and all elections under the tax laws of the United States and any other relevant jurisdictions as to the treatment of items of income, gain, loss, deduction and credit of the Company, or any other method or procedure related to the preparation of the Company’s tax returns.

 

Section 6.05.           Tax Status .  It is intended that the Company be classified as a corporation for federal income tax purposes.  The Company has filed an election pursuant to Treasury Regulation Section 301.7701-3(c) to be treated as a corporation.  Except as provided in this Section 6.05 relating to the tax classification of the Company, the Board of Managers may cause the Company to make or refrain from making any and all elections permitted by such tax laws, and the Board of Managers shall not be liable for any consequences to any previously admitted or subsequently admitted Members resulting from their making or failing to make any such elections.

 

Section 6.06.           Confidentiality .  (a)   Each Other Member agrees that Confidential Information (as defined below) furnished and to be furnished to him or her was and shall be made available in connection with such Other Member’s investment in the Company.  Such Other Member acknowledges that the Confidential Information which such Other Member has obtained or will obtain is the property of the Company and its Subsidiaries.  Each Other Member agrees that he or she will not disclose any Confidential Information to any other Person (other than its directors, employees, counsel, auditors, agents, partners, advisers and representatives so long as such Persons are made aware of the confidential nature of the Confidential Information and agree or are otherwise obligated to keep it confidential), except that Confidential Information may be disclosed: (i) to the extent required by applicable law, rule or regulation (including complying with any oral or written questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process to which a such Other Member is subject); provided that such Other Member gives the Company prompt notice of such requests, to the extent practicable, so that the Company may at its own cost and expense seek an appropriate protective order or similar relief (and the Other Member shall cooperate with such efforts by the Company, and shall in any event make only the minimum disclosure required by such law, rule or regulation), (ii) if the prior written consent of the Board shall have been obtained, (iii) by Additional Members, on a confidential basis, to current and prospective limited partners or members or lenders in connection with a loan or prospective loan to such Additional Member and to their respective legal counsel, auditors, agents and representatives, (iv) to any Other Member, (v) upon prior written notice to the Board of Managers, to any institutional

 

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investor which is not an Adverse Person to which it Transfers or offers to Transfer its Units or any part thereof (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 6.06 and has delivered to the Company a confidentiality agreement reasonably acceptable to the Company) or (vi) to any federal or state regulatory authority having jurisdiction over such Other Member, the National Association of Insurance Commissioners or the National Association of Insurance Commissioners Securities Valuation Office or any similar organization, or any nationally recognized rating agency that requires access to information about such Other Member’s investment portfolio, in each case, in the ordinary course.  The obligations with respect to Confidential Information in this Section 6.06 shall terminate three (3) years after a Person ceases to be a Member;  provided, however, that the obligation to maintain the confidentiality of “trade secrets” shall not terminate.

 

(b)            Confidential Information ” shall mean any information relating to the business or affairs of the Company or any of its Subsidiaries, including, but not limited to, information relating to financial statements, customer identities, potential customers, potential acquisitions, employees, sales representatives, suppliers, servicing methods, equipment programs, strategies and information, analyses, profit margins or other proprietary information used by the Company or any of its Affiliates; provided, however, that Confidential Information does not include any information which is in the public domain or becomes known in the industry through no wrongful act on the part of such Other Member; provided further that Confidential Information shall not include information that (i) is or becomes generally known to the public other than as a result of a disclosure by such Other Member in violation of this Agreement or, (ii) is or was available to such Other Member on a non-confidential basis prior to its disclosure to such Other Member.

 

(c)            Except as otherwise agreed by the Company, in the event of a conflict between this Section 6.06 and the terms of a Management Member’s employment or consulting agreement, the terms of such employment or consulting agreement shall be controlling.

 

Section 6.07.           Restrictive Covenants .

 

(a)            During the term of employment or consultancy and for a period of one (1) year after the termination thereof (which the Company may elect to extend in accordance with the Management Member’s consulting or employment agreement, if applicable) (the “ Non-Competition Period ”), each Management Member shall not, without the prior written consent of the Company, and whether as employee, principal, agent, shareholder, partner, consultant, advisor, limited liability company manager or member, director, or otherwise, directly or indirectly, compete with the Company or any subsidiary of the Company in the business of manufacturing solar panel encapsulant or providing consumer product quality assurance services to third parties, (the “ Restricted Business ”).  The making or guarantying of a loan, lease or any other financial arrangement to, with, or for any person or entity that engages in a Restricted Business shall be deemed a breach of this covenant.  However, such Management Member may purchase or own up to 1% of the outstanding stock of a publicly traded corporation that competes with the Company or any Subsidiary, but such Management Member may not be employed by or otherwise participate in the activities of such corporation.

 

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(b)            During the Non-Competition Period, such Management Member will not, and will not permit any of his or her affiliates to, directly or indirectly, (i) recruit or otherwise solicit or induce any employee, customer, subscriber or supplier of the Company or any of its Subsidiaries to terminate its employment or arrangement with the Company or any of its Subsidiaries, otherwise change its relationship with the Company or any of its Subsidiaries or establish any relationship with such Management Member or any of his or her affiliates to compete in the Restricted Business or (ii) without the Company’s prior written consent, hire (A) any employee of the Company or any of its Subsidiaries or (B) any person whose employment with the Company or such Subsidiary is terminated by such person without Good Reason during the six-month period ending on the date of such hire; provided, that with respect to former employees of the Company or any of its Subsidiaries, the Company’s consent shall not be unreasonably withheld.

 

(c)            The parties hereto agree that, if any court of competent jurisdiction in a final nonappealable judgment determines that a specified time period, a specified geographical area, a specified business limitation or any other relevant feature of this Section 6.07 is unreasonable, arbitrary or against public policy, then a lesser time period, geographical area, business limitation or other relevant feature which is determined to be reasonable, not arbitrary and not against public policy may be enforced against the applicable party.

 

(d)            In the event of a conflict between this Section 6.07 and the terms of a Management Member’s employment or consulting agreement the terms of such employment or consulting agreement shall be controlling.

 

Section 6.08.           Investment Opportunities and Conflicts of Interest .  The parties hereto expressly acknowledge and agree that (i) the DLJMB Members and their respective Affiliates are permitted to have, and may presently or in the future have, investments or other business relationships, ventures, agreements or arrangements with entities engaged in the Restricted Business other than through the Company and its Subsidiaries (an “ Other Business ”), (ii) the DLJMB Members and their respective Affiliates have or may develop a strategic relationship with businesses that are or may be competitive with the Company and its Subsidiaries, (iii) none of the DLJMB Members or their respective Affiliates will be prohibited by virtue of their investment in the Company or any of its Subsidiaries from pursuing and engaging in any such activities, (iv) none of the DLJMB Members or their respective Affiliates will be obligated to inform the Company or any Other Member of any such opportunity, relationship or investment, (v) the Other Members will not acquire, be provided with an option or opportunity to acquire or be entitled to any interest or participation in any Other Business as a result of the participation therein of any of the DLJMB Members or their respective Affiliates.  The Members expressly authorize and consent to the involvement of the DLJMB Members and/or their respective Affiliates in any Other Business; provided that any transactions between the Company and its Subsidiaries and an Other Business will be on terms no less favorable to the Company and its Subsidiaries than would be obtainable in a comparable arm’s-length transaction, and expressly waive, to the fullest extent permitted by applicable law, any rights to assert any claim that such involvement breaches any duty owed to any other Member or to assert that such involvement constitutes a conflict of interest by such Persons with respect to any Member and (vi) nothing contained herein shall limit, prohibit or restrict any designee of any

 

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DLJMB Members or any representative of any of its Affiliates from serving on the board of directors or other governing body or committee of any Other Business.

 

Section 6.09.           Conflicting Agreements .  Each Member represents and agrees that it shall not (a) grant any proxy or enter into or agree to be bound by any voting trust or agreement with respect to the Units, except as expressly contemplated by this Agreement, (b) enter into any agreement or arrangement of any kind with any Person with respect to its Units inconsistent with the provisions of this Agreement or for the purpose or with the effect of denying or reducing the rights of any other Member under this Agreement, including agreements or arrangements with respect to the Transfer or voting of its Units or (c) act, for any reason, as a member of a group or in concert with any other Person in connection with the Transfer or voting of its Units in any manner that is inconsistent with the provisions of this Agreement.

 

ARTICLE VII

 

TRANSFERS

 

Section 7.01.           General Restrictions on Transfer .  (a)   Each Member understands and agrees that the Units held by it on the date hereof have not been and will not be registered under the Securities Act and are restricted securities under the Securities Act and the rules and regulations promulgated thereunder.  Each Member agrees that it shall not Transfer any Units (or solicit any offers in respect of any Transfer of any Units), except in compliance with the Securities Act, any other applicable securities or “blue sky” laws and any restrictions on Transfer contained in this Agreement.  No Member shall Transfer any Units to any Person if such Transfer would result in adverse regulatory consequences to the Company, including, without limitation, obligations of the Company to file periodic reports with the SEC under the Exchange Act.

 

(b)            Notwithstanding anything in this Agreement to the contrary, other than pursuant to a Drag Along Sale pursuant to Section 7.07 , no Member shall Transfer any Units to an Adverse Person without the prior written consent of the Company.

 

(c)            Any attempt to Transfer any Units not in compliance with this Agreement shall be null and void, and the Company shall not, and shall cause any transfer agent not to, give any effect in the Company’s records to such attempted Transfer.

 

Section 7.02.           [Reserved]

 

Section 7.03.           Permitted Transferees .

 

(a)            Subject to Section 7.01 , any Member may at any time Transfer any or all of its Units to a Permitted Transferee without the consent of any Person and without compliance with Sections 7.04 , 7.06 and 7.07 , as the case may be, so long as (i) such Permitted Transferee shall have agreed in writing to be bound by the terms of this Agreement by executing a joinder agreement in the form of Exhibit A attached hereto (“ Joinder Agreement ”); (ii) the Transfer is in compliance with the Securities Act, any other applicable securities or “blue sky” laws and any other restrictions on Transfer contained in this Agreement; and (iii) the Transfer does not trigger any registration obligation under Section 12(g) of the Securities Act.  Such Member must give

 

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written prior notice to the Company of any proposed Transfer to a Permitted Transferee, including the identity of such proposed Permitted Transferee and such other information reasonably requested by the Company to ensure compliance with the terms of this Agreement and the Company shall be entitled to condition any such Transfer on receipt of an opinion of counsel reasonably acceptable to the Company that such Transfer is exempt from the registration requirements of the Securities Act.

 

(b)            If, while a Permitted Transferee holds any Units, a Permitted Transferee ceases to qualify as a Permitted Transferee in relation to the initial transferor Member from whom or which such Permitted Transferee or any previous Permitted Transferee of such initial transferor Member received such shares or becomes an Adverse Person (an “ Unwinding Event ”), then the relevant initial transferor Member:

 

(i)             shall forthwith notify the other Members and the Company of the pending occurrence of such Unwinding Event; and

 

(ii)            shall take all actions necessary, prior to such Unwinding Event, to effect a Transfer of all the Units held by the relevant Permitted Transferee either back to such Member or, pursuant to this Section 7.03 , to another Person which qualifies as a Permitted Transferee of such initial transferring Member.

 

Notwithstanding the foregoing, the provisions of this Section 7.03(b)  will not be applicable if, prior to any Transfer, the initial transferor Member receives from the Permitted Transferee its agreement not to undertake any actions that would be reasonably likely to result in an Unwinding Event.

 

Section 7.04.          Restrictions on Transfers by Other Members .  Until the date when the DLJMB Members cease to own fifteen percent (15%) or more of the then outstanding Class A Units (the “ Restricted Period ”), no Other Member may Transfer any of their Units, except (A) to a Permitted Transferee in accordance with Section 7.03 , or (B) in a Transfer of Units in a Tag-Along Sale, Drag-Along Sale or Repurchase pursuant to Sections 7.06 , 7.07 or 7.09.

 

Section 7.05.          Restrictions on Transfers by DLJMB Members .  Any DLJMB Member may at any time Transfer any Units (i) to a Permitted Transferee in compliance with Section 7.03 , (ii) in connection with the exercise of its Drag-Along Rights pursuant to Section 7.07 , (iii) in the Syndication or (iv) to any other Person so long as (A) the transferee agrees to be bound by this Agreement and (B) the transferor complies with Section 7.06 hereof to the extent applicable to such Transfer.

 

Section 7.06.          Tag-Along Rights .  (a)  Subject to Sections 7.06(g)  and 7.08 , if any DLJMB Members (collectively, the “ Tag-Along Seller ”) propose to Transfer any Class A Units to any Third Party or Third Parties in a single transaction or in a series of related transactions (a “ Tag-Along Sale ”):

 

(i)             the Tag-Along Seller shall provide each Other Class A Member written notice of the terms and conditions of such proposed Transfer (“ Tag-Along Notice ”) and offer each Other Class A Member the opportunity to participate in such Transfer in accordance with this Section 7.06 , and

 

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(ii)            each Other Class A Member may elect, at its option, to participate in the proposed Transfer in accordance with this Section 7.06 (each such electing Other Class A Member, a “ Tagging Person ”).

 

The Tag-Along Notice shall identify the number of Class A Units proposed to be sold by the Tag-Along Seller and all other Units subject to the offer (“ Tag-Along Offer ”), the consideration for which the Transfer is proposed to be made, and all other material terms and conditions of the Tag-Along Offer, including the form of the proposed agreement, if any, and a firm offer by the proposed Third Party transferee to purchase Class A Units from the Class A Members in accordance with this Section 7.06 .  If the economic terms of the Tag-Along Offer are changed in a manner that is beneficial to the Tag-Along Seller as compared to those set forth in the Tag-Along Notice, the Tag-Along Seller shall deliver a new Tag-Along Notice to each Other Class A Member setting forth the revised terms of the Tag-Along Offer, and the time periods in this Section 7.06 shall be calculated based upon the Other Class A Members’ receipt of such revised Tag-Along Notice.

 

From the date of its receipt of the Tag-Along Notice, each Tagging Person shall have the right (a “ Tag-Along Right ”), exercisable by notice (“ Tag-Along Response Notice ”) given to the Tag-Along Seller within ten (10) Business Days after its receipt of the Tag-Along Notice (the “ Tag-Along Notice Period ”), to request and require that the Tag-Along Seller include in the proposed Transfer up to the number of Class A Units constituting its Tag-Along Portion of Class A Units and the Tag-Along Seller shall include the number of Class A Units proposed to be Transferred by such Tag-Along Seller as set forth in the Tag-Along Notice.  Each Tag-Along Response Notice shall include wire transfer instructions for payment of the purchase price for the Class A Units to be sold in such Tag-Along Sale.  Each Tagging Person that exercises its Tag-Along Rights hereunder shall deliver to the Tag-Along Seller, with its Tag-Along Response Notice, the certificate or certificates representing the Units of such Tagging Person to be included in the Tag-Along Sale, together with a limited power-of-attorney authorizing the Tag-Along Seller to Transfer such Units on the terms set forth in the Tag-Along Notice.  Delivery of the Tag-Along Response Notice with such certificate or certificates and limited power-of-attorney shall constitute an irrevocable acceptance of the Tag-Along Offer by such Tagging Persons.

 

If, at the end of a 120-day period after the Tag-Along Date (which 120-day period shall be extended if any of the transactions contemplated by the Tag-Along Offer are subject to regulatory approval until the expiration of five (5) Business Days after all such approvals have been received, but in no event later than 180 days following the Tag-Along Date by the Tag-Along Seller), the Tag-Along Seller has not completed the Transfer of all such Class A Units on substantially the same terms and conditions set forth in the Tag-Along Notice, the Tag-Along Seller shall (i) promptly return to each Tagging Person the limited power-of-attorney (and all copies thereof and any other documents in the possession of the Tag-Along Seller executed by the Tagging Persons in connection with the proposed Tag-Along Sale, and (ii) not conduct any Transfer of Class A Units without again complying with this Section 7.06(a) .

 

(b)            Concurrently with the consummation of the Tag-Along Sale, the Tag-Along Seller shall (i) notify the Tagging Persons thereof, (ii) remit or cause to be remitted to the Tagging Persons the total consideration to be paid at the closing of the Tag-Along Sale for the

 

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Units of the Tagging Persons Transferred pursuant thereto, with the cash portion of the purchase price paid by wire transfer of immediately available funds in accordance with the wire transfer instructions in the applicable Tag-Along Response Notices and (iii) promptly after the consummation of such Tag-Along Sale, furnish such other evidence of the completion and the date of completion of such Transfer and the terms thereof as may be reasonably requested by the Tagging Persons.

 

(c)            If at the termination of the Tag-Along Notice Period any Other Member shall not have elected to participate in the Tag-Along Sale, such Other Member shall be deemed to have waived its rights under Section 7.06(a)  with respect to, and only with respect to, the Transfer of its Class A Units pursuant to such Tag-Along Sale.

 

(d)            If (i) any Other Member declines to exercise its Tag-Along Rights or (ii) any Tagging Person elects to exercise its Tag-Along Rights with respect to less than such Tagging Person’s Tag-Along Portion (the aggregate amount of Units subject to all such unexercised Tag-Along Portions, the “ Excess Portion ”), the Tag-Along Seller shall notify the Tagging Persons who desire to sell their Tag-Along Portion (but not less than such amount) (a “ Fully Participating Tagging Person ”) and the Tag-Along Seller and any Fully Participating Tagging Person shall be entitled to Transfer, pursuant to the Tag-Along Offer, in addition to any Units already being Transferred, a number of Units held by it equal to the product of (i) the Excess Portion and (ii) a fraction, the numerator of which is the total number of the relevant class of Class A Units owned by the Tag-Along Seller or Fully Participating Tagging Person, as the case may be, and the denominator of which is equal to the sum of the total number Class A Units owned by the Tag-Along Seller and all Fully Participating Tagging Persons.

 

(e)            The Tag-Along Seller shall Transfer, on behalf of itself and any Tagging Person, the Class A Units subject to the Tag-Along Offer and elected to be Transferred on the terms and conditions set forth in the Tag-Along Notice within 120 days (or such longer period as extended under Section 7.06(a) ) of the date on which all Tag-Along Rights shall have been waived, exercised or expired (the “ Tag-Along Date ”).

 

(f)             Notwithstanding anything contained in this Section 7.06 , there shall be no liability on the part of the Tag-Along Seller to the Tagging Persons (other than the obligation to return limited powers- of-attorney received by the Tag-Along Seller) if the Transfer of Class A Units pursuant to Section 7.06 is not consummated for whatever reason.  The decision to effect a Transfer of Class A Units pursuant to this Section 7.06 by the Tag-Along Seller is in the sole and absolute discretion of the Tag-Along Seller.

 

(g)            If the consummation of the Tag-Along Sale would result in a Change of Control, Incentive Members shall be entitled to participate in such Tag-Along Sale to the extent that their Incentive Units have vested and all references to “Class A Units” in this Section 7.06 shall mean “Units” and all references to “Class A Members” or “Other Class A Members” shall mean “Members.”

 

(h)            The provisions of this Section 7.06 shall not apply to any Transfer of Units: (i) to any Permitted Transferees of the Tag-Along Seller, (ii) in a Drag-Along Sale for

 

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which the Drag-Along Seller shall have elected to exercise its rights under Section 7.07 , or (iii) in connection with the Syndication.

 

Section 7.07.           Drag-Along Rights .  (a)   Subject to Section 7.08 , if one or more of the DLJMB Members (collectively, the “ Drag-Along Seller ”) propose to Transfer Units to any Third Party or Parties (the “ Drag-Along Transferee ”) in a single transaction or in a series of related transactions and the Units to be Transferred by the Drag-Along Seller represent not less than 50% of Units then owned by the DLJMB Members in the aggregate (any such Transfer, a “ Drag-Along Sale ”), the Drag-Along Seller may at its option require each Other Member to Transfer, and each other Member hereby agrees to Transfer, the Drag-Along Portion of the Units (“ Drag-Along Rights ”) then held by such Other Member.  All Other Members shall cooperate in, and shall take all actions that the Drag-Along Seller deems reasonably necessary or desirable to consummate the Drag-Along Sale, including, without limitation, (i) voting their respective Units (or executing and delivering any written consents in lieu thereof) in favor of the Drag-Along Sale, including voting to approve a Drag-Along Sale if such Drag-Along Sale is structured as a merger or a sale of all or substantially all of the assets of the Company, and against any action or proposal that may prevent, hinder or impede the consummation of the Drag-Along Sale, (ii) to the extent permitted by applicable law, not exercising any dissenters’ or appraisal rights to which they may be entitled in connection with the Drag-Along Sale, and (iii) subject to Section 7.07(b) , entering into agreements with the Drag-Along Transferee on terms substantially identical to those (if any) entered into between the Drag-Along Transferee and the Drag-Along Seller.  Each Other Member hereby grants to the Drag-Along Seller, an irrevocable proxy coupled with an interest to vote, including in any action by written consent, such Other Member’s Units in accordance with such Other Member’s agreements in this Section 7.07 and a power of attorney to execute and deliver in the name and on behalf of such Other Member all such agreements, instruments and other documentation (including any written consents of Members) as is required to Transfer the Units held by such Other Member to the Drag-Along Transferee.  The Drag-Along Seller shall provide notice to each Other Member that sets forth the circumstances in which such proxy or power of attorney was used immediately following the exercise of the Drag-Along Seller’s rights as set forth above.

 

(b)            The Drag-Along Seller shall provide notice of such Drag-Along Sale to the Other Members (a “ Drag-Along Sale Notice ”) not later than ten (10) Business Days prior to the proposed Drag-Along Sale.  The Drag-Along Sale Notice shall identify the Drag-Along Transferee, the number of Units subject to the Drag-Along Sale, the consideration for which a Transfer is proposed to be made (the “ Drag-Along Sale Price ”) and all other material terms and conditions of the Drag-Along Sale.  The number of Units to be sold by each Other Member shall be the Drag-Along Portion of the Units that such Other Member owns.  Each Other Member shall be required to participate in the Drag-Along Sale on the terms and conditions set forth in the Drag-Along Sale Notice and to tender the Drag-Along Portion of its Units as set forth below.  The price payable in such Transfer shall be the Drag-Along Sale Price.  Not later than five (5) Business Days after the date of the Drag-Along Sale Notice (the “ Drag-Along Sale Notice Period ”), each of the Other Members shall deliver to a representative of the Drag-Along Seller designated in the Drag-Along Sale Notice the certificate (if then certificated) and other applicable instruments representing the Units of such Other Member to be included in the Drag-Along Sale, together with a limited power-of-attorney authorizing the Drag-Along Seller or such representative to Transfer such Units on the terms set forth in the Drag-Along Notice and wire

 

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transfer instructions for payment of the cash portion of the consideration to be received in such Drag-Along Sale, or, if such delivery is not permitted by applicable law, an unconditional agreement to deliver such Units pursuant to this Section 7.07 (b)  at the closing for such Drag-Along Sale against delivery to such Other Member of the consideration therefor.  If an Other Member should fail to deliver such certificates (if then certificated) or instruments to the Drag-Along Seller and the Drag-Along Sale is consummated, the Company shall cause the books and records of the Company to show that such Units are bound by the provisions of this Section 7.07 (b)  and that such Units shall be Transferred to the Drag-Along Transferee immediately upon surrender for Transfer by the holder thereof.

 

(c)            The Drag-Along Seller shall have a period of 120 days from the date of receipt of the Drag-Along Sale Notice to consummate the Drag-Along Sale on the terms and conditions set forth in such Drag-Along Sale Notice, provided that, if such Drag-Along Sale is subject to regulatory approval, such 120-day period shall be extended until the expiration of five (5) Business Days after all such approvals have been received, but in no event later than 180 days following the date of receipt of the Drag-Along Sale Notice.  If the Drag-Along Sale shall not have been consummated during such period, the Drag-Along Seller shall promptly return to each of the Other Members the limited power-of-attorney (and all copies thereof) and all certificates and other applicable instruments representing Units that such Other Members delivered for Transfer pursuant hereto, together with any other documents in the possession of the Drag-Along Seller executed by the Other Members in connection with such proposed Transfer, and all the restrictions on Transfer contained in this Agreement or otherwise applicable at such time with respect to such Units owned by the Other Members shall again be in effect.

 

(d)            Concurrently with the consummation of the Drag-Along Sale, the Drag-Along Seller shall give notice thereof to the Other Members, shall remit or cause to be remitted to each of the Other Members the total consideration to be paid at the closing of the Drag-Along Sale (the cash portion of which is to be paid by wire transfer of immediately available funds in accordance with such Other Member’s wire transfer instructions) for the Units Transferred pursuant hereto and shall furnish such other evidence of the completion and time of completion of such Transfer and the terms thereof as may be reasonably requested by such Other Members.

 

(e)            Notwithstanding anything contained in this Section 7.07 , there shall be no liability on the part of the Drag-Along Seller to the Other Members (other than the obligation to return the limited power-of-attorney and the certificates (if then certificated) and other applicable instruments representing Units received by the Drag-Along Seller) if the Transfer of Units pursuant to this Section 7.07 is not consummated for whatever reason, regardless of whether the Drag-Along Seller has delivered a Drag-Along Sale Notice.  The decision to effect a Transfer of Units pursuant to this Section 7.07 by the Drag-Along Seller is in the sole and absolute discretion of the Drag-Along Seller.

 

Section 7.08.           Additional Conditions to Tag-Along Sales and Drag-Along Sales .  Notwithstanding anything contained in Sections 7.06 or 7.07 , in connection with a Tag-Along Sale under Section 7.06 or a Drag-Along Sale under Section 7.07 :

 

(a)            the DLJMB Members shall ensure (i) that upon the consummation of such Tag-Along Sale, all of the Members participating therein will receive the same form and amount

 

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of consideration per Unit, or, if any Members are given an option as to the form and amount of consideration to be received, all Members participating therein will be given the same option and (ii) if the Tag-Along Sale is a transaction that results in a Change of Control such that the Incentive Members participate in such Tag-Along Sale as set forth in Section 7.06(g) , the DLJMB Members shall ensure that upon the consummation of such Tag-Along Sale, all of the Incentive Members participating therein will receive the amount that would be distributed to them in respect of their Units included in the Tag-Along Sale as if the assets of the Company were sold for their fair market value (based upon the sale price per Unit) and the proceeds were distributed as consideration payable in accordance with Article VIII ;

 

(b)           the DLJMB Members shall ensure that upon the consummation of such Drag-Along Sale, all of the Members participating therein will receive the amount that would be distributed to them in respect of their Units included in the Drag-Along Sale as if the assets of the Company were sold for their fair market value (based upon the Drag-Along Sale Price) and the proceeds were distributed as consideration payable in accordance with Article VIII ; and

 

(c)           each Other Member shall (i) make such customary representations and warranties, including as to due organization and good standing, corporate power and authority, due approval, no conflicts and ownership and transfer of Units, and covenants and enter into such definitive agreements as are customary for transactions of the nature of the proposed Transfer, provided, that no Other Member shall be required to make any representation or warranty or agree to any covenant that is more extensive or burdensome than those made by the Tag-Along Seller or Drag-Along Seller or enter into any agreements not also executed by the Tag-Along Seller or the Drag-Along Seller, (ii) benefit from and be subject to all of the same provisions of the definitive agreements as the Tag-Along Seller or Drag-Along Seller, as the case may be, and (iii) be required to bear their proportionate share of any escrows, holdbacks or adjustments in respect of the purchase price or indemnification obligations; provided that no Other Member shall be obligated (A) to provide indemnification with respect to any other Member or the representations, warranties, covenants or agreements of any other Member, (B) to incur liability to any Person in connection with such Tag-Along Sale or Drag-Along Sale, as the case may be, including without limitation under any indemnity, in excess of the lesser of (1) its pro rata share of such liability and (2) the proceeds realized by such Other Member in such sale, or (C) to agree not to compete with or solicit employees of any Person; provided that any Management Member who is offered continued employment with the Company or any of its Subsidiaries after such Tag-Along Sale or Drag-Along Sale on reasonably similar or better terms may be required to agree with all the provisions in Sections 7.07 and 7.08 hereof.

 

Section 7.09.          Repurchase Rights .

 

(a)           Call Right .

 

(i)            Except as otherwise agreed to by the Company, upon any Management Member ceasing to be employed by the Company or its Subsidiaries (a “ Terminated Member ”) for any reason (a “ Termination Event ”), subject to the provisions of Sections 7.09(a)(ii), (iii)  and (iv) , 7.09(a)(iii) , 7.09(b)  and 7.09(c)  hereof, the Company shall have the option to purchase, and if such option is exercised, such Terminated Member shall sell, and shall cause any Permitted

 

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Transferees of such Terminated Member to sell, to the Company all or any portion of the Units owned by such Management Member and such Permitted Transferees designated by the Company (the “ Termination Units ”) on the date of the occurrence of such Termination Event at a price per Termination Unit equal to the Termination Price (as determined pursuant to Section 7.09(d)  below) of the Termination Units.

 

(ii)           With respect to each Termination Unit (other than Rollover Units in the event that the Terminated Member terminates for Good Reason or the Company terminates the Terminated Member without Cause, in which case Section 7.09(c)  shall apply), the Company shall notify a Terminated Member in writing, within the Call Period with respect to such Termination Units, whether the Company will exercise its right to purchase such Termination Units (the date on which a Terminated Member is so notified, the “ Call Notice Date ”).

 

(iii)          The Company shall have the option to assign its right to purchase all or any portion of the Termination Units under this Section 7.09 to the Class A Members on a pro rata basis in proportion to the number of Units held by such Class A Member and any such Class A Member may exercise the Company’s rights under this Section 7.09 in the same manner in which the Company could exercise such rights.  In the event that the Company determines that it will assign its right to purchase Termination Units under this Section 7.09 , it shall give the Class A Members written notice of the number of Termination Units, the Termination Price and the terms and conditions of the proposed sale.  Each Class A Member shall have ten (10) days from the date of receipt of any such notice to agree to purchase up to its pro rata share of such Termination Units, for the Termination Price and upon the terms and conditions specified in the notice, by giving written notice to the Company stating therein the quantity of Termination Units to be purchased up to such Class A Member’s pro rata share.  If any Class A Member fails to agree to purchase its full pro rata share within such ten (10) day period, the Company will give the Class A Members who did so agree (the “ Electing Call Members ”) notice of the number of Termination Units not subscribed for.  The Electing Call Members shall have five (5) days from the date of such second notice to agree to purchase their pro rata share (or such greater amount as the Electing Call Members agree upon) of all or any part of the Termination Units not purchased by such other Class A Members.

 

(iv)          The closing of the purchase by the Company of Termination Units pursuant to Section 7.09(a)  shall take place at the principal office of the Company on the date chosen by the Company, which date shall, except as may be reasonably necessary to determine the Termination Price, in no event be more than 45 days after the Call Notice Date; provided, that in the event the Terminated Member has not held the Termination Units for a period of 180 days after the date of grant, the closing shall occur immediately following the expiration of such 180 day period (for purposes hereof each Permitted Transferee shall be considered to have held the Termination Units to the same extent as the original transferee).  At such closing, (i) the Company shall pay the Terminated Member and/or such

 

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Terminated Member’s Permitted Transferees, as applicable, against delivery of duly endorsed certificates described below representing such Termination Units, the aggregate Termination Price by wire transfer of immediately available federal funds and (ii) the Terminated Member and/or such Terminated Member’s Permitted Transferees, as applicable, shall deliver to the Company a certificate or certificates representing the Termination Units to be purchased by the Company duly endorsed, or with unit powers duly endorsed, for transfer with signature guaranteed, free and clear of any lien or encumbrance, with any necessary stock transfer tax stamps affixed. The delivery of a certificate or certificates for the Termination Units by any Person selling such Termination Units pursuant to this Section 7.09 shall be deemed a representation and warranty by such Person that: (1) such Person has full right, title and interest in and to such Termination Units; (2) such Person has all necessary power and authority and has taken all necessary action to sell such Termination Units as contemplated; (3) such Termination Units are free and clear of any and all liens or encumbrances, and (4) there is no adverse claim with respect to such Termination Units.

 

(b)          Put Right .

 

(i)            Upon any Management Member’s termination for Good Reason, termination by the Company without Cause, or upon the death or Disability of the Management Member, such Management Member (or his or her legal representative) shall have the option to sell and if such option is exercised the Company shall purchase, all or any portion of such Terminated Member’s Termination Units designated by such Management Member (in each case other than Rollover Units, which shall be subject to Section 7.09(c) ) owned on the Termination Date (collectively, the “ Put Units ”) for a purchase price equal to the Termination Price of the Put Units.

 

(ii)           The Terminated Member (or such Terminated Member’s Permitted Transferees) shall notify the Company in writing, within 90 days of the Termination Date, whether such Terminated Member (or such Permitted Transferee) will exercise its option pursuant to Section 7.09(b)(i)  (the date on which the Company is so notified, the “ Put Notice Date ”).

 

(iii)          The Company may offer to the Class A Members the opportunity to participate in the purchase of all or any portion of the Put Units under this Section 7.09(b)  on a pro rata basis in proportion to the number of Units held by such Class A Member and any such Class A Member electing to participate may act under this Section 7.09(b)  in the same manner in which the Company could act.  In the event that the Company determines that it will offer the opportunity to purchase Termination Units under this Section 7.09 , it shall give the Class A Members written notice of the number of Put Units, the Termination Price and the terms and conditions of the proposed sale.  Each Class A Member shall have ten (10) days from the date of receipt of any such notice to agree to purchase up to its pro rata share of such Put Units, for the Termination Price and upon the terms and conditions specified in the notice, by giving written notice to the Company stating

 

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therein the quantity of Put Units to be purchased up to such Class A Member’s pro rata share.  If any Class A Member fails to agree to purchase its full pro rata share within such ten (10) day period, the Company will give the Class A Members who did so agree (the “ Electing Put Members ”) notice of the number of Put Units not subscribed for.  The Electing Put Members shall have five (5) days from the date of such second notice to agree to purchase their pro rata share (or such greater amount as the Electing Put Members agree upon) of all or any part of the Put Units not purchased by such other Class A Members.

 

(iv)          Any notice delivered pursuant to Section 7.09(b)(ii)  shall set forth the closing date chosen by such Management Member, which date shall in no event be less than 90 days nor more than 120 days after the Put Notice Date; provided that in the event the Terminated Member has not held the Termination Units for a period of 180 days after the date of grant, the closing shall occur immediately following the expiration of such 180 day period (for purposes hereof each Permitted Transferee shall be considered to have held the Termination Units to the same extent as the original transferee).  The closing of the purchase by the Company of Put Units pursuant to Section 7.09(b)  shall take place at the principal office of the Company on or before the closing date set forth in such notice.  At such closing, (i) the Company shall pay the Terminated Member and/or such Terminated Member’s Permitted Transferees, as applicable, against delivery of duly endorsed certificates described below representing such Termination Units, the aggregate Termination Price by wire transfer of immediately available federal funds and (ii) the Terminated Member and/or such Terminated Member’s Permitted Transferees, as applicable, shall deliver to the Company a certificate or certificates representing the Put Units to be purchased by the Company duly endorsed, or with unit powers duly endorsed, for transfer with signature guaranteed, free and clear of any lien or encumbrance, with any necessary stock transfer tax stamps affixed. The delivery of a certificate or certificates for the Put Units by any Person selling such Termination Units pursuant to this Section 7.09(b)  shall be deemed a representation and warranty by such Person that: (i) such Person has full right, title and interest in and to such Put Units; (ii) such Person has all necessary power and authority and has taken all necessary action to sell such Put Units as contemplated; (iii) such Put Units are free and clear of any and all liens or encumbrances, and (iv) there is no adverse claim with respect to such Put Units.

 

(c)           Rollover Units .

 

(i)            Except as otherwise agreed by the Company, upon any Management Member’s termination for Good Reason or termination by the Company without Cause, the Company and the Terminated Member shall each seriously and in good faith consider a proposal, which may be made by either party, for the Company to acquire the Rollover Units from the Terminated Member for the Termination Price but neither party shall be obligated to make or accept any offer.

 

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(ii)           Any closing of the purchase by the Company of Rollover Units pursuant to this Section 7.09(c)  shall take place at the principal office of the Company on the date chosen by the Company, which date shall, except as may be reasonably necessary to determine the Termination Price, in no event be more than 45 days after receipt of the acceptance; provided, that in the event the Terminated Member has not held the Termination Units for a period of 180 days after the date of grant, the closing shall occur immediately following the expiration of such 180 day period (for purposes hereof each Permitted Transferee shall be considered to have held the Termination Units to the same extent as the original transferee).  At such closing, (i) the Company shall pay the Terminated Member and/or such Terminated Member’s Permitted Transferees, as applicable, against delivery of duly executed option assignment documentation or duly endorsed certificates described below representing such Termination Units, the aggregate Termination Price by wire transfer of immediately available federal funds and (ii) the Terminated Member and/or such Terminated Member’s Permitted Transferees, as applicable, shall deliver to the Company an assignment(s) of option grant or certificate(s) representing the Termination Units to be purchased by the Company duly endorsed, or with unit powers duly endorsed, for transfer with signature guaranteed, free and clear of any lien or encumbrance, with any necessary stock transfer tax stamps affixed, as applicable. The delivery of an assignment(s) or certificate(s) for the Termination Units by any Person selling such Termination Units pursuant to this Section 7.09 shall be deemed a representation and warranty by such Person that: (1) such Person has full right, title and interest in and to such Termination Units; (2) such Person has all necessary power and authority and has taken all necessary action to sell such Termination Units as contemplated; (3) such Termination Units are free and clear of any and all liens or encumbrances, and (4) there is no adverse claim with respect to such Termination Units.

 

(d)          Termination Price .  For purposes of this Section 7.09 , if the employment or other service arrangement of a Management Member is terminated (i) by the Company or a Subsidiary thereof for Cause, the “ Termination Price ” shall be an amount per Termination Unit equal to the original purchase price paid to the Company for such Termination Unit, and (ii) if the employment or other service arrangement of a Management Member is terminated for any reason other than for Cause, the “ Termination Price ” shall be (x) in the case of a Call, an amount per Termination Unit equal to the greater of Repurchase Fair Market Value on the RFMV Calculation Date and original purchase price paid to the Company and (y) in the case of a Put, an amount per Put Unit equal to the Repurchase Fair Market Value on the RFMV Calculation Date.

 

(e)           Payment .  The Company shall pay the Termination Price in cash; provided , however , that in the event of the exercise of a Put Right under Section 7.09(b) , the Termination Price may be paid by the execution and delivery by the Company of a promissory note, secured by the underlying repurchased Termination Units, bearing interest at the prime rate, per annum, as published in The Wall Street Journal , eastern edition, with principal and accrued interest and payable in sixteen (16) equal quarterly installments on the first day of each calendar quarter, commencing with the first calendar quarter beginning after the closing date (or at such other time as is required in order to address the issue set forth in clauses (i) or (ii) below) if (i) 

 

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restrictive covenants or other provisions contained in the documents evidencing the Company’s indebtedness for borrowed money do not permit the Company to make such payments in cash (or to the extent partial cash payment is permitted, the balance to be represented by such a note); or (ii) the cash payment of the Termination Price would materially and adversely affect the Company’s financial condition as reasonably determined by the Board of Managers.  The Company will provide payment of the Termination Price in cash to the extent that the Board of Managers reasonably determines that such cash payment may be made subject to clauses (i) or (ii) above.

 

Section 7.10.          Preemptive Rights .  (a)  The Company shall give each Other Class A Member written notice (an “ Issuance Notice ”) of any proposed issuance by the Company of any Units (other than Excluded Units) at least ten (10) Business Days prior to the proposed issuance date.  The Issuance Notice shall specify the number and class of such Units and the price at which such Units are to be issued and the other material terms and conditions of the issuance.  Subject to Section 7.10(e)  below, each Other Class A Member shall be entitled to purchase such Other Class A Member’s Pro Rata Share of the Units proposed to be issued at the price and on the other terms and conditions specified in the Issuance Notice.

 

(b)           Each Other Class A Member may exercise his or her rights under this Section 7.10 by delivering notice of his or her election to purchase such Units to the Company and to each other within ten (10) Business Days of receipt of the Issuance Notice.  A delivery of such notice (which notice shall specify the number (or amount) of Units to be purchased by such Other Class A Member submitting such notice) by such Other Class A Member shall constitute a binding agreement of such Other Class A Member to purchase, at the price and on the terms and conditions specified in the Issuance Notice, the number (or amount) of Units specified in such Other Class A Member’s notice.  If, at the termination of such ten (10) Business Day period, any Other Class A Member shall not have exercised his or her rights to purchase any of such Other Class A Member’s Pro Rata Share of such Units, such Other Member shall be deemed to have waived all of its rights under this Section 7.10 with respect to, and only with respect to, the purchase of such Units.

 

(c)           If any Other Class A Member declines to exercise his or her preemptive rights under this Section 7.10 or elects to exercise such rights with respect to less than such Other Class A Member’s Pro Rata Share of such Units (the aggregate amount of Units subject to all such unexercised preemptive rights, the “ Excess Units ”), any participating Other Class A Member electing to exercise its rights with respect to its full Pro Rata Share (a “ Fully Participating Member ”) shall be entitled to purchase an additional number of Units equal to the product of (i) the number of Excess Units and (ii) a fraction, the numerator of which is the Aggregate Ownership of the Class A Units owned by the Fully Participating Member, and the denominator of which is equal to the sum of the Aggregate Ownership of that class of Units of all Fully Participating Members.

 

(d)           The Company shall have ninety (90) days from the date of the Issuance Notice to consummate the proposed issuance of any or all of such Units that each Other Class A Member has elected not to purchase at the price and upon terms and conditions that are not materially less favorable to the Company than those specified in the Issuance Notice, provided that, if such issuance is subject to regulatory approval, such 90-day period shall be extended until

 

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the expiration of five (5) Business Days after all such approvals have been received, but in no event later than 120 days from the date of the Issuance Notice.  At the consummation of such issuance, the Company will register the Units to be purchased by each Other Class A Member exercising preemptive rights pursuant to this Section 7.10   in the name of such Other Class A Member, against payment by such Other Class A Member of the purchase price for such Units.  If the Company proposes to issue any class of Units after such 90-day period or on other terms materially less favorable to the issuer, it shall again comply with the procedures set forth in this Section 7.10 .

 

(e)           The Company shall not be under any obligation to consummate any proposed issuance of Units, nor shall there be any liability on the part of the Company to any Other Class A Member if the Company has not consummated any proposed issuance of Units pursuant to this Section 7.10 for whatever reason, regardless of whether it shall have delivered an Issuance Notice in respect of such proposed issuance.

 

(f)            The Company may offer and sell Units to the prospective investor subject to the preemptive rights under this Section 7.10 without first offering such Units to each Other Class A Member or complying with the procedures of this Section 7.10 , so long as the Board of Managers has determined in good faith that the procedures in this Section 7.10 cannot be complied with prior to the offer and sale of Units and each Other Class A Member receives prompt written notice of such sales and thereafter is given the opportunity to purchase its Pro Rata Share of such Units within forty-five (45) days after the close of such sale and in any event no later than ten (10) Business Days from receipt of the notice referred to herein on substantially the same terms and conditions and for the identical price as such sale to the prospective investor.

 

ARTICLE VIII

 

DISSOLUTION; LIQUIDATION

 

Section 8.01.          Dissolution .  The Company shall be dissolved and its affairs wound up on the first to occur of any of the following events:

 

(a)           the decision, following the occurrence of a Change of Control or consummation of an Initial Public Offering, of a majority of the Board of Managers to dissolve the Company;

 

(b)           the unanimous decision, at any time, of the Board of Managers, to dissolve the Company; or

 

(c)           any other event sufficient under the Act (other than action of the Board of Managers or the Members) to cause the dissolution of the Company.

 

Section 8.02.          Final Accounting .  Upon the dissolution of the Company, a proper accounting shall be made from the date of the last previous accounting to the date of dissolution.

 

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Section 8.03.         Liquidation .

 

(a)           Dissolution of the Company shall be effective as of the date on which the event occurs giving rise to the dissolution and all Members shall be given prompt notice thereof in accordance with Article VIII , but the Company shall not terminate until the assets of the Company have been distributed as provided for in Section 8.03(c) .  Notwithstanding the dissolution of the Company, prior to the termination of the Company, the business, assets and affairs of the Company shall continue to be governed by this Agreement.

 

(b)           Upon the dissolution of the Company, the Board of Managers or, if there is no Board of Managers, a person selected by the affirmative vote of Class A Members holding Class A Units that represent more than 50% of the issued and outstanding Class A Units, shall act as the liquidator (the “ Liquidator ”) of the Company to wind up the Company.  The Liquidator shall have full power and authority to sell, assign and encumber any or all of the Company’s assets and to wind up and liquidate the affairs of the Company in an orderly and business-like manner.

 

(c)           The Liquidator shall distribute all proceeds from liquidation in the following order of priority:

 

(i)            first , to creditors of the Company (including creditors who are Members) in satisfaction of the liabilities of the Company (whether by payment or the making of reasonable provision for payment thereof); and

 

(ii)           second , to the Members in the same manner in which non-liquidating distributions are made pursuant to Section 5.02 .

 

(d)          The Liquidator shall determine whether any assets of the Company shall be liquidated through sale or shall be distributed in kind.  A distribution in kind of an asset to a Member shall be considered, for the purposes of this Article VIII , a distribution in an amount equal to the fair market value of the assets so distributed as determined in good faith by the Liquidator in its reasonable discretion.

 

Section 8.04.         Cancellation of Certificate .  Upon the completion of the distribution of Company assets as provided in Section 8.03 , the Company shall be terminated and the Person acting as Liquidator shall cause the cancellation of the Certificate and shall take such other actions as may be necessary or appropriate to terminate the Company.

 

ARTICLE IX

 

REPRESENTATIONS

 

Section 9.01.         Investment Purpose .  Each Member hereby represents and warrants to the Company, the Board of Managers and each other Member that such Member (i) is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act, (ii) has acquired its Units for itself for investment purposes only, and not with a view to any resale or distribution of such Units, (iii) HAS BEEN ADVISED AND UNDERSTANDS THAT SUCH UNITS HAVE NOT BEEN AND SHALL NOT BE REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS AND, THEREFORE, CANNOT BE RESOLD UNLESS SUCH UNITS

 

48



 

ARE REGISTERED UNDER THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS, OR UNLESS EXEMPTIONS FROM REGISTRATION ARE AVAILABLE, and (iv) has, either alone or with its “purchaser representatives” as that term is defined in Rule 501(h) under the Securities Act, such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Company.  Each Member further acknowledges that the Company has made available to such Member, at a reasonable time prior to its acquisition of its Units, the opportunity to ask questions and receive answers concerning the terms and conditions of such acquisition and to obtain any additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information furnished by the Company in connection with such acquisition.  Each Member further represents and warrants to the Company and each other Member that, as of the signing of this Agreement:

 

(a)           if other than an individual, it is duly organized, validly existing and in good standing under the laws of the jurisdiction where it purports to be organized;

 

(b)           it has full power and authority to enter into and perform this Agreement;

 

(c)           all actions necessary to authorize the signing and delivery of this Agreement, and the performance of obligations under it, have been duly taken;

 

(d)           this Agreement has been duly signed and delivered by a duly authorized officer or other representative of such Member (if such Member is not an individual) and constitutes the legal, valid and binding obligation of such Member enforceable in accordance with its terms (except as such enforceability may be affected by applicable bankruptcy, insolvency or other similar laws affecting creditors’ rights generally, and except that the availability of equitable remedies is subject to judicial discretion);

 

(e)           no consent or approval of any other Person is required in connection with the signing, delivery and performance of this Agreement by such Member; and

 

(f)            the signing, delivery and performance of this Agreement do not violate the organizational documents of such Member (if such Member is not an individual) or any material agreement to which such Member is a party or by which it is bound unless such violation would not have a material adverse effect on the ability of the Member to fulfill and perform its obligations under this Agreement.

 

Section 9.02.          Independent Inquiry .  Each Member acknowledges, agrees, represents and warrants that it has completed its own independent inquiry and has relied fully upon the advice of its own legal counsel, accountant, financial and other advisors in determining the legal, tax, financial and other consequences of this Agreement and the transactions contemplated hereby and the suitability of this Agreement and the transactions contemplated hereby for such Member and its particular circumstances and has not relied upon any representations or advice by any other Member or the Board of Managers.  Without limiting the generality of the foregoing, each Member acknowledges, agrees, represents and warrants that (i) it has completed its own independent inquiry as to the investment risks associated with its respective Units, (ii) any projections or assumptions as to potential returns that have previously

 

49



 

been submitted to such Member by the Company or any other person Affiliated with the Company are not guarantees of actual returns and (iii) no representations, warranties or guarantees have been made to such Member as to the returns or performance of the Company by any of the Board of Managers, the Company or any other person Affiliated with the Company.

 

ARTICLE X

 

GENERAL PROVISIONS

 

Section 10.01.        Members Representative .  For purposes of this Agreement, the DLJ Members hereby consent to the appointment of DLJMB, as representative of the DLJ Members (the “ Members Representative ”), and as attorney-in-fact for and on behalf of the DLJ Members, and, subject to the express limitations set forth below, the taking by the Members Representative of any and all actions and the making of any decisions required or permitted to be taken by the DLJ Members under this Agreement.  The Members Representative will have unlimited authority and power to act on behalf of the DLJ Members with respect to this Agreement and the disposition, settlement or other handling of all claims, rights or obligations arising under this Agreement so long as all DLJ Members are treated in the same manner.  The DLJ Members will be bound by all actions taken by the Members Representative in connection with this Agreement.  In performing its functions hereunder, the Members Representative will not be liable to the DLJ Members in the absence of gross negligence or willful misconduct.

 

Section 10.02.        Aggregation of Shares .  All Units held by a Member and its Affiliates shall be aggregated together for purposes of determining the availability of any rights under this Agreement; provided, however, for purposes of this Section 10.02 , none of the DLJ Members shall be deemed an Affiliate of any Other Member.

 

Section 10.03.        Binding Effect; Assignability; Benefit .  (a)   This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, legal representatives and permitted assigns.  Any Member that ceases to own beneficially any Units shall cease to be bound by the terms hereof (other than (i) the provisions of Annex A applicable to such Member with respect to any offering of Registrable Securities completed before the date such Member ceased to own any Units, (ii)  Sections 6.08 , 6.07 , 6.08 and 6.09 and (iii)  Article X ).

 

(b)           Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

Section 10.04.        Notices .  All notices, requests and other communications to any party shall be in writing and shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by facsimile transmission,

 

If to the Company, to:

 

STR Holdings (New) LLC

c/o DLJ Merchant Banking Partners

 

50


 

One Madison Avenue, 11th Floor
New York, NY  10010
Attention:  Kenneth Lohsen
Facsimile:  (212) 538-0619

 

If to the DLJ Members, to:

 

c/o DLJ Merchant Banking, Inc.
One Madison Avenue, 11th Floor
New York, NY 10010
Attention:  Kenneth Lohsen
Facsimile:  (212) 538-0619

 

In each case with a copy to:

 

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention:  Douglas P. Warner, Esq.
Facsimile:  (212) 310-8007

 

If to an Other Member, to the address or facsimile number provided by such Other Member to the Company for the purposes of notices hereunder;

or, in each case, at such other address or fax number as such party may hereafter specify for the purpose of notices hereunder by written notice to the other parties hereto.  Notice shall be sent by United States Mail, first class postage prepaid, return receipt requested, by Federal Express or other nationally recognized overnight parcel delivery service for next day delivery; or by hand delivery with a receipt confirmation requested.  Notice given in accordance with this paragraph shall be presumed to have been delivered and received three (3) days after mailing if sent by United States Mail, first class, one day after mailing if sent for next day deliver by Federal Express or equivalent; and on the day of delivery if hand delivered.  Notice may also be given by fax or electronic mail, but such notice will not be effective unless the notice provider obtains a confirmation of receipt of the fax or electronic mail signed by the notice recipient.

 

Any Person that hereafter becomes a Member shall provide its address and fax number to the Company, which shall promptly provide such information to each other Member.

 

Section 10.05.        Waiver; Amendment .  (a) No provision of this Agreement may be waived except by an instrument in writing executed by the party against whom the waiver is to be effective.  No provision of this Agreement may be amended or otherwise modified except by an instrument in writing executed by (1) the Company; (2) Members holding at least 51% of the votes represented by the outstanding Units; and (3) if any such amendment will disproportionately and materially adversely affect the Other Class A Members differently than the DLJMB Members, the consent of such Other Class A Members, as the case may be, holding at least 51% of the outstanding Class A Units held by the Other Class A Members, as applicable, at the time of such proposed amendment or modification will be required; provided , however , that this Section 10.05 may not be amended without the written consent of Other Class A

 

51



 

Members holding at least 51% of the outstanding Class A Units held by the Other Class A Members and Section 10.02 may not be amended in any manner that materially and adversely affects a Member without the prior written consent of such Member so adversely affected.

 

Section 10.06.        Transfer of All Securities .  Upon the permitted Transfer by any Member, executor or other entity of all Units owned or held by him, her or it and, upon payment of any consideration to which such Member is entitled, such Member shall have no further rights or privileges under this Agreement or otherwise be entitled to the benefits hereof.  However, such Transfer shall not relieve a Member, his or her executor or his, her or its successors or assigns from liability hereunder in the event of a breach by any such Member of his, her or its duties hereunder prior to such Transfer.

 

Section 10.07.        Fees and Expenses .  Except as provided herein or otherwise agreed in writing, each party shall pay its own costs and expenses incurred in connection with the preparation and execution of this Agreement, or any amendment or waiver hereof, and the transactions contemplated hereby and all matters related hereto.

 

Section 10.08.        Governing Law .  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the conflicts of laws rules of such state.

 

Section 10.09.        Jurisdiction .  The parties hereby 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 in contract, tort or otherwise, shall be brought in the United States District Court for the District of Delaware or in the Court of Chancery of the State of Delaware (or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Delaware), so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any case of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Delaware, 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 which is brought in any such court has been brought in an inconvenient form.  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.

 

Section 10.10.        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 10.11.        Specific Enforcement; Cumulative Remedies .  The parties hereto acknowledge that money damages may not be an adequate remedy for violations of this Agreement and that any party, in addition to any other rights and remedies which the parties may have hereunder or at law or in equity, may, in his or its sole discretion, apply to a court of competent jurisdiction for specific performance or injunction or such other relief as such court

 

52



 

may deem just and proper in order to enforce this Agreement or prevent any violation hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such relief.  All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such rights, powers or remedies by such party.

 

Section 10.12.        Entire Agreement .  This Agreement and any exhibits and other documents referred to herein constitute the entire agreement and understanding among the parties hereto in respect of the subject matter hereof and thereof and supersede all prior and contemporaneous agreements and understandings, both oral and written, among the parties hereto, or between any of them, with respect to the subject matter hereof and thereof.

 

Section 10.13.        Captions .  The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

 

Section 10.14.        Pronouns .  Any masculine personal pronoun shall be considered to mean the corresponding feminine or neuter personal pronoun, and vice versa, as the context requires.

 

Section 10.15.        Severability .  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other 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.  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 so that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

Section 10.16.        Counterparts; Effectiveness .  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement shall become automatically effective upon the execution of this Agreement by the Company and the Members holding at least 51% of the vote represented by the outstanding Units.

 

Section 10.17.        Initial Public Offering .  Notwithstanding anything to the contrary contained herein, (i) the Board of Managers deems it advisable and in the best interests of the Company that the Company be converted into a corporation pursuant to the Plan of Conversion in substantially the same form attached hereto as Exhibit B (the “ Plan ”), the Certificate of Incorporation attached as an exhibit to the Plan and the Certificate of Conversion in substantially the same form attached hereto as Exhibit C (the “ Certificate of Conversion ”) in connection with any Initial Public Offering and in accordance with the Act, and (ii) the Members hereby consent to such conversion of the Company into a corporation in connection with any Initial Public Offering and in accordance with the Act and the Plan and authorize, approve and adopt the Plan, the Certificate of Incorporation attached as an exhibit to the Plan and the Certificate of Conversion.

 

53



 

Notwithstanding anything to the contrary contained herein, in connection with any Initial Public Offering, and upon the request of the Board of Managers, each of the Members hereby agrees that it will, at the expense of the Company, take such action and execute such documents as may reasonably be necessary to effect such Initial Public Offering.  Either in connection with an Initial Public Offering or prior to the expiration of the later of (i) 180 days following the consummation of the Initial Public Offering or (ii) the expiration of any underwriter lock-up period, the Board of Managers will liquidate the Company and distribute to the Members shares of common stock of the corporate successor of the Company which effects the Initial Public Offering; provided that (a) fifty percent (50%) of the shares of common stock held by each Member shall become eligible for sale by such Member on the date that is 180 days following the expiration of any underwriter lock-up period applicable to such Member and the remaining fifty percent (50%) of such Member’s shares shall become eligible for sale by such Member on the date that is 271 days following the expiration of such underwriter lock-up period and (b) the Members have entered into an agreement acceptable to the Company not to sell such shares of common stock except as set forth in clause (a) above or pursuant to the exercise of registration rights (as set forth in Annex A).  The number of shares of common stock of the corporate successor of the Company to be received by each Member shall be determined in accordance with Section 8.03 hereof.  In connection with any such distribution or in the event that the Company is converted into a corporation that effects the Initial Public Offering, the Members shall be entitled to the registration rights set forth on Annex A hereto.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

 

54



 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

 

STR HOLDINGS (NEW) LLC

 

 

 

By:

/s/ Barry A. Morris

 

Name:

Barry A. Morris

 

Title:

Executive Vice President and Chief Financial Officer

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 


 

 

DLJ MERCHANT BANKING PARTNERS IV, L.P.

 

 

 

 

By:

DLJ Merchant Banking IV, L.P., its General Partner

 

 

 

 

By:

DLJ Merchant Banking, Inc., its General Partner

 

 

 

 

By:

/s/ Kenneth Lohsen

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

 

 

 

 

DLJ OFFSHORE PARTNERS IV, L.P.

 

 

 

 

By:

DLJ Merchant Banking IV, L.P., its General Partner

 

 

 

 

By:

DLJ Merchant Banking, Inc., its General Partner

 

 

 

 

By:

/s/ Kenneth Lohsen

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

 

 

 

 

DLJ MERCHANT BANKING PARTNERS IV (PACIFIC), L.P.

 

 

 

 

By:

MBP IV Pacific, LLC, its General Partner

 

 

 

 

By:

DLJ Merchant Banking IV, L.P., its Managing Member

 

 

 

 

By:

DLJ Merchant Banking, Inc., its General Partner

 

 

 

 

By:

/s/ Kenneth Lohsen

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

MBP IV PLAN INVESTORS, L.P.

 

 

 

 

By:

DLJ LBO Plans Management Corporation, its General Partner

 

 

 

 

By:

/s/ Kenneth Lohsen

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

 

By:

DLJ LBO Plans Management Corporation III, its General Partner

 

 

 

 

By:

/s/ Kenneth Lohsen

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

AXA EQUITABLE LIFE INSURANCE COMPANY

 

 

 

 

 

By:

/s/ Basil Livanos

 

Name:

Basil Livanos

 

Title:

Investment Officer

 

 

 

 

CREDIT SUISSE/CFIG STR INVESTORS SPV, LLC

 

 

 

 

By: DLJ MB Advisors, Inc., its Managing Member

 

 

 

 

 

By:

/s/ Kenneth Lohsen

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

 

 

 

 

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

 

 

 

 

 

By:

/s/ Howard Stern

 

Name:

Howard Stern

 

Title:

Authorized Representative

 

 

 

 

PRAIRIE FIRE TRUST

 

 

 

 

 

 

By:

/s/ John W. Blackburn

 

Name:

John W. Blackburn

 

Title:

Authorized Designee

 

 

 

 

MRS TRUST

 

 

 

 

 

 

By:

/s/ John W. Blackburn

 

Name:

John W. Blackburn

 

Title:

Authorized Designee

 

 

 

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

MICHAEL R. STONE 2008 GRAT

 

 

 

 

 

 

By:

/s/ John W. Blackburn

 

Name:

John W. Blackburn

 

Title:

Authorized Designee

 

 

 

 

 

 

 

HARRINGTON SOUND, LLC

 

 

 

 

By:

/s/ Elizabeth Berrett

 

Name:

Elizabeth Berrett

 

Title:

Trustee of HS Trust its Member

 

 

 

 

 

 

 

/s/ Michel R. Stone

 

Michel R. Stone

 

 

 

 

 

/s/ John A. Janitz

 

John A. Janitz

 

 

 

 

 

/s/ Dominick J. Schiano

 

Dominick J. Schiano

 

 

 

 

 

/s/ Paul Vigano

 

Paul Vigano

 

 

 

 

 

/s/ John F. Gual

 

John F. Gual

 

 

 

 

 

/s/ Robert S. Yorgensen

 

Robert S. Yorgensen

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

/s/ Barry A. Morris

 

Barry A. Morris

 

 

 

 

 

/s/ Wei Hung Kwok

 

Wei Hung Kwok

 

 

 

 

 

/s/ Dennis L. Jilot

 

The Dennis L. and Linda L. Jilot Family Trust

 

 

 

 

 

/s/ Dennis L. Jilot

 

Dennis L. Jilot

 

 

 

 

 

/s/ Thomas D. Vitro

 

Thomas D. Vitro

 

 

 

 

 

/s/ Gregory G. Gardner

 

Gregory G. Gardner

 

 

 

 

 

/s/ Richard Ian Saunderson

 

Richard Ian Saunderson

 

 

 

 

 

/s/ Michael Choukas

 

Michael Choukas

 

 

 

 

 

/s/ Varchala Abrol

 

Varchala Abrol

 

 

 

 

 

/s/ Robert J. Cammilleri

 

Robert J. Cammilleri

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

/s/ Russell Childrey

 

Russell Childrey

 

 

 

 

 

/s/ Susan E. DeRagon

 

Susan E. DeRagon

 

 

 

 

 

/s/ Francis J. Donino

 

Francis J. Donino

 

 

 

 

 

/s/ Ann Marie Glica

 

Ann Marie Glica

 

 

 

 

 

/s/ Thomas J. Harney

 

Thomas J. Harney

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

/s/ Chi Kim Kam

 

Chi Kim Kam

 

 

 

 

 

/s/ Edward F. Kozloski

 

Edward F. Kozloski

 

 

 

 

 

/s/ Senon Kruczkowski

 

Senon Kruczkowski

 

 

 

 

 

/s/ Roy C. Lamothe

 

Roy C. Lamothe

 

 

 

 

 

/s/ Carina Maceira

 

Carina Maceira

 

 

 

 

 

/s/ Alyce E. Mayer

 

Alyce E. Mayer

 

 

 

 

 

/s/ Donald O. Montanari

 

Donald O. Montanari

 

 

 

 

 

/s/ Victor Ovadia

 

Victor Ovadia

 

 

 

 

 

/s/ Alex Sanchez

 

Alex Sanchez

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 



 

 

/s/ Ryan T. Tucker

 

Ryan T. Tucker

 

 

 

 

 

/s/ Hans-Hermann Vogel

 

Hans-Hermann Vogel

 

 

 

 

 

/s/ Jack D. Warren

 

Jack D. Warren

 

 

 

 

 

/s/ Lam Sing Yim

 

Lam Sing Yim

 

 

 

 

 

/s/ Kwok Wai Yu

 

Kwok Wai Yu

 

 

 

 

 

/s/ Bernardo Alvarez

 

Bernardo Alvarez

 

 

 

 

 

/s/ David Espina

 

David Espina

 

 

 

 

 

/s/ Eugene Damon

 

Eugene Damon

 

[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LLC AGREEMENT FOR STR HOLDINGS (NEW) LLC]

 


 

SCHEDULE I(1)

 

CAPITAL CONTRIBUTIONS OF EACH MEMBER AND CAPITALIZATION

 

 

 

Capital
Contributions
($)

 

Units

 

% of Class

 

Class A Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DLJ Merchant Banking Partners IV, L.P.

 

51,926,480

 

5,192,648

 

28.71

%

DLJ Offshore Partners IV, L.P.

 

27,178,459

 

2,717,846

 

15.03

%

DLJ Merchant Banking Partners IV (Pacific), L.P.

 

3,993,384

 

399,338

 

2.21

%

MBP IV Plan Investors, L.P.

 

17,098,580

 

1,709,858

 

9.45

%

Dennis L. Jilot

 

0

 

223,464

 

1.24

%

John F. Gual

 

2,650,000

 

265,000

 

1.47

%

Robert S. Yorgensen

 

1,450,180

 

145,018

 

0.80

%

Barry A. Morris

 

52,157

 

5,216

 

0.03

%

Wei Hung Kwok

 

700,000

 

70,000

 

0.39

%

Richard Ian Saunderson

 

500,000

 

50,000

 

0.28

%

Gregory G. Gardner

 

400,000

 

40,000

 

0.22

%

Thomas D. Vitro

 

500,000

 

50,000

 

0.28

%

MRS Trust

 

5,625,000

 

562,500

 

3.11

%

Michael R. Stone GRAT 2008

 

966,970

 

96,697

 

0.53

%

Michael R. Stone

 

908,030

 

90,803

 

0.50

%

Prairie Fire Trust

 

7,500,000

 

750,000

 

4.15

%

Harrington Sound, LLC

 

500,000

 

50,000

 

0.28

%

Paul Vigano

 

200,000

 

20,000

 

0.11

%

Michael A. Choukas

 

1,000,000

 

100,000

 

0.55

%

The Northwestern Mutual Life Insurance Company

 

30,000,000

 

3,000,000

 

16.59

%

Credit Suisse/CFIG STR Investors SPV, LLC

 

10,500,000

 

1,050,000

 

5.80

%

The Dennis L. and Linda L. Jilot Family Trust

 

10,000,000

 

1,000,000

 

5.53

%

AXA Equitable Life Insurance Company

 

5,000,000

 

500,000

 

2.76

%

 

 

 

 

 

 

 

 

Class A Unit Totals

 

$

178,649,240

 

18,088,388

 

100.00

%

 

 

 

 

 

 

 

 

Class B Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert S. Yorgensen

 

NA

 

54,982

 

27.52

%

Barry A. Morris

 

NA

 

144,784

 

72.48

%

 

 

 

 

 

 

 

 

Class B Unit Totals

 

 

 

199,766

 

100.00

%

 


(1) This schedule is as of the moment immediately prior to the conversion of the Company from STR Holdings, LLC to STR Holdings, Inc.

 



 

Class C Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dennis L. Jilot

 

NA

 

296,809

 

26.16

%

John F. Gual

 

NA

 

73,584

 

6.49

%

Robert S. Yorgensen

 

NA

 

284,442

 

25.07

%

Barry A. Morris

 

NA

 

173,139

 

15.26

%

Wei Hung Kwok

 

NA

 

23,334

 

2.06

%

Richard Ian Saunderson

 

NA

 

23,334

 

2.06

%

Gregory G. Gardner

 

NA

 

23,334

 

2.06

%

Tomas D. Vitro

 

NA

 

23,334

 

2.06

%

Michael A. Choukas

 

NA

 

3,704

 

0.33

%

Bernardo Alvarez

 

NA

 

23,334

 

2.06

%

Francis J. Donino

 

NA

 

23,334

 

2.06

%

Zenon Kruczkowski

 

NA

 

23,334

 

2.06

%

Varchala Abrol

 

NA

 

4,083

 

0.36

%

Eugene Damon

 

NA

 

11,666

 

1.03

%

Chi Kin Kam

 

NA

 

11,666

 

1.03

%

Ryan T. Tucker

 

NA

 

11,666

 

1.03

%

Lam Sing Yim

 

NA

 

11,666

 

1.03

%

Kwok Wai Yu

 

NA

 

11,666

 

1.03

%

Robert J. Cammilleri

 

NA

 

4,666

 

0.41

%

Russell Childrey

 

NA

 

4,666

 

0.41

%

Susan E. DeRagon

 

NA

 

4,666

 

0.41

%

David Espina

 

NA

 

4,666

 

0.41

%

Ann Marie Glica

 

NA

 

4,666

 

0.41

%

Thomas J. Harney

 

NA

 

4,666

 

0.41

%

Edward F. Kozloski

 

NA

 

4,666

 

0.41

%

Carina Maceira

 

NA

 

4,666

 

0.41

%

Alyce E. Mayer

 

NA

 

4,666

 

0.41

%

Donald O. Montanari

 

NA

 

4,666

 

0.41

%

Victor Ovadia

 

NA

 

4,666

 

0.41

%

Alejandro Sanchez

 

NA

 

4,666

 

0.41

%

Hans-Hermann Vogel

 

NA

 

4,666

 

0.41

%

Jack D. Warren

 

NA

 

4,666

 

0.41

%

Roy C. Lamothe

 

NA

 

11,666

 

1.03

%

 

 

 

 

 

 

 

 

Class C Unit Totals

 

 

 

1,134,419

 

100.00

%

 

 

 

 

 

 

 

 

Class D Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dennis L. Jilot

 

NA

 

106,003

 

25.99

%

John F. Gual

 

NA

 

30,034

 

7.36

%

Robert S. Yorgensen

 

NA

 

101,586

 

24.91

%

Barry A. Morris

 

NA

 

61,835

 

15.16

%

Wei Hung Kwok

 

NA

 

8,333

 

2.04

%

Richard Ian Saunderson

 

NA

 

8,333

 

2.04

%

Gregory G. Gardner

 

NA

 

8,333

 

2.04

%

Thomas D. Vitro

 

NA

 

8,333

 

2.04

%

Bernardo Alvarez

 

NA

 

8,333

 

2.04

%

Francis J. Donino

 

NA

 

8,333

 

2.04

%

Zenon Kruczkowski

 

NA

 

8,333

 

2.04

%

 



 

Varchala Abrol

 

NA

 

1,667

 

0.41

%

Eugene Damon

 

NA

 

4,167

 

1.02

%

Chi Kin Kam

 

NA

 

4,167

 

1.02

%

Ryan T. Tucker

 

NA

 

4,167

 

1.02

%

Lam Sing Yim

 

NA

 

4,167

 

1.02

%

Kwok Wai Yu

 

NA

 

4,167

 

1.02

%

Robert J. Cammilleri

 

NA

 

1,667

 

0.41

%

Russell Childrey

 

NA

 

1,667

 

0.41

%

Susan E. DeRagon

 

NA

 

1,667

 

0.41

%

David Espina

 

NA

 

1,667

 

0.41

%

Ann Marie Glica

 

NA

 

1,667

 

0.41

%

Thomas J. Harney

 

NA

 

1,667

 

0.41

%

Edward F. Kozloski

 

NA

 

1,667

 

0.41

%

Carina Maceira

 

NA

 

1,667

 

0.41

%

Alyce E. Mayer

 

NA

 

1,667

 

0.41

%

Donald O. Montanari,

 

NA

 

1,667

 

0.41

%

Victor Ovadia

 

NA

 

1,667

 

0.41

%

Alejandro Sanchez

 

NA

 

1,667

 

0.41

%

Hans-Hermann Vogel

 

NA

 

1,667

 

0.41

%

Jack D. Warren

 

NA

 

1,667

 

0.41

%

Roy C. Lamothe

 

NA

 

4,167

 

1.03

%

 

 

 

 

 

 

 

 

Class D Unit Totals

 

 

 

407,796

 

100.00

%

 

 

 

 

 

 

 

 

Class E Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dennis L. Jilot

 

NA

 

106,003

 

25.25

%

John F. Gual

 

NA

 

26,280

 

6.51

%

Robert S. Yorgensen

 

NA

 

101,586

 

25.16

%

Barry A. Morris

 

NA

 

61,835

 

15.31

%

Wei Hung Kwok

 

NA

 

8,333

 

2.06

%

Richard Ian Saunderson

 

NA

 

8,333

 

2.06

%

Gregory G. Gardner

 

NA

 

8,333

 

2.06

%

Thomas D. Vitro

 

NA

 

8,333

 

2.06

%

Bernardo Alvarez

 

NA

 

8,333

 

2.06

%

Francis J. Donino

 

NA

 

8,333

 

2.06

%

Zenon Kruczkowski

 

NA

 

8,333

 

2.06

%

Varchala Abrol

 

NA

 

1,458

 

0.36

%

Eugene Damon

 

NA

 

4,167

 

1.03

%

Chi Kin Kam

 

NA

 

4,167

 

1.03

%

Ryan T. Tucker

 

NA

 

4,167

 

1.03

%

Lam Sing Yim

 

NA

 

4,167

 

1.03

%

Kwok Wai Yu

 

NA

 

4,167

 

1.03

%

Robert J. Cammilleri

 

NA

 

1,667

 

0.41

%

Russell Childrey

 

NA

 

1,667

 

0.41

%

Susan E. DeRagon

 

NA

 

1,667

 

0.41

%

David Espina

 

NA

 

1,667

 

0.41

%

Ann Marie Glica

 

NA

 

1,667

 

0.41

%

Thomas J. Harney

 

NA

 

1,667

 

0.41

%

Edward F. Kozloski

 

NA

 

1,667

 

0.41

%

 



 

Carina Maceira

 

NA

 

1,667

 

0.41

%

Alyce E. Mayer

 

NA

 

1,667

 

0.41

%

Donald O. Montanari

 

NA

 

1,667

 

0.41

%

Victor Ovadia

 

NA

 

1,667

 

0.41

%

Alejandro Sanchez

 

NA

 

1,667

 

0.41

%

Hans-Hermann Vogel

 

NA

 

1,667

 

0.41

%

Jack D. Warren

 

NA

 

1,667

 

0.41

%

Roy C. Lamothe

 

NA

 

4,167

 

1.03

%

 

 

 

 

 

 

 

 

Class E Unit Totals

 

 

 

403,833

 

100.00

%

 

 

 

 

 

 

 

 

Class F Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MRS Trust

 

NA

 

27,781

 

4.72

%

Prairie Fire Trust

 

NA

 

27,781

 

4.72

%

Harrington Sound, LLC

 

NA

 

1,852

 

0.31

%

Paul Vigano

 

NA

 

741

 

0.13

%

Dominick J. Schiano

 

NA

 

265,008

 

45.06

%

John A. Janitz

 

NA

 

265,008

 

45.06

%

 

 

 

 

 

 

 

 

Class F Unit Totals

 

 

 

588,171

 

100.00

%

 

 

 

 

 

 

 

 

Total

 

$

178,649,240

 

20,822,373

 

100.00

%

 


 

SCHEDULE II

 

CONFIDENTIAL

 

Class D Units Equity Value Targets

 

·                   The calculation below shows the equity value targets at which the Class D Units would vest based on 85% of equity value achieved using the Management Case projections

 

Target Equity Value Calculation

 

 

 

Projected

 

 

 

2007

 

2008

 

2009

 

2010

 

2011

 

Adjusted EBITDA

 

$

44.2

 

$

53.0

 

$

66.6

 

$

82.3

 

$

103.5

 

EV / EBITDA Multiple

 

10.0

x

10.0

x

10.0

x

10.0

x

10.0

x

Enterprise Value

 

441.7

 

530.4

 

665.6

 

823.1

 

1,034.5

 

Less: Net Debt on Balance Sheet

 

(254.7

)

(246.7

)

(235.9

)

(225.9

)

(206.4

)

Value of Common Equity

 

187.1

 

283.8

 

429.8

 

597.3

 

828.1

 

Performance Threshold

 

85.0

%

85.0

%

85.0

%

85.0

%

85.0

%

Target Equity Valuation

 

$

159.0

 

$

241.2

 

$

365.3

 

$

507.7

 

$

703.8

 

 

·                   One year catch-up provision – if the performance target is not fully satisfied in any one year, the unvested portion of the units in respect of that year may vest in the next subsequent year if the target equity value is met in the subsequent year, otherwise, the units are lost

 


 

Annex A

 

REGISTRATION RIGHTS

 

For the purposes of this Annex A all references to the “Company” shall refer to any corporate successor to the Company by way of conversion, STR or any of their respective Subsidiaries which effects the Initial Public Offering.

 

Section 1.01.        Demand Registration .  (a)  If the Company shall receive a written request from the DLJMB Members (such requesting person, the “ Requesting Stockholder ”) that the Company effect the registration under the Securities Act of all or any portion of such Requesting Stockholder’s Registrable Securities, and specifying the intended method of disposition thereof, then the Company shall promptly give notice of such requested registration (each such request shall be referred to herein as a “ Demand Registration ”) at least fifteen (15) Business Days prior to the anticipated filing date of the registration statement relating to such Demand Registration to the other Stockholders and thereupon shall use its best efforts to effect, as expeditiously as possible, the registration under the Securities Act of:

 

(i)            all Registrable Securities for which the Requesting Stockholders have requested registration under this Section 1.01 , and

 

(ii)           subject to the restrictions set forth in Sections 1.01(e)  and 1.02, all other Registrable Securities of the same class as those requested to be registered by the Requesting Stockholders that any Stockholders with rights to request registration under Section 1.02 (all such Stockholders, together with the Requesting Stockholders, the “ Registering Stockholders ”) have requested the Company to register by request received by the Company within ten (10) Business Days after such Stockholders receive the Company’s notice of the Demand Registration, all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered; provided that, subject to Section 1.01(d)  hereof, the Company shall not be obligated to effect (x) more than six Demand Registrations, (y) more than one Demand Registration during any four-month period, or (z) any Demand Registration unless the aggregate gross proceeds expected to be received from the sale of the Registrable Securities requested to be included by all Registering Stockholders in such Demand Registration are at least (A) $50 million if such Demand Registration would constitute the Initial Public Offering, or (B) $20 million in any Demand Registration other than the Initial Public Offering.

 

(b)           Promptly after the expiration of the ten (10) Business Day period referred to in Section 1.01(a)(ii)  hereof, the Company will notify all Registering Stockholders of the identities of the other Registering Stockholders and the number of

 



 

shares of Registrable Securities requested to be included therein.  At any time prior to the effective date of the registration statement relating to such registration, the Requesting Stockholders may revoke such request, without liability to any of the other Registering Stockholders, by providing a notice to the Company revoking such request.

 

(c)           The Company shall be liable for and pay all Registration Expenses in connection with each Demand Registration, regardless of whether such Registration is effected.

 

(d)           A Demand Registration shall not be deemed to have occurred:

 

(i)            unless the registration statement relating thereto (A) has become effective under the Securities Act and (B) has remained effective for a period of at least 120 days (or such shorter period in which all Registrable Securities of the Registering Stockholders included in such registration have actually been sold thereunder), provided that such registration statement shall not be considered a Demand Registration if, after such registration statement becomes effective, (1) such registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court and (2) less than 75% of the Registrable Securities included in such registration statement have been sold thereunder; or

 

(ii)           if the Maximum Offering Size (as defined below) is reduced in accordance with Section 1.01(e)  such that less than 50% of the Registrable Securities of the Requesting Stockholders sought to be included in such registration are included.

 

(e)           If a Demand Registration involves a Public Offering and the managing underwriter advises the Company and the Requesting Stockholders that, in its view, the number of Company Securities that the Registering Stockholders and the Company propose to include in such registration exceeds the largest number of shares that can be sold without having an adverse effect on such offering, including the price at which such shares can be sold (the “ Maximum Offering Size ”), the Company shall include in such registration, in the priority listed below, up to the Maximum Offering Size:

 

(i)            first, all Registrable Securities requested to be registered by the Registering Stockholders (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Stockholders on the basis of the relative number of Registrable Securities so requested to be included in such registration by each); and

 

(ii)           second, all Registrable Securities proposed to be registered by the Company.

 



 

Section 1.02.        Piggyback Registration .  (a)  If the Company proposes to register any Company Securities under the Securities Act (whether for itself or in connection with a sale of securities by a Stockholder, but other than a registration on Form S-8 or S-4, or any successor or similar forms, relating to common stock issuable upon exercise of employee stock options or in connection with any employee benefit or similar plan of the Company or in connection with a direct or indirect acquisition by the Company of another Person), the Company shall each such time give prompt written notice at least ten (10) Business Days prior to the anticipated filing date of the registration statement relating to such registration (provided that, solely with respect to the Initial Public Offering, prompt written notice must be given at least ten (10) Business Days following the initial filing date of the registration statement relating to such registration) to each Stockholder (each a “ Piggyback Stockholder ”), which notice shall set forth such Piggyback Stockholder’s rights under this Section 1.02 and shall offer such Piggyback Stockholder the opportunity to include in such registration statement the number of Registrable Securities of the same class or series as those proposed to be registered as each such Piggyback Stockholder may request (a “ Piggyback Registration ”), subject to the provisions of Section 1.02(b)  and the Public Offering Limitations.  Upon the request of any such Piggyback Stockholder made within five (5) Business Days after the receipt of notice from the Company (which request shall specify the number of Registrable Securities intended to be registered by such Piggyback Stockholder), the Company shall use its best efforts to effect the registration under the Securities Act of all Registrable Securities that the Company has been so requested to register by all such Piggyback Stockholders, to the extent requisite to permit the disposition of the Registrable Securities so to be registered, provided that (i) if such registration involves a Public Offering, all such Piggyback Stockholders requesting to be included in the Company’s registration must sell their Registrable Securities to the underwriters selected as provided in Section 1.04(f)(i)  on the same terms and conditions as apply to the Company or any other selling Piggyback Stockholders, and (ii) if, at any time after giving notice of its intention to register any Company Securities pursuant to this Section 1.02(a)  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 such securities, the Company shall give notice to all such Piggyback Stockholders and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration.  No registration effected under this Section 1.02 shall relieve the Company of its obligations to effect a Demand Registration to the extent required by Section 1.01 .  The Company shall be liable for and pay all Registration Expenses in connection with each Piggyback Registration.

 

(b)           If a Piggyback Registration involves a Public Offering (other than any Demand Registration, in which case the provisions with respect to priority of inclusion in such offering set forth in Section 1.01(e)  shall apply) and the managing underwriter advises the Company that, in its view, the number of Company Securities that the Company and such selling Piggyback Stockholders propose to include in such registration exceeds the Maximum Offering Size, the Company shall include in such registration, in the following priority, up to the Maximum Offering Size:

 



 

(i)            with respect to a Public Offering by the Company for its own account:

 

1.             first, such number of Registrable Securities proposed to be registered for the account of the Company, if any, as would not cause the offering to exceed the Maximum Offering Size, and

 

2.             second, all Registrable Securities requested to be included in such registration by any Registering Stockholders (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Stockholders based on their relative number of Registrable Securities requested to be included in the Piggyback Registration, unless the managing underwriter reasonably determines otherwise (which, for the avoidance of doubt, could, in the reasonable determination of the managing underwriter, include the exclusion of all Registrable Securities of the Management Members), in which case the allocation of such Registrable Securities shall be in the manner reasonably determined by the managing underwriter).

 

(ii)           With respect to a Public Offering by the Company for the account of selling stockholders:

 

1.             first, all Registrable Securities requested to be included in such registration by any Registering Stockholders (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Stockholders based on their relative number of Registrable Securities requested to be included in the Piggyback Registration, unless the managing underwriter reasonably determines otherwise (which, for the avoidance of doubt, could, in the reasonable determination of the managing underwriter, include the exclusion of all Registrable Securities of the Management Members), in which case the allocation of such Registrable Securities shall be in the manner reasonably determined by the managing underwriter), and

 

2.             second, all Registrable Securities proposed to be registered for the account of the Company.

 

Section 1.03.        Lock-Up Agreements .  In connection with each underwritten Public Offering, if requested by the managing underwriter, the Company and the Stockholders agree (and the Company agrees, in connection with any underwritten Public Offering, to use its commercially reasonable efforts to cause its Affiliates to agree) not to effect any public sale or private offer or distribution, including any sale pursuant to Rule 144 of any Registrable Securities during the 10 days prior to the

 



 

consummation of such Public Offering and during such time period after the consummation of such Public Offering, not to exceed 90 days (180 days in the case of the Initial Public Offering); provided , however , that no Other Member will be required to agree to any restrictions that are more restrictive than those applicable to any DLJMB Member; provided further , however, that the restrictions described in this Section 1.03 shall not apply to (i) any Company Securities or other securities of the Company acquired in the Initial Public Offering, in any Public Offering or in any open market transaction following the Initial Public Offering and (ii) any Other Member that ceases to have Piggyback Registration Rights.

 

Section 1.04.        Registration Procedures .  Whenever any Stockholders request that any Registrable Securities be registered pursuant to Section 1.01 or 1.02 hereof, subject to the provisions of such Sections, the Company shall use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as practicable, and, in connection with any such request:

 

(a)           The Company shall as expeditiously as possible prepare and file with the SEC a registration statement on any form for which the Company then qualifies or that counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its best efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days, or in the case of a shelf registration statement, one (1) year (or such shorter period in which all of the Registrable Securities of the Registering Stockholders included in such registration statement shall have actually been sold thereunder).

 

(b)           Prior to filing a registration statement or prospectus or any amendment or supplement thereto, the Company shall, if requested, furnish to each participating Stockholder and each underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter the Company shall furnish to such Stockholder and underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act and such other documents as such Stockholder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Stockholder.

 

(c)           After the filing of the registration statement, the Company shall (i) cause the related prospectus to be supplemented by any required prospectus supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act, (ii) comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement during the applicable period in accordance with the intended methods of disposition by the

 



 

Registering Stockholders thereof set forth in such registration statement or supplement to such prospectus and (iii) promptly notify each Registering Stockholder holding Registrable Securities covered by such registration statement of any stop order issued or threatened by the SEC or any state securities commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

 

(d)           The Company shall use its best efforts to (i) register or qualify the Registrable Securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions in the United States as any Registering Stockholder holding such Registrable Securities reasonably (in light of such Stockholder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Stockholder to consummate the disposition of the Registrable Securities owned by such Stockholder; provided that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 1.04(d) , (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction.

 

(e)           The Company shall immediately notify each Registering Stockholder holding such Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly prepare and make available to each such Stockholder and file with the SEC any such supplement or amendment.

 

(f)            (i) The DLJMB Members shall have the right, in their sole discretion, to select the underwriter or underwriters in connection with any Public Offering resulting from a Demand Registration, which underwriter or underwriters may include any Affiliate of any DLJMB Member, and (ii) the Company shall select an underwriter or underwriters in connection with any other Public Offering.  In connection with any Public Offering, the Company shall enter into customary agreements (including an underwriting agreement in customary form) and take all such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities in any such Public Offering, including the engagement of a “qualified independent underwriter” in connection with the qualification of the underwriting arrangements with the FINRA.

 

(g)           Upon execution of confidentiality agreements in form and substance reasonably satisfactory to the Company, the Company shall make available for inspection by any Registering Stockholder and any underwriter participating in any disposition pursuant to a registration statement being filed by the Company pursuant to

 



 

this Section 1.04 and any attorney, accountant or other professional retained by any such Stockholder or underwriter (collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “ Records ”) as shall be reasonably necessary or desirable to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement.  Records that the Company determines, in good faith, to be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction.  Each Registering Stockholder agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it or its Affiliates as the basis for any market transactions in the Company Securities unless and until such information is made generally available to the public.  Each Registering Stockholder further agrees that, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, it shall give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

 

(h)           The Company shall furnish to each Registering Stockholder and to each such underwriter, if any, a signed counterpart, addressed to such Stockholder or underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the Company’s independent public accountants, each in customary form and covering such matters of the kind customarily covered by opinions or comfort letters, as the case may be, as a majority of such Stockholders or the managing underwriter therefor reasonably requests.

 

(i)            The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earning statement or such other document that shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

(j)            The Company may require each such Registering Stockholder promptly to furnish in writing to the Company such information regarding the distribution of the Registrable Securities as the Company may from time to time request and such other information as may be legally required in connection with such registration.

 

(k)           Each such Registering Stockholder agrees that, upon receipt of any written notice from the Company of the occurrence of any event requiring the preparation of a supplement or amendment of a prospectus relating to the Registrable Securities covered by a registration statement that is required to be delivered under the Securities Act so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or to make the statements therein not

 



 

misleading, such Stockholder shall forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Stockholder’s receipt of the copies of a supplemented or amended prospectus, and, if so directed by the Company, such Stockholder shall deliver to the Company all copies, other than any permanent file copies then in such Stockholder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.  If the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 1.04(a)  hereof) by the number of days during the period from and including the date of the giving of notice pursuant to Section 1.04(e)  hereof to the date when the Company shall make available to such Stockholder a prospectus supplemented or amended to conform with the requirements of Section 1.04(e)  hereof.

 

(l)            The Company shall use its reasonable efforts to list all Registrable Securities covered by such registration statement on any securities exchange or quotation system on which any of the Registrable Securities are then listed or traded and to maintain such listing so long as any such Registrable Securities remain outstanding.

 

(m)          The Company shall have appropriate officers of the Company (i) prepare and make presentations at any “road shows” and before analysts and rating agencies, as the case may be, (ii) take other actions to obtain ratings for any Registrable Securities and (iii) otherwise use their reasonable efforts to cooperate as requested by the underwriters in the offering, marketing or selling of the Registrable Securities.

 

Section 1.05.        Indemnification by the Company .  The Company agrees to indemnify and hold harmless each Registering Stockholder holding Registrable Securities covered by a registration statement, its officers, directors, employees, managers, members, partners and agents, and each Person, if any, who controls any such Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses) (“ Damages ”) caused by or relating to any untrue statement or alleged untrue statement of a material fact contained in any registration statement, prospectus or free writing prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by or relating to any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Damages are caused by or related to any such untrue statement or omission or alleged untrue statement or omission so made based upon information furnished in writing to the Company by such Stockholder or on such Stockholder’s behalf expressly for use therein, provided that, with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus, or in any prospectus, as the case may be, the indemnity agreement contained in this paragraph shall not apply to the extent that any Damages result from the fact that a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) was not sent or given to the Person

 



 

asserting any such Damages at or prior to the written confirmation of the sale of the Registrable Securities concerned to such Person if it is determined that the Company has provided such prospectus to such Stockholder and it was the responsibility of such Stockholder to provide such Person with a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) and such current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) would have cured the defect giving rise to such Damages.  The Company also agrees to indemnify any underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Stockholders provided in this Section 1.05 .

 

Section 1.06.        Indemnification by the Participating Stockholders .  Each Registering Stockholder holding Registrable Securities included in any registration statement agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Stockholder, but only (i) with respect to information furnished in writing to the Company by such Stockholder or on such Stockholder’s behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus or (ii) to the extent that any Damages result from the fact that a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) was not sent or given to the Person asserting any such Damages at or prior to the written confirmation of the sale of the Registrable Securities concerned to such Person if it is determined that it was the responsibility of such Stockholder to provide such Person with a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) and such current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) was available to such Stockholder and would have cured the defect giving rise to such Damages.  Each such Stockholder also agrees to indemnify and hold harmless underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in this Section 1.06 .  As a condition to including Registrable Securities in any registration statement filed in accordance with Article 5 hereof, the Company may require that it shall have received an undertaking reasonably satisfactory to it from any underwriter to indemnify and hold it harmless to the extent customarily provided by underwriters with respect to similar securities.  No Registering Stockholder shall be liable under this Section 1.06 for any Damages in excess of the net proceeds realized by such Stockholder in the sale of Registrable Securities of such Stockholder to which such Damages relate.

 

Section 1.07.        Conduct of Indemnification Proceedings .  If any proceeding (including any governmental investigation) shall be instituted involving any

 



 

Person in respect of which indemnity may be sought pursuant to this Article 5, such Person (an “ Indemnified Party ”) shall promptly notify the Person against whom such indemnity may be sought (the “ Indemnifying Party ”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses, provided that the failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure to notify.  In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the reasonable judgment of such Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  It is understood that, in connection with any proceeding or related proceedings in the same jurisdiction, the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred.  In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties.  The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any Damages (to the extent stated above) by reason of such settlement or judgment.  Without the prior written consent of the Indemnified Party, no Indemnifying Party shall effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding.

 

Section 1.08.        Contribution .  If the indemnification provided for in this Article 5 is unavailable to the Indemnified Parties in respect of any Damages, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages (i) as between the Company and the Registering Stockholders holding Registrable Securities covered by a registration statement on the one hand and the underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and such Stockholders on the one hand and the underwriters on the other, from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and such Stockholders on the one hand and of such underwriters on the other in connection with the statements or omissions that resulted in such Damages, as well as any other relevant equitable considerations and (ii) as between the Company on the one hand and each such Stockholder on the other, in

 


 

such proportion as is appropriate to reflect the relative fault of the Company and of each such Stockholder in connection with such statements or omissions, as well as any other relevant equitable considerations.  The relative benefits received by the Company and such Stockholders on the one hand and such underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and such Stockholders bear to the total underwriting discounts and commissions received by such underwriters, in each case as set forth in the table on the cover page of the prospectus.  The relative fault of the Company and such Stockholders on the one hand and of such underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and such Stockholders or by such underwriters.  The relative fault of the Company on the one hand and of each such Stockholder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

The Company and the Registering Stockholders agree that it would not be just and equitable if contribution pursuant to this Section 1.08 were determined by pro rata allocation (even if the underwriters were treated as one Member for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph.  The amount paid or payable by an Indemnified Party as a result of the Damages referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 1.08 , no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any Damages that such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Registering Stockholder shall be required to contribute any amount in excess of the amount by which the net proceeds realized by such Stockholder in the sale of Registrable Securities of such Stockholder to which such Damages relate exceeds the amount of any Damages that such Stockholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  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.  Each Registering Stockholder’s obligation to contribute pursuant to this Section 1.08 is several in the proportion that the proceeds of the offering received by such Stockholder bears to the total proceeds of the offering received by all such Registering Stockholders and not joint.

 



 

Section 1.09.        Participation in Public Offering .  No Stockholder will be permitted to require registration of any Registrable Securities in any Public Offering hereunder unless such Stockholder (a) agrees to sell such Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and the provisions of this Agreement in respect of registration rights.

 

Section 1.10.        Other Indemnification .  Indemnification similar to that specified herein (with appropriate modifications) shall be given by the Company and each Stockholder participating therein with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act.

 

Section 1.11.        Cooperation by the Company .  If any Stockholder shall transfer any Registrable Securities pursuant to Rule 144, the Company shall cooperate, to the extent commercially reasonable, with such Stockholder and shall provide to such Stockholder such information as such Stockholder shall reasonably request.

 

Section 1.12.        No Transfer of Registration Rights .  None of the rights of Stockholders under this Article 5 shall be assignable by any Stockholder to any Person acquiring Securities in any Public Offering or pursuant to Rule 144 but are assignable to other Persons to whom Company Securities are Transferred in compliance with this Agreement.

 

Section 1.13.        Restriction on Company Grants of Subsequent Registration Rights .  The Company agrees that, without the prior written consent of the DLJMB Members, it shall not enter into any agreement with the holder or prospective holder of any securities of the Company that would allow such holder or prospective holder any registration rights.

 

Section 1.14.        Definitions .

 

(a)           Capitalized terms used in this Annex A and not otherwise defined herein shall have the meanings assigned to them in the Limited Liability Company Agreement of STR Holdings (New) LLC.

 

(b)           The following terms, as used herein, have the following meanings:

 

(i)            “ Company Securities ” means (i) the common stock of the Company, (ii) any other stock issued by the Company and (iii) any securities convertible into or exchangeable for, or options, warrants or other rights to acquire, common stock or any other stock issued by the Company.

 



 

(ii)           “ Public Offering ” means an underwritten public offering of Company Securities pursuant to an effective registration statement under the Securities Act, other than pursuant to a registration statement on Form S-4 or Form S-8 or any similar or successor form.

 

(iii)          “ Public Offering Limitations ” means (i) no Other Member shall be permitted to exercise its rights to require registration of any Company Securities in a Piggyback Registration under Section 1.02 hereof with respect to the Initial Public Offering unless the DLJMB Members are registering their Registrable Securities in the Initial Public Offering and (ii) in each Public Offering, including, without limitation, the Initial Public Offering pursuant to clause (i) above, such Other Member shall be entitled to Transfer a number of the class of Company Securities to be Transferred in the Offering not exceeding (A) the number of Registrable Securities held by such Other Member at such time multiplied by (B) a fraction the numerator of which is the number of Registrable Securities to be registered by the DLJMB Members in any registration pursuant to Section 1.02 and the denominator of which is the total number of Registrable Securities held by the DLJMB Members immediately prior to any such registration.

 

(iv)          “ Registration Expenses ” means any and all expenses incident to the performance of or compliance with any registration or marketing of securities, including all (i) registration and filing fees, and all other fees and expenses payable in connection with the listing of securities on any securities exchange or automated interdealer quotation system, (ii) fees and expenses of compliance with any securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with “blue sky” qualifications of the securities registered), (iii) expenses in connection with the preparation, printing, mailing and delivery of any registration statements, prospectuses and other documents in connection therewith and any amendments or supplements thereto, (iv) security engraving and printing expenses, (v) internal expenses of the Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (vi) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses relating to any comfort letters or costs associated with the delivery by independent certified public accountants of any comfort letters), (vii) reasonable fees and expenses of any special experts retained by the Company in connection with such registration, (viii) reasonable fees and out-of-pocket expenses of counsel to the Stockholders participating in the offering selected (A) by the DLJMB Members, in the case of any offering in which any DLJMB Members participate, or (B) in any other case, by the Stockholders holding the

 



 

majority of the Registrable Securities to be sold for the account of all Stockholders in the offering, (ix) fees and expenses in connection with any review by the FINRA of the underwriting arrangements or other terms of the offering, and all fees and expenses of any “qualified independent underwriter,” including the fees and expenses of any counsel thereto, (x) fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding any underwriting fees, discounts and commissions attributable to the sale of Registrable Securities, (xi) costs of printing and producing any agreements among underwriters, underwriting agreements, any “blue sky” or legal investment memoranda and any selling agreements and other documents in connection with the offering, sale or delivery of the Registrable Securities, (xii) transfer agents’ and registrars’ fees and expenses and the fees and expense of any other agent or trustee appointed in connection with such offering, (xiii) expenses relating to any analyst or investor presentations or any “road shows” undertaken in connection with the registration, marketing or selling of the Registrable Securities and (xiv) fees and expenses payable in connection with any ratings of the Registrable Securities, including expenses relating to any presentations to rating agencies.

 

(v)           “ Stockholder ” means each Person (other than the Company) who, at any relevant determination date, shall be a party to or bound by the Limited Liability Company Agreement of STR Holdings (New) LLC (as may be amended from time to time) for so long as such Person shall “beneficially own” (as such term is defined in Rule 13d-3 of the Exchange Act) any Company Securities.

 



 

Exhibit A

 

JOINDER AGREEMENT

 

This Joinder Agreement (this “ Joinder Agreement ”) is made as of [                ] [    ], 200[_] by the undersigned (the “ Permitted Transferee ”) in accordance with the Second Amended and Restated Limited Liability Company Agreement dated as of [                ] [    ], 2009 (as the same may be amended from time to time, the “ LLC Agreement ”) of STR Holdings (New) LLC, a Delaware limited liability company.  Capitalized terms used, but not defined, herein shall have the meaning ascribed to such terms in the LLC Agreement.

 

The Permitted Transferee hereby acknowledges, agrees and confirms that, by its execution of this Joinder Agreement, the Permitted Transferee shall be deemed to be a party to and a [                ] Member under the LLC Agreement as of the date hereof and shall have all of the rights and obligations of a [                ] Member hereafter as if it had executed the LLC Agreement.  The Permitted Transferee hereby agrees, as of the date hereof, to be bound by all of the terms, provisions and conditions contained in the LLC Agreement applicable to it in accordance with the foregoing.

 

The Permitted Transferee hereby makes the representations and warranties that are set forth in Article 9 of the LLC Agreement.

 

IN WITNESS WHEREOF, the undersigned has executed this Joinder Agreement as of the date written below.

 

 

 

[ PERMITTED TRANSFEREE ]

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 



 

AGREED AS OF THE            day of [              ], 200[    ]

 

 

STR HOLDINGS (NEW) LLC

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

[SIGNATURE PAGE TO JOINDER AGreeMenT]

 



 

Exhibit B

 

Plan of Conversion

 



 

PLAN OF CONVERSION

 

This PLAN OF CONVERSION (this “Plan”) is entered into as of this      day of             , 2009 by STR Holdings (New) LLC, a Delaware limited liability company (the “Constituent Entity”).

 

RECITALS

 

WHEREAS , the Constituent Entity is duly formed and existing under the laws of the State of Delaware, with its Certificate of Formation being filed in the office of the Secretary of State of Delaware on September 30, 2009;

 

WHEREAS , the Constituent Entity desires to convert from a Delaware limited liability company to a Delaware corporation, pursuant to Section 265 of the Delaware General Corporation Law (“DGCL”) and Section 18-216 of the Delaware Limited Liability Company Act; and

 

WHEREAS , for federal income tax purposes, it is intended that the Conversion (as defined below) shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, and that this Plan constitutes a plan of reorganization.

 

NOW, THEREFORE , in consideration of the several and mutual promises, agreements, covenants, understandings, undertakings, representations and warranties hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Constituent Entity agrees that the recitals are true and correct and by this reference incorporated herein as if fully set forth and further covenant and agree as follows:

 

1.             Name of Constituent Entity .  The name of the Constituent Entity is STR Holdings (New) LLC.

 

2.             Name of Resulting Entity .  The name of the resulting entity is STR Holdings, Inc., a Delaware corporation (the “Resulting Entity”).

 

3.             Jurisdiction and Form of Constituent Entity .  The Constituent Entity was a limited liability company under the laws of the State of Delaware and it is subject to the laws thereof.

 

4.             Jurisdiction and Form of Resulting Entity .  The Resulting Entity will be incorporated as a corporation under the laws of the State of Delaware and it will be subject to the laws thereof.

 

5.             Conversion .  At the Effective Date (as defined below), the Constituent Entity shall be converted into the Resulting Entity and shall continue its existence in the form of a Delaware corporation (the “Conversion”).

 

6.             Effective Date .  Pursuant to Section 265 of the DGCL, the Constituent Entity designates the date of the filing of the certificate of conversion with the Secretary of State of the State of Delaware as the effective date of the Conversion (the “Effective Date”).

 



 

7.             Organizational Documents of Resulting Entity .  The Certificate of Incorporation of the Resulting Entity shall be in the form attached hereto as Exhibit A .

 

8.             Effect of Conversion .  At the Effective Date:

 

(a)           the Constituent Entity shall be converted into the Resulting Entity;

 

(b)           the Resulting Entity shall be subject to the jurisdiction of the State of Delaware and be governed by the laws thereof;

 

(c)           the Resulting Entity shall be a continuation of the existence of the Constituent Entity;

 

(d)           the title to all real estate and other property owned by the Constituent Entity shall be vested in the Resulting Entity without reversion or impairment;

 

(e)           the Resulting Entity shall have all the liabilities of the Constituent Entity;

 

(f)            all proceedings pending against the Constituent Entity may be continued as if the Conversion had not occurred or the Resulting Entity may be substituted in the proceeding for the Constituent Entity;

 

(g)           the units of the Constituent Entity shall be automatically converted into shares of stock as set forth herein; and

 

(h)           the Conversion shall not be deemed a dissolution of the Constituent Entity.

 

9.             Conversion of Units of the Constituent Entity into Shares of Stock of the Resulting Entity .  Upon the Effective Date, by virtue of the Conversion, without any action on the part of the members thereof, the issued and outstanding units of the Constituent Entity shall be immediately canceled and converted into shares of common stock of the Resulting Entity, some of which will be subject to the terms and conditions of restricted common stock agreements, issued to the individuals in the amounts opposite their names on Exhibit B attached hereto.

 

10.           Termination or Abandonment .  This Plan may be terminated and/or the Conversion abandoned at any time prior to the Effective Date by the action of the board of managers of the Constituent Entity.  In the event of termination of this Plan and/or abandonment of the Conversion, this Plan shall become void and of no further force and effect without liability on the part of any party hereto or their respective officers and agents.

 

[Signature Page Follows.]

 

2



 

IN WITNESS WHEREOF , the Constituent Entity has caused this Plan to be executed as of the day and year first written above.

 

 

CONSTITUENT ENTITY:

 

STR HOLDINGS (NEW) LLC

 

 

 

By:

 

 

Name:

Barry A. Morris

 

Title:

Executive Vice President and Chief Financial Officer

 

[SIGNATURE PAGE TO PLAN OF CONVERSION]

 



 

 

 

Exhibit C

 

Certificate of Conversion

 



 

CERTIFICATE OF CONVERSION TO CORPORATION
OF
STR HOLDINGS (NEW) LLC
TO
STR HOLDINGS, INC.

 

This Certificate of Conversion to Corporation, dated as of                                 , 2009 is being duly executed and filed by STR Holdings (New) LLC, a Delaware limited liability company (the “LLC”), to convert the LLC to STR Holdings, Inc., a Delaware corporation (the “Corporation”), under Section 265 of the Delaware General Corporation Law and Section 18-216 of the Delaware Limited Liability Company Act.

 

FIRST:                    The LLC was first formed as a Delaware limited liability Company on September 30, 2009.

 

SECOND:               The LLC’s name immediately prior to the filing of this Certificate of Conversion to Corporation is STR Holdings (New) LLC.

 

THIRD:                  The name of the Corporation as set forth in its Certificate of Incorporation is STR Holdings, Inc.

 

FOURTH:              The conversion of the LLC to the Corporation shall be effective upon the filing of this Certificate of Conversion to Corporation and the Certificate of Incorporation of the Corporation with the Secretary of State of the State of Delaware.

 

FIFTH:                   The LLC is a limited liability company formed under the laws of the State of Delaware.

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Conversion to Corporation as of the date first written above.

 

 

STR HOLDINGS (NEW) LLC

 

 

 

 

 

By:

 

 

 

Name:

Barry A. Morris

 

 

Title:

Executive Vice President and Chief Financial Officer

 




Exhibit 2.3

 

PLAN OF CONVERSION

 

This PLAN OF CONVERSION (this “Plan”) is entered into as of this 6th day of November, 2009 by STR Holdings (New) LLC, a Delaware limited liability company (the “Constituent Entity”).

 

RECITALS

 

WHEREAS , the Constituent Entity is duly formed and existing under the laws of the State of Delaware, with its Certificate of Formation being filed in the office of the Secretary of State of Delaware on September 30, 2009;

 

WHEREAS , the Constituent Entity desires to convert from a Delaware limited liability company to a Delaware corporation, pursuant to Section 265 of the Delaware General Corporation Law (“DGCL”) and Section 18-216 of the Delaware Limited Liability Company Act; and

 

WHEREAS , for federal income tax purposes, it is intended that the Conversion (as defined below) shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, and that this Plan constitutes a plan of reorganization.

 

NOW, THEREFORE , in consideration of the several and mutual promises, agreements, covenants, understandings, undertakings, representations and warranties hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Constituent Entity agrees that the recitals are true and correct and by this reference incorporated herein as if fully set forth and further covenant and agree as follows:

 

1.             Name of Constituent Entity .  The name of the Constituent Entity is STR Holdings (New) LLC.

 

2.             Name of Resulting Entity .  The name of the resulting entity is STR Holdings, Inc., a Delaware corporation (the “Resulting Entity”).

 

3.             Jurisdiction and Form of Constituent Entity .  The Constituent Entity was a limited liability company under the laws of the State of Delaware and it is subject to the laws thereof.

 

4.             Jurisdiction and Form of Resulting Entity .  The Resulting Entity will be incorporated as a corporation under the laws of the State of Delaware and it will be subject to the laws thereof.

 

5.             Conversion .  At the Effective Date (as defined below), the Constituent Entity shall be converted into the Resulting Entity and shall continue its existence in the form of a Delaware corporation (the “Conversion”).

 

6.             Effective Date .  Pursuant to Section 265 of the DGCL, the Constituent Entity designates the date of the filing of the certificate of conversion with the Secretary of State of the State of Delaware as the effective date of the Conversion (the “Effective Date”).

 



 

7.             Organizational Documents of Resulting Entity .  The Certificate of Incorporation of the Resulting Entity shall be in the form attached hereto as Exhibit A .

 

8.             Effect of Conversion .  At the Effective Date:

 

(a)                                   the Constituent Entity shall be converted into the Resulting Entity;

 

(b)                                  the Resulting Entity shall be subject to the jurisdiction of the State of Delaware and be governed by the laws thereof;

 

(c)                                   the Resulting Entity shall be a continuation of the existence of the Constituent Entity;

 

(d)                                  the title to all real estate and other property owned by the Constituent Entity shall be vested in the Resulting Entity without reversion or impairment;

 

(e)                                   the Resulting Entity shall have all the liabilities of the Constituent Entity;

 

(f)                                     all proceedings pending against the Constituent Entity may be continued as if the Conversion had not occurred or the Resulting Entity may be substituted in the proceeding for the Constituent Entity;

 

(g)                                  the units of the Constituent Entity shall be automatically converted into shares of stock as set forth herein; and

 

(h)                                  the Conversion shall not be deemed a dissolution of the Constituent Entity.

 

9.             Conversion of Units of the Constituent Entity into Shares of Stock of the Resulting Entity .  Upon the Effective Date, by virtue of the Conversion, without any action on the part of the members thereof, the issued and outstanding units of the Constituent Entity shall be immediately canceled and converted into shares of common stock of the Resulting Entity, some of which will be subject to the terms and conditions of restricted common stock agreements, issued to the individuals in the amounts opposite their names on Exhibit B attached hereto.

 

10.           Termination or Abandonment .  This Plan may be terminated and/or the Conversion abandoned at any time prior to the Effective Date by the action of the board of managers of the Constituent Entity.  In the event of termination of this Plan and/or abandonment of the Conversion, this Plan shall become void and of no further force and effect without liability on the part of any party hereto or their respective officers and agents.

 

[Signature Page Follows.]

 

2



 

IN WITNESS WHEREOF , the Constituent Entity has caused this Plan to be executed as of the day and year first written above.

 

 

CONSTITUENT ENTITY:

 

STR HOLDINGS (NEW) LLC

 

 

 

By:

/s/ Barry A. Morris

 

Name:

Barry A. Morris

 

Title:

Executive Vice President and Chief

 

 

Financial Officer

 

[SIGNATURE PAGE TO PLAN OF CONVERSION]

 



 

EXHIBIT A

 

CERTIFICATE OF INCORPORATION

 


 

CERTIFICATE OF INCORPORATION OF

 

STR HOLDINGS, INC.

 

FIRST:  The name of the Corporation is: STR Holdings, Inc.

 

SECOND:  The address of the registered office of the Corporation in the State of Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, County of New Castle, State of Delaware, 19808. The name of the registered agent of the Corporation in the State of Delaware at such address is Corporation Service Company.

 

THIRD:  The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, as from time to time amended (the “DGCL”).

 

FOURTH:  (a)  The total number of shares of all classes of stock which the Corporation shall have authority to issue is Two Hundred Twenty Million (220,000,000) shares, consisting of (a) Two Hundred Million (200,000,000) shares of Common Stock, par value $0.01 per share (“Common Stock”) and (b) Twenty Million (20,000,000) shares of one or more series of Preferred Stock, par value $0.01 per share (“Preferred Stock”).

 

(b)  Except as otherwise provided by law, the shares of stock of the Corporation, regardless of class, may be issued by the Corporation from time to time in such amounts, for such consideration and for such corporate purposes as the Board of Directors of the Corporation (the “Board of Directors”) may from time to time determine.

 

(c)  Shares of Preferred Stock may be issued from time to time in one or more series of any number of shares as may be determined from time to time by the Board of Directors, provided that the aggregate number of shares issued and not cancelled of any and all such series shall not exceed the total number of shares of Preferred Stock authorized by this Certificate of Incorporation.  Each series of Preferred Stock shall be distinctly designated.  The voting powers, if any, of each such series and the preferences and relative, participating, optional and other special rights of each such series and the qualifications, limitations and restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and the Board of Directors is hereby expressly granted authority to fix, in the resolution or resolutions providing for the issue of a particular series of Preferred Stock, the voting powers, if any, of each such series and the designations, preferences and relative, participating, optional and other special rights of each such series and the qualifications, limitations and restrictions thereof to the full extent now or hereafter permitted by this Certificate of Incorporation and the laws of the State of Delaware.  Shares of Preferred Stock, regardless of series, that are converted into other securities or other consideration or otherwise acquired by the Corporation shall be retired and cancelled, and the Corporation shall take all such actions

 



 

as are necessary to cause such shares to have the status of authorized but unissued shares of Preferred Stock, without designation as to series, and the Company shall have the right to reissue such shares.

 

(d)  Subject to the provisions of applicable law or of the Bylaws of the Corporation with respect to the closing of the transfer books or the fixing of a record date for the determination of stockholders entitled to vote, and except as otherwise provided by law or by the resolution or resolutions providing for the issue of any series of Preferred Stock, the holders of outstanding shares of Common Stock shall exclusively possess the voting power for the election of directors and for all other purposes, each holder of record of shares of Common Stock being entitled to one vote for each share of Common Stock standing in such holder’s name on the books of the Corporation.  Shares of capital stock of the Corporation shall not be entitled to cumulative voting.

 

(e)  Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the Bylaws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed from office for cause or without cause by the affirmative vote of the holders of outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast a meeting of the stockholders called for that purpose, the notice for which states that the purpose or one of the purposes of the meeting is the removal of such director, and constituting at least a majority of such shares entitled to vote if such removal is for cause, or at least 75% of such shares entitled to vote if such removal is without cause.  Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of paragraph (e) of this Article shall not apply with respect to the director or directors elected by such holders of Preferred Stock.  For purposes of this Article Fourth, “cause” shall mean, with respect to any director, (i) the willful failure by such director to perform, or the gross negligence of such director in performing, the duties of a director, (ii) the engaging by such director in willful or serious misconduct that is injurious to the Corporation or (iii) the conviction of such director of, or the entering by such director of a plea of nolo contendere to, a crime that constitutes a felony.

 

FIFTH:  In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in this Certificate of Incorporation, Bylaws of the Corporation may be adopted, amended or repealed by a majority of the Board of Directors of the Corporation, but any Bylaws adopted by the Board of Directors may be amended or repealed by the stockholders entitled to vote thereon.  Election of directors need not be conducted by written ballot.

 

SIXTH:  (a)  The number of directors of the Corporation shall be fixed from time to time exclusively by the Board of Directors pursuant to resolution adopted by

 



 

a majority of the directors then in office; provided, however, that the number of directors shall not be less than three (3) nor more than fifteen (15).

 

(b)  Any vacancies in the Board of Directors for any reason, and any directorships resulting from any increase in the number of directors, may be filled only by the Board of Directors (and not by the stockholders), acting by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director.  Any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and shall qualify.  No decrease in the number of directors shall shorten the term of any incumbent director.

 

(c)  Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors at an annual or special meeting of stockholders, the election, terms of office, filling of vacancies, removal of directors and other features of the directorships shall be governed by the terms of this Certificate of Incorporation or in any resolution or resolutions adopted by the Board of Directors providing for the issuance of any class or series of Preferred Stock.

 

(d)  Advance notice of nominations for the election of directors, other than by the Board of Directors or a duly authorized committee thereof or any authorized officer of the Corporation to whom the Board of Directors or such committee shall have delegated such authority, and information concerning nominees, shall be given in the manner provided in the Bylaws of the Corporation.

 

SEVENTH:  A director of the Corporation shall not be personally liable either to the Corporation or to any stockholder for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions which are not in good faith or which involve intentional misconduct or knowing violation of law, (iii) for any matter in respect of which such director shall be liable under Section 174 of the DGCL or any amendment thereto or successor provision thereto, or (iv) for any transaction from which the director shall have derived an improper personal benefit.  Neither amendment nor repeal of this Article SEVENTH nor the adoption of any provision of the Certificate of Incorporation of the Corporation inconsistent with this Article SEVENTH shall eliminate or reduce the effect of this paragraph in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article SEVENTH, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.  If the DGCL is amended to eliminate or further limit the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the DGCL.

 

EIGHTH.  Any action required or permitted to be taken by the stockholders of the Corporation may only be effected at a duly called annual or special meeting of the stockholders of the Corporation, and may not be effected by the

 



 

stockholders in writing in lieu of such a meeting, unless such action by written consent of stockholders is unanimously recommended by the directors of the Corporation then in office.

 

NINTH.  The Corporation shall not be governed by Section 203 of the DGCL (“Section 203”), and the restrictions contained in Section 203 shall not apply to the Corporation.

 

TENTH.  To the fullest extent permitted by Section 122(17) of the DGCL and except as may be otherwise expressly agreed in writing by the Corporation and DLJ Merchant Banking Partners IV, L.P. and its affiliates (collectively, “DLJMB”), the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, business opportunities, which are from time to time presented to DLJMB or any of its officers, directors, agents, stockholders, members, partners, affiliates and subsidiaries (other than the Corporation and its subsidiaries), even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and no such person shall be liable to the Corporation or any of its subsidiaries for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries unless, in the case of any such person who is a director or officer of the Corporation, such business opportunity is expressly offered to such director or officer in writing solely in his or her capacity as a director or officer of the Corporation.  Any person purchasing or otherwise acquiring any interest in any shares of stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article TENTH.  Neither the alteration, amendment or repeal of this Article TENTH, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article TENTH, shall eliminate or reduce the effect of this Article TENTH in respect of any business opportunity first identified or any other matter occurring, or any cause of action, suit or claim that, but for this Article TENTH, would accrue or arise, prior to such alteration, amendment, repeal or adoption.

 

ELEVENTH.  The name and mailing address of the Sole Incorporator of the Corporation is as follows:

 

Barry A. Morris

10 Water Street

Enfield, CT 06082

 

IN WITNESS WHEREOF, I, the undersigned, being the Sole Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the Delaware General Corporation Law, do make this Certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this      day of       , 2009.

 



 

EXHIBIT B

 

Name of Stockholder

 

Number of
Unrestricted Shares
of Common Stock

 

Number of
Restricted Shares
of Common
Stock

 

DLJ Merchant Banking Partners IV, L.P.

 

10,262,778

 

 

DLJ Offshore Partners IV, L.P.

 

5,371,566

 

 

DLJ Merchant Banking Partners IV (Pacific), L.P.

 

789,254

 

 

MBP IV Plan Investors, L.P.

 

3,379,373

 

 

Dennis L. Jilot

 

220,809

 

614,155

 

The Dennis L. and Linda L. Jilot Family Trust

 

1,976,405

 

 

John F. Gual

 

624,921

 

 

Robert S. Yorgensen

 

509,582

 

207,637

 

Barry A. Morris

 

254,719

 

126,388

 

Wei Hung Kwok

 

151,475

 

17,793

 

Richard Ian Saunderson

 

111,947

 

17,793

 

Gregory G. Gardner

 

92,183

 

17,793

 

Thomas D. Vitro

 

111,947

 

17,793

 

MRS Trust

 

1,134,333

 

4,521

 

Michael R. Stone

 

179,464

 

 

Michael R. Stone 2008 GRAT

 

191,113

 

 

Prairie Fire Trust

 

1,504,909

 

4,521

 

 



 

Harrington Sound, LLC

 

100,327

 

302

 

Paul Vigano

 

40,132

 

120

 

Michael A. Choukas

 

199,329

 

1,928

 

The Northwestern Mutual Life Insurance Company

 

5,929,216

 

 

Credit Suisse/CFIG STR Investors SPV, LLC

 

2,075,226

 

 

AXA Equitable Life Insurance Company

 

988,203

 

 

Dominick J. Schiano

 

215,629

 

43,126

 

John A. Janitz

 

215,629

 

43,126

 

Bernardo Alvarez

 

13,126

 

17,794

 

Francis J. Donino

 

13,126

 

17,794

 

Zenon Kruczkowski

 

13,126

 

17,794

 

Varchala Abrol

 

5,614

 

 

Eugene Damon

 

6,564

 

8,895

 

Chi Kin Kam

 

6,564

 

8,895

 

Ryan T. Tucker

 

6,564

 

8,895

 

Lam Sing Yim

 

6,564

 

8,895

 

Kwok Wai Yu

 

6,564

 

8,895

 

Robert J. Cammilleri

 

2,625

 

3,559

 

Russell Childrey

 

2,625

 

3,559

 

 



 

Susan E. DeRagon

 

2,625

 

3,559

 

David Espina

 

2,625

 

3,559

 

Ann Marie Glica

 

2,625

 

3,559

 

Thomas J. Harney

 

2,625

 

3,559

 

Edward F. Kozloski

 

2,625

 

3,559

 

Carina Maceira

 

2,625

 

3,559

 

Alyce E. Mayer

 

2,625

 

3,559

 

Donald O. Montanari

 

2,625

 

3,559

 

Victor Ovadia

 

2,625

 

3,559

 

Alejandro Sanchez

 

2,625

 

3,559

 

Hans-Hermann Vogel

 

2,625

 

3,559

 

Jack D. Warren

 

2,625

 

3,559

 

 




Exhibit 3.1

 

CERTIFICATE OF INCORPORATION OF

 

STR HOLDINGS, INC.

 

FIRST:  The name of the Corporation is: STR Holdings, Inc.

 

SECOND:  The address of the registered office of the Corporation in the State of Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, County of New Castle, State of Delaware, 19808. The name of the registered agent of the Corporation in the State of Delaware at such address is Corporation Service Company.

 

THIRD:  The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, as from time to time amended (the “DGCL”).

 

FOURTH:  (a)  The total number of shares of all classes of stock which the Corporation shall have authority to issue is Two Hundred Twenty Million (220,000,000) shares, consisting of (a) Two Hundred Million (200,000,000) shares of Common Stock, par value $0.01 per share (“Common Stock”) and (b) Twenty Million (20,000,000) shares of one or more series of Preferred Stock, par value $0.01 per share (“Preferred Stock”).

 

(b)  Except as otherwise provided by law, the shares of stock of the Corporation, regardless of class, may be issued by the Corporation from time to time in such amounts, for such consideration and for such corporate purposes as the Board of Directors of the Corporation (the “Board of Directors”) may from time to time determine.

 

(c)  Shares of Preferred Stock may be issued from time to time in one or more series of any number of shares as may be determined from time to time by the Board of Directors, provided that the aggregate number of shares issued and not cancelled of any and all such series shall not exceed the total number of shares of Preferred Stock authorized by this Certificate of Incorporation.  Each series of Preferred Stock shall be distinctly designated.  The voting powers, if any, of each such series and the preferences and relative, participating, optional and other special rights of each such series and the qualifications, limitations and restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and the Board of Directors is hereby expressly granted authority to fix, in the resolution or resolutions providing for the issue of a particular series of Preferred Stock, the voting powers, if any, of each such series and the designations, preferences and relative, participating, optional and other special rights of each such series and the qualifications, limitations and restrictions thereof to the full extent now or hereafter permitted by this Certificate of Incorporation and the laws of the State of Delaware.  Shares of Preferred Stock, regardless of series, that are converted into other securities or other consideration or otherwise acquired by the Corporation shall be retired and cancelled, and the Corporation shall take all such actions as are necessary to cause such shares to have the status of authorized but unissued shares

 



 

of Preferred Stock, without designation as to series, and the Company shall have the right to reissue such shares.

 

(d)  Subject to the provisions of applicable law or of the Bylaws of the Corporation with respect to the closing of the transfer books or the fixing of a record date for the determination of stockholders entitled to vote, and except as otherwise provided by law or by the resolution or resolutions providing for the issue of any series of Preferred Stock, the holders of outstanding shares of Common Stock shall exclusively possess the voting power for the election of directors and for all other purposes, each holder of record of shares of Common Stock being entitled to one vote for each share of Common Stock standing in such holder’s name on the books of the Corporation.  Shares of capital stock of the Corporation shall not be entitled to cumulative voting.

 

(e)  Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the Bylaws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed from office for cause or without cause by the affirmative vote of the holders of outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast a meeting of the stockholders called for that purpose, the notice for which states that the purpose or one of the purposes of the meeting is the removal of such director, and constituting at least a majority of such shares entitled to vote if such removal is for cause, or at least 75% of such shares entitled to vote if such removal is without cause.  Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of paragraph (e) of this Article shall not apply with respect to the director or directors elected by such holders of Preferred Stock.  For purposes of this Article Fourth, “cause” shall mean, with respect to any director, (i) the willful failure by such director to perform, or the gross negligence of such director in performing, the duties of a director, (ii) the engaging by such director in willful or serious misconduct that is injurious to the Corporation or (iii) the conviction of such director of, or the entering by such director of a plea of nolo contendere to, a crime that constitutes a felony.

 

FIFTH:  In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in this Certificate of Incorporation, Bylaws of the Corporation may be adopted, amended or repealed by a majority of the Board of Directors of the Corporation, but any Bylaws adopted by the Board of Directors may be amended or repealed by the stockholders entitled to vote thereon.  Election of directors need not be conducted by written ballot.

 

SIXTH:  (a)  The number of directors of the Corporation shall be fixed from time to time exclusively by the Board of Directors pursuant to resolution adopted by a majority of the directors then in office; provided, however, that the number of directors shall not be less than three (3) nor more than fifteen (15).

 

2



 

(b)  Any vacancies in the Board of Directors for any reason, and any directorships resulting from any increase in the number of directors, may be filled only by the Board of Directors (and not by the stockholders), acting by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director.  Any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and shall qualify.  No decrease in the number of directors shall shorten the term of any incumbent director.

 

(c)  Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors at an annual or special meeting of stockholders, the election, terms of office, filling of vacancies, removal of directors and other features of the directorships shall be governed by the terms of this Certificate of Incorporation or in any resolution or resolutions adopted by the Board of Directors providing for the issuance of any class or series of Preferred Stock.

 

(d)  Advance notice of nominations for the election of directors, other than by the Board of Directors or a duly authorized committee thereof or any authorized officer of the Corporation to whom the Board of Directors or such committee shall have delegated such authority, and information concerning nominees, shall be given in the manner provided in the Bylaws of the Corporation.

 

SEVENTH:  A director of the Corporation shall not be personally liable either to the Corporation or to any stockholder for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions which are not in good faith or which involve intentional misconduct or knowing violation of law, (iii) for any matter in respect of which such director shall be liable under Section 174 of the DGCL or any amendment thereto or successor provision thereto, or (iv) for any transaction from which the director shall have derived an improper personal benefit.  Neither amendment nor repeal of this Article SEVENTH nor the adoption of any provision of the Certificate of Incorporation of the Corporation inconsistent with this Article SEVENTH shall eliminate or reduce the effect of this paragraph in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article SEVENTH, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.  If the DGCL is amended to eliminate or further limit the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the DGCL.

 

EIGHTH.  Any action required or permitted to be taken by the stockholders of the Corporation may only be effected at a duly called annual or special meeting of the stockholders of the Corporation, and may not be effected by the stockholders in writing in lieu of such a meeting, unless such action by written consent of stockholders is unanimously recommended by the directors of the Corporation then in office.

 

3



 

NINTH.  The Corporation shall not be governed by Section 203 of the DGCL (“Section 203”), and the restrictions contained in Section 203 shall not apply to the Corporation.

 

TENTH.  To the fullest extent permitted by Section 122(17) of the DGCL and except as may be otherwise expressly agreed in writing by the Corporation and DLJ Merchant Banking Partners IV, L.P. and its affiliates (collectively, “DLJMB”), the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, business opportunities, which are from time to time presented to DLJMB or any of its officers, directors, agents, stockholders, members, partners, affiliates and subsidiaries (other than the Corporation and its subsidiaries), even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and no such person shall be liable to the Corporation or any of its subsidiaries for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries unless, in the case of any such person who is a director or officer of the Corporation, such business opportunity is expressly offered to such director or officer in writing solely in his or her capacity as a director or officer of the Corporation.  Any person purchasing or otherwise acquiring any interest in any shares of stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article TENTH.  Neither the alteration, amendment or repeal of this Article TENTH, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article TENTH, shall eliminate or reduce the effect of this Article TENTH in respect of any business opportunity first identified or any other matter occurring, or any cause of action, suit or claim that, but for this Article TENTH, would accrue or arise, prior to such alteration, amendment, repeal or adoption.

 

ELEVENTH.  The name and mailing address of the Sole Incorporator of the Corporation is as follows:

 

Barry A. Morris

10 Water Street

Enfield, CT 06082

 

IN WITNESS WHEREOF, I, the undersigned, being the Sole Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the Delaware General Corporation Law, do make this Certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 6th day of November, 2009.

 

 

 

/s/ Barry A. Morris

 

Barry A. Morris

 

Sole Incorporator

 

4




Exhibit 3.2

 

BYLAWS OF

 

STR HOLDINGS, INC.

(a Delaware corporation)

 

ARTICLE I

 

Offices

 

SECTION 1.            Registered Office .  The registered office of STR Holdings, Inc. (the “Corporation”) shall be fixed in the Corporation’s certificate of incorporation, as the same may be amended and/or restated from time to time (as so amended and/or restated, the “Certificate of Incorporation”).

 

SECTION 2.            Other Offices .  The Corporation’s Board of Directors (the “Board of Directors”) may at any time establish other offices at any place or places where the Corporation is qualified to do business or as the business of the Corporation may require.

 

ARTICLE II

 

Meetings of Stockholders

 

SECTION 1.            Annual Meetings .  The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such place, date and time, within or without the State of Delaware, as the Board of Directors shall determine.

 

SECTION 2.            Special Meetings .  Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be held only upon call by the Board of Directors or the Chief Executive Officer or by stockholders holding together at least a majority of all the shares of the Corporation entitled to vote at the meeting, and shall be held at such place, date and time, within or without the State of Delaware, as may be specified by such body or person or persons in such call.

 

SECTION 3.            Notice of Meetings .  Written notice of all meetings of the stockholders, stating the place (if any), date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and the place within the city or other municipality or community at which the list of stockholders may be examined, shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting.  Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held.  Only business within the purpose or purposes described in the notice may be conducted at a special meeting of stockholders.

 

SECTION 4.            Postponement and Cancellation of Meeting .  Any previously scheduled annual or special meeting of the stockholders may be postponed, and any

 



 

previously scheduled annual or special meeting of the stockholders called by the Board of Directors may be canceled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of stockholders.

 

SECTION 5.            Stockholder Lists .  The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held.  The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

 

The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

 

SECTION 6.            Quorum .  Except as otherwise provided by law or the Certificate of Incorporation, a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy.  If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without further notice, until a quorum shall have been obtained.  When a quorum is once present it is not broken by the subsequent withdrawal of any stockholder.

 

SECTION 7.            Organization .  Meetings of stockholders shall be presided over by the Chairman, if any, or if none or in the Chairman’s absence the Vice Chairman, if any, or if none or in the Vice Chairman’s absence the President, if any, or if none or in the President’s absence a Vice President, or, if none of the foregoing is present, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting.  The Secretary of the Corporation, or in the Secretary’s absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting.  The Board of Directors may adopt before a meeting such rules for the conduct of the meeting, including an agenda and limitations on the number of speakers and the time which any speaker may address the meeting, as the Board of Directors determines to be necessary or appropriate for the orderly and efficient conduct of the meeting.  Subject to any rules for the conduct of the meeting adopted by the Board of Directors, the person presiding at the meeting may also adopt, before or at the meeting, rules for the conduct of the meeting.

 

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SECTION 8.            Voting; Proxies; Required Votes; Action by Written Consent .

 

(a)            General .  At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholder’s duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Certificate of Incorporation provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these Bylaws.

 

(b)            Director Elections .   At all elections of directors the voting may but need not be conducted by written ballot.  A nominee for director shall be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast (which includes votes withheld) against such nominee’s election; provided, however , that directors shall be elected by a plurality of the votes to be cast at any meeting of stockholders for which the election of directors is “contested” by one or more stockholders.  For purposes of this Section 8(b), an election of directors is “contested” if  (i) the Secretary of the Corporation receives a notice that a stockholder has nominated a person for election to the Board of Directors in compliance with the advance notice requirements for stockholder nominees for director set forth in Article II, Section 10 of these Bylaws and (ii) such nomination has not been withdrawn by such stockholder on or prior to the day next preceding the date the Corporation first furnishes its notice of meeting for such meeting to the stockholders.   The election of directors at such meeting of stockholders shall for all purposes remain “contested” under this Section 8(b) (and the plurality voting rule shall continue to apply) even if the stockholder nominating such director candidate withdraws the nomination of such candidate on any date after the Corporation first furnishes its notice of meeting to stockholders but before the date the meeting is held.

 

(c)            All Other Matters .  Except as otherwise required by law or the Certificate of Incorporation, any other action of the stockholders shall be authorized by the vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter.  Where a separate vote by a class or classes, present in person or represented by proxy, shall constitute a quorum entitled to vote on that matter, the affirmative vote of the majority of shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class, unless otherwise provided in the Certificate of Incorporation.

 

(d)            Actions by Written Consent .  Any action required or permitted to be taken by the stockholders of the Corporation may only be effected at a duly called annual or special meeting of the stockholders of the Corporation, and may not be effected by the stockholders in writing in lieu of such a meeting,

 

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unless such action by written consent of stockholders is unanimously recommended by the directors of the Corporation then in office.

 

SECTION 9.            Advance Notification of Business to be Transacted at Meetings of Stockholders .  To be properly brought before the annual or any special meeting of the stockholders, any business to be transacted at an annual or special meeting of stockholders must be either (a) specified in the notice of meeting (or any supplement or amendment thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (c) otherwise properly brought before the meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to notice of and to vote at the meeting and (ii) who complies with the advance notice procedures set forth in this Section 9.  Except for proposals properly made in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and included in the Corporation’s notice of meeting, the foregoing clause (c) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of stockholders.  Stockholders seeking to nominate persons for election to the Board of Directors must comply with Section 10, and this Section 9 shall not be applicable to nominations.

 

In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.  To be timely, a stockholder’s written notice must be delivered to the Secretary of the Corporation or mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the first anniversary of the date of the immediately preceding year’s annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than sixty (60) days after the anniversary of the preceding year’s annual meeting, to be timely, notice by the stockholder must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting is first given or made (which for this purpose shall include any and all filings of the Corporation made on the EDGAR system of the U.S. Securities and Exchange Commission (“SEC”) or any similar public database maintained by the SEC), whichever first occurs.

 

To be in proper written form, a stockholder’s notice to the Secretary of the Corporation must set forth as to each matter such stockholder proposes to bring before a meeting:  (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (ii) the name and record address of such stockholder proposing such business and the beneficial owner, if any, on whose behalf the proposal is made; (iii) the class or series and number of shares of capital stock of the Corporation that are, directly or indirectly, owned beneficially or of record by

 

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such stockholder; (iv) any derivative positions held or beneficially held, directly or indirectly, by such stockholder; (v) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder, or any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such stockholder with respect to any share of stock of the Corporation; (vi) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business; (vii) any proxy, contract, arrangement, understanding or relationship pursuant to which such stockholder has or shares a right to vote any shares of any security of the Corporation; (viii) any direct or indirect interest of such stockholder in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement); (ix) any pending or threatened litigation in which such stockholder is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation; (x) any material transaction occurring during the prior twelve months between such stockholder, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand; (xi) a representation that such stockholder intends to appear in person or by proxy at the meeting to bring such business before the meeting; and (xii) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies or consents by such stockholder in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act, and the rules and regulations promulgated thereunder.

 

This Section 9 is expressly intended to apply to any business proposed to be brought before an annual meeting of stockholders other than any proposal made pursuant to Rule 14a-8 under the Exchange Act.  Notwithstanding the foregoing provisions of this section, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations thereunder with respect to the matters set forth in this Section 9.  Nothing in this Section 9 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

 

Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual or any special meeting of the stockholders except business brought before the meeting in accordance with the procedures set forth in this Section 9; provided , however , that, once business has been properly brought before the meeting in accordance with such procedures, nothing in this Section 9 shall be deemed to preclude discussion by any stockholder of any such business. The officer of the Corporation presiding at the meeting shall, if the facts warrant, determine and declare to the meeting that the business was not properly brought before the meeting in accordance with the provisions of this Section 9, and if such officer shall so determine, such officer shall so declare to the

 

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meeting that any such business not properly brought before the meeting shall not be transacted.

 

SECTION 10.  Advance Notification of Nominations for Directors .  Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the rights, if any, of the holders of shares of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances.   All nominations of persons for election to the Board of Directors shall be made at any annual meeting of the stockholders, or at any special meeting of the stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 10 and on the record date for the determination of stockholders entitled to notice of and to vote at such meeting and (ii) who complies with the advance notice procedures set forth in this Section 10.  The foregoing clause (b) shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board of Directors at an annual meeting or special meeting.

 

In addition to any other applicable requirements, for a director nomination to be properly made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.  To be timely, a stockholder’s written notice to the Secretary of the Corporation must be delivered to or mailed and received at the principal executive offices of the Corporation, in the case of: (x) an annual meeting, not less than ninety (90) days nor more than one hundred twenty (120) days prior to the first anniversary of the date of the immediately preceding year’s annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than sixty (60) days after the anniversary of the preceding year’s annual meeting, to be timely, notice by the stockholder must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting is first given or made (which for this purpose shall include any and all filings of the Corporation made on the EDGAR system of the SEC or any similar public database maintained by the SEC), whichever first occurs; and (y) a special meeting of the stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting is first given or made (which for this purpose shall include any and all filings of the corporation made on the EDGAR system of the SEC or any similar public database maintained by the SEC).

 

To be in proper written form, a stockholder’s notice to the Secretary of the Corporation must set forth:

 

(a)                                   as to each person whom the stockholder proposes to nominate for election as a director:  (i) the name, age, business address and residence address of the person; (ii) the principal occupation or employment of the person; (iii) 

 

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the class or series and number of shares of capital stock of the corporation that are, directly or indirectly, owned beneficially or of record by the person, if any; (iv) any derivative positions held or beneficially held, directly or indirectly, by such stockholder; (v) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the stockholder, or any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such stockholder with respect to any share of stock of the Corporation; (vi) a statement whether such person, if elected, intends to tender, promptly following such person’s election or reelection, an irrevocable resignation effective upon such person’s failure to receive the required vote for re-election at the next meeting at which such person would face re-election and upon acceptance of such resignation by the Board of Directors, in accordance with the Corporation’s Corporate Governance Guidelines; (vii) any direct or indirect voting commitments or other arrangements of such person with respect to their actions as a director; and (viii) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings of the proposing stockholder required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and

 

(b)            as to the stockholder giving the notice:  (i) the name and record address of such stockholder proposing such nomination and the beneficial owner, if any, on whose behalf the nomination is made; (ii) the class or series and number of shares of capital stock of the Corporation which are, directly or indirectly, owned beneficially or of record by such stockholder; (iii) a description of all direct and indirect compensation and other material monetary agreements, arrangements or understandings during the past three years, and any other material relationships, between such stockholder and each proposed nominee, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such stockholder were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant; (iv) any derivative positions held or beneficially held, directly or indirectly, by such stockholder; (v) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such stockholder with respect to any share of stock of the Corporation; (v) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (vii) any

 

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other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings of the proposing stockholder required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named or referred to as a nominee and to serve as a director if elected. The Corporation may require any proposed nominee to furnish such other information (which may include attending meetings to discuss the furnished information) as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

 

Notwithstanding the foregoing provisions of this section, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 10.

 

Notwithstanding anything in these Bylaws to the contrary, no person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 10. The officer of the Corporation presiding at the meeting shall, if the facts warrant, determine and declare to the meeting that the nomination was not made in accordance with the provisions of this Section 10, and if such officer shall also determine, such officer shall so declare to the meeting that any such defective nomination shall be disregarded.

 

SECTION 11.          Inspectors .  The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof.  If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors.  In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat.  Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability.  The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders.  On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors.

 

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ARTICLE III

 

Board of Directors

 

SECTION 1.            General Powers .  The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors.

 

SECTION 2.            Qualification; Number; Term; Remuneration .

 

(a)            Each director shall be at least eighteen (18) years of age.  A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware.  The number of directors constituting the entire Board shall at all times be not less than three (3) nor more than fifteen (15), the exact number of which shall be fixed from time to time by action of the Board of Directors, one of whom may be selected by the Board of Directors to be its Chairman.  The use of the phrase “entire Board” herein refers to the total number of directors which the Corporation would have if there were no vacancies.

 

(b)            Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the annual meeting of stockholders of the year in which such director’s term expires and until their successors are elected and qualified or until their earlier resignation or removal.  No decrease in the number of directors shall shorten the term of any incumbent director.

 

(c)            Directors may be reimbursed or paid in advance their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director.  No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.  Members of special or standing committees may be allowed like compensation for attending committee meetings.

 

SECTION 3.            Quorum and Manner of Voting .  Except as otherwise provided by law, a majority of the entire Board then in office shall constitute a quorum.  A majority of the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice.  The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

 

SECTION 4.            Places of Meetings .  Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting.

 

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SECTION 5.            Annual Meeting .  Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting.  Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders’ meeting is held.

 

SECTION 6.            Regular Meetings .  Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine.  Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors.

 

SECTION 7.            Special Meetings .  Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, President or by a majority of the directors then in office.

 

SECTION 8.            Notice of Meetings .  A notice of the place, date and time and the purpose or purposes of each meeting of the Board of Directors shall be given to each director by mailing the same at least two days before the special meeting, or by telephoning or emailing the same or by delivering the same personally not later than the day before the day of the meeting.

 

SECTION 9.            Organization .  At all meetings of the Board of Directors, the Chairman, if any, or if none or in the Chairman’s absence or inability to act, the President, or in the President’s absence or inability to act any Vice President who is a member of the Board of Directors, or in such Vice President’s absence or inability to act as chairman chosen by the directors, shall preside.  The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary’s absence, the presiding officer may appoint any person to act as secretary of the meeting.

 

SECTION 10.          Participating in Meeting by Conference Telephone .  Members of the Board of Directors, or any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other at the same time and such participation shall constitute presence in person at such meeting.

 

SECTION 11.          Resignation .  Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the letter of resignation.

 

SECTION 12.          Removal .

 

(a)                                   Notwithstanding any other provisions of the Certificate of Incorporation or these Bylaws (and notwithstanding the fact that some lesser percentage may be specified by law, the Certificate of Incorporation or the Bylaws of the Corporation), any director or the entire Board of Directors of the

 

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Corporation may be removed from office for cause by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose, the notice for which states that the purpose or one of the purposes of the meeting is the removal of such director.  For purposes of this Section 12, “cause” shall mean, with respect to any director, (i) the willful failure by such director to perform, or the gross negligence of such director in performing, the duties of a director, (ii) the engaging by such director in willful or serious misconduct that is injurious to the Corporation or (iii) the conviction of such director of, or the entering by such director of a plea of nolo contendere to, a crime that constitutes a felony.

 

(b)            Any director may be removed from office without cause only by the affirmative vote of at least 75% of the outstanding shares of stock entitled to vote in an election of directors.

 

(c)            Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of the Corporation’s preferred stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions (a) and (b) of this Section 12 shall not apply with respect to the director or directors elected by such holders of preferred stock.

 

SECTION 13.          Vacancies .  Vacancies on the Board of Directors for any reason, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled only by the Board of Directors (and not by the stockholders) by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director.

 

SECTION 14.          Action by Written Consent .  Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors.

 

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ARTICLE IV

 

Committees

 

SECTION 1.            Appointment; Limitations .  From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment.  No Committee of the Board shall take any action to amend the Certificate of Incorporation or these Bylaws, adopt any agreement to merge or consolidate the Corporation, declare any dividend or recommend to the stockholders a sale, lease or exchange of all or substantially all of the assets and property of the Corporation, a dissolution of the Corporation or a revocation of a dissolution of the Corporation. No Committee of the Board shall take any action which is required in these Bylaws, in the Certificate of Incorporation or by statute to be taken by a vote of a specified proportion of the whole Board of Directors.

 

SECTION 2.            Procedures, Quorum and Manner of Acting .  Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors.  Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee.  Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors.

 

SECTION 3.            Action by Written Consent .  Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee.

 

SECTION 4.            Term; Termination .  In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors.

 

ARTICLE V

 

Officers

 

SECTION 1.            Election and Qualifications .  The Board of Directors shall elect the officers of the Corporation, which shall include a President and a Secretary, and may include, by election or appointment, a Chief Executive Officer, one or more Vice Presidents (any one or more of whom may be given an additional designation of rank or function), a Treasurer and such Assistant Secretaries, such Assistant Treasurers and such

 

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other officers as the Board may from time to time deem proper.  Each officer shall have such powers and duties as may be prescribed by these Bylaws and as may be assigned by the Board of Directors or the President.  Any two or more offices may be held by the same person unless specifically prohibited therefrom by law.

 

SECTION 2.            Term of Office and Remuneration .  The term of office of all officers shall be one year and until their respective successors have been elected and qualified, but any officer may be removed from office, either with or without cause, at any time by the Board of Directors.  Any vacancy in any office arising from any cause may be filled for the unexpired portion of the term by the Board of Directors.  The remuneration of all officers of the Corporation may be fixed by the Board of Directors or in such manner as the Board of Directors shall provide.

 

SECTION 3.            Resignation; Removal .  Any officer may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation.  Any officer shall be subject to removal, with or without cause, at any time by vote of a majority of the entire Board of Directors, and any officer appointed by an executive officer or by a committee may be removed either with or without cause by the officer or committee who appointed him or her or by the Chairman or President.

 

SECTION 4.            Chairman of the Board .  The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the Board of Directors and shall have such other powers and duties as may from time to time be assigned by the Board of Directors.

 

SECTION 5.            President and Chief Executive Officer .  The President shall be the chief executive officer of the Corporation, and shall have such duties as customarily pertain to that office.  The President shall have general management and supervision of the property, business and affairs of the Corporation and over its other officers; may appoint and remove assistant officers and other agents and employees, other than officers referred to in Section 1 of this Article V; may execute and deliver in the name of the Corporation powers of attorney, contracts, bonds and other obligations and instruments; and shall have such other powers and authority as from time to time may be assigned by the Board of Directors.

 

SECTION 6.            Vice President .  A Vice President may execute and deliver in the name of the Corporation contracts and other obligations and instruments pertaining to the regular course of the duties of said office, and shall have such other authority as from time to time may be assigned by the Board of Directors or the President.

 

SECTION 7.            Treasurer .  The Treasurer shall in general have all duties incident to the position of Treasurer and such other duties as may be assigned by the Board of Directors or the President.

 

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SECTION 8.            Secretary .  The Secretary shall in general have all the duties incident to the office of Secretary and such other duties as may be assigned by the Board of Directors or the President.

 

SECTION 9.            Assistant Officers .  Any assistant officer shall have such powers and duties of the officer such assistant officer assists as such officer or the Board of Directors shall from time to time prescribe.

 

ARTICLE VI

 

Indemnification of Directors, Officers and Others

 

SECTION 1.            Indemnification of Directors, Officer and Others .  (a) Each person who is or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that such person is or was a director or officer of the Corporation or, while serving as such director or officer, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including, without limitation, service with respect to employee benefit plans (an “Other Entity”), shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law (the “DGCL”), as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, and amounts paid in settlement) actually and reasonably incurred by such person in connection therewith if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation and with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful, and such indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of such person’s heirs, executors and administrators; provided , however , that, except as otherwise provided herein, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors. The Corporation may enter into agreements with any such person for the purpose of providing for such indemnification.

 

SECTION 2.            Reimbursement and Advancement of Expenses .  The Corporation shall, from time to time, reimburse or advance to any current or former director or officer the funds necessary for payment of expenses (including attorney’s fees and disbursements) actually and reasonably incurred by such person in investigating, responding to, defending or testifying in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, to which such person becomes or is threatened to be made a party by reason of the fact that such person is or was, or is

 

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alleged to have been, a director or officer of the Corporation, or is or was, or is alleged to have been, serving at the request of the Corporation as a director or officer or in any other fiduciary capacity of or for any Other Entity; provided , however , that the Corporation may pay such expenses in advance of the final disposition of such action, suit or proceeding only upon receipt of an undertaking, if such undertaking is required by the DGCL, by or on behalf of such person to repay such amount if it shall ultimately be determined by final judicial decision that such person is not entitled to be indemnified by the Corporation against such expenses.  Expenses may be similarly advanced or reimbursed to persons who are and were not directors or officers of the Corporation in respect of their service to the Corporation or to any Other Entity at the request of the Corporation to the extent the Board of Directors at any time determines that such persons should be so entitled to advancement or reimbursement of such expenses, and the Corporation may enter into agreements with such persons for the purpose of providing such advances or reimbursement.

 

SECTION 3.            Insurance .  The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

 

SECTION 4.            Preservation of Other Rights .  The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article VI shall not be exclusive of, and the Corporation is authorized to honor or provide, any other right that any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, which other right may provide indemnification and advancement in excess of the indemnification and advancement otherwise permitted by Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to the Corporation, its stockholders and others.

 

SECTION 5.            Survival .

 

(a)            The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article VI shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of such person’s heirs, executors and administrators.

 

(b)            The provisions of this Article VI shall be a contract between the Corporation, on the one hand, and each person who was a director and officer at any time while this Article VI is in effect and any other person indemnified hereunder, on the other hand, pursuant to which the Corporation and each such person intend to be legally bound. Any repeal or modification of the provisions of this Article VI shall not adversely affect any right or protection of any director, officer, employee or agent of the

 

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Corporation existing at the time of such repeal or modification, regardless of whether a claim arising out of such action, omission or state of facts is asserted before or after such repeal or amendment.

 

SECTION 6.            Enforceability of Right to Indemnification .  The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Article VI shall be enforceable by any person entitled to such indemnification or reimbursement or advancement of expenses in any court of competent jurisdiction.  If a claim under Sections 1 and 2 of this Article VI is not paid in full by the Corporation within thirty (30) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim.  The burden of proving that such indemnification or reimbursement or advancement of expenses is not appropriate shall be on the Corporation.  Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel and its stockholders) to have made a determination prior to the commencement of such action that such indemnification or reimbursement or advancement of expenses is proper in the circumstances nor an actual determination by the Corporation (including its Board of Directors, its independent legal counsel and its stockholders) that such person is not entitled to such indemnification or reimbursement or advancement of expenses shall constitute a defense to the action or create a presumption that such person is not so entitled.  Such a person shall also be indemnified by the Corporation against any expenses reasonably incurred in connection with successfully establishing his or her right to such indemnification or reimbursement or advancement of expenses, in whole or in part.

 

ARTICLE VII

 

Books and Records

 

SECTION 1.            Location .  The books and records of the Corporation may be kept at such place or places within or without the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine.  The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the Bylaws and by such officer or agent as shall be designated by the Board of Directors.

 

SECTION 2.            Addresses of Stockholders .  Notices of meetings and all other corporate notices may be delivered personally or mailed to each stockholder at the stockholder’s address as it appears on the records of the Corporation.

 

SECTION 3.            Fixing Date for Determination of Stockholders of Record .

 

(a)            In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date

 

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shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting.  If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

(b)            Provided that the Board of Directors has authorized stockholder action by written consent under Article II, Section 8(d) hereof, in order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors.  If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.  Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.  If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by this chapter, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

 

(c)            In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall be not more than 60 days prior to such action.  If no record date is fixed, the record

 

17



 

date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

ARTICLE VIII

 

Certificates Representing Stock

 

SECTION 1.            Certificates; Signatures; Rules and Regulations .  There may be issued to each holder of fully paid shares of capital stock of the Corporation a certificate or certificates for such shares; however, the Corporation may issue uncertificated shares of its capital stock. Every holder of capital stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form.  Any and all signatures on any such certificate may be facsimiles.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.  The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation.  The Board of Directors may appoint one or more transfer agents for the Corporation’s capital stock and may make, or authorize such agent or agents to make, all such rules and regulations as are expedient governing the issue, transfer and registration of shares of the capital stock of the Corporation and any certificates representing such shares.

 

SECTION 2.            Transfers of Stock The capital stock of the Corporation shall be transferred only upon the books of the Corporation either (a) if such shares are certificated, by the surrender to the Corporation or its transfer agent of the old stock certificate therefor properly endorsed or accompanied by a written assignment or power of attorney properly executed, with transfer stamps (if necessary) affixed, or (b) if such shares are uncertificated, upon proper instructions from the holder thereof or such holder’s attorney lawfully constituted in writing, in each case with such proof of the authenticity of signature as the Corporation or its transfer agent may reasonably require. Prior to due presentment for registration of transfer of a security (whether certificated or uncertificated), the Corporation shall treat the registered owner of such security as the person exclusively entitled to vote, receive notifications and dividends, and otherwise to exercise all the rights and powers of such security.

 

SECTION 3.            Fractional Shares .  The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip

 

18



 

in registered or bearer form over the manual or facsimile signature of an officer of the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a stockholder except as therein provided.

 

SECTION 4.            Lost, Stolen or Destroyed Certificates .  The Corporation may issue a new certificate of stock in place of any certificate, theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.

 

ARTICLE IX

 

Dividends

 

Subject always to the provisions of law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

 

ARTICLE X

 

Ratification

 

Any transaction, questioned in any lawsuit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized.  Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction.

 

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ARTICLE XI

 

Corporate Seal

 

The corporate seal shall have inscribed thereon the name of the Corporation, and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine.  The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal.

 

ARTICLE XII

 

Fiscal Year

 

The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors.  Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the calendar year.

 

ARTICLE XIII

 

Waiver of Notice

 

Whenever notice is required to be given by these Bylaws or by the Certificate of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice.

 

ARTICLE XIV

 

Bank Accounts, Drafts, Contracts, Etc.

 

SECTION 1.            Bank Accounts and Drafts .  In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by such primary financial officer.

 

SECTION 2.            Contracts .  The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver

 

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any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.

 

SECTION 3.            Proxies; Powers of Attorney; Other Instruments .  The Chairman, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation.  The Chairman, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person.  The Board of Directors, from time to time, may confer like powers upon any other person.

 

SECTION 4.            Financial Reports .  The Board of Directors may appoint the primary financial officer or other fiscal officer or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law.

 

ARTICLE XV

 

Amendments

 

The Board of Directors shall have power to adopt, amend or repeal Bylaws.  Bylaws adopted by the Board of Directors may be repealed or changed, and new Bylaws made, by the stockholders, and the stockholders may prescribe that any Bylaw made by them shall not be altered, amended or repealed by the Board of Directors.

 

ARTICLE XVI

 

Miscellaneous

 

When used in these Bylaws and when permitted by applicable law, the terms “written” and “in writing” shall include any “electronic transmission,” as defined in Section 232(c) of the DGCL, including without limitation any telegram, cablegram, facsimile transmission and communication by electronic mail, and “address” shall include the recipient’s electronic address for such purposes.

 

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Exhibit 4.1

 

COMMON STOCK

PAR VALUE $0.01

COMMON STOCK

THIS CERTIFICATE IS TRANSFERABLE IN CANTON, MA, JERSEY CITY, NJ AND GOLDEN, CO

 

Certificate
Number

 

 

 

Shares

 

 

STR HOLDINGS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

 

 

THIS CERTIFIES THAT

 

CUSIP 78478V 10 0

SEE REVERSE FOR CERTAIN DEFINITIONS

 

is the owner of

 

 

 

FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF

 

STR Holdings, Inc. (hereinafter called the “Corporation”) , transferable on the books of the Corporation in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby, are issued and shall be held subject to all of the provisions of the Certificate of Incorporation, as may be amended from time to time, and the Bylaws, as may be amended from time to time, of the Corporation (copies of which are on file with the Corporation and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.

 

Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

 

 

 

 

DATED <<Month Day, Year>>

COUNTERSIGNED AND REGISTERED:

COMPUTERSHARE TRUST COMPANY, N.A.
TRANSFER AGENT AND REGISTRAR,

 

 

President and Chief Executive Officer

 

 

 

 

 

By

 

Executive Vice President and Chief Financial Officer

 

AUTHORIZED SIGNATURE

 


 

STR HOLDINGS, INC.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE CORPORATION AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE CERTIFICATE OF INCORPORATION OF THE CORPORATION, AS MAY BE AMENDED FROM TIME TO TIME, AND THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE CORPORATION, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR ANY FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR SUCH OWNER’S LEGAL REPRESENTATIVES, TO GIVE THE CORPORATION A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE.

 

The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

 

 

TEN COM

- as tenants in common

UNIF GIFT MIN ACT-

Custodian

 

 

 

(Cust)

(Minor)

TEN ENT

- as tenants by the entireties

under Uniform Gifts to Minors Act

 

 

 

(State)

JT TEN

- as joint tenants with right of survivorship

UNIF TRF MIN ACT

Custodian (until age   )

 

  and not as tenants in common

 

(Cust)

(Minor)

 

 

under Uniform Transfers to Minors Act.

 

 

 

(State)

 

Additional abbreviations may also be used though not in the above list.

 

 

 

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

 

For value received,                                                   

 

hereby sell, assign and transfer unto

 

 

 

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE)

 

 

                                                                                                                                                                                              Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint                                                                                                                                                                                                       Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises.

 

Dated:

 

 

20

 

 

Signature(s) Guaranteed: Medallion Guarantee Stamp

 

 

 

 

 

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15.

 

 

 

________________________________________________

 

 

 

Signature:

 

 

 

 

 

Signature:

 

 

 

Notice:

The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever.

 



Exhibit 4.2

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made as of November 6, 2009, among STR Holdings, Inc., a corporation organized under the laws of the State of Delaware (the “ Company ”), and the Persons named on the signature pages hereto (including any additional signatories to this Agreement after the date hereof, the “ Stockholders ”).

 

W I T N E S S E T H:

 

WHEREAS, the parties hereto desire to enter into this Agreement to establish certain arrangements with respect to the Company Securities owned by the Stockholders, and other related matters; and

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree as follows:

 

ARTICLE I

 

Section 1.01.     Demand Registration .

 

(a)            If the Company shall receive a written request from the DLJMB Stockholders (such requesting person, the “ Requesting Stockholder ”) that the Company effect the registration under the Securities Act of all or any portion of such Requesting Stockholder’s Registrable Securities, and specifying the intended method of disposition thereof, then the Company shall promptly give notice of such requested registration (each such request shall be referred to herein as a “ Demand Registration ”) at least fifteen (15) Business Days prior to the anticipated filing date of the registration statement relating to such Demand Registration to the other Stockholders and thereupon shall use its best efforts to effect, as expeditiously as possible, the registration under the Securities Act of:

 

(i)             all Registrable Securities for which the Requesting Stockholders have requested registration under this Section 1.01 , and

 

(ii)            subject to the restrictions set forth in Sections 1.01(e)  and 1.02, all other Registrable Securities of the same class as those requested to be registered by the Requesting Stockholders that any Stockholders with rights to request registration under Section 1.02 (all such Stockholders, together with the Requesting Stockholders, the “ Registering Stockholders ”) have requested the Company to register by request received by the Company within ten (10) Business Days after such Stockholders receive the Company’s notice of the Demand Registration, all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered; provided that, subject to Section 1.01(d)  hereof, the Company shall not be obligated to effect (x) more than six Demand Registrations, (y) 

 



 

more than one Demand Registration during any four-month period, or (z) any Demand Registration unless the aggregate gross proceeds expected to be received from the sale of the Registrable Securities requested to be included by all Registering Stockholders in such Demand Registration are at least $20 million in any Demand Registration other than the Initial Public Offering.

 

(b)            Promptly after the expiration of the ten (10) Business Day period referred to in Section 1.01(a)(ii)  hereof, the Company will notify all Registering Stockholders of the identities of the other Registering Stockholders and the number of shares of Registrable Securities requested to be included therein.  At any time prior to the effective date of the registration statement relating to such registration, the Requesting Stockholders may revoke such request, without liability to any of the other Registering Stockholders, by providing a notice to the Company revoking such request.

 

(c)            The Company shall be liable for and pay all Registration Expenses in connection with each Demand Registration, regardless of whether such Demand Registration is effected.

 

(d)            A Demand Registration shall not be deemed to have occurred:

 

(i)             unless the registration statement relating thereto (A) has become effective under the Securities Act and (B) has remained effective for a period of at least 120 days (or such shorter period in which all Registrable Securities of the Registering Stockholders included in such registration have actually been sold thereunder), provided that such registration statement shall not be considered a Demand Registration if, after such registration statement becomes effective, (1) such registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court and (2) less than 75% of the Registrable Securities included in such registration statement have been sold thereunder; or

 

(ii)            if the Maximum Offering Size (as defined below) is reduced in accordance with Section 1.01(e)  such that less than 50% of the Registrable Securities of the Requesting Stockholders sought to be included in such registration are included.

 

(e)            If a Demand Registration involves a Public Offering and the managing underwriter advises the Company and the Requesting Stockholders that, in its view, the number of Company Securities that the Registering Stockholders and the Company propose to include in such registration exceeds the largest number of shares that can be sold without having an adverse effect on such offering, including the price at which such shares can be sold (the “ Maximum Offering Size ”), the Company shall include in such registration, in the priority listed below, up to the Maximum Offering Size:

 

(i)             first, all Registrable Securities requested to be registered by the Registering Stockholders (allocated, if necessary for the offering not to exceed the

 

2



 

Maximum Offering Size, pro rata among such Stockholders on the basis of the relative number of Registrable Securities so requested to be included in such registration by each); and

 

(ii)            second, all Registrable Securities proposed to be registered by the Company.

 

Section 1.02.     Piggyback Registration .

 

(a)           If the Company proposes to register any Company Securities under the Securities Act (whether for itself or in connection with a sale of securities by a Stockholder, but other than a registration on Form S-8 or S-4, or any successor or similar forms, relating to common stock issuable upon exercise of employee stock options or in connection with any employee benefit or similar plan of the Company or in connection with a direct or indirect acquisition by the Company of another Person), the Company shall each such time give prompt written notice at least ten (10) Business Days prior to the anticipated filing date of the registration statement relating to such registration to each Stockholder (each a Piggyback Stockholder ”), which notice shall set forth such Piggyback Stockholder’s rights under this Section 1.02 and shall offer such Piggyback Stockholder the opportunity to include in such registration statement the number of Registrable Securities of the same class or series as those proposed to be registered as each such Piggyback Stockholder may request (a “ Piggyback Registration ”), subject to the provisions of Section 1.02(b)  and the Public Offering Limitations.  Upon the request of any such Piggyback Stockholder made within five (5) Business Days after the receipt of notice from the Company (which request shall specify the number of Registrable Securities intended to be registered by such Piggyback Stockholder), the Company shall use its best efforts to effect the registration under the Securities Act of all Registrable Securities that the Company has been so requested to register by all such Piggyback Stockholders, to the extent requisite to permit the disposition of the Registrable Securities so to be registered, provided that (i) if such registration involves a Public Offering, all such Piggyback Stockholders requesting to be included in the Company’s registration must sell their Registrable Securities to the underwriters selected as provided in Section 1.04(f)(i)  on the same terms and conditions as apply to the Company or any other selling Piggyback Stockholders, and (ii) if, at any time after giving notice of its intention to register any Company Securities pursuant to this Section 1.02(a)  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 such securities, the Company shall give notice to all such Piggyback Stockholders and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration.  No registration effected under this Section 1.02 shall relieve the Company of its obligations to effect a Demand Registration to the extent required by Section 1.01 .  The Company shall be liable for and pay all Registration Expenses in connection with each Piggyback Registration.

 

(b)            If a Piggyback Registration involves a Public Offering (other than any Demand Registration, in which case the provisions with respect to priority of inclusion in such offering set forth in Section 1.01(e)  shall apply) and the managing

 

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underwriter advises the Company that, in its view, the number of Company Securities that the Company and such selling Piggyback Stockholders propose to include in such registration exceeds the Maximum Offering Size, the Company shall include in such registration, in the following priority, up to the Maximum Offering Size:

 

(i)             with respect to a Public Offering by the Company for its own account:

 

(1)            first, such number of Registrable Securities proposed to be registered for the account of the Company, if any, as would not cause the offering to exceed the Maximum Offering Size, and

 

(2)            second, all Registrable Securities requested to be included in such registration by any Registering Stockholders (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Stockholders based on their relative number of Registrable Securities requested to be included in the Piggyback Registration, unless the managing underwriter reasonably determines otherwise (which, for the avoidance of doubt, could, in the reasonable determination of the managing underwriter, include the exclusion of all Registrable Securities of the Management Stockholders), in which case the allocation of such Registrable Securities shall be in the manner reasonably determined by the managing underwriter).

 

(ii)            With respect to a Public Offering by the Company for the account of selling stockholders:

 

(1)            first, all Registrable Securities requested to be included in such registration by any Registering Stockholders (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Stockholders based on their relative number of Registrable Securities requested to be included in the Piggyback Registration, unless the managing underwriter reasonably determines otherwise (which, for the avoidance of doubt, could, in the reasonable determination of the managing underwriter, include the exclusion of all Registrable Securities of the Management Members), in which case the allocation of such Registrable Securities shall be in the manner reasonably determined by the managing underwriter), and

 

(2)            second, all Registrable Securities proposed to be registered for the account of the Company.

 

Section 1.03.     Lock-Up Agreements .  (a) In connection with each underwritten Public Offering, if requested by the managing underwriter, the Company and the Stockholders agree (and the Company agrees, in connection with any underwritten Public Offering, to use its commercially reasonable efforts to cause its Affiliates to agree) not to effect any public sale or private offer or distribution, including any sale pursuant to Rule 144 of any Registrable Securities during the 10 days prior to the consummation of such Public Offering and during such time period after the consummation of such Public Offering, not to exceed 90 days (180 days in the case of the Initial Public Offering); provided , however , that no Other Stockholder will be required to agree to any restrictions that are more restrictive than those applicable to any DLJMB Stockholder; provided further , however, that the restrictions described in this Section 1.03 shall not apply to (i) any Company Securities or other securities of the Company acquired in the Initial Public Offering, in any Public Offering or in any open market transaction following the Initial Public Offering and (ii) any Other Stockholder that ceases to have Piggyback Registration Rights.

 

(b)           Other than pursuant to a Demand Registration or Piggyback Registration, following the expiration of any underwriter lock-up period applicable to the Stockholders for the Initial Public Offering:

 

(i)            only fifty percent (50%) of the Company Securities held by each Stockholder shall become eligible for sale by such Stockholder on the date that is 180 days following the expiration of such underwriter lock-up period; and

 

(ii)           the remaining fifty percent (50%) of such Stockholder’s Company Securities shall become eligible for sale by such Stockholder on the date that is 271 days following the expiration of such underwriter lock-up period

 

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Section 1.04.     Registration Procedures .  Whenever any Stockholders request that any Registrable Securities be registered pursuant to Section 1.01 or 1.02 hereof, subject to the provisions of such Sections, the Company shall use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as practicable, and, in connection with any such request:

 

(a)            The Company shall as expeditiously as possible prepare and file with the SEC a registration statement on any form for which the Company then qualifies or that counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its best efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days, or in the case of a shelf registration statement, one (1) year (or such shorter period in which all of the Registrable Securities of the Registering Stockholders included in such registration statement shall have actually been sold thereunder).

 

(b)                                  Prior to filing a registration statement or prospectus or any amendment or supplement thereto, the Company shall, if requested, furnish to each participating Stockholder and each underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter the Company shall furnish to such Stockholder and underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act and such other documents as such Stockholder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Stockholder.

 

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(c)            After the filing of the registration statement, the Company shall (i) cause the related prospectus to be supplemented by any required prospectus supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act, (ii) comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement during the applicable period in accordance with the intended methods of disposition by the Registering Stockholders thereof set forth in such registration statement or supplement to such prospectus and (iii) promptly notify each Registering Stockholder holding Registrable Securities covered by such registration statement of any stop order issued or threatened by the SEC or any state securities commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

 

(d)            The Company shall use its best efforts to (i) register or qualify the Registrable Securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions in the United States as any Registering Stockholder holding such Registrable Securities reasonably (in light of such Stockholder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Stockholder to consummate the disposition of the Registrable Securities owned by such Stockholder; provided that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 1.04(d) , (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction.

 

(e)            The Company shall immediately notify each Registering Stockholder holding such Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly prepare and make available to each such Stockholder and file with the SEC any such supplement or amendment.

 

(f)                                     (i) The DLJMB Stockholders shall have the right, in their sole discretion, to select the underwriter or underwriters in connection with any Public Offering resulting from a Demand Registration, which underwriter or underwriters may include any Affiliate of any DLJMB Stockholder, and (ii) the Company shall select an underwriter or underwriters in connection with any other Public Offering.  In connection with any Public Offering, the Company shall enter into customary agreements (including an underwriting agreement in customary form) and take all such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities in any such Public Offering, including the engagement of a “qualified independent underwriter” in connection with the qualification of the underwriting arrangements with FINRA.

 

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(g)            Upon execution of confidentiality agreements in form and substance reasonably satisfactory to the Company, the Company shall make available for inspection by any Registering Stockholder and any underwriter participating in any disposition pursuant to a registration statement being filed by the Company pursuant to this Section 1.04 and any attorney, accountant or other professional retained by any such Stockholder or underwriter (collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “ Records ”) as shall be reasonably necessary or desirable to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement.  Records that the Company determines, in good faith, to be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction.  Each Registering Stockholder agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it or its Affiliates as the basis for any market transactions in the Company Securities unless and until such information is made generally available to the public.  Each Registering Stockholder further agrees that, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, it shall give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

 

(h)            The Company shall furnish to each Registering Stockholder and to each such underwriter, if any, a signed counterpart, addressed to such Stockholder or underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the Company’s independent public accountants, each in customary form and covering such matters of the kind customarily covered by opinions or comfort letters, as the case may be, as a majority of such Stockholders or the managing underwriter therefor reasonably requests.

 

(i)             The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earning statement or such other document that shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

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(j)             The Company may require each such Registering Stockholder promptly to furnish in writing to the Company such information regarding the distribution of the Registrable Securities as the Company may from time to time request and such other information as may be legally required in connection with such registration.

 

(k)            Each such Registering Stockholder agrees that, upon receipt of any written notice from the Company of the occurrence of any event requiring the preparation of a supplement or amendment of a prospectus relating to the Registrable Securities covered by a registration statement that is required to be delivered under the Securities Act so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or to make the statements therein not misleading, such Stockholder shall forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Stockholder’s receipt of the copies of a supplemented or amended prospectus, and, if so directed by the Company, such Stockholder shall deliver to the Company all copies, other than any permanent file copies then in such Stockholder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.  If the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 1.04(a)  hereof) by the number of days during the period from and including the date of the giving of notice pursuant to Section 1.04(e)  hereof to the date when the Company shall make available to such Stockholder a prospectus supplemented or amended to conform with the requirements of Section 1.04(e)  hereof.

 

(l)             The Company shall use its reasonable efforts to list all Registrable Securities covered by such registration statement on any securities exchange or quotation system on which any of the Registrable Securities are then listed or traded and to maintain such listing so long as any such Registrable Securities remain outstanding.

 

(m)           The Company shall have appropriate officers of the Company (i) prepare and make presentations at any “road shows” and before analysts and rating agencies, as the case may be, (ii) take other actions to obtain ratings for any Registrable Securities and (iii) otherwise use their reasonable efforts to cooperate as requested by the underwriters in the offering, marketing or selling of the Registrable Securities.

 

Section 1.05.     Indemnification by the Company .  The Company agrees to indemnify and hold harmless each Registering Stockholder holding Registrable Securities covered by a registration statement, its officers, directors, employees, managers, members, partners and agents, and each Person, if any, who controls any such Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses) (“ Damages ”) caused by or relating to any untrue statement or alleged untrue statement of a material fact contained in any registration statement, prospectus or free writing

 

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prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by or relating to any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Damages are caused by or related to any such untrue statement or omission or alleged untrue statement or omission so made based upon information furnished in writing to the Company by such Stockholder or on such Stockholder’s behalf expressly for use therein, provided that, with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus, or in any prospectus, as the case may be, the indemnity agreement contained in this paragraph shall not apply to the extent that any Damages result from the fact that a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) was not sent or given to the Person asserting any such Damages at or prior to the written confirmation of the sale of the Registrable Securities concerned to such Person if it is determined that the Company has provided such prospectus to such Stockholder and it was the responsibility of such Stockholder to provide such Person with a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) and such current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) would have cured the defect giving rise to such Damages.  The Company also agrees to indemnify any underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Stockholders provided in this Section 1.05 .

 

Section 1.06.     Indemnification by the Participating Stockholders .  Each Registering Stockholder holding Registrable Securities included in any registration statement agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Stockholder, but only (i) with respect to information furnished in writing to the Company by such Stockholder or on such Stockholder’s behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus or (ii) to the extent that any Damages result from the fact that a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) was not sent or given to the Person asserting any such Damages at or prior to the written confirmation of the sale of the Registrable Securities concerned to such Person if it is determined that it was the responsibility of such Stockholder to provide such Person with a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) and such current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) was available to such Stockholder and would have cured the defect giving rise to such Damages.  Each such Stockholder also agrees to indemnify and hold harmless underwriters of the Registrable Securities, their officers and directors and each Person

 

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who controls such underwriters within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in this Section 1.06 .  As a condition to including Registrable Securities in any registration statement filed in accordance with Article 5 hereof, the Company may require that it shall have received an undertaking reasonably satisfactory to it from any underwriter to indemnify and hold it harmless to the extent customarily provided by underwriters with respect to similar securities.  No Registering Stockholder shall be liable under this Section 1.06 for any Damages in excess of the net proceeds realized by such Stockholder in the sale of Registrable Securities of such Stockholder to which such Damages relate.

 

Section 1.07.     Conduct of Indemnification Proceedings .  If any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Agreement, such Person (an “ Indemnified Party ”) shall promptly notify the Person against whom such indemnity may be sought (the “ Indemnifying Party ”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses, provided that the failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure to notify.  In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the reasonable judgment of such Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  It is understood that, in connection with any proceeding or related proceedings in the same jurisdiction, the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred.  In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties.  The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any Damages (to the extent stated above) by reason of such settlement or judgment.  Without the prior written consent of the Indemnified Party, no Indemnifying Party shall effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding.

 

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Section 1.08.     Contribution .  If the indemnification provided for in this Article 1 is unavailable to the Indemnified Parties in respect of any Damages, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages (i) as between the Company and the Registering Stockholders holding Registrable Securities covered by a registration statement on the one hand and the underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and such Stockholders on the one hand and the underwriters on the other, from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and such Stockholders on the one hand and of such underwriters on the other in connection with the statements or omissions that resulted in such Damages, as well as any other relevant equitable considerations and (ii) as between the Company on the one hand and each such Stockholder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each such Stockholder in connection with such statements or omissions, as well as any other relevant equitable considerations.  The relative benefits received by the Company and such Stockholders on the one hand and such underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and such Stockholders bear to the total underwriting discounts and commissions received by such underwriters, in each case as set forth in the table on the cover page of the prospectus.  The relative fault of the Company and such Stockholders on the one hand and of such underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and such Stockholders or by such underwriters.  The relative fault of the Company on the one hand and of each such Stockholder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

The Company and the Registering Stockholders agree that it would not be just and equitable if contribution pursuant to this Section 1.08 were determined by pro rata allocation (even if the underwriters were treated as one Member for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph.  The amount paid or payable by an Indemnified Party as a result of the Damages referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 1.08 , no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the

 

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public exceeds the amount of any Damages that such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Registering Stockholder shall be required to contribute any amount in excess of the amount by which the net proceeds realized by such Stockholder in the sale of Registrable Securities of such Stockholder to which such Damages relate exceeds the amount of any Damages that such Stockholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  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.  Each Registering Stockholder’s obligation to contribute pursuant to this Section 1.08 is several in the proportion that the proceeds of the offering received by such Stockholder bears to the total proceeds of the offering received by all such Registering Stockholders and not joint.

 

Section 1.09.     Participation in Public Offering .  No Stockholder will be permitted to require registration of any Registrable Securities in any Public Offering hereunder unless such Stockholder (a) agrees to sell such Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and the provisions of this Agreement in respect of registration rights.

 

Section 1.10.     Other Indemnification .  Indemnification similar to that specified herein (with appropriate modifications) shall be given by the Company and each Stockholder participating therein with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act.

 

Section 1.11.     Cooperation by the Company .  If any Stockholder shall transfer any Registrable Securities pursuant to Rule 144 of the Securities Act, the Company shall cooperate, to the extent commercially reasonable, with such Stockholder and shall provide to such Stockholder such information as such Stockholder shall reasonably request.

 

Section 1.12.     No Transfer of Registration Rights .  None of the rights of Stockholders under this Agreement shall be assignable by any Stockholder to any Person acquiring Securities in any Public Offering or pursuant to Rule 144 of the Securities Act.

 

Section 1.13.     Restriction on Company Grants of Subsequent Registration Rights .  The Company agrees that, without the prior written consent of the DLJMB Stockholders, it shall not enter into any agreement with the holder or prospective holder of any securities of the Company that would allow such holder or prospective holder any registration rights.

 

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ARTICLE II

 

The following terms, as used herein, have the following meanings:

 

Section 2.01.     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 2.02.     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 2.03.     Company Securities ” means (i) the common stock of the Company, (ii) any other stock issued by the Company and (iii) any securities convertible into or exchangeable for, or options, warrants or other rights to acquire, common stock or any other stock issued by the Company.

 

Section 2.04.     DLJMB Stockholders ” means DLJ Merchant Banking Partners IV, L.P., 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.

 

Section 2.05.     Exchange Act ” means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.

 

Section 2.06.     Initial Public Offering ” means the first Public Offering.

 

Section 2.07.     Management Stockholder ” means any Stockholder who is an employee of the Company or any of its Subsidiaries.  In no event shall any DLJMB Stockholder be deemed to be a Management Stockholder.

 

Section 2.08.     Other Stockholder ” means all Stockholders other than the DLJMB Stockholders.

 

Section 2.09.     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 2.10.     Public Offering ” means an underwritten public offering of Company Securities pursuant to an effective registration statement under the Securities Act, other than pursuant to a registration statement on Form S-4 or Form S-8 or any similar or successor form.

 

Section 2.11.     Public Offering Limitations ” means in each Public Offering, such Other Member shall be entitled to Transfer a number of the class of Company Securities to be Transferred in the Offering not exceeding (A) the number of Registrable Securities held by such Other Member at such time multiplied by (B) a fraction the numerator of which is the number of Registrable Securities to be registered by the DLJMB Members in any registration pursuant to Section 1.02 and the denominator of which is the total number of Registrable Securities held by the DLJMB Members immediately prior to any such registration.

 

Section 2.12.     Registrable Securities ” means, at any time, any common stock of the Company 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

 

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effective registration statement, (ii) such shares are sold under Rule 144 under the Securities Act, (iii) such shares are then included in an effective registration statement filed pursuant to this Agreement or (iv) such shares are eligible for sale without registration pursuant to Rule 144 under the Securities Act without limitation thereunder on volume or manner of sale.

 

Section 2.13.     Registration Expenses ” means any and all expenses incident to the performance of or compliance with any registration or marketing of securities, including all (i) registration and filing fees, and all other fees and expenses payable in connection with the listing of securities on any securities exchange or automated interdealer quotation system, (ii) fees and expenses of compliance with any securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with “blue sky” qualifications of the securities registered), (iii) expenses in connection with the preparation, printing, mailing and delivery of any registration statements, prospectuses and other documents in connection therewith and any amendments or supplements thereto, (iv) security engraving and printing expenses, (v) internal expenses of the Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (vi) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses relating to any comfort letters or costs associated with the delivery by independent certified public accountants of any comfort letters), (vii) reasonable fees and expenses of any special experts retained by the Company in connection with such registration, (viii) reasonable fees and out-of-pocket expenses of counsel to the Stockholders participating in the offering selected (A) by the DLJMB Members, in the case of any offering in which any DLJMB Members participate, or (B) in any other case, by the Stockholders holding the majority of the Registrable Securities to be sold for the account of all Stockholders in the offering, (ix) fees and expenses in connection with any review by FINRA of the underwriting arrangements or other terms of the offering, and all fees and expenses of any “qualified independent underwriter,” including the fees and expenses of any counsel thereto, (x) fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding any underwriting fees, discounts and commissions attributable to the sale of Registrable Securities, (xi) costs of printing and producing any agreements among underwriters, underwriting agreements, any “blue sky” or legal investment memoranda and any selling agreements and other documents in connection with the offering, sale or delivery of the Registrable Securities, (xii) transfer agents’ and registrars’ fees and expenses and the fees and expense of any other agent or trustee appointed in connection with such offering, (xiii) expenses relating to any analyst or investor presentations or any “road shows” undertaken in connection with the registration, marketing or selling of the Registrable Securities and (xiv) fees and expenses payable in connection with any ratings of the Registrable Securities, including expenses relating to any presentations to rating agencies.

 

14



 

Section 2.14.     Required Stockholders ” means Stockholders of at least a majority in number of Registrable Securities.

 

Section 2.15.     SEC ” means the United States Securities and Exchange Commission.

 

Section 2.16.     Securities Act ” means the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder.

 

ARTICLE III

 

Section 3.01.     Termination . All rights and obligations of the Company hereunder shall terminate on the date on which no Registrable Securities are outstanding.

 

Section 3.02.     Amendment and Waiver . This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Company, the Required Stockholders of all Registrable Securities and any Stockholder that would be materially and disproportionately affected by such an amendment. Any party hereto may waive any right of such party hereunder by an instrument in writing signed by such party and delivered to the other parties. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.

 

Section 3.03.     Successors and Assigns . This Agreement shall not inure to the benefit of, or be binding on, or be assignable or transferable by any Stockholder to, any Person to the extent such Person acquires Company Securities in, or at any time following, the Initial Public Offering.

 

Section 3.04.     Severability . If any provision of this Agreement shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Agreement shall not be affected and shall remain in full force and effect.

 

Section 3.05.     Entire Agreement . Except as otherwise expressly set forth herein, this Agreement, together with the several agreements and other documents and instruments referred to herein or therein or annexed hereto or thereto, embody the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way.

 

Section 3.06.     Counterparts; Execution by Facsimile Signature . This Agreement may be executed in any number of counterparts, each of which shall be an

 

15



 

original, but all of which together shall constitute one instrument. This Agreement may be executed by facsimile signature(s).

 

Section 3.07.     Notices . All notices required or permitted hereunder shall be in writing and shall be deemed effectively given (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next Business Day or (iii) one Business Day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the addresses set forth below or such other address or facsimile number as a party may from time to time specify by notice to the other parties hereto:

 

If to the Company, at:

 

STR Holdings, Inc.
10 Water Street
Endfield, CT 06082
Telephone: 860-749-8371
Attention: Investor Relations

 

If to any Stockholder, to such Stockholder’s address as set forth in the register of shareholders maintained by the Company.

 

Section 3.08.     Governing Law . THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

Section 3.09.     Consent to Jurisdiction . Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction and venue of the United States District Court for the Southern District of New York and in the courts hearing appeals therefrom unless no basis for federal jurisdiction exists, in which event each party hereto irrevocably consents to the exclusive jurisdiction and venue of the Supreme Court of the State of New York, New York County, and the courts hearing appeals therefrom, for any action, suit or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the parties hereto irrevocably and unconditionally waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any such action, suit or proceeding, any claim that such party is not personally subject to the jurisdiction of the aforesaid courts for any reason, other than the failure to serve process in accordance with this Section 3.09, that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and to the fullest extent permitted by applicable law, that the action, suit or proceeding in any such court is brought in an inconvenient forum, that the venue of such action, suit or proceeding is improper, or that this Agreement, or the subject matter hereof, may not be enforced in or by such courts and further irrevocably waives, to the

 

16



 

fullest extent permitted by applicable law, the benefit of any defense that would hinder, fetter or delay the levy, execution or collection of any amount to which the party is entitled pursuant to the final judgment of any court having jurisdiction. Each of the parties hereto expressly acknowledges that the foregoing waivers are intended to be irrevocable under the laws of the State of New York and of the United States of America; provided, that consent by the parties hereto to jurisdiction and service contained in this Section 3.11 is solely for the purpose referred to in this Section 2.09 and shall not be deemed to be a general submission to said courts or in the State of New York other than for such purpose.

 

Section 3.10.     Waiver of Jury Trial . EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. EACH PARTY TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed and delivered as of the date first written above.

 

 

 

STR HOLDINGS, INC.

 

 

 

 

 

 

 

By:

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Executive Vice President and Chief Financial Office

 

17


 

 

DLJ MERCHANT BANKING PARTNERS IV, L.P.

 

By:

DLJ Merchant Banking IV, L.P., its General Partner

 

By:

DLJ Merchant Banking, Inc., its General Partner

 

 

 

By:

/S/ KENNETH LOHSEN

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

DLJ OFFSHORE PARTNERS IV, L.P.

 

 

 

By:

DLJ Merchant Banking IV, L.P., its General Partner

 

By:

DLJ Merchant Banking, Inc., its General Partner

 

 

 

 

By:

/S/ KENNETH LOHSEN

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

DLJ MERCHANT BANKING PARTNERS IV (PACIFIC), L.P.

 

By:

MBP IV Pacific, LLC, its General Partner

 

By:

DLJ Merchant Banking IV, L.P., its Managing Member

 

By:

DLJ Merchant Banking, Inc., its General Partner

 

 

 

By:

/S/ KENNETH LOHSEN

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

 

MBP IV PLAN INVESTORS, L.P.

 

By:

DLJ LBO Plans Management Corporation, its General Partner

 

 

 

By:

/S/ KENNETH LOHSEN

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

By:

DLJ LBO Plans Management Corporation III, its General Partner

 

 

 

By:

/S/ KENNETH LOHSEN

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

[SIGNATURE PAGE TO THE REGISTRATION RIGHTS AGREEMENT]

 



 

 

AXA EQUITABLE LIFE INSURANCE COMPANY

 

 

 

By:

/S/ BASIL LIVANOS

 

Name:

Basil Livanos

 

Title:

Investment Officer

 

 

 

CREDIT SUISSE/CFIG STR INVESTORS SPV, LLCBy:

 

DLJ MB Advisors, Inc., its Managing Member

 

 

 

By:

/S/ KENNETH LOHSEN

 

Name:

Kenneth Lohsen

 

Title:

Vice President

 

 

 

 

 

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

 

 

 

By:

/S/ HOWARD STERN

 

Name:

Howard Stern

 

Title:

Authorized Representative

 

 

 

PRAIRIE FIRE TRUST

 

 

 

By:

/S/ JOHN W. BLACKBURN

 

Name:

John W. Blackburn

 

Title:

Authorized Designee

 

 

 

MRS TRUST

 

 

 

By:

/S/ JOHN W. BLACKBURN

 

Name:

John W. Blackburn

 

Title:

Trustee

 

 

 

MICHAEL R. STONE 2008 GRAT

 

 

 

By:

/S/ JOHN W. BLACKBURN

 

Name:

John W. Blackburn

 

Title:

Trustee

 

 

 

HARRINGTON SOUND, LLC

 

 

 

By:

/S/ ELIZABETH BARRETT

 

Name:

Elizabeth Barrett

 

Title:

Trustee of HS Trust its Member

 

[SIGNATURE PAGE TO THE REGISTRATION RIGHTS AGREEMENT]

 



 

 

/S/ MICHAEL R. STONE

 

Michel R. Stone

 

 

 

/S/ JOHN A. JANITZ

 

John A. Janitz

 

 

 

/S/ DOMINICK J. SCHIANO

 

Dominick J. Schiano

 

 

 

/S/ PAUL VIGANO

 

Paul Vigano

 

 

 

/S/ JOHN F. GUAL

 

John F. Gual

 

 

 

/S/ ROBERT S. YORGENSEN

 

Robert S. Yorgensen

 

 

 

/S/ BARRY A MORRIS

 

Barry A. Morris

 

 

 

/S/ WEI HUNG KWOK

 

Wei Hung Kwok

 

 

 

/S/ DENNIS L. JILOT

 

The Dennis L. and Linda L. Jilot Family Trust

 

 

 

/S/ DENNIS L. JILOT

 

Dennis L. Jilot

 

 

 

/S/ THOMAS D. VITRO

 

Thomas D. Vitro

 

 

 

/S/ GREGORY G. GARDNER

 

Gregory G. Gardner

 

 

 

/S/ RICHARD IAN SAUNDERSON

 

Richard Ian Saunderson

 

 

 

/S/ MICHAEL CHOUKAS

 

Michael Choukas

 

 

 

/S/ VARCHALA ABROL

 

Varchala Abrol

 

 

 

/S/ ROBERT J. CAMMILLERI

 

Robert J. Cammilleri

 

[SIGNATURE PAGE TO THE REGISTRATION RIGHTS AGREEMENT]

 



 

 

/S/ RUSSELL CHILDREY

 

Russell Childrey

 

 

 

/S/ SUSAN E. DERAGON

 

Susan E. DeRagon

 

 

 

/S/ FRANCIS J. DONINO

 

Francis J. Donino

 

 

 

/S/ ANN MARIE GLICA

 

Ann Marie Glica

 

 

 

/S/ THOMAS J. HARNEY

 

Thomas J. Harney

 

 

 

/S/ CHI KIN KAM

 

Chi Kin Kam

 

 

 

/S/ EDWARD F. KOZLOSKI

 

Edward F. Kozloski

 

 

 

/S/ ZENON KRUCZKOWSKI

 

Zenon Kruczkowski

 

 

 

/S/ ROY C. LAMOTHE

 

Roy C. Lamothe

 

 

 

/S/ CARINA MACEIRA

 

Carina Maceira

 

 

 

/S/ ALYCE E. MAYER

 

Alyce E. Mayer

 

 

 

/S/ DONALD O. MONTANARI

 

Donald O. Montanari

 

 

 

/S/ VICTOR OVADIA

 

Victor Ovadia

 

 

 

/S/ ALEJANDRO SANCHEZ

 

Alejandro Sanchez

 

 

 

/S/ RYAN T. TUCKER

 

Ryan T. Tucker

 

 

 

/S/ HANS-HERMANN VOGEL

 

Hans-Hermann Vogel

 

[SIGNATURE PAGE TO THE REGISTRATION RIGHTS AGREEMENT]

 



 

 

/S/ JACK D. WARREN

 

Jack D. Warren

 

 

 

/S/ LAM SING YIM

 

Lam Sing Yim

 

 

 

/S/ KWOK WAI YU

 

Kwok Wai Yu

 

 

 

/S/ BERNARDO ALVAREZ

 

Bernardo Alvarez

 

 

 

/S/ DAVID ESPINA

 

David Espina

 

 

 

/S/ EUGENE DAMON

 

Eugene Damon

 

[SIGNATURE PAGE TO THE REGISTRATION RIGHTS AGREEMENT]

 




Exhibit 10.1

 

INDEMNITY AGREEMENT

 

This Indemnity Agreement (“ Agreement ”) is made as of November 6, 2009 by and between STR Holdings, Inc. a Delaware corporation (the “ Company ”), and [          ] (“ Indemnitee ”).

 

RECITALS

 

WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors, officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation.

 

WHEREAS, the Board of Directors of the Company (the “ Board ”) has determined that, in order to attract and retain qualified individuals, the Company will maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities.  The Certificate of Incorporation (the “ Charter ”) of the Company and the Bylaws (the “ Bylaws ”) of the Company provide for indemnification of the officers and directors of the Company.  Indemnitee may also be entitled to indemnification pursuant to the Delaware General Corporation Law (“ DGCL ”).  The Charter, Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification.

 

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons.

 

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future.

 

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified.

 

WHEREAS, this Agreement is a supplement to and in furtherance of the Charter and Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

 



 

1.              Services to the Company .  Indemnitee will serve as a director and/or officer of the Company or Enterprise for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his resignation or is terminated.

 

2.              Definitions.   For purposes of this Agreement, the following terms shall have the following meanings:

 

(a)            “Corporate Status” describes the status of a person who is or was a director, officer, trustee, partner, managing member, fiduciary, employee or agent of the Company or of any other Enterprise which such person is or was serving at the request of the Company.

 

(b)            “Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

 

(c)            “Enterprise” shall mean the Company, any Subsidiary of the Company and any other corporation, limited liability company, partnership, limited partnership, limited liability partnership, joint venture, trust, employee benefit plan or other Enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, trustee, partner, managing member, fiduciary, employee or agent.

 

(d)            “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(e)            “Expenses” shall include attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding.  Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation, the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent.

 

(f)             “Independent Counsel” shall mean a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent:  (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

(g)            “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) 

 

2



 

any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

 

(h)            The term “Proceeding” shall include any threatened, pending or completed action, suit, claim, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative nature, in which Indemnitee was, is or will be involved as a party or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or of any inaction on his part while acting as director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of any other Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement.

 

(i)             “Subsidiary” shall mean, in respect of any Person, any corporation, association, limited liability company, partnership or other business entity of which more than 50% of the total voting power of shares of capital stock or other interests (including partnership or membership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.

 

(j)             References to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of the Company or which imposes duties on, or involves services by, such director, officer, trustee, partner, managing member, fiduciary, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as such terms are referred to in this Agreement and used in the DGCL.

 

3.              Indemnity in Third-Party Proceedings.   The Company shall indemnify and hold harmless Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is made, or is threatened to be made, a party to or a participant in (as a witness or otherwise) any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor.  Pursuant to this Section 3 , Indemnitee shall be indemnified against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including, without limitation, all interest, assessments and other charges paid or payable in connection with or in respect of any of the foregoing) (collectively, “ Losses ”) actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any action, discovery event, claim, issue or matter therein or related thereto, if Indemnitee acted in good faith, for a purpose which he reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding, in addition, had no reasonable cause to believe that his or her conduct was unlawful.

 

3



 

4.              Indemnity in Proceedings by or in the Right of the Company.   The Company shall indemnify and hold harmless Indemnitee in accordance with the provisions of this Section 4 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding by or in the right of the Company to procure a judgment in its favor.  Pursuant to this Section 4 , Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company.  No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court in a non-appealable decision to be liable to the Company, unless and only to the extent that any court in which the Proceeding was brought or the Delaware Court (as defined below) shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

 

5.              Indemnification for Expenses of a Party Who is Wholly or Partly Successful.  Notwithstanding any other provisions of this Agreement, to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify and hold harmless Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith.  If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify and hold harmless Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter.  If the Indemnitee is not wholly successful in such Proceeding, the Company also shall indemnify and hold harmless Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which the Indemnitee was successful.  For purposes of this Section 5 and without limitation, the termination of any claim, issue or matter in such a Proceeding by withdrawal or dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

6.              Indemnification For Expenses of a Witness.   Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified and held harmless against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

 

7.              Additional Indemnification.

 

(a)            Notwithstanding any limitation in Sections 3 , 4 or 5 hereof, the Company shall indemnify Indemnitee to the fullest extent permitted by law if Indemnitee is made, or is threatened to be made, a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Losses actually and reasonably incurred by Indemnitee in connection with the Proceeding.  No indemnification shall be made under this Section 7(a)  on account of Indemnitee’s conduct which constitutes a breach of Indemnitee’s duty of loyalty to the Company or its stockholders or is an act or omission not in good faith or which involves intentional misconduct or a knowing violation of the law.

 

4



 

(b)            For purposes of Section 7(a)  hereof, the meaning of the phrase “ to the fullest extent permitted by law ” shall include, but not be limited to:

 

i.               to the fullest extent authorized or permitted by the provisions of the DGCL as in effect as of the date of this Agreement that authorize or contemplate indemnification by agreement; and

 

ii.              to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

 

8.              Contribution in the Event of Joint Liability.

 

(a)            Whether or not any of the indemnification and hold harmless rights provided in Sections 3 , 4 , 5 and 7 hereof are available in respect of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such Proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee.  The Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

 

(b)            Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding), the Company shall contribute to the amount of Expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such Proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which such Proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such Proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the events that resulted in such expenses, judgments, fines or amounts paid in settlement, as well as any other equitable considerations.  The relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such Proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary, and the degree to which their conduct is active or passive.

 

(c)            The Company hereby agrees to fully indemnify and hold harmless Indemnitee from any claims for contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee.

 

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9.              Exclusions.  Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity payment in connection with any claim made against Indemnitee:

 

(a)            for which payment actually has been received by or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount actually received under any insurance policy or other indemnity provision; or

 

(b)            for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law;

 

(c)            except as otherwise provided in Sections 14(d)-(e)  hereof, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law; or

 

(d)            to the extent such payment would violate Section 402 of the Sarbanes-Oxley Act of 2002.

 

10.            Advances of Expenses; Defense of Claim.

 

(a)            Notwithstanding any provision of this Agreement to the contrary, the Company shall advance the Expenses incurred by Indemnitee to the fullest extent permitted by law in connection with any Proceeding within ten (10) business days after the receipt by the Company of a statement or statements (including, at the request of the Company, reasonable detail underlying the expenses for which payment is requested) requesting such advances from time to time, whether prior to or after final disposition of any Proceeding.  Advances shall be unsecured, interest free and shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement.  Advances shall include any and all reasonable Expenses incurred pursuing a Proceeding to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed.  The Indemnitee shall qualify for advances solely upon the execution and delivery to the Company of an undertaking providing that the Indemnitee undertakes to repay the advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company.  This Section 10(a)  shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 9 hereof.

 

(b)            The Company will be entitled to participate in the Proceeding at its own cost and expense.

 

(c)            In the event the Company shall be obligated under this Section 10 hereof to pay the expenses of any Proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee, which

 

6



 

approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election so to do.  After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently paid or incurred by Indemnitee with respect to the same Proceeding, provided that (a) Indemnitee shall have the right to employ his counsel in any such Proceeding at Indemnitee’s expense; and (b) if (1) the employment of counsel by Indemnitee has been authorized by the Company, (2) (i) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company (or any other person or persons included in a joint defense) and Indemnitee in the conduct of any such defense or (ii) representation by such counsel retained by the Company would be precluded under the applicable standards of professional conduct, or (3) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.  The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which Indemnitee shall have reasonably made the conclusion provided for in (2) above.

 

11.            Procedure for Notification and Application for Indemnification.

 

(a)            Indemnitee agrees to notify promptly the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder.  The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise unless the Company is materially prejudiced by such failure.

 

(b)            Indemnitee shall thereafter deliver to the Company a written application to indemnify and hold harmless Indemnitee in accordance with this Agreement.  Such application(s) may be delivered from time to time and at such time(s) as reasonably appropriate.  Following such a written application for indemnification by Indemnitee, the Indemnitee’s entitlement to indemnification shall be determined according to Section 12(a)  hereof.

 

12.            Procedure Upon Application for Indemnification.

 

(a)            Upon written request by Indemnitee for indemnification pursuant to Section 11(b)  hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following methods, which shall be at the election of Indemnitee:  (i) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board; (ii) by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (iii) by the stockholders of the Company.  If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) business days after such determination.  Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination.  Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the

 

7



 

determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

 

(b)            In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12(a)  hereof, the Independent Counsel shall be selected as provided in this Section 12(b) .  The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected.  If the Independent Counsel is selected by the Board, the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected.  In either event, Indemnitee or the Company, as the case may be, may, within ten (10) business days after such written notice of selection shall have been received, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided , however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 hereof, and the objection shall set forth with particularity the factual basis of such assertion.  Absent a proper and timely objection, the person so selected shall act as Independent Counsel.  If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit.  If, within twenty (20) business days after submission by Indemnitee of a written request for indemnification pursuant to Section 11(b)  hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court (as defined below) for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Delaware Court, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 12(a)  hereof.  Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14(a)  of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 

(c)            The Company agrees to pay the reasonable fees and expenses of Independent Counsel and to fully indemnify and hold harmless such Independent Counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

13.            Presumptions and Effect of Certain Proceedings.

 

(a)            Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

 

8


 

(b)            If the person, persons or entity empowered or selected under Section 12 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be made in accordance with Section 14 ; provided , however , that such thirty (30) day period may be extended for a reasonable time if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto or for compliance with applicable advance notice provisions or delivery of meeting materials in connection with any stockholder or board meeting.

 

(c)            The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was not unlawful.

 

14.            Remedies of Indemnitee.

 

(a)            In the event that (i) a determination is made pursuant to Section 12 hereof that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 10 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 12(a)  of this Agreement within thirty (30) days after receipt by the Company of the request for indemnification (as such time period may extended in accordance with Section 13(b) ), (iv) payment of indemnification is not made pursuant to Section 5 , 6 or the last sentence of Section 12(a)  hereof within ten (10) business days after receipt by the Company of a written request therefor, or (v) payment of indemnification pursuant to Section 3 , Section 4 or Section 7 hereof is not made within ten (10) business days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Delaware Court (as defined below) to such indemnification or advancement of Expenses.  Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association.  Except as set forth herein, the provisions of Delaware law (without regard to its conflict of laws rules) shall apply to any such arbitration.  The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

 

(b)            If a determination shall have been made pursuant to Section 12(a)  hereof that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall be conducted in all respects as a de   novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination.  If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 14 , Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 10 hereof until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).

 

9



 

(c)            If a determination shall have been made pursuant to Section 12(a)  hereof that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14 , absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

(d)            The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

 

(e)            The Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by Indemnitee, shall (within ten (10) business days after the Company’s receipt of such written request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any judicial proceeding or arbitration brought by Indemnitee (i) to enforce his rights under, or to recover damages for breach of, this Agreement or any other indemnification, advancement or contribution agreement or provision of the Company’s Charter or Bylaws now or hereafter in effect; or (ii) for recovery or advances under any insurance policy maintained by any person for the benefit of Indemnitee, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance, contribution or insurance recovery, as the case may be.

 

15.            Non-exclusivity; Survival of Rights; Subrogation.

 

(a)            The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, Bylaws, any agreement, a vote of stockholders of the Company or a resolution of the Board, or otherwise.  No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal.  To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Charter, Bylaws or this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

(b)           The Company or its Subsidiaries shall be primarily liable for all indemnification, reimbursements, advancements or similar payments (the “ Indemnity Obligations ”) afforded to Indemnitee acting on behalf or at the request of the Company or any of its Subsidiaries, whether the Indemnity Obligations are created by law, organizational or constituent documents, contract (including this Agreement) or otherwise. Notwithstanding the fact that such Indemnitee’s employer, other than the Company (such persons, together with its and their heirs, successors and assigns, the “ Employer Parties ”), may have concurrent liability to Indemnitee with respect to the Indemnity Obligations, the Company hereby agrees that in no event shall the Company or any of its Subsidiaries have any right or claim against any of the Employer Parties for contribution or have rights of subrogation against any Employer Parties through Indemnitee for any payment made by the Company or any of its Subsidiaries with respect to any Indemnity Obligation. In addition, the Company hereby agrees that in the event that any Employer Parties pay or advance to Indemnitee any amount with respect to an Indemnity Obligation, the Company will, or will cause its Subsidiaries to, as applicable, promptly reimburse such Employer Parties for such payment or advance upon request.

 

(c)            In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

10



 

(d)            The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

 

(e)            The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such Enterprise.

 

16.            Settlement .

 

(a)            Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without the Company’s prior written consent.

 

(b)            The Company shall not, without the prior written consent of Indemnitee, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (1) includes an admission of fault of Indemnitee, any non-monetary remedy affecting or obligation of Indemnitee, or monetary loss for which Indemnitee is not wholly indemnified hereunder or (2) with respect to any Proceeding with respect to which Indemnitee may be or is made a party, witness or participant or may be or is otherwise entitled to seek indemnification hereunder, does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee.  Neither the Company nor Indemnitee shall unreasonably withhold its consent to any proposed settlement under this Section 16 .

 

17.            Insurance.

 

(a)            The Company shall obtain and maintain a policy or policies of director’s and officer’s liability insurance customary for similarly situated companies in a sufficient amount as determined by the Board, with reputable insurance companies providing the Indemnitee, other officers of the Company and members of the Board with coverage for losses from wrongful acts, and to ensure the Company’s performance of its indemnification obligations under this Agreement.  In all policies of director and officer liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee at least the same rights and benefits as are accorded to the most favorably insured of the Company’s officers and directors.  Notwithstanding anything to the contrary in this Agreement, the Company shall not indemnify the Indemnitee to the extent the Indemnitee is actually reimbursed from the proceeds of insurance, and in the event the Company makes any indemnification payments to the Indemnitee and the Indemnitee is subsequently reimbursed from the proceeds of insurance, the Indemnitee shall promptly refund such indemnification payments to the Company to the extent of such insurance reimbursement.

 

18.            Duration of Agreement.   This Agreement shall continue until and terminate upon the later of: (a) six (6) years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company or as a director, officer, trustee, partner, managing member,

 

11



 

fiduciary, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise which Indemnitee served at the request of the Company; or (b) one (1) year after the final termination of any Proceeding (including any rights of appeal thereto) then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 14 hereof relating thereto (including any rights of appeal of any Section 14 Proceeding).

 

19.            Severability.   If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

20.            Enforcement and Binding Effect.

 

(a)            The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.

 

(b)            This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

 

(c)            The indemnification and advancement of expenses provided by, or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise at the Company’s request, and shall inure to the benefit of Indemnitee and his or her spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

 

(d)            The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

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(e)            The Company and Indemnitee agree herein that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm.  Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled.  The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith.  The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by any court of competent jurisdiction, and the Company hereby waives any such requirement of such a bond or undertaking.

 

21.            Modification and Waiver.   No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

 

22.            Notices.   All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) if delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

 

(a)            If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide in writing to the Company.

 

(b)            If to the Company to:

 

STR Holdings, Inc.

10 Water Street

Enfield, CT 06082

Attention:  Board of Directors

 

or to any other address as may have been furnished to Indemnitee in writing by the Company.

 

23.            Contribution.   To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and (ii) the relative fault of the Company (and its

 

13



 

directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

 

24.            Applicable Law and Consent to Jurisdiction.  This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules.  Except with respect to any arbitration commenced by Indemnitee pursuant to Section 14(a)  hereof, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “ Court ”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Court has been brought in an improper or inconvenient forum.

 

25.            Counterparts.   This Agreement may be executed in two or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.  Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

 

26.            Miscellaneous.   Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.  The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

[Remainder of this page intentionally left blank.]

 

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CONFIDENTIAL

 

 

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

 

 

STR HOLDINGS, INC.

 

INDEMNITEE

 

 

 

 

 

 

By:

 

 

By:

 

 

 

 

Name:

 

 

Name:

Title:

 

 

Address:

 




Exhibit 10.2

 

STR Holdings, Inc.

2009 Equity Incentive Plan

 

Article 1.                Establishment & Purpose

 

1.1   Establishment .  STR Holdings, Inc., a Delaware corporation (hereinafter referred to as the “ Company ”), establishes the 2009 Equity Incentive Plan (hereinafter referred to as the “ Plan ”) as set forth in this document.

 

1.2   Purpose of the Plan .  The purpose of this Plan is to attract, retain and motivate officers and employees of, consultants to, and non-employee directors providing services to the Company and its Subsidiaries and Affiliates, and to promote the success of the Company’s business by providing them with appropriate incentives and rewards either through a proprietary interest in the long-term success of the Company or compensation based on fulfilling their performance goals.

 

Article 2.                Definitions

 

Whenever capitalized in the Plan, the following terms shall have the meanings set forth below.

 

2.1           Affiliate means any entity that the Company, either directly or indirectly, is in common control with, is controlled by or controls or any entity in which the Company has a substantial direct or indirect equity interest, as determined by the Board.

 

2.2           Award means any Option, Stock Appreciation Right, Restricted Stock, Dividend Equivalent or Other Stock-Based Award that is granted under the Plan.

 

2.3           Award Agreement means either (a) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan, or (b) a written statement issued by the Company to a Participant describing the terms and provisions of the actual grant of such Award.

 

2.4           Beneficial Owner or Beneficial Ownership shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

 

2.5           Board means the Board of Directors of the Company.

 

2.6           Change of Control means the occurrence of any of the following events with respect to the Company, (i) any consolidation or merger with or into any other corporation, partnership, limited liability company or other entity in which the holders of capital stock of the Company immediately prior to such merger or consolidation no longer beneficially own, directly or indirectly, a majority of the outstanding capital stock or equity interest of the surviving corporation, partnership, limited liability company or other entity immediately after such merger or consolidation, (ii) the sale or transfer of the capital stock of the Company in which the holders of capital stock of the Company immediately prior to such sale or transfer no longer beneficially own, directly or indirectly, a majority of the outstanding capital stock or equity interest of the Company immediately after such sale or transfer, (iii) a sale or transfer of all or substantially all of the assets of the Company, or (iv) the license of all or substantially all of the assets of the Company where such license is substantially equivalent to a sale or transfer of all or substantially all of the assets of the Company.

 



 

2.7           Code means the U.S. Internal Revenue Code of 1986, as amended from time to time.

 

2.8           Committee means the Board, or any committee designated by the Board to administer this Plan.

 

2.9           Company means STR Holdings, Inc., a Delaware corporation, and any successor thereto.

 

2.10         Consultant means any person (other than an Employee or a Director) who is engaged by the Company, a Subsidiary or an Affiliate to render consulting or advisory services to the Company or such Subsidiary or Affiliate.

 

2.11         Director means a member of the Board who is not an Employee.

 

2.12         Dividend Equivalent means any right to a dividend equivalent granted from time to time under Article 6 of the Plan.

 

2.13         Effective Date means the date set forth in Section 14.14.

 

2.14         Employee means an officer or other employee of the Company, its Subsidiaries or an Affiliate, including a member of the Board who is such an employee.

 

2.15         Exchange Act means the Securities Exchange Act of 1934, as amended from time to time.

 

2.16         Fair Market Value means, as of any date of determination (i)  if the Shares are listed on any established stock exchange or a national market system, its fair market value shall be the closing sales price for a share of such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; (ii)  if the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, its fair market value shall be the mean between the high bid and low asked prices for a Share on the last market trading day prior to the day of determination; or (iii) in the absence of an established market for the Shares, the fair market value thereof shall be determined in good faith by the Board through a reasonable application of a reasonable valuation method.

 

2.17         Incentive Stock Option means an Option intended to meet the requirements of an incentive stock option as defined in Section 422 of the Code and designated as an Incentive Stock Option.

 

2.18         Nonqualified Stock Option means an Option that is not an Incentive Stock Option.

 

2.19         Other Stock-Based Award means any right granted under Article 10 of the Plan.

 

2.20         Option means any stock option granted form time to time under Article 6 of the Plan.

 

2.21         Option Price means the purchase price per Share subject to an Option, as determined pursuant to Section 6.2 of the Plan.

 

2.22         Participant means any eligible person as set forth in Section 4.1 to whom an Award is granted.

 

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2.23         Plan means the STR Holdings, Inc. Equity Incentive Plan.

 

2.24         Restricted Stock ” means any Award granted under Article 8.

 

2.25         Restriction Period means the period during which Restricted Stock awarded under Article 8 of the Plan is subject to forfeiture.

 

2.26         Service means service as an Employee, Director or Consultant.

 

2.27         Share means a share of common stock of the Company, par value $[      ] per share, or such other class or kind of shares or other securities resulting from the application of Section 12.1 hereof.

 

2.28         Stock Appreciation Right means any right granted under Article 7.

 

2.29         Subsidiary means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company (or any parent of the Company) if each of the corporations, other than the last corporation in each unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

2.30         Ten Percent Stockholder means a person who on any given date owns, either directly or indirectly (taking into account the attribution rules contained in Section 424(d) of the Code), stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or a Subsidiary or Affiliate.

 

Article 3.                Administration

 

3.1           Authority of the Committee .  The Plan shall be administered by the Committee, which shall have full power to interpret and administer the Plan and full authority to select the Directors, Employees and Consultants to whom Awards will be granted and determine the type and amount of Awards to be granted to each such Director, Employee or Consultant, the terms and conditions of Awards granted under the Plan and the terms of Award Agreements to be entered into with Participants.  Without limiting the generality of the foregoing, the Committee may, in its sole discretion, clarify, construe or resolve any ambiguity in, or interpret any provision of, any provision of the Plan or any Award Agreement, accelerate or waive vesting of Awards and exercisability of Awards, extend the term or period of exercisability of any Awards, modify the purchase price under any Award, or waive any terms or conditions applicable to any Award; provided that no action taken by the Committee shall adversely affect in any material respect the rights granted to any Participant under any outstanding Awards without the Participant’s written consent (other than pursuant to Article 11 or Article 12 hereof).  Awards may, in the discretion of the Committee, be made under the Plan in assumption of, or in substitution for, outstanding awards previously granted by the Company or its affiliates or a company acquired by the Company or with which the Company combines.  The Committee shall have full and exclusive discretionary power to adopt rules, forms, instruments, and guidelines for administering the Plan as the Committee deems necessary or proper.  All actions taken and all interpretations and determinations made by the Committee or by the Board (or any other committee or sub-committee thereof), as applicable, shall be final and binding upon the Participants, the Company, and all other interested individuals.

 

3.2           Delegation.   The Committee may delegate to one or more of its members, one or more officers of the Company or any of its Subsidiaries, and one or more agents or advisors such administrative duties or powers as it may deem advisable.

 

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Article 4.                Eligibility and Participation

 

4.1           Eligibility .  Participants will consist of such Employees, Consultants, and Directors as the Committee in its sole discretion determines and whom the Committee may designate from time to time to receive awards under the Plan.  Designation of a Participant in any year shall not require the Committee to designate such person to receive an award in any other year or, once designated, to receive the same type or amount of award as granted to the Participant in any other year.

 

4.2           Types of Award.   Awards under the Plan may be granted in any one or a combination of:  (a) Options, (b) Stock Appreciation Rights, (c) Restricted Stock, (d) Dividend Equivalents and (e) Other Stock-Based Awards.  Awards granted under the Plan shall be evidenced by Award Agreements (which need not be identical) that provide additional terms and conditions associated with such Awards, as determined by the Committee in its sole discretion; provided , however , that in the event of any conflict between the provisions of the Plan and any such Award Agreement, the provisions of the Plan shall prevail.

 

Article 5.                Shares Subject to the Plan and Maximum Awards

 

5.1           Number of Shares Available for Awards.

 

(a)            General.  Subject to adjustment as provided in Section 5.1(b) and Article 12, the maximum number of Shares available for issuance to Participants pursuant to Awards under the Plan shall be 4,750,000 Shares.  The Shares available for issuance under the Plan may consist, in whole or in part, of authorized and unissued Shares or treasury Shares. The number of Shares available for granting Incentive Stock Options under the Plan shall not exceed 4,750,000 Shares, subject to adjustments provided in Article 12 hereof and subject to the provisions of Sections 422 or 424 of the Code or any successor provisions.  Any Shares delivered to the Company as part or full payment for the purchase price of an Award granted under this Plan or, to the extent the Committee determines that the availability of Incentive Stock Options under the Plan will not be compromised, to satisfy the Company’s withholding obligation with respect to an Award granted under this Plan, shall again be available for Awards under the Plan.  The maximum number of Shares that can be granted to any one Participant, in any calendar year, shall not exceed 2,000,000 Shares.

 

(b)            Additional Shares.   In the event that any outstanding Award expires, is forfeited, cancelled or otherwise terminated without consideration (i.e., Shares or cash) therefor, the Shares subject to such Award, to the extent of any such forfeiture, cancellation, expiration, termination or settlement for cash, shall again be available for Awards under the Plan. If the Committee authorizes the assumption under this Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, of awards granted under another plan, such assumption shall not reduce the maximum number of Shares available for issuance under this Plan.

 

Article 6.                Stock Options

 

6.1           Grant of Options .  The Committee is hereby authorized to grant Options to Participants.  Each Option shall permit a Participant to purchase from the Company a stated number of Shares at an Option Price established by the Committee, subject to the terms and conditions described in this Article 6

 

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and to such additional terms and conditions, as established by the Committee, in its sole discretion, that are consistent with the provisions of the Plan.  Options shall be designated as either Incentive Stock Options or Nonqualified Stock Options, provided that Options granted to Directors and Consultants shall be Nonqualified Stock Options.  An Option granted as an Incentive Stock Option shall, to the extent it fails to qualify as an Incentive Stock Option, be treated as a Nonqualified Stock Option.  Neither the Committee nor the Company or any of its Affiliates shall be liable to any Participant or to any other person if it is determined that an Option intended to be an Incentive Stock Option does not qualify as an Incentive Stock Option.  Options shall be evidenced by Award Agreements which shall state the number of Shares covered by such Option.  Such agreements shall conform to the requirements of the Plan, and may contain such other provisions, as the Committee shall deem advisable.

 

6.2           Terms of Option Grant.  The Option Price shall be determined by the Committee at the time of grant, but shall not be less than 100% of the Fair Market Value of a Share on the date of grant.  In the case of any Incentive Stock Option granted to a Ten Percent Stockholder, the Option Price shall not be less than 110% of the Fair Market Value of a Share on the date of grant.

 

6.3           Option Term.  The term of each Option shall be determined by the Committee at the time of grant and shall be stated in the Award Agreement, but in no event shall such term be greater than ten years (or, in the case on an Incentive Stock Option granted to a Ten Percent Stockholder, five years).

 

6.4           Time of Exercise .  Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant.

 

6.5           Method of Exercise .  Except as otherwise provided in the Plan or in an Award Agreement, an Option may be exercised for all, or from time to time any part, of the Shares for which it is then exercisable.  For purposes of this Article 6, the exercise date of an Option shall be the later of the date a notice of exercise is received by the Company and, if applicable, the date payment is received by the Company pursuant to clauses (i), (ii), (iii), (iv), or (v) in the following sentence. The aggregate Option Price for the Shares as to which an Option is exercised shall be paid to the Company in full at the time of exercise at the election of the Participant (i) in cash or its equivalent (e.g., by cashier’s check), (ii) to the extent permitted by the Committee, in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee, (iii) partly in cash and, to the extent permitted by the Committee, partly in such Shares, (iv) by reducing the number of Shares otherwise deliverable upon the exercise of the Option by the number of Shares having a Fair Market Value equal to the Option Price, or (v) if there is a public market for the Shares at such time, subject to such requirements as may be imposed by the Committee, through the delivery of irrevocable instructions to a broker to sell Shares obtained upon the exercise of the Option and to deliver promptly to the Company an amount out of the proceeds of such sale equal to the aggregate Option Price for the Shares being purchased.  The Committee may prescribe any other method of payment that it determines to be consistent with applicable law and the purpose of the Plan.

 

6.6           Limitations on Incentive Stock Options .  Incentive Stock Options may be granted only to employees of the Company or of a “parent corporation” or “subsidiary corporation” (as such terms are defined in Section 424 of the Code) at the date of grant.  The aggregate Fair Market Value (generally determined as of the time the Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under all plans of the Company and of any parent corporation or subsidiary corporation) shall not exceed one hundred thousand dollars ($100,000).  For purposes of the preceding sentence, Incentive Stock Options will be taken into account generally in the order in which they are granted.  No Incentive Stock Option may be exercised later than ten (10) years after the date it is granted.  Each provision of the Plan and each Award

 

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Agreement relating to an Incentive Stock Option shall be construed so that each Incentive Stock Option shall be an incentive stock option as defined in Section 422 of the Code, and any provisions of the Award Agreement thereof that cannot be so construed shall be disregarded.

 

Article 7.                Stock Appreciation Rights

 

7.1           Grant of Stock Appreciation Rights .  The Committee is hereby authorized to grant Stock Appreciation Rights to Participants, including a grant of Stock Appreciation Rights in tandem with any Option at the same time such Option is granted (a “ Tandem SAR ”).  Stock Appreciation Rights shall be evidenced by Award Agreements that shall conform to the requirements of the Plan and may contain such other provisions, as the Committee shall deem advisable.  Subject to the terms of the Plan and any applicable Award Agreement, a Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive, upon exercise thereof, the excess of (a) the Fair Market Value of a specified number of Shares on the date of exercise over (b) the grant price of the right as specified by the Committee on the date of the grant.  Such payment may be in the form of cash, Shares, other property or any combination thereof, as the Committee shall determine in its sole discretion.

 

7.2           Terms of Stock Appreciation Right .  Subject to the terms of the Plan and any applicable Award Agreement, the grant price (which shall not be less than 100% of the Fair Market Value of a Share on the date of grant), term, methods of exercise, methods of settlement, and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee.  The Committee may impose such other conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.  Unless otherwise provided in the Award Agreement, no Stock Appreciation Right shall have a term of more than 10 years from the date of grant.

 

7.3           Tandem Stock Appreciation Rights and Options .  A Tandem SAR shall be exercisable only to the extent that the related Option is exercisable and shall expire no later than the expiration of the related Option.  Upon the exercise of all or a portion of a Tandem SAR, a Participant shall be required to forfeit the right to purchase an equivalent portion of the related Option (and, when a Share is purchased under the related Option, the Participant shall be required to forfeit an equivalent portion of the Stock Appreciation Right).

 

Article 8.                Restricted Stock

 

8.1           Grant of Restricted Stock An Award of Restricted Stock is a grant by the Company of a specified number of Shares to the Participant, which Shares may be subject to forfeiture upon the occurrence of specified events.  Participants shall be awarded Restricted Stock in exchange for consideration not less than the minimum consideration required by applicable law.  Restricted Stock shall be evidenced by an Award Agreement, which shall conform to the requirements of the Plan and may contain such other provisions, as the Committee shall deem advisable.

 

8.2           Terms of Restricted Stock Awards .  Each Award Agreement evidencing a Restricted Stock grant shall specify the period(s) of restriction, the number of Shares of Restricted Stock subject to the Award, the purchase price of such Shares of Restricted Stock, the performance, employment or other conditions (including the termination of a Participant’s Service whether due to death, disability or other cause) under which the Restricted Stock may become vested or may be forfeited to the Company and such other provisions as the Committee shall determine.  Upon determination of the number of Shares of Restricted Stock to be granted to the Participant and payment of any purchase price, the Committee shall direct that a certificate or certificates representing the number of Shares be issued to the Participant with the Participant designated as the registered owner. The certificate(s) representing such shares shall be legended as to sale, transfer, assignment, pledge or other encumbrances during the Restriction Period and

 

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deposited by the Participant, together with a stock power endorsed in blank, with the Company, to be held in escrow during the Restriction Period.  At the end of the Restriction Period, the restrictions imposed hereunder shall lapse with respect to the number of shares of Restricted Stock as determined by the Committee, and the legend shall be removed and such number of Shares delivered to the Participant (or, where appropriate, the Participant’s legal representative).

 

8.3           Voting and Dividend Rights.  Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, Participants holding Restricted Stock granted hereunder shall have the right to exercise voting rights with respect to the Restricted Stock and shall have the right to receive dividends on such Restricted Stock.

 

8.4           Performance Goals .  The Committee may condition the grant of Restricted Stock or the expiration of the Restriction Period upon the Participant’s achievement of one or more performance goal(s) specified in the Award Agreement. If the Participant fails to achieve the specified performance goal(s), the Committee shall not grant the Restricted Stock to such Participant or the Participant shall forfeit the Award of Restricted Stock to the Company, as applicable, unless otherwise provided in the Participant’s Award Agreement or the applicable stockholders agreement.

 

8.5           Section 83(b) Election.  If a Participant makes an election pursuant to Section 83(b) of the Code concerning Restricted Stock, the Participant shall be required to promptly file a copy of such election with the Company.

 

Article 9.                Dividend Equivalents

 

The Committee may grant Dividend Equivalents to Participants based on the dividends declared on Shares that are subject to any Award.  The grant of Dividend Equivalents shall be treated as a separate Award.  Dividend Equivalents shall be credited to a notional account maintained by the Company, as of dividend payment dates during the period between the date the Award is granted and the date the Award is exercised, vested, expired, credited or paid.  Such Dividend Equivalents shall be converted to cash or Shares by such formula and at such time and subject to such limitations as may be determined by the Committee.  As determined by the Committee, Dividend Equivalents granted with respect to any Option or Stock Appreciation Right may be payable regardless of whether such Option or Stock Appreciation Right is subsequently exercised.

 

Article 10.             Other Stock-Based Awards

 

The Committee, in its sole discretion, may grant Awards of Shares and Awards that are valued, in whole or in part, by reference to, or are otherwise based on the Fair Market Value of, Shares (the “ Other Stock-Based Awards ”).  Such Other Stock-Based Awards shall be in such form, and dependent on such conditions, as the Committee shall determine, including, without limitation, the right to receive one or more Shares (or the equivalent cash value of such Shares) upon the completion of a specified period of service, the occurrence of an event and/or the attainment of performance objectives.  Other Stock-Based Awards may be granted alone or in addition to any other Awards granted under the Plan.  Subject to the provisions of the Plan, the Committee shall determine to whom and when Other Stock-Based Awards will be made, the number of Shares to be awarded under (or otherwise related to) such Other Stock-Based Awards; whether such Other Stock-Based Awards shall be settled in cash, Shares or a combination of cash and Shares; and all other terms and conditions of such Awards (including, without limitation, the vesting provisions thereof and provisions ensuring that all Shares so awarded and issued shall be fully paid and non-assessable).

 

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Article 11.             Compliance with Section 409A of the Code

 

11.1         General.   To the extent that the Plan and/or Awards are subject to Section 409A of the Code, the Committee may, in its sole discretion and without a Participant’s prior consent, amend the Plan and/or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and actions with retroactive effect) as are necessary or appropriate to (a) exempt the Plan and/or any Award from the application of Section 409A of the Code, (b) preserve the intended tax treatment of any such Award, or (c) comply with the requirements of Section 409A of the Code, Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date of the grant (“Section 409A Guidance”).  This Plan shall be interpreted at all times in such a manner that the terms and provisions of the Plan and Awards are exempt from or comply with Section 409A Guidance.

 

11.2         Timing of Payment.   All Awards that would otherwise be subject to Section 409A of the Code shall be paid or otherwise settled on or as soon as practicable after the applicable vesting date and not later than the 15th day of the third month from the end of (i) the Participant’s tax year that includes the applicable payment or settlement date, or (ii) the Company’s tax year that includes the applicable payment or settlement date, whichever is later; provided , however , that the Committee reserves the right to delay payment or specify a compliant payment date with respect to any such Award under the circumstances set forth in Section 409A Guidance; provided , further , that notwithstanding any contrary provision in the Plan or Award Agreement, any payment(s) that are otherwise required to be made under the Plan to a “specified employee” (as defined under Section 409A of the Code) as a result of his or her separation from service (other than a payment that is not subject to Section 409A of the Code) shall be delayed for the first six (6) months following such separation from service (or, if earlier, the date of death of the specified employee) and shall instead be paid (in a manner set forth in the Award Agreement) on the payment date that immediately follows the end of such six-month period or as soon as administratively practicable thereafter.

 

Article 12.             Adjustments

 

12.1         Adjustments in Capitalization .  In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off, combination of Shares, exchange of Shares, dividend in kind, extraordinary cash dividend, or other like change in capital structure (other than normal cash dividends) to stockholders of the Company, or any similar corporate event or transaction, the Committee, to prevent dilution or enlargement of Participants’ rights under the Plan, shall substitute or adjust, in its sole discretion, (a) the number and kind of Shares or other securities that may be issued under the Plan, the number and kind of Shares or other securities subject to outstanding Awards, and/or where applicable, the exercise price, base value or purchase price applicable to such Awards; (b) grant a right to receive one or more payments of securities, cash and/or property (which right may be evidenced as an additional Award under this Plan) in respect of any outstanding Award, or (c) provide for the settlement of any outstanding Award (other than a Stock Option or Stock Appreciation Right) in such securities, cash and/or other property as would have been received had the Award been settled in full immediately prior to such corporate event or transaction; provided , however , that in the case of an adjustment made in accordance with (b) or (c) above, the right to any securities, cash and/or property may be issued subject to the same vesting schedule as the outstanding Award being adjusted; and provided, further, that any adjustment pursuant to this Section 12.1 shall comply with Section 409A of the Code, to the extent applicable.  Should the vesting of any Award be conditioned upon the Company’s attainment of performance conditions, the Board may make such adjustments to the terms and conditions of such

 

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Awards and the criteria therein to recognize unusual and nonrecurring events affecting the Company or in response to changes in applicable laws, regulations or accounting principles.

 

12.2         Change of Control .  Upon the occurrence of a Change of Control after the Effective Date, unless otherwise specifically prohibited under applicable laws or by the applicable rules and regulations of any governing governmental agencies or national securities exchanges, or unless the Committee shall determine otherwise in the Award Agreement, the Committee is authorized (but not obligated) to make adjustments in the terms and conditions of outstanding Awards, including without limitation the following (or any combination thereof): (i) continuation or assumption of such outstanding Awards under the Plan by the Company (if it is the surviving company or corporation) or by the surviving company or corporation or its parent; (ii) substitution by the surviving company or corporation or its parent of awards with substantially the same terms for such outstanding Awards; (iii) accelerated exercisability, vesting and/or lapse of restrictions under all then outstanding Awards immediately prior to the occurrence of such event; (iv) upon written notice, provided that any outstanding Awards must be exercised, to the extent then exercisable, within fifteen days immediately prior to the scheduled consummation of the event, or such other period as determined by the Committee (in either case contingent upon the consummation of the event), and at the end of such period, such Awards shall terminate to the extent not so exercised within the relevant period; and (v) cancellation of all or any portion of outstanding Awards for fair value (as determined in the sole discretion of the Committee) which, in the case of Options and Stock Appreciation Rights, may equal the excess, if any, of the value of the consideration to be paid in the Change of Control transaction to holders of the same number of Shares subject to such Options or Stock Appreciation Rights (or, if no such consideration is paid, Fair Market Value of the Shares subject to such outstanding Awards or portion thereof being canceled) over the aggregate Option Price or grant price, as applicable, with respect to such Awards or portion thereof being canceled.

 

Article 13.             Duration, Amendment, Modification, Suspension, and Termination

 

13.1         Duration of the Plan.  Unless sooner terminated as provided in Section 13.2, the Plan shall terminate on the tenth (10th) anniversary of the Effective Date.

 

13.2         Amendment, Modification, Suspension, and Termination of Plan .  The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof or any Award (or Award Agreement) thereunder at any time; provided that, subject to Article 11, no such amendment, alteration, suspension, discontinuation or termination shall be made (i) without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to the Plan and (ii) without the consent of the Participant, if such action would materially diminish any of the rights of any Participant under any Award theretofore granted to such Participant under the Plan; provided , however , the Committee may amend the Plan, any Award or any Award Agreement in such manner as it deems necessary to comply with applicable laws.

 

Article 14.             General Provisions

 

14.1         No Right to Service . The granting of an Award under the Plan shall impose no obligation on the Company, any Subsidiary or any Affiliate to continue the Service of a Participant and shall not lessen or affect any right that the Company, any Subsidiary or any Affiliate may have to terminate the Service of such Participant. No Participant or other person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Participants, or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant (whether or not such Participants are similarly situated).

 

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14.2         Settlement of Awards; No Fractional Shares.  Each Award Agreement shall establish the form in which the Award shall be settled.  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award.  The Committee shall determine whether cash, Awards, other securities or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be rounded, forfeited or otherwise eliminated.

 

14.3         Tax Withholding.  The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan.  With respect to required withholding, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares or by delivering Shares to the Company, having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction.

 

14.4         No Guarantees Regarding Tax Treatment.   Participants (or their beneficiaries) shall be responsible for all taxes with respect to any Awards under the Plan.  The Committee and the Company make no guarantees to any person regarding the tax treatment of Awards or payments made under the Plan.  Neither the Committee nor the Company has any obligation to take any action to prevent the assessment of any excise tax on any person with respect to any Award under Section 409A of the Code or otherwise and none of the Company, any of its Subsidiaries or Affiliates, or any of their employees or representatives shall have any liability to a Participant with respect thereto.

 

14.5         Non-Transferability of Awards.  Except as provided by the terms of any applicable stockholders agreement or unless otherwise determined by the Committee, an Award shall not be transferable or assignable by the Participant except in the event of his death (subject to the applicable laws of descent and distribution) and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate.  An award exercisable after the death of a Participant may be exercised by the legatees, personal representatives or distributees of the Participant. Any permitted transfer of the Awards to heirs or legatees of the Participant shall not be effective to bind the Company unless the Committee shall have been furnished with written notice thereof and a copy of such evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions hereof.

 

14.6         Conditions and Restrictions on Shares.  The Committee may impose such other conditions or restrictions on any Shares received in connection with an Award as it may deem advisable or desirable.  These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received for a specified period of time or a requirement that a Participant represent and warrant in writing that the Participant is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.  The certificates for Shares may include any legend which the Committee deems appropriate to reflect any conditions and restrictions applicable to such Shares.

 

14.7         Shares Not Registered .  Shares and Awards shall not be issued under the Plan unless the issuance and delivery of such Shares and any Awards comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, State securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded.  Except as set forth in an Award Agreement, the Company shall not be obligated to file any registration statement under any applicable securities laws to permit the purchase or issuance of any Shares or any Awards under the Plan, and accordingly any certificates for Shares or documents granting Awards may have an appropriate legend or statement of applicable restrictions endorsed thereon.  If the Company deems it necessary to

 

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ensure that the issuance of securities under the Plan is not required to be registered under any applicable securities laws, each Participant to whom such security would be purchased or issued shall deliver to the Company an agreement or certificate containing such representations, warranties and covenants as the Company which satisfies such requirements.

 

14.8         Rights as a Stockholder.  Except as otherwise provided herein or in the applicable Award Agreement, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.

 

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

 

14.10       Unfunded Plan.  Participants shall have no right, title, or interest whatsoever in or to any investments that the Company or any of its Subsidiaries may make to aid it in meeting its obligations under the Plan.  Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other person.  To the extent that any person acquires a right to receive payments from the Company or any of its Subsidiaries under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company or a Subsidiary, as the case may be.  All payments to be made hereunder shall be paid from the general funds of the Company or a Subsidiary, as the case may be, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts.  The Plan is not subject to the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time.

 

14.11       No Constraint on Corporate Action.  Nothing in the Plan shall be construed to (a) limit, impair, or otherwise affect the Company’s or its Subsidiary’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets, or (b) limit the right or power of the Company or its Subsidiary to take any action which such entity deems to be necessary or appropriate.

 

14.12       Successors.   All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business or assets of the Company.

 

14.13       Governing Law.  The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction.

 

14.14       Effective Date. The Plan shall be effective as of the date of adoption by the Board, which date is set forth below (the “ Effective Date ”), provided that the Plan is approved by the stockholders of the Company at an annual meeting or any special meeting of stockholders of the Company within 12 months of the Effective Date, and such approval of stockholders shall be a condition to the right of each Participant to receive any Award hereunder.  Any Award granted under the Plan prior to such approval of stockholders shall be effective as of the date of grant, but no such Award may be exercised or settled and

 

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no restrictions relating to any Award may lapse prior to such stockholder approval, and if stockholders fail to approve the Plan as specified hereunder, any such Award shall be cancelled.

 

*                               *                               *

 

This Plan was duly adopted and approved by the Board of Directors of the Company pursuant to a unanimous written consent of the Board of Directors of the Company dated the 6 th  day of November, 2009.

 

STR HOLDINGS, INC.

 

 

/s/ Barry A. Morris

 

Name:

Barry A. Morris

 

Title:

Executive Vice President and Chief Financial Officer

 

 

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Exhibit 10.3

 

Execution Copy

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “ Agreement ”), dated as of July 18, 2008 (the “ Effective Date ”), is made by and between SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (together with any successor thereto, the “ Company ”), and DENNIS L. JILOT (the “ Executive ”).

 

Recitals

 

A.            The Company desires to engage the Executive to perform services under the terms hereof and the Executive desires to be employed by the Company.

 

B.            The Company desires to be assured that the unique and expert services of the Executive will be substantially available to the Company, and that the Executive is willing and able to render such services on the terms hereinafter set forth.

 

C.            The Company desires to be assured that the confidential information and goodwill of the Company will be preserved for the exclusive benefit of the Company.

 

Terms

 

In consideration of such employment and the respective agreements of the parties set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.              Certain Definitions

 

(a)           “ Annual Base Salary ” shall have the meaning set forth in Section 3(a).

 

(b)           “ Board ” shall mean the Board of Managers of Parent.

 

(c)           “ Bonus Compensation ” shall have the meaning set forth in Section 3(b).

 

(d)           The Company shall have “ Cause ” to terminate the Executive’s employment hereunder upon:  (i) the Executive’s breach of Section 2(c) (other than any such failure resulting from the Executive’s Disability), which is not remedied within 30 days after receipt by the Executive of written notice from the Company specifying such failure in reasonable detail; (ii) the Executive’s failure or refusal to follow the reasonable instructions of the Board or the board of directors of any Subsidiary of the Company, which failure or refusal is not cured within 30 days following written notice; (iii) the Executive’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 ; (iv) the Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s or any of its Subsidiaries’ premises; (v) the Executive’s commission of any act of fraud, embezzlement, misappropriation of funds, material misrepresentation, breach of fiduciary duty or other act of dishonesty detrimental to the Company or any of its Subsidiaries; or (vi) the Executive’s intentional wrongful act or gross negligence that has a material detrimental effect on the Company or its Subsidiaries.

 

(e)           “ Company ” shall have the meaning set forth in the preamble hereto.

 



 

(f)            “ Date of Termination ” shall mean (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated due to his Disability, the date determined pursuant to Section 4(a)(ii); (iii) if the Executive’s employment is terminated pursuant to Section 4(a)(iii)-(vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier; or (iv) if the Executive’s employment is terminated pursuant to Section 4(a)(vii) the date on which the Term expires.

 

(g)           “ Disability ” shall mean (x) any physical or mental illness, injury or infirmity which prevents the Executive from performing the Executive’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 and (y) a disability upon which Executive would be deemed disabled under the definitions contained in the long-term disability insurance policy(s) maintained by the Company for the benefit of Executive pursuant to Section 3(c) of this Agreement.  Any determination of disability shall be made by the Board in consultation with a qualified physician or physicians selected by the Board and reasonably acceptable to the Executive.  The failure of the Executive to submit to a reasonable examination by such physician or physicians shall act as an estoppel to any objection by the Executive to the determination of disability by the Board.

 

(h)           “ Effective Date ” shall have the meaning set forth in the preamble hereto.

 

(i)            “ Executive ” shall have the meaning set forth in the preamble hereto.

 

(j)            The Executive shall have “ Good Reason ” to resign his employment upon the occurrence (without the Executive’s prior written consent) of any of the following:  (A) a material diminution in the nature or scope of the Executive’s responsibilities, duties or authority in his capacity as Chairman, President and Chief Executive Officer, without regard to any other responsibilities, duties or authority the Executive may have had or performed for the Company at any time; (B) the Company’s material breach of this Agreement; (C) any change in the Executive’s reporting relationship so that he no longer reports to the Board; (D) any decrease in the Executive’s Annual Base Salary, target bonus percentage as set forth in Section 3(a), or benefit plans, programs and arrangements as in effect from time to time (other than a general reduction in base salary, target bonus percentages or benefit plans, programs and arrangements that affects all members of senior management equally); or (E) Executive is removed from the Board of Directors of the Company; provided, however , that the Executive may not resign his employment for Good Reason unless:  (x) the Executive provided the Company with at least 30 days prior written notice of his intent to resign for Good Reason (which notice must be provided within 180 days following (i) the occurrence of the event(s) purported to constitute Good Reason, or (ii) if the Executive could not reasonably have known of the occurrence of any of such events, the date on which the Executive had actual knowledge of the occurrence of any of such events); and (y) the Company has not remedied the alleged occurrence(s) within the 30-day period following its receipt of such notice from the Executive.

 

(k)           “ Notice of Termination ” shall have the meaning set forth in Section 4(b).

 

(l)            “ Parent ” means STR Holdings LLC, or any successor thereto, a Delaware limited liability company.

 

(m)          “ Restricted Shares ” shall have the meaning set forth in Section 6.

 

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(n)           “ Term ” shall have the meaning set forth in Section 2(b).

 

2.              Employment

 

(a)           In General .  The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.

 

(b)           Term of Employment .  The initial term of employment under this Agreement (the “ Initial Term ”) shall be for the period beginning on July 18, 2008 and ending on the fourth anniversary thereof, unless earlier terminated as provided in Section 4.  The employment term hereunder shall automatically be extended for successive one-year periods (“ Extension Terms ” and, collectively with the Initial Term, the “ Term ”) unless either party gives written notice of non-extension to the other no later than 90 days prior to the expiration of the then applicable Term.

 

(c)           Position and Duties .  The Executive shall serve as Chairman, President and Chief Executive Officer of the Company, with responsibilities, duties and authority customary for such position.  The Executive shall report to the Board.  The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company and its subsidiaries.  The Executive agrees to observe and comply with the Company’s rules and policies as adopted by the Company from time to time.  During the Term, it shall not be a violation of this Agreement for the Executive to (i) serve on industry trade, civic or charitable boards or committees; (ii) deliver lectures or fulfill speaking engagements; or (iii) manage personal investments (which shall include (x) investments by the Executive of his personal assets in any business which does not compete directly or indirectly with the Company, in such form or manner as will not require any services on the part of the Executive in the operation of such business and (y) the purchase by the Executive of a total of up to 5% of the regularly traded securities of any entity, whether or not it competes with the Company), as long as, in the reasonable judgment of the Board, such activities do not and will not interfere with the performance of the Executive’s duties and responsibilities as an employee of the Company.  The Executive shall perform his duties hereunder primarily from his office located in Reno, Nevada, and at such other locations as are mutually determined by the Executive and the Board, and shall travel as necessary or as reasonably requested by the Board.

 

3.              Compensation and Related Matters

 

(a)           Annual Base Salary .  During the Term, and effective as of December 31, 2007, the Executive shall receive a base salary at a rate of $500,000 per annum, which shall be paid in accordance with the customary payroll practices of the Company (the “ Annual Base Salary ”).  The Executive’s Annual Base Salary will be reviewed annually by the Board and the Board may, in its sole discretion and consistent with past practices, increase the Annual Base Salary considering the Executive’s performance and that of the Company.

 

(b)           Bonus Compensation .  In addition to the Annual Base Salary, for each fiscal year, or portion thereof, during the Term, the Executive shall be eligible to participate in the Company’s management incentive plan (or any successor incentive plan adopted by the Board) pursuant to which Executive may be paid a target amount of 50% of his Annual Base Salary except as the parties may have agreed otherwise in writing; provided , however , in no event shall Executive be paid a regular bonus in excess of 100% of his Annual Base Salary.  The

 

3



 

Executive’s bonus will be based upon performance measured against mutually agreed upon goals to be established as soon as practicable after the date hereof.  In the discretion of management, Executive shall be eligible to receive incentive units pursuant to the terms of the Amended and Restated Limited Liability Company Agreement of STR Holdings LLC (the “ LLC Agreement ”).  Any bonus shall be paid no later than the 15th day of the third month following the end of the calendar year in which such bonus is earned and vested.

 

(c)           Benefits .  The Executive shall be entitled to participate in employee benefit plans, programs and arrangements of the Company now (or, to the extent determined by the Board, hereafter) in effect under Executive’s current employment agreement, dated September 1, 2003.  For the sake of clarity, Executive shall be entitled to continue to participate in, on the same or substantially similar terms, (i) his current long-term disability insurance policy provided by Provident Life and Accident Insurance Company, (ii) his current life insurance policy provided by MassMutual Financial Group, (iii) his current long-term care insurance policy provided by CNA – Continental Casualty Company (Executive’s wife, Linda Jilot, shall also be entitled to continue to participate in, on the same or substantially similar terms, her current long-term care insurance policy provided by CNA – Continental Casualty Company).  In addition, during the Term, Executive shall be entitled to reimbursement of the annual membership dues and standard fees of the La Costa Club of which the Executive is currently a member not to exceed $9,000.

 

(d)           Vacation .  During the Term, the Executive shall be entitled to four weeks paid vacation each calendar year.  Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive.

 

(e)           Expenses .  The Company shall promptly reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures.

 

(f)            Legal Expenses .  Notwithstanding anything to the contrary above, the Company further agrees to reimburse Executive for Executive’s legal costs up to an amount equal to $5,000 in connection with the review of this Agreement and the proposed terms of Employee’s employment hereunder and/or related tax preparation services by Executive’s legal counsel and/or accountant.

 

4.              Termination .  The Executive’s employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:

 

(a)           Circumstances

 

(i)            Death .  The Executive’s employment hereunder shall terminate upon his death.

 

(ii)           Disability .  If the Executive incurs a Disability, the Company may give the Executive written notice of its intention to terminate the Executive’s employment.  In that event, the Executive’s employment with the Company shall terminate effective on the later of the 30th day after receipt of such notice by the

 

4



 

Executive or the date specified in such notice, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties.

 

(iii)          Termination for Cause .  The Company may terminate the Executive’s employment for Cause.

 

(iv)          Termination without Cause .  The Company may terminate the Executive’s employment without Cause.

 

(v)           Resignation for Good Reason .  The Executive may resign his employment for Good Reason.

 

(vi)          Resignation without Good Reason .  The Executive may resign his employment without Good Reason.

 

(vii)         Non-renewal .  Either party may notify the other of his or its intent not to renew this Agreement at least 90 days prior to the expiration of the Term, which shall be treated as a termination without Cause if such notice is given by the Company and the Company does not concurrently waive the Executive’s obligations under Section 2 of the Agreement Not to Compete, or a resignation without Good Reason if such notice is given by the Executive.

 

(b)          Notice of Termination .  Any termination of the Executive’s employment by the Company or by the Executive under this Section 4 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating (i) the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Section 4(a)(iv) or 4(a)(vi), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) specifying a Date of Termination which, if submitted by the Executive (or, in the case of a termination described in Section 4(a)(ii), by the Company), shall be at least 90 days following the receipt of such notice (a “ Notice of Termination ”); provided, however , that a Notice of Termination delivered by the Company pursuant to Section 4(a)(ii) shall not be required to specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii); and provided, further , that in the event that the Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of Company’s receipt of such Notice of Termination (even if such date is prior to the date specified in such Notice of Termination).  A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion.  The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

5.              Company Obligations Upon Termination of Employment

 

(a)           In General .  Upon a termination of the Executive’s employment for any reason, the Executive shall be entitled to receive in a lump sum within 20 business days following the Executive’s termination:  the sum of the Executive’s Annual Base Salary through the Date of

 

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Termination; a pro rata portion of Executive’s bonus, if any, for the applicable period of the calendar year ending on the Date of Termination (which portion of the bonus shall be reasonably determined by the Board at the end of the year in which termination occurs in accordance with the Board’s bonus determination policies then in effect); and any expenses owed to the Executive under Section 3(e).  The Executive shall also be entitled to any accrued vacation pay owed to the Executive pursuant to Section 3(d); any amount arising from the Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(c) (including without limitation, any disability or life insurance benefit plans, programs or arrangements), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements; and any benefits that may be due the Executive under the LLC Agreement or incentive unit agreements between the Executive and the Company.

 

(b)            Termination without Cause or for Good Reason .  If the Executive’s employment shall be terminated by the Company without Cause or by the Executive for Good Reason (including by reason of the Executive’s death or Disability but not by reason of the Executive’s termination by the Company for Cause or termination by the Executive without Good Reason), then, in addition to the payments and benefits described in Section 5(a) (including benefits under stock option agreements), the Company shall:

 

(i)            Continue to pay to the Executive (or the Executive’s estate), in accordance with the Company’s regular payroll practice following the Date of Termination, the Executive’s Annual Base Salary, and continue the Executive’s and/or the Executive’s wife’s participation in the Company’s health and life insurance plans through twenty seven months from the Date of Termination; provided that each payment is intended to constitute a separate payment within the meaning of Code Section 409A and the regulations thereunder; provided , further that in the event that Executive is determined by the Company to be a “specified employee” (as defined in Code Section 409A(2)(B) and determined in accordance with Code 416(i) (without regard to paragraph (5) thereof)) of the Company at a time when its stock is deemed to be publicly traded on an established securities market, any payments determined to be “nonqualified deferred compensation” payable following termination of employment shall be made no earlier than the earlier of (i) the last day of the sixth (6th) complete calendar month following such termination of employment, or (ii) Executive’s death, consistent with the provisions of Code Section 409A.  Any payment delayed by reason of the prior sentence shall be paid out in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule.  Notwithstanding the foregoing provisions of this Paragraph 5(b)(i) or anything in this Agreement to the contrary, the health and life insurance benefits that are not non-taxable medical benefits, “disability pay” or “death benefit” plans within the meaning of Treasury Regulation Section 1.409A-1(a)(5) shall be provided and administered in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv), which requires that (i) the amount of such benefits provided during one taxable year shall not affect the amount of such benefits provided in any other taxable year, except that to the extent such benefits consist of the reimbursement of expenses referred to in Section 105(b) of the Code, a maximum, if provided under the terms of the plan providing such health and life insurance benefits, may be imposed on the amount of such reimbursements over some or all of the period in which such benefit is to be provided to the Executive and/or the Executive’s wife, as described in Treasury Regulation Section 1.409A-3(i)(iv)(B), (ii) to the extent that any such benefits consist of

 

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reimbursement of eligible expenses, such reimbursement must be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred and (iii) no such benefit may be liquidated or exchanged for another benefit;

 

(ii)           If the Executive otherwise would have been entitled to receive a payment pursuant to the Company’s bonus plan had he been employed on the last day of the Company’s fiscal year, then pay to the Executive (or the Executive’s estate) on April 30 of the year following the year in which the Executive’s termination occurs, (and in the event that the Company has not received its audited financial statements for the prior year by April 30 of such year, such bonus shall be paid as soon as practicable thereafter, consistent with the provisions of Code Section 409A, but in no event later than the last day of such following year), the amount of such payment, multiplied by a fraction the numerator of which is the number of days during such fiscal year that the Executive was employed and the denominator of which is 365; and

 

(iii)          Continue paid coverage for the Executive and/or the Executive’s wife and any eligible dependents under all Company group health benefit plans in which the Executive and any dependents were entitled to participate immediately prior to the Date of Termination through the twenty-seventh month after the Date of Termination, to the extent permitted thereunder.  As of the date that the Executive ceases to receive coverage under any group health plan pursuant to this Section 5(b)(iii), the Executive shall be eligible to elect to receive “COBRA” continuation coverage to the extent permitted by Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended, and if such coverage ceases prior to twelve months from the Date of Termination, the Company shall pay for such COBRA coverage through such twelve month period.

 

6.             Restricted Stock .  U pon the occurrence of an initial public offering, Parent intends to issue to the Executive restricted shares at the initial public offering price with an aggregate fair market value equal to $6,000,000 (the “ Restricted Shares ”); provided, however, should an initial public offering not occur by April 1, 2009, Parent intends to issue to the Executive Restricted Shares at the then fair market price with an aggregate fair market value equal to $6,000,000.  Executive shall have the option to make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (“Code”), to include the fair market value of the restricted shares in his current taxable income as of the date of issuance, and Parent agrees to reasonably cooperate with Executive if he chooses to make this election. The Restricted Shares shall be subject to the reasonable terms and conditions of any equity incentive plan adopted by the Board or the compensation committee of the Board and 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 Restricted Shares; provided, however, if Executive is still actively employed in his current capacity as Chairman, President and Chief Executive Officer of the Company as of the fourth anniversary of the Effective Date, the remaining unvested Restricted Shares shall become immediately vested.  In the event of a Change of Control or in the event the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason (including by reason of the Executive’s death or Disability), the Restricted Shares, to the extent they then remain unvested, shall become immediately and fully vested.  A “Change of Control” shall mean (i) the sale (in one transaction or a series of transactions) of all or substantially all of the assets of the Company to a third party; (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

 

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being held by a “person” or “group” (as such terms are used in the Exchange Act) that does not include any of the then existing shareholders of the Company or any of their respective Affiliates; or (iii) a merger or consolidation of the Company 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 then existing shareholders of the Company or any of their respective Affiliates.

 

7.            Agreement Not To Compete .  As of the date hereof the Executive shall enter into an Agreement Not To Compete, in substantially the form attached hereto as Appendix A , the terms and conditions of which are incorporated herein by this reference.  If the Executive breaches any his covenants in such Agreement Not to Compete, then notwithstanding any other provision of this Agreement, the Executive shall be entitled to no further payments or benefits provided for in this Agreement.

 

8.            Assignment and Successors .  The Company may assign its rights under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, shall use its best efforts to require any such successor or other assignee to assume its obligations under this Agreement, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and entities controlled by the Company or under common control with the Company.  The Executive may not assign his rights or obligations under this Agreement to any individual or entity.  This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.

 

9.            Governing Law .  This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Nevada, without reference to the principles of conflicts of law of the State of Nevada or any other jurisdiction, and where applicable, the laws of the United States.

 

10.          Validity .  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

11.          Notices .  Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party shall have specified by notice in writing to the other party):

 

If to the Company, to:

 

Specialized Technology Resources, Inc.

10 Water Street

Enfield, Connecticut  06082-4899

Attn:  Barry A. Morris

Facsimile:  (860) 749-9158

 

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with a copy to:

 

DLJ Merchant Banking Partners

Credit Suisse Alternative Investments

2121 Avenue of the Stars

Suite 3300

Los Angeles, CA 90067
Attn:  Susan C. Schnabel
Facsimile:  (310) 282-7798

 

12.          Counterparts .   This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

 

13.          Entire Agreement .   The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) is intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement.  The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

 

14.          Amendments; Waivers .   This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of Company.  By an instrument in writing similarly executed, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however , that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.  Notwithstanding anything herein to the contrary, no amendment may be made to this Agreement if it would cause the Agreement or any payment hereunder not to be in compliance with Code Section 409A.

 

15.          No Inconsistent Actions .   The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

 

16.          Construction .   This Agreement shall be deemed drafted equally by both the parties.  Its language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the language is to be construed against any party shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “or” is used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be

 

9



 

deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

 

17.          Enforcement .   If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

 

18.          Withholding .   The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges that the Company is required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

 

19.          Employee Acknowledgement .   The Executive acknowledges that he has read and understands this Agreement, is fully aware of its legal effect and has consulted with legal counsel as to its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his judgment.

 

20.          Survival .   The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.

 

21.          Disputes .   All disputes between the parties arising from or in connection with this Agreement or the Executive’s employment hereunder, including those relating to the existence and validity of this agreement to arbitrate, shall be submitted to full and binding arbitration in Reno, Nevada, before a panel of three arbitrators and administered by the American Arbitration Association under its National Rules for the Resolution of Employment Disputes, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.  Each party shall be responsible for its own costs and expenses of such arbitration.  Notwithstanding the foregoing, nothing in this Section 21 shall prevent or otherwise hinder the ability of the Company to seek injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions in connection with any controversy or claim arising out of or relating to the Agreement Not to Compete.

 

 [signature page follows]

 

10



 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

 

/s/ Dennis L. Jilot

 

Dennis L. Jilot

 

 

 

 

 

SPECIALIZED TECHNOLOGY

 

RESOURCES, INC.

 

 

 

 

 

By:

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Vice President and Chief Financial
  Officer

 

 

SIGNATURE PAGE FOR EMPLOYMENT AGREEMENT (JILOT)

 



 

Appendix A

 

Agreement Not To Compete

 

[Please see attached]

 

2


 

Execution Copy

 

AGREEMENT NOT TO COMPETE

 

This Agreement Not To Compete (this “ Agreement ”) dated as of July 18, 2008 (the “ Effective Date ”), is made by and between SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (together with any successor thereto, the “ Company ”), and DENNIS L. JILOT (the “ Employee ”).

 

Recitals

 

A.            Contemporaneously with the execution hereof, the Company and Employee are executing an Employment Agreement (the “ Employment Agreement ”) pursuant to which the Company will employ Employee as its Chairman, President and Chief Executive Officer.

 

B.            Pursuant to the Employment Agreement, Employee has agreed to enter into this Agreement as a condition of his employment.

 

Terms

 

In consideration of the Employment Agreement, the respective agreements of the parties herein and other good and valuable consideration received by each party from the other, the parties agree as follows:

 

1.             Defined Terms Any capitalized term used herein but not defined shall have the meaning ascribed to such term in the Employment Agreement.

 

2.             Agreement Not to Compete .  For a period equal to the term of Employee’s employment with the Company and through the date which is twenty-seven (27) months following the Employee’s Date of Termination for any reason (the “ Initial Noncompetition Period ”), provided Company is not in material default under this Agreement or the Employment Agreement, Employee shall not, without the prior written consent of the Company, and whether as employee, principal, agent, shareholder, partner, consultant, advisor, limited liability company manager or member, director, or otherwise, directly or indirectly, compete with the Company or any subsidiary of the Company in the business of manufacturing solar panel encapsulent, or the business of providing consumer product quality assurance services to third parties (collectively, the “ Business ”).  The making or guarantying of a loan, lease or any other financial arrangement to, with or for any person or entity that engages in any of the activities described in the preceding sentence shall be deemed a breach of the covenant set forth in the preceding sentence.  However, Employee may purchase or own up to 5% of the outstanding stock of any publicly traded corporation that competes with the Company or any Company Affiliate in the Business, but may not be employed by or otherwise participate in the activities of such corporation.  For purposes of this agreement, “ Company Affiliate ” means any entity directly or indirectly controlled by the Company, and also includes STR Holdings, Inc. and any of its direct or indirect subsidiaries.

 

Provided Company is not in material default under this Agreement or the Employment Agreement, the Company shall have the option to extend the Initial Noncompetition Period for an additional twelve (12) months (the “ Extended Noncompetition Period ” and, together with the Initial Noncompetition Period, the “ Noncompetition Period ”); provided, that the Company gives the Executive written notice of such extension at least six (6) months prior to the

 



 

expiration of the Initial Noncompetition Period, and agrees to pay to the Employee, in accordance with the Company’s regular payroll practice, the Executive’s Annual Salary, and to continue the Executive’s participation in the Company’s health and life insurance and retirement plans through the Extended Noncompetition Period.  For all purposes of this Agreement and the Employment Agreement (including article 3. below), the Noncompetition Period shall not apply or restrict Employee’s activities, nor shall the term of the Noncompetition Period be extended, during any time Company is in material default under this Agreement or the Employment Agreement.

 

Employee represents and warrants that he does not own, directly, indirectly, in whole or in part, beneficially or otherwise, any company or enterprise that competes with or participates in the Business, or otherwise engage in any activity that would violate this Section 1.

 

3.             Confidential Information; Non-Solicitation; Non-Disparagement; Inventions .

 

(a)           Employee acknowledges that he will occupy a position of trust and confidence with the Company and may become familiar with the following, any and all of which constitute confidential information of the Company or Company Affiliates (collectively, the “ Confidential Information ”):  (i) all information related to vendors, suppliers and customers, including, without limitation, customer lists, the identities of existing, past or prospective customers and acquisition targets, prices charged or proposed to be charged to customers, customer contacts, special customer requirements and all related information; (ii) all marketing plans, materials and techniques; (iii) all methods of business operation and related procedures of the Company or Company Affiliates; and (iv) all patterns, devices, compilations of information, copyrightable material and technical information, if any, in each case that relates in any way to the Business of the Company or any Company Affiliate.

 

(b)           Employee acknowledges and agrees that all Confidential Information learned or obtained by him is the property of the Company or a Company Affiliate.  Therefore, Employee shall not at any time disclose to any unauthorized persons or use for his own account or for the benefit of any third party any Confidential Information, whether Employee has such information in his memory or embodied in writing or other physical form, without the Company’s prior written consent (which it may grant or withhold in its sole discretion), unless and to the extent that the Confidential Information is or becomes generally known to and available for use by the public other than as a result of Employee’s fault or, to Employee’s knowledge, the fault of any other person bound by a duty of confidentiality to the Company or any Company Affiliate.  Employee agrees to deliver to the Company at any time the Company may request, all documents, memoranda, notes, plans, records, reports, and other documentation, models, components, devices, or computer software, whether embodied in a disk or in other form (and all copies of all of the foregoing), relating to the businesses, operations, or affairs of the Company or any Company Affiliate and any other Confidential Information that Employee may then possess or have under Employee’s control.

 

(c)           If the Employee or any entity controlled by Employee (an “ Employee Affiliate ”) is required by law to disclose any Confidential Information, Employee shall promptly notify the Company in writing so that the Company may seek a protective order or other motion to prevent or limit the production or disclosure of such information.  If such motion has been denied, or if Company does not seek a protective order or other motion, then the person required to disclose such information may disclose only such portion of such information that, based on advice of Employee’s outside legal counsel, is required by law to be disclosed (provided that the

 

2



 

person required to disclose such information shall use all reasonable efforts to preserve the confidentiality of the remainder of such information).  Company shall reimburse Employee for the reasonable expenses (including legal fees and costs) he incurs in responding to or opposing a request for him to disclose Confidential Information.  Employee shall continue to be bound by his obligations pursuant to this Agreement for any information that is not required to be disclosed, or that has been afforded protective treatment, pursuant to such motion.

 

(d)           During the Noncompetition Period, Employee will not, and will not permit any Employee Affiliate to, directly or indirectly, (a) recruit or otherwise solicit or induce any employee, customer, subscriber or supplier of the Company or any Company Affiliate to terminate its employment or arrangement with the Company or any Company Affiliate, otherwise change its relationship with the Company or any Company Affiliate, or establish any relationship with Employee or any Employee Affiliate to compete in the Business or (b) without the Company’s prior written consent, hire any employee of the Company or any Company Affiliate, including any person whose employment with the Company or any Company Affiliate is terminated by such employee without Good Reason.

 

(e)           During the Noncompetition Period, Employee agrees not to disparage in any material respect the Company or any Company Affiliate, any of their respective products or practices, or any of their respective directors, officers, managers, agents, representatives, stockholders, members or affiliates, either orally or in writing.  The Company and any Company Affiliates (including without limitation any officers or directors of the Company or any Company Affiliate) agree not to disparage in any material respect the Employee or an Employee Affiliate either orally or in writing.  Notwithstanding the forgoing, nothing contained herein shall limit the ability of either party, as applicable, to provide truthful testimony as required by law or any judicial or administrative process.

 

(f)            All rights to discoveries, inventions, improvements and innovations (including all data and records pertaining thereto) related to the Business of the Company or any Company Affiliate, whether or not patentable, copyrightable, registrable as a trademark, or reduced to writing, that Employee may discover, invent or originate during the term of Employee’s consulting arrangement or employment with the Company or any Company Affiliate,  either alone or with others and whether or not during working hours or by the use of the facilities of either the Company or any of its subsidiaries (“ Inventions ”), shall be the exclusive property of the Company.  Employee shall promptly disclose all Inventions to the Company, shall execute at the request of the Company any assignments or other documents the Company may deem necessary to protect or perfect its rights therein, and shall assist the Company, at the Company’s expense, in obtaining, defending and enforcing the Company’s rights therein.  Employee hereby appoints the Company as his attorney-in-fact to execute on his behalf any assignments or other documents deemed necessary by the Company to protect or perfect its rights to any Inventions.

 

4.             Remedies .  The necessity of protection against the competition of Employee and the nature and scope of such protection has been carefully considered and agreed upon by the parties hereto.  Employee and the Company acknowledge that the duration, scope and geographic area applicable to the restrictions set forth in this Agreement are fair, reasonable and necessary.  Employee acknowledges that the consideration provided for herein is sufficient and adequate to compensate Employee for agreeing to the restrictions contained in this Agreement and that such restrictions will not cause him undue hardship.  If, however, any court determines that the foregoing restrictions are unreasonable and for that reason unenforceable, such restrictions shall be modified, rewritten or interpreted to include as much of their nature and

 

3



 

scope as will render them enforceable.  Employee and the Company agree that a monetary remedy for a breach of this Agreement will be inadequate and will be impracticable and extremely difficult to prove, and further agree that such a breach would cause the Company irreparable harm, and that the Company and the Company Affiliates shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damages.  Employee agrees that the Company and the Company Affiliates shall be entitled to such injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bond or other undertaking in connection therewith.

 

5.                                       Notices .  Notices sent by the Company or Employee hereunder shall be made in writing to such party at the below addresses or as the Company and Employee may otherwise agree in writing.

 

If to the Company, to:

 

Specialized Technology Resources, Inc.
10 Water Street
Enfield, Connecticut  06082-4899
Attn:  Barry A. Morris
Facsimile:  (860) 749-9158

 

with a copy to:

 

DLJ Merchant Banking Partners

Credit Suisse Alternative Investments

2121 Avenue of the Stars

Suite 3300

Los Angeles, CA 90067
Attn:  Susan C. Schnabel
Facsimile:  (310) 282-7798

 

If to Employee, at the address set forth on the signature page hereto.

 

6.                                       Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

7.                                       Headings .  The headings herein are for convenience only, do not constitute part of this Agreement, and shall not be deemed to limit or affect any of the provisions hereof.

 

8.                                       Entire Understanding .  This Agreement and the other agreements and instruments incorporated herein constitute the entire agreement and understanding between the parties, and supersede all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

 

9.                                       Amendments .  This Agreement may not be modified or changed except by written instrument signed by each of the parties hereto that expressly states the intention of the parties to modify or change this Agreement.

 

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10.           Governing Law .  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Nevada, without regard to principles of conflicts of laws.

 

11.           Construction .  Whenever in this Agreement the context so requires, references to the masculine shall be deemed to include feminine and the neuter, references to the neuter shall be deemed to include the masculine and feminine, and references to the plural shall be deemed to include the singular and the singular to include the plural.

 

12.           Cooperation .  Each party hereto shall cooperate with the other party and shall take such further action and shall execute and deliver such further documents as may be necessary or desirable in order to carry out the provisions and purposes of this Agreement.

 

13.           Waiver .  Employee or the Company may, by express written notice to the other:  (i) waive any inaccuracies in the representations or warranties of the other party contained in this Agreement or in any document delivered pursuant to this Agreement; (ii) waive compliance with any of the covenants of the other party contained in this Agreement; or (iii) waive or modify performance of any of the obligations of the other party.  No action taken pursuant to this Agreement shall be deemed to constitute a waiver by the party taking such action, possessing such knowledge or performing such investigation of compliance with the representations, warranties, covenants and agreements contained herein.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be constituted as a waiver of any subsequent breach.  The failure of any party to insist, in any one or more instances, upon performance of any of the terms, covenants or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or any such term, covenant or condition.

 

14.           Knowledge and Skill .  THE EMPLOYEE REPRESENTS AND WARRANTS THAT THE KNOWLEDGE, SKILLS AND ABILITIES HE OR SHE POSSESSES AT THE TIME OF COMMENCEMENT OF EMPLOYMENT HEREUNDER ARE SUFFICIENT TO PERMIT HIM OR HER, IN THE EVENT OF TERMINATION OF HIS OR HER EMPLOYMENT HEREUNDER, TO EARN A LIVELIHOOD SATISFACTORY TO HIMSELF WITHOUT VIOLATING ANY PROVISION HEREOF, FOR EXAMPLE, BY USING SUCH KNOWLEDGE, SKILLS AND ABILITIES, OR SOME OF THEM, IN THE SERVICE OF A NON-COMPETITOR.

 

15.           Interpretation of Agreement .  Each party hereto cooperated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto shall be deemed the work product of the parties and may not be construed against any party by reason of its preparation.  Accordingly, any rule of law, or any legal decision that would require interpretation of any ambiguities in this Agreement against the party that drafted it, is of no application and is hereby expressly waived.  The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intentions of the parties regarding this Agreement.

 

16.           Parties in Interest; Assignment .  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective permitted successors, assigns, heirs and/or personal representatives, except that neither this Agreement nor any interest herein shall be assigned or assignable by operation of law or otherwise by Employee without the prior written consent of the Company.  Nothing in this Agreement, expressed or implied, is

 

5



 

intended to confer on any person other than the parties and their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.

 

17.           Severability .  If, notwithstanding the express, carefully considered agreement of the Company and Employee set forth herein, any provision of this Agreement shall be deemed invalid, unenforceable or illegal, or if the period during which this Agreement is to remain effective is found to exceed the legally permissible period or the territory with respect to which this Agreement is to be effective is found to exceed the legally permissible territory, then notwithstanding such invalidity, unenforceability or illegality the remainder of this Agreement shall continue in full force and effect during the maximum period and for the maximum territory legally permissible.

 

18.           Waiver of Jury Trial .  Consistent with the intention of Section 10, the Company and Employee each further waives its or his respective right to a jury trial of any claim or cause of action arising out of this Agreement or any dealings between them relating to the subject matter of this Agreement.  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, including, without limitation, contract claims, tort claims, and all other common law and statutory claims.  This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, supplements or other modifications to this Agreement or to any other document or agreement relating to the transactions contemplated by this Agreement.

 

19.           Specific Performance and Other Equitable Relief .  Without in any way limiting the provisions of Section 4, Employee acknowledges that the remedies at law of the Company and Company Affiliates for failure of Employee to perform any act required to be performed by Employee under this Agreement are inadequate and, therefore, that the Company and Company Affiliates shall be entitled to specific performance of this Agreement by Employee and to such other equitable relief as a court may deem appropriate to prevent any further violation of this Agreement by Employee, and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided by law or under this Agreement.

 

20.           Full Understanding .  Employee represents that he fully understands his right to discuss all aspects of this Agreement with his private attorney, and that to the extent, if any, Employee desired, Employee availed himself of this right.  Employee further represents that he has carefully read and fully understands all of the provisions of this Agreement, that Employee is competent to execute this Agreement, that Employee’s agreement to execute and deliver this Agreement has not been obtained by any duress and that Employee freely and voluntarily enters into it, and that Employee has read this Agreement in its entirety and fully understands the meaning, intent and consequences of this Agreement.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement Not to Compete as of the date first written above.

 

 

 

 

Dennis L. Jilot

 

 

 

 

 

SPECIALIZED TECHNOLOGY
RESOURCES, INC.,

 

 

 

 

 

By: Barry A. Morris

 

Its: Vice President and Chief Financial Officer

 

 

SIGNATURE PAGE FOR NON-COMPETE AGREEMENT (JILOT)

 




Exhibit 10.4

 

EXECUTION COPY

 

AMENDMENT TO THE

 

EMPLOYMENT AGREEMENT

 

BETWEEN

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.

 

AND

 

DENNIS L. JILOT

 

This Amendment (the “ Amendment ”) to that certain Employment Agreement (the “ Agreement ”) by and between Specialized Technology Resources, Inc., a Delaware corporation (together with any successor thereto, the “ Company ”) and Dennis L. Jilot (the “ Executive ”), dated as of July 18, 2008, is made as of the date hereof by and between the Company and the Executive.

 

RECITALS

 

WHEREAS, the Company and the Executive entered into the Agreement as of July 18, 2008;

 

WHEREAS, Section 14 of the Agreement permits the Company and the Executive to amend or supplement the Agreement by a writing signed by a duly authorized officer of the Company and the Executive; and

 

WHEREAS, the Company and the Executive wish to amend the Agreement with respect to the contemplated issuance of restricted shares of STR Holdings LLC, a Delaware limited liability company (together with any successor thereto, “ Parent ”), pursuant to Section 6 of the Agreement.

 

AGREEMENT

 

In consideration of the mutual promises, covenants and conditions hereinafter set forth, the Company and the Executive agree to amend the Agreement as follows:

 

1.              All capitalized terms not defined herein shall have the meaning ascribed to them in the Agreement.

 

2.              Section 6 of the Agreement is hereby amended and restated in its entirety with the following:

 

6 .            Restricted Stock; Phantom Units .

 

(a)            In General .  Upon the occurrence of an initial public offering or, if earlier, the conversion of Parent to an entity treated as a corporation for federal income tax purposes (a “ Conversion ”), the Company intends to issue to the Executive a number of restricted shares of Parent having an aggregate fair market value (at the initial public offering price or, in the case of a Conversion, at a price determined in good faith by the Board) equal to the fair market value at the date of the initial public offering or Conversion of 223,464 Class A Units of Parent (the “ Restricted Shares ”); provided, however, should neither an initial public offering nor a Conversion occur by December 31, 2009, the Company intends to issue to the Executive 223,464 phantom Class A Units of Parent (such phantom Class A Units of Parent, the “ Phantom Units ”).  In the event the

 



 

Restricted Shares are issued to the Executive, the Executive shall have the option to make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (“ Code ” and such an election, an “ 83(b) Election ”), to include the fair market value of the Restricted Shares in his current taxable income as of the date of issuance, and Parent agrees to reasonably cooperate with the Executive if he chooses to make this election.  The Restricted Shares or Phantom Units, as the case may be, shall be subject to any terms and conditions reasonably determined by the Board of Directors of the Company or the compensation committee of the Board of Directors of the Company and shall entitle the Executive to receive the value of the Class A Units underlying the Phantom Units (or the equity interests into which such Class A Units have converted) payable by the Company to the Executive, in cash or in equity of Parent or the Company (or either of their successors), at the earliest of (a) July 18, 2012, (b) a Change of Control and (c) the Executive’s termination by the Company without Cause or by the Executive for Good Reason (including by reason of the Executive’s death or Disability) (such earliest date, the “ Payment Date ”); provided, that in the event that Executive is determined by the Company to be a “specified employee” (as defined in Code Section 409A(2)(B) and determined in accordance with Code Section 416(i) (without regard to paragraph (5) thereof)) of the Company at a time when its stock is deemed to be publicly traded on an established securities market, any payments determined to be “nonqualified deferred compensation” payable following termination of employment shall be made no earlier than the earlier of (i) the last day of the sixth (6th) complete calendar month following such termination of employment, or (ii) Executive’s death, consistent with the provisions of Code Section 409A.  Any payment delayed by reason of the prior sentence shall be paid out in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule.  The Restricted Shares or Phantom Units, as the case may be, shall vest in equal 1/60th installments as of the last day of each of the 60 successive calendar months beginning after April 2009, which, for the sake of clarity, means that the first vesting date for such Restricted Shares or Phantom Units will be May 31, 2009; provided, however, if the Executive is still actively employed in his current capacity as Chairman, President and Chief Executive Officer of the Company as of July 18, 2012, the remaining unvested Restricted Shares or Phantom Units, as the case may be, shall become immediately vested; provided, further that if Executive’s employment is terminated by the Company for Cause or by the Executive without Good Reason, Executive shall immediately forfeit any Restricted Shares or Phantom Units that remain unvested as of the date of such termination.  In the event of a Change of Control or in the event the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason (including by reason of the Executive’s death or Disability) whether prior to or after the issuance date of the Restricted Shares or Phantom Units, as the case may be, the Restricted Shares or Phantom Units, as the case may be, to the extent they then remain unvested, shall become immediately and fully vested and payable in accordance with the terms of this Section 6(a).  A “Change of Control” shall mean (i) the sale (in one transaction or a series of transactions) of all or substantially all of the assets of the Company to a third party; (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 being held, directly or indirectly, by a “person” or “group” (as such terms are used in the Exchange Act) that does not include any of the then existing shareholders of the Company or any of their respective Affiliates; or (iii) a merger or consolidation of the Company with or into another Person if following such merger or consolidation, more than 50% of the voting power of the Company is held, directly or indirectly, by a “person” or “group” (as such terms are used in the Exchange Act) that does not include any of the then existing shareholders of the Company or any of their respective Affiliates;

 

2



 

provided, however, notwithstanding the foregoing provisions of this Paragraph 6(a) or anything in this Agreement to the contrary, the definition of “Change of Control” herein shall in all instances comply with Treasury Regulation Section 1.409A-3(a)(5).

 

(b)            Gross-Up .  In the event the Phantom Units are issued to the Executive, upon the payment by the Company of the amounts described in Section 6(a) above, the Company shall pay to the Executive an amount in cash to compensate the Executive for the difference between the federal income taxes payable with respect to amounts received pursuant to Section 6(a) above and the federal income taxes that would have been payable by the Executive were the Executive to have (i) been issued Restricted Shares on April 1, 2009, (ii) made an 83(b) Election with respect to his receipt of such Restricted Shares and (iii) to have sold such Restricted Shares on the Payment Date for an amount equal to the amount payable pursuant to Section 6(a).  Any payment made by the Company to the Executive pursuant to this Section 6(b) shall be made no later than the end of the taxable year of the Executive following the taxable year in which the Executive remits such taxes.

 

3.              All other provisions of the Agreement not specifically amended by this Amendment shall remain in full force and effect.  This Amendment shall become automatically effective upon the execution of this Amendment by the Company and the Executive.

 

4.              This Amendment shall be construed in accordance with and governed by the laws of the State of Nevada, without giving effect to the provisions, policies or principles thereof relating to choice or conflict of laws.

 

5.              This Amendment may be executed in counterparts and by facsimile signature, each of which shall be deemed an original, but all of which together shall constitute one instrument.

 

[ Signature Page Follows ]

 

3



 

IN WITNESS WHEREOF , the parties have executed this Amendment as of the date first written above.

 

 

 

/s/ Dennis L. Jilot

 

Dennis L. Jilot

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.

 

 

 

 

 

By:

/s/ Barry A. Morris

 

Name: Barry A. Morris

 

Title:   Executive Vice President and Chief Financial Officer

 

SIGNATURE PAGE TO AMENDMENT (D. JILOT EMPLOYMENT AGMT)

 




Exhibit 10.5

 

EXECUTION COPY

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “ Agreement ”), dated as of June 15, 2007, is made by and between SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (together with any successor thereto, the “ Company ”), and BARRY A. MORRIS, of Enfield, Connecticut (the “ Executive ”).

 

Recitals

 

A.            The Company desires to engage the Executive to perform services under the terms hereof and the Executive desires to be employed by the Company.

 

B.            The Company desires to be assured that the unique and expert services of the Executive will be substantially available to the Company, and that the Executive is willing and able to render such services on the terms hereinafter set forth.

 

C.            The Company desires to be assured that the confidential information and goodwill of the Company will be preserved for the exclusive benefit of the Company.

 

Terms

 

In consideration of such employment and the respective agreements of the parties set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.            Certain Definitions

 

(a)           “ Annual Base Salary ” shall have the meaning set forth in Section 3(a).

 

(b)           “ Board ” shall mean the Board of Managers of Parent.

 

(c)           “ Bonus Compensation ” shall have the meaning set forth in Section 3(b).

 

(d)           The Company shall have “ Cause ” to terminate the Executive’s employment hereunder upon:  (i) the Executive’s breach of Section 2(c) (other than any such failure resulting from the Executive’s Disability), which is not remedied within 30 days after receipt by the Executive of written notice from the Company specifying such failure in reasonable detail; (ii) the Executive’s failure or refusal to follow the reasonable instructions of the Board or the board of directors of any Subsidiary of the Company, which failure or refusal is not cured within 30 days following written notice; (iii) the Executive’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 ; (iv) the Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s or any of its Subsidiaries’ premises; (v) the Executive’s commission of any act of fraud, embezzlement, misappropriation of funds, material misrepresentation, breach of fiduciary duty or other act of dishonesty detrimental to the Company or any of its Subsidiaries; or (vi) the Executive’s intentional wrongful act or gross negligence that has a material detrimental effect on the Company or its Subsidiaries.

 

(e)           “ Sale of the Company ” means either (i) a sale of more than 50% of the assets of the Company or the Parent (ii) a sale or other transfer of more than 50% of the

 



 

Company’s then outstanding stock or the Parent’s outstanding Units (as defined in the LLC Agreement) in a single transaction to persons or entities who are not stockholders or unitholders at the time of the sale.  For purposes of determining whether a sale of more than 50% of the Company’s or Parent’s assets has occurred, the change of ownership rules set forth in Treas. Reg. § 1.409A-3(i)(5)(vii) shall apply.  For purposes of determining whether any person or entity is a stockholder or a unitholder at the time of sale of more than 50% of the stock of the Company or Units of the Parent, the attribution of ownership rules set forth in Treas. Reg. § 1.409A-3(i)(5)(iii) shall apply.  For purposes of determining whether a sale or other transfer of more than 50% of the outstanding stock of the Company or Units of the Parent has occurred, the change in corporate ownership rules set forth in Treas. Reg. § 1.409A-3(i)(5)(v), shall apply.  Notwithstanding the foregoing, neither of the events in clauses (i) or (ii) herein shall be deemed a “Sale of the Company” unless such event is a “change in the ownership or event control of the corporation, or in the ownership of a substantial portion of the assets of the corporation” as defined in and for purposes of Section 409A of the Code and the regulations thereunder.

 

(f)            “ Company ” shall have the meaning set forth in the preamble hereto.

 

(g)           “ Date of Termination ” shall mean (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated due to his Disability, the date determined pursuant to Section 4(a)(ii); (iii) if the Executive’s employment is terminated pursuant to Section 4(a)(iii)-(vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier; or (iv) if the Executive’s employment is terminated pursuant to Section 4(a)(vii) the date on which the Term expires.

 

(h)           “ Disability ” shall mean any physical or mental illness, injury or infirmity which prevents the Executive from performing the Executive’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 in consultation with a qualified physician or physicians selected by the Board and reasonably acceptable to the Executive.  The failure of the Executive to submit to a reasonable examination by such physician or physicians shall act as an estoppel to any objection by the Executive to the determination of disability by the Board.

 

(i)            “ Effective Date ” shall have the meaning set forth in Section 2(b).

 

(j)            “ Executive ” shall have the meaning set forth in the preamble hereto.

 

(k)           The Executive shall have “ Good Reason ” to resign his employment upon the occurrence (without the Executive’s prior written consent) of any of the following:  (A) a material diminution in the nature or scope of the Executive’s responsibilities, duties or authority in his capacity as Vice President and Chief Financial Officer, without regard to any other responsibilities, duties or authority the Executive may have had or performed for the Company at any time; (B) the Company’s material breach of this Agreement; (C) any change in the Executive’s reporting relationship so that he no longer reports to the Chief Executive Officer; (D) a relocation of the Executive’s place of employment to a location more than thirty miles by road from Enfield, Connecticut; or (E) any decrease in the Executive’s Annual Base Salary, target bonus percentage as set forth in Section 3(a), or benefit plans, programs and arrangements as in effect from time to time (other than a general reduction in base salary, target bonus percentages or benefit plans, programs and arrangements that affects all members of senior management

 

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equally); provided, however , that the Executive may not resign his employment for Good Reason unless:  (x) the Executive provided the Company with at least 30 days prior written notice of his intent to resign for Good Reason (which notice must be provided within 45 days following (i) the occurrence of the event(s) purported to constitute Good Reason, or (ii) if the Executive could not reasonably have known of the occurrence of any of such events, the date on which the Executive had actual knowledge of the occurrence of any of such events); and (y) the Company has not remedied the alleged occurrence(s) within the 30-day period following its receipt of such notice from the Executive.

 

(l)            “ Notice of Termination ” shall have the meaning set forth in Section 4(b).

 

(m)          “ Parent ” means STR Holdings LLC, a Delaware limited liability company.

 

(n)           Term ” shall have the meaning set forth in Section 2(b).

 

2.            Employment

 

(a)           In General .  The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.

 

(b)           Term of Employment .  The initial term of employment under this Agreement (the “ Initial Term ”) shall be for the period beginning on June 15, 2007 (the “ Effective Date ”) and ending on the third anniversary thereof, unless earlier terminated as provided in Section 4.  The employment term hereunder shall automatically be extended for successive one-year periods (“ Extension Terms ” and, collectively with the Initial Term, the “ Term ”) unless either party gives written notice of non-extension to the other no later than 60 days prior to the expiration of the then applicable Term.

 

(c)           Position and Duties .  The Executive shall serve as Vice President and Chief Financial Officer of the Company, with responsibilities, duties and authority customary for such position, subject to direction by the Chief Executive Officer.  The Executive shall report to the Chief Executive Officer.  The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company and its subsidiaries.  The Executive agrees to observe and comply with the Company’s rules and policies as adopted by the Company from time to time.  During the Term, it shall not be a violation of this Agreement for the Executive to (i) serve on industry trade, civic or charitable boards or committees; (ii) deliver lectures or fulfill speaking engagements; or (iii) manage personal investments (which shall include (x) investments by the Executive of his personal assets in any business which does not compete directly or indirectly with the Company, in such form or manner as will not require any services on the part of the Executive in the operation of such business and (y) the purchase by the Executive of a total of up to 1% of the regularly traded securities of any entity, whether or not it competes with the Company), as long as, in the reasonable judgment of the Chief Executive Officer of the Company, such activities do not and will not interfere with the performance of the Executive’s duties and responsibilities as an employee of the Company.  The Executive shall perform his duties hereunder at the Company’s corporate headquarters in Enfield, Connecticut and shall travel as necessary or as reasonably requested by the Chief Executive Officer of the Company.

 

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3.            Compensation and Related Matters

 

(a)           Annual Base Salary .  During the Term, the Executive shall receive a base salary at a rate of $215,000.00 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to increase as determined by the Board in its sole discretion (the “ Annual Base Salary ”).  The Executive’s Annual Base Salary will be reviewed annually by the Board and the Board may, in its sole discretion, increase the Annual Base Salary considering the Executive’s performance and that of the Company.

 

(b)           Bonus Compensation .

 

(i)            In addition to the Annual Base Salary, for each fiscal year, or portion thereof, during the Term, the Executive shall be eligible to participate in the Company’s management incentive plan (or any successor incentive plan adopted by the Board) pursuant to which Executive may be paid a target amount of 40% of his Annual Base Salary except as the parties may have agreed otherwise in writing.  The Executive’s bonus will be based upon performance measured against mutually agreed upon goals to be established as soon as practicable after the date hereof.  In the discretion of management, Executive shall be eligible to receive incentive units pursuant to the terms of the Amended and Restated Limited Liability Company Agreement of STR Holdings LLC (the “ LLC Agreement ”).

 

(ii)           In accordance with Section 2.9 of the Amended and Restated Merger Agreement, dated June 15, 2007, by and among the Company, STR Holdings LLC and STR Acquisition, Inc. (the “ Merger Agreement ”) and in consideration of the Executive’s desire to “rollover” options exercisable for 40,000 shares of the Company at an exercise price of $3.25 per share for options of an equivalent value in the Surviving Corporation (as defined in the Merger Agreement), which rollover could not be accommodated due to structural restrictions, the Company shall pay the Executive a bonus equal to the lesser of (A) an amount equal to the product of (i) 40,000 and (ii) the excess of the Per Share Merger Consideration (as defined in the Merger Agreement) over $3.25 (the “ Aggregate Spread ”) and (B) and the “fair market value” of that number of Class A Units of STR Holdings, LLC equal to the quotient achieved by dividing the Aggregate Spread by $10.00 (the “ Bonus Amount ”).  For purposes hereof “fair market value” shall mean Repurchase Fair Market Value as set forth in the Amended and Restated Limited Liability Company Agreement of STR Holdings, LLC, as it may be further amended and restated.  The Bonus Amount shall be calculated on the Payment Date (as defined below).

 

(iii)          Upon the earlier to occur of December 31, 2015, a Sale of the Company or termination of the Executive’s employment for any reason (in each case, the “ Payment Date ”), the Bonus Amount shall be distributed to the Executive and paid in a lump sum, without interest, as soon as administratively possible but not later than 60 days following such Payment Date.

 

(iv)          The Executive may from time to time designate one or more persons (who may be any one or more members of such person’s family or other persons, administrators, trusts, foundations or other entities) as his or her beneficiary under the Bonus Account.  Such designation shall be made on a form prescribed by the Company.

 

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(c)           Benefits .  The Executive shall be entitled to participate in employee benefit plans, programs and arrangements of the Company now (or, to the extent determined by the Board, hereafter) in effect which are applicable to the senior management of the Company.

 

(d)           Vacation .  During the Term, the Executive shall be entitled to four weeks paid vacation each calendar year.  Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive.

 

(e)           Expenses .  The Company shall promptly reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures.

 

4.            Termination .  The Executive’s employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:

 

(a)           Circumstances

 

(i)            Death .  The Executive’s employment hereunder shall terminate upon his death.

 

(ii)           Disability .  If the Executive incurs a Disability, the Company may give the Executive written notice of its intention to terminate the Executive’s employment.  In that event, the Executive’s employment with the Company shall terminate effective on the later of the 30th day after receipt of such notice by the Executive or the date specified in such notice, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties.

 

(iii)          Termination for Cause .  The Company may terminate the Executive’s employment for Cause.

 

(iv)          Termination without Cause .  The Company may terminate the Executive’s employment without Cause.

 

(v)           Resignation for Good Reason .  The Executive may resign his employment for Good Reason.

 

(vi)          Resignation without Good Reason .  The Executive may resign his employment without Good Reason.

 

(vii)         Non-renewal .  Either party may notify the other of his or its intent not to renew this Agreement at least 60 days prior to the expiration of the Term, which shall be treated as a termination without Cause if such notice is given by the Company and the Company does not concurrently waive the Executive’s obligations under Section 2 of the Agreement Not to Compete, or a resignation without Good Reason if such notice is given by the Executive.

 

(b)           Notice of Termination .  Any termination of the Executive’s employment by the Company or by the Executive under this Section 4 (other than termination pursuant to

 

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paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating (i) the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Section 4(a)(iv) or 4(a)(vi), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) specifying a Date of Termination which, if submitted by the Executive (or, in the case of a termination described in Section 4(a)(ii), by the Company), shall be at least 30 days following the receipt of such notice (a “ Notice of Termination ”); provided, however , that a Notice of Termination delivered by the Company pursuant to Section 4(a)(ii) shall not be required to specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii); and provided, further , that in the event that the Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of Company’s receipt of such Notice of Termination (even if such date is prior to the date specified in such Notice of Termination).  A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion.  The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

5.            Company Obligations Upon Termination of Employment

 

(a)           In General .  Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive in a lump sum within 20 business days following the Executive’s termination:  the sum of the Executive’s Annual Base Salary through the Date of Termination; and any expenses owed to the Executive under Section 3(e).  The Executive shall also be entitled to any accrued vacation pay owed to the Executive pursuant to Section 3(d); any amount arising from the Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(c) (including without limitation, any disability or life insurance benefit plans, programs or arrangements), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements; and any benefits that may be due the Executive under the LLC Agreement or incentive unit agreements between the Executive and the Company.

 

(b)           Termination without Cause or for Good Reason .  If the Executive’s employment shall be terminated by the Company without Cause or by the Executive for Good Reason (but not by reason of the Executive’s death, Disability, termination by the Company for Cause or termination by the Executive without Good Reason), then, in addition to the payments and benefits described in Section 5(a) (including benefits under stock option agreements), the Company shall:

 

(i)            Continue to pay to the Executive, in accordance with the Company’s regular payroll practice following the Date of Termination, the Executive’s Annual Base Salary, and continue the Executive’s participation in the Company’s health, life insurance and retirement plans through twelve months from the Date of Termination; provided that each payment is intended to constitute a separate payment within the meaning of Code Section 409A and the regulations thereunder; provided , further that in the event that Executive is determined by the Company to be a “specified employee” (as

 

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defined in Code Section 409A(2)(B) and determined in accordance with Code 416(i) (without regard to paragraph (5) thereof)) of the Company at a time when its stock is deemed to be publicly traded on an established securities market, any payments determined to be “nonqualified deferred compensation” payable following termination of employment shall be made no earlier than the earlier of (i) the last day of the sixth (6th) complete calendar month following such termination of employment, or (ii) Executive’s death, consistent with the provisions of Code Section 409A.  Any payment delayed by reason of the prior sentence shall be paid out in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule;

 

(ii)           If the Executive otherwise would have been entitled to receive a payment pursuant to the Company’s bonus plan had he been employed on the last day of the Company’s fiscal year, then pay to the Executive on April 30 of the year following the year in which the Executive’s termination occurs, (and in the event that the Company has not received its audited financial statements for the prior year by April 30 of such year, such bonus shall be paid as soon as practicable thereafter, consistent with the provisions of Code Section 409A, but in no event later than the last day of such following year), the amount of such payment, multiplied by a fraction the numerator of which is the number of days during such fiscal year that the Executive was employed and the denominator of which is 365; and

 

(iii)          Continue paid coverage for the Executive and any eligible dependents under all Company group health benefit plans in which the Executive and any dependents were entitled to participate immediately prior to the Date of Termination through the twelfth month after the Date of Termination, to the extent permitted thereunder.  As of the date that the Executive ceases to receive coverage under any group health plan pursuant to this Section 5(b)(iii), the Executive shall be eligible to elect to receive “COBRA” continuation coverage to the extent permitted by Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended, and if such coverage ceases prior to twelve months from the Date of Termination, the Company shall pay for such COBRA coverage through such twelve month period.

 

6.            Agreement Not To Compete .  As of the date hereof the Executive shall enter into an Agreement Not To Compete, in substantially the form attached hereto as Appendix A , the terms and conditions of which are incorporated herein by this reference.  If the Executive breaches any his covenants in such Agreement Not to Compete, then notwithstanding any other provision of this Agreement, the Executive shall be entitled to no further payments or benefits provided for in this Agreement.

 

7.            Assignment and Successors .  The Company may assign its rights under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, shall use its best efforts to require any such successor or other assignee to assume its obligations under this Agreement, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and entities controlled by the Company or under common control with the Company.  The Executive may not assign his rights or obligations under this Agreement to any individual or entity.  This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.

 

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8.            Governing Law .  This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of New York, without reference to the principles of conflicts of law of the State of New York or any other jurisdiction, and where applicable, the laws of the United States.

 

9.            Validity .  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

10.         Notices .  Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party shall have specified by notice in writing to the other party):

 

If to the Company, to:


Specialized Technology Resources, Inc.
10 Water Street
Enfield, Connecticut  06082-4899
Attn:  Barry A. Morris
Facsimile:  (860) 749-9158

 

with a copy to:


DLJ Merchant Banking
Eleven Madison Avenue, 16th Floor
New York, New York  10010
Attn:  Susan C. Schnabel
Facsimile:  (310) 712-2734

 

11.         Counterparts .   This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

 

12.         Entire Agreement .   The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) is intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement.  The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

 

13.         Amendments; Waivers .   This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of Company.  By an instrument in writing similarly executed, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however , that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in exercising any right,

 

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remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.  Notwithstanding anything herein to the contrary, no amendment may be made to this Agreement if it would cause the Agreement or any payment hereunder not to be in compliance with Code Section 409A.

 

14.         No Inconsistent Actions .   The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

 

15.         Construction .   This Agreement shall be deemed drafted equally by both the parties.  Its language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the language is to be construed against any party shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “or” is used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

 

16.         Enforcement .   If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

 

17.         Withholding .   The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges that the Company is required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

 

18.         Employee Acknowledgement .   The Executive acknowledges that he has read and understands this Agreement, is fully aware of its legal effect and has consulted with legal counsel as to its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his judgment.

 

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19.         Survival .   The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.

 

20.         Disputes .  All disputes between the parties arising from or in connection with this Agreement or the Executive’s employment hereunder, including those relating to the existence and validity of this agreement to arbitrate, shall be submitted to full and binding arbitration in Hartford, Connecticut, before a panel of three arbitrators and administered by the American Arbitration Association under its National Rules for the Resolution of Employment Disputes, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.  Each party shall be responsible for its own costs and expenses of such arbitration.  Notwithstanding the foregoing, nothing in this Section 20 shall prevent or otherwise hinder the ability of the Company to seek injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions in connection with any controversy or claim arising out of or relating to the Agreement Not to Compete.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

 

 

/s/ Barry A. Morris

 

Barry A. Morris

 

 

 

 

 

SPECIALIZED TECHNOLOGY
RESOURCES, INC.

 

 

 

 

 

By:

/s/ Dennis L. Jilot

 

 

Name: Dennis L. Jilot

 

 

Title: Chairman and Chief Executive Officer

 

SIGNATURE PAGE FOR EMPLOYMENT AGREEMENT (MORRIS)

 



 

Appendix A

 

Agreement Not To Compete

 

[Please see attached]

 

2


 

Execution Copy

 

AGREEMENT NOT TO COMPETE

 

This Agreement Not To Compete (this “ Agreement ”) dated as of June 15, 2007 (the “ Effective Date ”), is made by and between SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (together with any successor thereto, the “ Company ”), and BARRY A. MORRIS, of Enfield, Connecticut, (the “ Employee ”).

 

Recitals

 

A.            Contemporaneously with the execution hereof, the Company and Employee are executing an Employment Agreement (the “ Employment Agreement ”) pursuant to which the Company will employ Employee as Vice President and Chief Financial Officer.

 

B.            Pursuant to the Employment Agreement, Employee has agreed to enter into this Agreement as a condition of his employment.

 

Terms

 

In consideration of the Employment Agreement, the respective agreements of the parties herein and other good and valuable consideration received by each party from the other, the parties agree as follows:

 

1.             Defined Terms .  Any capitalized term used herein but not defined shall have the meaning ascribed to such term in the Employment Agreement.

 

2.             Agreement Not to Compete .  For a period equal to the term of Employee’s employment with the Company and through the date which is twelve (12) months following the Employee’s Date of Termination for any reason (the “ Initial Noncompetition Period ”), Employee shall not, without the prior written consent of the Company, and whether as employee, principal, agent, shareholder, partner, consultant, advisor, limited liability company manager or member, director, or otherwise, directly or indirectly, compete with the Company or any subsidiary of the Company in the business of manufacturing solar panel encapsulent, or the business of providing consumer product quality assurance services to third parties (collectively, the “ Business ”).  The making or guarantying of a loan, lease or any other financial arrangement to, with or for any person or entity that engages in any of the activities described in the preceding sentence shall be deemed a breach of the covenant set forth in the preceding sentence.  However, Employee may purchase or own up to 1% of the outstanding stock of any publicly traded corporation that competes with the Company or any Company Affiliate, but may not be employed by or otherwise participate in the activities of such corporation.  For purposes of this agreement, “ Company Affiliate ” means any entity directly or indirectly controlled by the Company, and also includes STR Holdings, Inc. and any of its direct or indirect subsidiaries.

 

The Company shall have the option to extend the Initial Noncompetition Period for an additional twelve (12) months (the “ Extended Noncompetition Period ” and, together with the Initial Noncompetition Period, the “ Noncompetition Period ”); provided, that the Company gives the Executive written notice of such extension at least six (6) months prior to the expiration of the Initial Noncompetition Period, and agrees to pay to the Employee, in accordance with the Company’s regular payroll practice, the Executive’s Annual Base Salary, and to continue the Executive’s participation in the Company’s health and life insurance and retirement plans through the Extended Noncompetition Period.

 



 

Employee represents and warrants that he does not own, directly, indirectly, in whole or in part, beneficially or otherwise, any company or enterprise that competes with or participates in the Business, or otherwise engage in any activity that would violate this Section 1.

 

3.             Confidential Information; Non-Solicitation; Non-Disparagement; Inventions .

 

(a)           Employee acknowledges that he will occupy a position of trust and confidence with the Company and may become familiar with the following, any and all of which constitute confidential information of the Company or Company Affiliates (collectively, the “ Confidential Information ”):  (i) all information related to vendors, suppliers and customers, including, without limitation, customer lists, the identities of existing, past or prospective customers and acquisition targets, prices charged or proposed to be charged to customers, customer contacts, special customer requirements and all related information; (ii) all marketing plans, materials and techniques; (iii) all methods of business operation and related procedures of the Company or Company Affiliates; and (iv) all patterns, devices, compilations of information, copyrightable material and technical information, if any, in each case that relates in any way to the Business of the Company or any Company Affiliate.

 

(b)           Employee acknowledges and agrees that all Confidential Information learned or obtained by him is the property of the Company or a Company Affiliate.  Therefore, Employee shall not at any time disclose to any unauthorized persons or use for his own account or for the benefit of any third party any Confidential Information, whether Employee has such information in his memory or embodied in writing or other physical form, without the Company’s prior written consent (which it may grant or withhold in its sole discretion), unless and to the extent that the Confidential Information is or becomes generally known to and available for use by the public other than as a result of Employee’s fault or, to Employee’s knowledge, the fault of any other person bound by a duty of confidentiality to the Company or any Company Affiliate.  Employee agrees to deliver to the Company at any time the Company may request, all documents, memoranda, notes, plans, records, reports, and other documentation, models, components, devices, or computer software, whether embodied in a disk or in other form (and all copies of all of the foregoing), relating to the businesses, operations, or affairs of the Company or any Company Affiliate and any other Confidential Information that Employee may then possess or have under Employee’s control.

 

(c)           If the Employee or any entity controlled by Employee (an “ Employee Affiliate ”) is required by law to disclose any Confidential Information, Employee shall promptly notify the Company in writing so that the Company may seek a protective order or other motion to prevent or limit the production or disclosure of such information.  If such motion has been denied, then the person required to disclose such information may disclose only such portion of such information that, based on advice of Employee’s outside legal counsel, is required by law to be disclosed (provided that the person required to disclose such information shall use all reasonable efforts to preserve the confidentiality of the remainder of such information).  Employee shall continue to be bound by his obligations pursuant to this Agreement for any information that is not required to be disclosed, or that has been afforded protective treatment, pursuant to such motion.

 

(d)           During the Noncompetition Period, Employee will not, and will not permit any Employee Affiliate to, directly or indirectly, (a) recruit or otherwise solicit or induce any employee, customer, subscriber or supplier of the Company or any Company Affiliate to

 

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terminate its employment or arrangement with the Company or any Company Affiliate, otherwise change its relationship with the Company or any Company Affiliate, or establish any relationship with Employee or any Employee Affiliate to compete in the Business or (b) without the Company’s prior written consent, hire any employee of the Company or any Company Affiliate, including any person whose employment with the Company or any Company Affiliate is terminated by such employee without Good Reason.

 

(e)           During the Noncompetition Period, Employee agrees not to disparage in any material respect the Company or any Company Affiliate, any of their respective products or practices, or any of their respective directors, officers, managers, agents, representatives, stockholders, members or affiliates, either orally or in writing.  The Company and any Company Affiliates (including without limitation any officers or directors of the Company or any Company Affiliate) agree not to disparage in any material respect the Employee either orally or in writing.  Notwithstanding the forgoing, nothing contained herein shall limit the ability of either party, as applicable, to provide truthful testimony as required by law or any judicial or administrative process.

 

(f)            All rights to discoveries, inventions, improvements and innovations (including all data and records pertaining thereto) related to the Business of the Company or any Company Affiliate, whether or not patentable, copyrightable, registrable as a trademark, or reduced to writing, that Employee may discover, invent or originate during the term of Employee’s consulting arrangement or employment with the Company or any Company Affiliate, and for a period of 12 months thereafter, either alone or with others and whether or not during working hours or by the use of the facilities of either the Company or any of its subsidiaries (“ Inventions ”), shall be the exclusive property of the Company.  Employee shall promptly disclose all Inventions to the Company, shall execute at the request of the Company any assignments or other documents the Company may deem necessary to protect or perfect its rights therein, and shall assist the Company, at the Company’s expense, in obtaining, defending and enforcing the Company’s rights therein.  Employee hereby appoints the Company as his attorney-in-fact to execute on his behalf any assignments or other documents deemed necessary by the Company to protect or perfect its rights to any Inventions.

 

4.             Remedies .  The necessity of protection against the competition of Employee and the nature and scope of such protection has been carefully considered and agreed upon by the parties hereto.  Employee and the Company acknowledge that the duration, scope and geographic area applicable to the restrictions set forth in this Agreement are fair, reasonable and necessary.  Employee acknowledges that the consideration provided for herein is sufficient and adequate to compensate Employee for agreeing to the restrictions contained in this Agreement and that such restrictions will not cause him undue hardship.  If, however, any court determines that the foregoing restrictions are unreasonable and for that reason unenforceable, such restrictions shall be modified, rewritten or interpreted to include as much of their nature and scope as will render them enforceable.  Employee and the Company agree that a monetary remedy for a breach of this Agreement will be inadequate and will be impracticable and extremely difficult to prove, and further agree that such a breach would cause the Company irreparable harm, and that the Company and the Company Affiliates shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damages.  Employee agrees that the Company and the Company Affiliates shall be entitled to such injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bond or other undertaking in connection therewith.

 

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5.             Notices .  Notices sent by the Company or Employee hereunder shall be made in writing to such party at the below addresses or as the Company and Employee may otherwise agree in writing.

 

f to the Company, to:

 

Specialized Technology Resources, Inc.
10 Water Street
Enfield, Connecticut  06082-4899
Attn:  Barry A. Morris
Facsimile:  (860) 749-9158

 

with a copy to:

 

DLJ Merchant Banking
Eleven Madison Avenue, 16th Floor
New York, New York  10010
Attn:  Susan C. Schnabel
Facsimile:  (310) 712-2734

 

If to Employee, at the address set forth on the signature page hereto.

 

6.             Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

7.             Headings .  The headings herein are for convenience only, do not constitute part of this Agreement, and shall not be deemed to limit or affect any of the provisions hereof.

 

8.             Entire Understanding .  This Agreement and the other agreements and instruments incorporated herein constitute the entire agreement and understanding between the parties, and supersede all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

 

9.             Amendments .  This Agreement may not be modified or changed except by written instrument signed by each of the parties hereto that expressly states the intention of the parties to modify or change this Agreement.

 

10.           Governing Law .  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to principles of conflicts of laws.

 

11.           Construction .  Whenever in this Agreement the context so requires, references to the masculine shall be deemed to include feminine and the neuter, references to the neuter shall be deemed to include the masculine and feminine, and references to the plural shall be deemed to include the singular and the singular to include the plural.

 

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12.           Cooperation .  Each party hereto shall cooperate with the other party and shall take such further action and shall execute and deliver such further documents as may be necessary or desirable in order to carry out the provisions and purposes of this Agreement.

 

13.           Waiver .  Employee or the Company may, by express written notice to the other:  (i) waive any inaccuracies in the representations or warranties of the other party contained in this Agreement or in any document delivered pursuant to this Agreement; (ii) waive compliance with any of the covenants of the other party contained in this Agreement; or (iii) waive or modify performance of any of the obligations of the other party.  No action taken pursuant to this Agreement shall be deemed to constitute a waiver by the party taking such action, possessing such knowledge or performing such investigation of compliance with the representations, warranties, covenants and agreements contained herein.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be constituted as a waiver of any subsequent breach.  The failure of any party to insist, in any one or more instances, upon performance of any of the terms, covenants or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or any such term, covenant or condition.

 

14.           Knowledge and Skill .  THE EMPLOYEE REPRESENTS AND WARRANTS THAT THE KNOWLEDGE, SKILLS AND ABILITIES HE OR SHE POSSESSES AT THE TIME OF COMMENCEMENT OF EMPLOYMENT HEREUNDER ARE SUFFICIENT TO PERMIT HIM OR HER, IN THE EVENT OF TERMINATION OF HIS OR HER EMPLOYMENT HEREUNDER, TO EARN A LIVELIHOOD SATISFACTORY TO HIMSELF WITHOUT VIOLATING ANY PROVISION HEREOF, FOR EXAMPLE, BY USING SUCH KNOWLEDGE, SKILLS AND ABILITIES, OR SOME OF THEM, IN THE SERVICE OF A NON-COMPETITOR.

 

15.           Interpretation of Agreement .  Each party hereto cooperated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto shall be deemed the work product of the parties and may not be construed against any party by reason of its preparation.  Accordingly, any rule of law, or any legal decision that would require interpretation of any ambiguities in this Agreement against the party that drafted it, is of no application and is hereby expressly waived.  The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intentions of the parties regarding this Agreement.

 

16.           Parties in Interest; Assignment .  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective permitted successors, assigns, heirs and/or personal representatives, except that neither this Agreement nor any interest herein shall be assigned or assignable by operation of law or otherwise by Employee without the prior written consent of the Company.  Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties and their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.

 

17.           Severability .  If, notwithstanding the express, carefully considered agreement of the Company and Employee set forth herein, any provision of this Agreement shall be deemed invalid, unenforceable or illegal, or if the period during which this Agreement is to remain effective is found to exceed the legally permissible period or the territory with respect to which this Agreement is to be effective is found to exceed the legally permissible territory, then notwithstanding such invalidity, unenforceability or illegality the remainder of this Agreement

 

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shall continue in full force and effect during the maximum period and for the maximum territory legally permissible.

 

18.           Waiver of Jury Trial .  Consistent with the intention of Section 10, the Company and Employee each further waives its or his respective right to a jury trial of any claim or cause of action arising out of this Agreement or any dealings between them relating to the subject matter of this Agreement.  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, including, without limitation, contract claims, tort claims, and all other common law and statutory claims.  This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, supplements or other modifications to this Agreement or to any other document or agreement relating to the transactions contemplated by this Agreement.

 

19.           Specific Performance and Other Equitable Relief .  Without in any way limiting the provisions of Section 4, Employee acknowledges that the remedies at law of the Company and Company Affiliates for failure of Employee to perform any act required to be performed by Employee under this Agreement are inadequate and, therefore, that the Company and Company Affiliates shall be entitled to specific performance of this Agreement by Employee and to such other equitable relief as a court may deem appropriate to prevent any further violation of this Agreement by Employee, and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided by law or under this Agreement.

 

20.           Full Understanding .  Employee represents that he fully understands his right to discuss all aspects of this Agreement with his private attorney, and that to the extent, if any, Employee desired, Employee availed himself of this right.  Employee further represents that he has carefully read and fully understands all of the provisions of this Agreement, that Employee is competent to execute this Agreement, that Employee’s agreement to execute and deliver this Agreement has not been obtained by any duress and that Employee freely and voluntarily enters into it, and that Employee has read this Agreement in its entirety and fully understands the meaning, intent and consequences of this Agreement.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement Not to Compete as of the date first written above.

 

 

 

 

 

Barry A. Morris

 

 

 

 

 

SPECIALIZED TECHNOLOGY
RESOURCES, INC.,

 

 

 

 

 

 

 

By: Dennis L. Jilot

 

Its: Chairman and Chief Executive Officer

 

SIGNATURE PAGE FOR NON-COMPETE AGREEMENT (MORRIS)

 




Exhibit 10.6

 

EXECUTION COPY

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “ Agreement ”), dated as of June 15, 2007, is made by and between SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (together with any successor thereto, the “ Company ”), and ROBERT S. YORGENSEN, of Enfield, Connecticut (the “ Executive ”).

 

Recitals

 

A.             The Company desires to engage the Executive to perform services under the terms hereof and the Executive desires to be employed by the Company.

 

B.             The Company desires to be assured that the unique and expert services of the Executive will be substantially available to the Company, and that the Executive is willing and able to render such services on the terms hereinafter set forth.

 

C.             The Company desires to be assured that the confidential information and goodwill of the Company will be preserved for the exclusive benefit of the Company.

 

Terms

 

In consideration of such employment and the respective agreements of the parties set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.              Certain Definitions

 

(a)            Annual Base Salary ” shall have the meaning set forth in Section 3(a).

 

(b)            Board ” shall mean the Board of Managers of Parent.

 

(c)            Bonus Compensation ” shall have the meaning set forth in Section 3(b).

 

(d)            The Company shall have “ Cause ” to terminate the Executive’s employment hereunder upon:  (i) the Executive’s breach of Section 2(c) (other than any such failure resulting from the Executive’s Disability), which is not remedied within 30 days after receipt by the Executive of written notice from the Company specifying such failure in reasonable detail; (ii) the Executive’s failure or refusal to follow the reasonable instructions of the Board or the board of directors of any Subsidiary of the Company, which failure or refusal is not cured within 30 days following written notice; (iii) the Executive’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 ; (iv) the Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s or any of its Subsidiaries’ premises; (v) the Executive’s commission of any act of fraud, embezzlement, misappropriation of funds, material misrepresentation, breach of fiduciary duty or other act of dishonesty detrimental to the Company or any of its Subsidiaries; or (vi) the Executive’s intentional wrongful act or gross negligence that has a material detrimental effect on the Company or its Subsidiaries.

 

(e)            Sale of the Company ” means either (i) a sale of more than 50% of the assets of the Company or the Parent (ii) a sale or other transfer of more than 50% of the

 



 

Company’s then outstanding stock or the Parent’s outstanding Units (as defined in the LLC Agreement) in a single transaction to persons or entities who are not stockholders or unitholders at the time of the sale.  For purposes of determining whether a sale of more than 50% of the Company’s or Parent’s assets has occurred, the change of ownership rules set forth in Treas. Reg. § 1.409A-3(i)(5)(vii) shall apply.  For purposes of determining whether any person or entity is a stockholder or a unitholder at the time of sale of more than 50% of the stock of the Company or Units of the Parent, the attribution of ownership rules set forth in Treas. Reg. § 1.409A-3(i)(5)(iii) shall apply.  For purposes of determining whether a sale or other transfer of more than 50% of the outstanding stock of the Company or Units of the Parent has occurred, the change in corporate ownership rules set forth in Treas. Reg. § 1.409A-3(i)(5)(v), shall apply.  Notwithstanding the foregoing, neither of the events in clauses (i) or (ii) herein shall be deemed a “Sale of the Company” unless such event is a “change in the ownership or event control of the corporation, or in the ownership of a substantial portion of the assets of the corporation” as defined in and for purposes of Section 409A of the Code and the regulations thereunder.

 

(f)             Company ” shall have the meaning set forth in the preamble hereto.

 

(g)            Date of Termination ” shall mean (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated due to his Disability, the date determined pursuant to Section 4(a)(ii); (iii) if the Executive’s employment is terminated pursuant to Section 4(a)(iii)-(vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier; or (iv) if the Executive’s employment is terminated pursuant to Section 4(a)(vii) the date on which the Term expires.

 

(h)            Disability ” shall mean any physical or mental illness, injury or infirmity which prevents the Executive from performing the Executive’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 in consultation with a qualified physician or physicians selected by the Board and reasonably acceptable to the Executive.  The failure of the Executive to submit to a reasonable examination by such physician or physicians shall act as an estoppel to any objection by the Executive to the determination of disability by the Board.

 

(i)             Effective Date ” shall have the meaning set forth in Section 2(b).

 

(j)             Executive ” shall have the meaning set forth in the preamble hereto.

 

(k)            The Executive shall have “ Good Reason ” to resign his employment upon the occurrence (without the Executive’s prior written consent) of any of the following:  (A) a material diminution in the nature or scope of the Executive’s responsibilities, duties or authority in his capacity as President of the STR Solar business of the Company, without regard to any other responsibilities, duties or authority the Executive may have had or performed for the Company at any time; (B) the Company’s material breach of this Agreement; (C) any change in the Executive’s reporting relationship so that he no longer reports to the Chief Executive Officer; (D) a relocation of the Executive’s place of employment to a location more than thirty miles by road from Enfield, Connecticut; or (E) any decrease in the Executive’s Annual Base Salary, target bonus percentage as set forth in Section 3(a), or benefit plans, programs and arrangements as in effect from time to time (other than a general reduction in base salary, target bonus percentages or benefit plans, programs and arrangements that affects all members of senior management

 

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equally); provided, however , that the Executive may not resign his employment for Good Reason unless:  (x) the Executive provided the Company with at least 30 days prior written notice of his intent to resign for Good Reason (which notice must be provided within 45 days following (i) the occurrence of the event(s) purported to constitute Good Reason, or (ii) if the Executive could not reasonably have known of the occurrence of any of such events, the date on which the Executive had actual knowledge of the occurrence of any of such events); and (y) the Company has not remedied the alleged occurrence(s) within the 30-day period following its receipt of such notice from the Executive.

 

(l)             Notice of Termination ” shall have the meaning set forth in Section 4(b).

 

(m)           Parent ” means STR Holdings LLC, a Delaware limited liability company.

 

(n)            Term ” shall have the meaning set forth in Section 2(b).

 

2.              Employment

 

(a)            In General .  The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.

 

(b)            Term of Employment .  The initial term of employment under this Agreement (the “ Initial Term ”) shall be for the period beginning on June 15, 2007 (the “ Effective Date ”) and ending on the third anniversary thereof, unless earlier terminated as provided in Section 4.  The employment term hereunder shall automatically be extended for successive one-year periods (“ Extension Terms ” and, collectively with the Initial Term, the “ Term ”) unless either party gives written notice of non-extension to the other no later than 60 days prior to the expiration of the then applicable Term.

 

(c)            Position and Duties .  The Executive shall serve as President of the STR Solar business of the Company, with responsibilities, duties and authority customary for such position, subject to direction by the Chief Executive Officer.  The Executive shall report to the Chief Executive Officer.  The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company and its subsidiaries.  The Executive agrees to observe and comply with the Company’s rules and policies as adopted by the Company from time to time.  During the Term, it shall not be a violation of this Agreement for the Executive to (i) serve on industry trade, civic or charitable boards or committees; (ii) deliver lectures or fulfill speaking engagements; or (iii) manage personal investments (which shall include (x) investments by the Executive of his personal assets in any business which does not compete directly or indirectly with the Company, in such form or manner as will not require any services on the part of the Executive in the operation of such business and (y) the purchase by the Executive of a total of up to 1% of the regularly traded securities of any entity, whether or not it competes with the Company), as long as, in the reasonable judgment of the Chief Executive Officer of the Company, such activities do not and will not interfere with the performance of the Executive’s duties and responsibilities as an employee of the Company.  The Executive shall perform his duties hereunder at the Company’s corporate headquarters in Enfield, Connecticut and shall travel as necessary or as reasonably requested by the Chief Executive Officer of the Company.

 

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3.                                       Compensation and Related Matters

 

(a)            Annual Base Salary .  During the Term, the Executive shall receive a base salary at a rate of $235,000.00 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to increase as determined by the Board in its sole discretion (the “ Annual Base Salary ”).  The Executive’s Annual Base Salary will be reviewed annually by the Board and the Board may, in its sole discretion, increase the Annual Base Salary considering the Executive’s performance and that of the Company.

 

(b)            Bonus Compensation .

 

(i)             In addition to the Annual Base Salary, for each fiscal year, or portion thereof, during the Term, the Executive shall be eligible to participate in the Company’s management incentive plan (or any successor incentive plan adopted by the Board) pursuant to which Executive may be paid a target amount of 40% of his Annual Base Salary except as the parties may have agreed otherwise in writing.  The Executive’s bonus will be based upon performance measured against mutually agreed upon goals to be established as soon as practicable after the date hereof.  In the discretion of management, Executive shall be eligible to receive incentive units pursuant to the terms of the Amended and Restated Limited Liability Company Agreement of STR Holdings LLC (the “ LLC Agreement ”).

 

(ii)            In accordance with Section 2.9 of the Amended and Restated Merger Agreement, dated June 15, 2007, by and among the Company, STR Holdings LLC and STR Acquisition, Inc. (the “ Merger Agreement ”) and in consideration of the Executive’s desire to “rollover” options exercisable for (A) 12,500 shares of the Company at an exercise price of $3.25 per share and (B) 2,500 shares of the Company at an exercise price of $0.50 per share for options of an equivalent value in the Surviving Corporation (as defined in the Merger Agreement), which rollover could not be accommodated due to structural restrictions, the Company shall pay the Executive a bonus equal to the lesser of (A) the sum of (1) an amount equal to the product of (i) 12,500 and (ii) the excess of the Per Share Merger Consideration (as defined in the Merger Agreement) over $3.25 and (2) an amount equal to the product of (i) 2,500 and (ii) the excess of the Per Share Merger Consideration over $0.50 (the “ Aggregate Spread ”) and (B) and the “fair market value” of that number of Class A Units of STR Holdings, LLC equal to the quotient achieved by dividing the Aggregate Spread by $10.00 (the “ Bonus Amount ”).  For purposes hereof “fair market value” shall mean Repurchase Fair Market Value as set forth in the Amended and Restated Limited Liability Company Agreement of STR Holdings, LLC, as it may be further amended and restated.  The Bonus Amount shall be calculated on the Payment Date (as defined below).

 

(iii)           Upon the earlier to occur of December 31, 2015, a Sale of the Company or termination of the Executive’s employment for any reason (in each case, the “ Payment Date ”), the Bonus Amount shall be distributed to the Executive and paid in a lump sum, without interest, as soon as administratively possible but not later than 60 days following such Payment Date.

 

(iv)           The Executive may from time to time designate one or more persons (who may be any one or more members of such person’s family or other persons, administrators, trusts, foundations or other entities) as his or her beneficiary under the Bonus Account.  Such designation shall be made on a form prescribed by the Company.

 

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(c)            Benefits .  The Executive shall be entitled to participate in employee benefit plans, programs and arrangements of the Company now (or, to the extent determined by the Board, hereafter) in effect which are applicable to the senior management of the Company.

 

(d)            Vacation .  During the Term, the Executive shall be entitled to four weeks paid vacation each calendar year.  Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive.

 

(e)            Expenses .  The Company shall promptly reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures.

 

4.              Termination .  The Executive’s employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:

 

(a)            Circumstances

 

(i)             Death .  The Executive’s employment hereunder shall terminate upon his death.

 

(ii)            Disability .  If the Executive incurs a Disability, the Company may give the Executive written notice of its intention to terminate the Executive’s employment.  In that event, the Executive’s employment with the Company shall terminate effective on the later of the 30th day after receipt of such notice by the Executive or the date specified in such notice, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties.

 

(iii)           Termination for Cause .  The Company may terminate the Executive’s employment for Cause.

 

(iv)           Termination without Cause .  The Company may terminate the Executive’s employment without Cause.

 

(v)            Resignation for Good Reason .  The Executive may resign his employment for Good Reason.

 

(vi)           Resignation without Good Reason .  The Executive may resign his employment without Good Reason.

 

(vii)          Non-renewal .  Either party may notify the other of his or its intent not to renew this Agreement at least 60 days prior to the expiration of the Term, which shall be treated as a termination without Cause if such notice is given by the Company and the Company does not concurrently waive the Executive’s obligations under Section 2 of the Agreement Not to Compete, or a resignation without Good Reason if such notice is given by the Executive.

 

(b)            Notice of Termination .  Any termination of the Executive’s employment by the Company or by the Executive under this Section 4 (other than termination pursuant to

 

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paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating (i) the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Section 4(a)(iv) or 4(a)(vi), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) specifying a Date of Termination which, if submitted by the Executive (or, in the case of a termination described in Section 4(a)(ii), by the Company), shall be at least 30 days following the receipt of such notice (a “ Notice of Termination ”); provided, however , that a Notice of Termination delivered by the Company pursuant to Section 4(a)(ii) shall not be required to specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii); and provided, further , that in the event that the Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of Company’s receipt of such Notice of Termination (even if such date is prior to the date specified in such Notice of Termination).  A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion.  The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

5.              Company Obligations Upon Termination of Employment

 

(a)            In General .  Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive in a lump sum within 20 business days following the Executive’s termination:  the sum of the Executive’s Annual Base Salary through the Date of Termination; and any expenses owed to the Executive under Section 3(e).  The Executive shall also be entitled to any accrued vacation pay owed to the Executive pursuant to Section 3(d); any amount arising from the Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(c) (including without limitation, any disability or life insurance benefit plans, programs or arrangements), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements; and any benefits that may be due the Executive under the LLC Agreement or incentive unit agreements between the Executive and the Company.

 

(b)            Termination without Cause or for Good Reason .  If the Executive’s employment shall be terminated by the Company without Cause or by the Executive for Good Reason (but not by reason of the Executive’s death, Disability, termination by the Company for Cause or termination by the Executive without Good Reason), then, in addition to the payments and benefits described in Section 5(a) (including benefits under stock option agreements), the Company shall:

 

(i)             Continue to pay to the Executive, in accordance with the Company’s regular payroll practice following the Date of Termination, the Executive’s Annual Base Salary, and continue the Executive’s participation in the Company’s health, life insurance and retirement plans through twelve months from the Date of Termination; provided that each payment is intended to constitute a separate payment within the meaning of Code Section 409A and the regulations thereunder; provided , further that in the event that Executive is determined by the Company to be a “specified employee” (as

 

6



 

defined in Code Section 409A(2)(B) and determined in accordance with Code 416(i) (without regard to paragraph (5) thereof)) of the Company at a time when its stock is deemed to be publicly traded on an established securities market, any payments determined to be “nonqualified deferred compensation” payable following termination of employment shall be made no earlier than the earlier of (i) the last day of the sixth (6th) complete calendar month following such termination of employment, or (ii) Executive’s death, consistent with the provisions of Code Section 409A.  Any payment delayed by reason of the prior sentence shall be paid out in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule;

 

(ii)            If the Executive otherwise would have been entitled to receive a payment pursuant to the Company’s bonus plan had he been employed on the last day of the Company’s fiscal year, then pay to the Executive on April 30 of the year following the year in which the Executive’s termination occurs, (and in the event that the Company has not received its audited financial statements for the prior year by April 30 of such year, such bonus shall be paid as soon as practicable thereafter, consistent with the provisions of Code Section 409A, but in no event later than the last day of such following year), the amount of such payment, multiplied by a fraction the numerator of which is the number of days during such fiscal year that the Executive was employed and the denominator of which is 365; and

 

(iii)           Continue paid coverage for the Executive and any eligible dependents under all Company group health benefit plans in which the Executive and any dependents were entitled to participate immediately prior to the Date of Termination through the twelfth month after the Date of Termination, to the extent permitted thereunder.  As of the date that the Executive ceases to receive coverage under any group health plan pursuant to this Section 5(b)(iii), the Executive shall be eligible to elect to receive “COBRA” continuation coverage to the extent permitted by Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended, and if such coverage ceases prior to twelve months from the Date of Termination, the Company shall pay for such COBRA coverage through such twelve month period.

 

6.              Agreement Not To Compete .  As of the date hereof the Executive shall enter into an Agreement Not To Compete, in substantially the form attached hereto as Appendix A , the terms and conditions of which are incorporated herein by this reference.  If the Executive breaches any his covenants in such Agreement Not to Compete, then notwithstanding any other provision of this Agreement, the Executive shall be entitled to no further payments or benefits provided for in this Agreement.

 

7.              Assignment and Successors .  The Company may assign its rights under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, shall use its best efforts to require any such successor or other assignee to assume its obligations under this Agreement, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and entities controlled by the Company or under common control with the Company.  The Executive may not assign his rights or obligations under this Agreement to any individual or entity.  This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.

 

7



 

8.              Governing Law .  This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of New York, without reference to the principles of conflicts of law of the State of New York or any other jurisdiction, and where applicable, the laws of the United States.

 

9.              Validity .  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

10.           Notices .  Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party shall have specified by notice in writing to the other party):

 

If to the Company, to:

 

Specialized Technology Resources, Inc.

10 Water Street

Enfield, Connecticut  06082-4899

Attn:  Barry A. Morris

Facsimile:  (860) 749-9158

 

with a copy to:

 

DLJ Merchant Banking
Eleven Madison Avenue, 16th Floor

New York, New York  10010

Attn:  Susan C. Schnabel

Facsimile:  (310) 712-2734

 

11.           Counterparts .   This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

 

12.           Entire Agreement .   The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) is intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement.  The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

 

13.           Amendments; Waivers .   This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of Company.  By an instrument in writing similarly executed, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however , that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in exercising any right,

 

8



 

remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.  Notwithstanding anything herein to the contrary, no amendment may be made to this Agreement if it would cause the Agreement or any payment hereunder not to be in compliance with Code Section 409A.

 

14.           No Inconsistent Actions .   The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

 

15.           Construction .   This Agreement shall be deemed drafted equally by both the parties.  Its language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the language is to be construed against any party shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “or” is used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

 

16.           Enforcement .   If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

 

17.           Withholding .   The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges that the Company is required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

 

18.           Employee Acknowledgement .   The Executive acknowledges that he has read and understands this Agreement, is fully aware of its legal effect and has consulted with legal counsel as to its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his judgment.

 

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19.           Survival .   The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.

 

20.           Disputes .  All disputes between the parties arising from or in connection with this Agreement or the Executive’s employment hereunder, including those relating to the existence and validity of this agreement to arbitrate, shall be submitted to full and binding arbitration in Hartford, Connecticut, before a panel of three arbitrators and administered by the American Arbitration Association under its National Rules for the Resolution of Employment Disputes, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.  Each party shall be responsible for its own costs and expenses of such arbitration.  Notwithstanding the foregoing, nothing in this Section 20 shall prevent or otherwise hinder the ability of the Company to seek injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions in connection with any controversy or claim arising out of or relating to the Agreement Not to Compete.

 

[signature page follows]

 

10



 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

 

/s/ Robert S. Yorgensen

 

Robert S. Yorgensen

 

 

 

 

 

SPECIALIZED TECHNOLOGY

 

RESOURCES, INC.

 

 

 

 

 

By:

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Vice President and Chief Financial
Officer

 

 

signature page for employment agreement (YOrgensen)

 



 

Appendix A

 

Agreement Not To Compete

 

[Please see attached]

 

2


 

Execution Copy

 

AGREEMENT NOT TO COMPETE

 

This Agreement Not To Compete (this “ Agreement ”) dated as of June 15, 2007 (the “ Effective Date ”), is made by and between SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (together with any successor thereto, the “ Company ”), and ROBERT S. YORGENSEN, of Enfield, Connecticut, (the “ Employee ”).

 

Recitals

 

A.             Contemporaneously with the execution hereof, the Company and Employee are executing an Employment Agreement (the “ Employment Agreement ”) pursuant to which the Company will employ Employee as President of STR Solar .

 

B.             Pursuant to the Employment Agreement, Employee has agreed to enter into this Agreement as a condition of his employment.

 

Terms

 

In consideration of the Employment Agreement, the respective agreements of the parties herein and other good and valuable consideration received by each party from the other, the parties agree as follows:

 

1.              Defined Terms Any capitalized term used herein but not defined shall have the meaning ascribed to such term in the Employment Agreement.

 

2.              Agreement Not to Compete .  For a period equal to the term of Employee’s employment with the Company and through the date which is twelve (12) months following the Employee’s Date of Termination for any reason (the “ Initial Noncompetition Period ”), Employee shall not, without the prior written consent of the Company, and whether as employee, principal, agent, shareholder, partner, consultant, advisor, limited liability company manager or member, director, or otherwise, directly or indirectly, compete with the Company or any subsidiary of the Company in the business of manufacturing solar panel encapsulent, or the business of providing consumer product quality assurance services to third parties (collectively, the “ Business ”).  The making or guarantying of a loan, lease or any other financial arrangement to, with or for any person or entity that engages in any of the activities described in the preceding sentence shall be deemed a breach of the covenant set forth in the preceding sentence.  However, Employee may purchase or own up to 1% of the outstanding stock of any publicly traded corporation that competes with the Company or any Company Affiliate, but may not be employed by or otherwise participate in the activities of such corporation.  For purposes of this agreement, “ Company Affiliate ” means any entity directly or indirectly controlled by the Company, and also includes STR Holdings, Inc. and any of its direct or indirect subsidiaries.

 

The Company shall have the option to extend the Initial Noncompetition Period for an additional twelve (12) months (the “ Extended Noncompetition Period ” and, together with the Initial Noncompetition Period, the “ Noncompetition Period ”); provided, that the Company gives the Executive written notice of such extension at least six (6) months prior to the expiration of the Initial Noncompetition Period, and agrees to pay to the Employee, in accordance with the Company’s regular payroll practice, the Executive’s Annual Base Salary, and to continue the Executive’s participation in the Company’s health and life insurance and retirement plans through the Extended Noncompetition Period.

 



 

Employee represents and warrants that he does not own, directly, indirectly, in whole or in part, beneficially or otherwise, any company or enterprise that competes with or participates in the Business, or otherwise engage in any activity that would violate this Section 1.

 

3.              Confidential Information; Non-Solicitation; Non-Disparagement; Inventions .

 

(a)            Employee acknowledges that he will occupy a position of trust and confidence with the Company and may become familiar with the following, any and all of which constitute confidential information of the Company or Company Affiliates (collectively, the “ Confidential Information ”):  (i) all information related to vendors, suppliers and customers, including, without limitation, customer lists, the identities of existing, past or prospective customers and acquisition targets, prices charged or proposed to be charged to customers, customer contacts, special customer requirements and all related information; (ii) all marketing plans, materials and techniques; (iii) all methods of business operation and related procedures of the Company or Company Affiliates; and (iv) all patterns, devices, compilations of information, copyrightable material and technical information, if any, in each case that relates in any way to the Business of the Company or any Company Affiliate.

 

(b)            Employee acknowledges and agrees that all Confidential Information learned or obtained by him is the property of the Company or a Company Affiliate.  Therefore, Employee shall not at any time disclose to any unauthorized persons or use for his own account or for the benefit of any third party any Confidential Information, whether Employee has such information in his memory or embodied in writing or other physical form, without the Company’s prior written consent (which it may grant or withhold in its sole discretion), unless and to the extent that the Confidential Information is or becomes generally known to and available for use by the public other than as a result of Employee’s fault or, to Employee’s knowledge, the fault of any other person bound by a duty of confidentiality to the Company or any Company Affiliate.  Employee agrees to deliver to the Company at any time the Company may request, all documents, memoranda, notes, plans, records, reports, and other documentation, models, components, devices, or computer software, whether embodied in a disk or in other form (and all copies of all of the foregoing), relating to the businesses, operations, or affairs of the Company or any Company Affiliate and any other Confidential Information that Employee may then possess or have under Employee’s control.

 

(c)            If the Employee or any entity controlled by Employee (an “ Employee Affiliate ”) is required by law to disclose any Confidential Information, Employee shall promptly notify the Company in writing so that the Company may seek a protective order or other motion to prevent or limit the production or disclosure of such information.  If such motion has been denied, then the person required to disclose such information may disclose only such portion of such information that, based on advice of Employee’s outside legal counsel, is required by law to be disclosed (provided that the person required to disclose such information shall use all reasonable efforts to preserve the confidentiality of the remainder of such information).  Employee shall continue to be bound by his obligations pursuant to this Agreement for any information that is not required to be disclosed, or that has been afforded protective treatment, pursuant to such motion.

 

(d)            During the Noncompetition Period, Employee will not, and will not permit any Employee Affiliate to, directly or indirectly, (a) recruit or otherwise solicit or induce any employee, customer, subscriber or supplier of the Company or any Company Affiliate to

 

2



 

terminate its employment or arrangement with the Company or any Company Affiliate, otherwise change its relationship with the Company or any Company Affiliate, or establish any relationship with Employee or any Employee Affiliate to compete in the Business or (b) without the Company’s prior written consent, hire any employee of the Company or any Company Affiliate, including any person whose employment with the Company or any Company Affiliate is terminated by such employee without Good Reason.

 

(e)            During the Noncompetition Period, Employee agrees not to disparage in any material respect the Company or any Company Affiliate, any of their respective products or practices, or any of their respective directors, officers, managers, agents, representatives, stockholders, members or affiliates, either orally or in writing.  The Company and any Company Affiliates (including without limitation any officers or directors of the Company or any Company Affiliate) agree not to disparage in any material respect the Employee either orally or in writing.  Notwithstanding the forgoing, nothing contained herein shall limit the ability of either party, as applicable, to provide truthful testimony as required by law or any judicial or administrative process.

 

(f)             All rights to discoveries, inventions, improvements and innovations (including all data and records pertaining thereto) related to the Business of the Company or any Company Affiliate, whether or not patentable, copyrightable, registrable as a trademark, or reduced to writing, that Employee may discover, invent or originate during the term of Employee’s consulting arrangement or employment with the Company or any Company Affiliate, and for a period of 12 months thereafter, either alone or with others and whether or not during working hours or by the use of the facilities of either the Company or any of its subsidiaries (“ Inventions ”), shall be the exclusive property of the Company.  Employee shall promptly disclose all Inventions to the Company, shall execute at the request of the Company any assignments or other documents the Company may deem necessary to protect or perfect its rights therein, and shall assist the Company, at the Company’s expense, in obtaining, defending and enforcing the Company’s rights therein.  Employee hereby appoints the Company as his attorney-in-fact to execute on his behalf any assignments or other documents deemed necessary by the Company to protect or perfect its rights to any Inventions.

 

4.              Remedies .  The necessity of protection against the competition of Employee and the nature and scope of such protection has been carefully considered and agreed upon by the parties hereto.  Employee and the Company acknowledge that the duration, scope and geographic area applicable to the restrictions set forth in this Agreement are fair, reasonable and necessary.  Employee acknowledges that the consideration provided for herein is sufficient and adequate to compensate Employee for agreeing to the restrictions contained in this Agreement and that such restrictions will not cause him undue hardship.  If, however, any court determines that the foregoing restrictions are unreasonable and for that reason unenforceable, such restrictions shall be modified, rewritten or interpreted to include as much of their nature and scope as will render them enforceable.  Employee and the Company agree that a monetary remedy for a breach of this Agreement will be inadequate and will be impracticable and extremely difficult to prove, and further agree that such a breach would cause the Company irreparable harm, and that the Company and the Company Affiliates shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damages.  Employee agrees that the Company and the Company Affiliates shall be entitled to such injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bond or other undertaking in connection therewith.

 

3



 

5.              Notices .  Notices sent by the Company or Employee hereunder shall be made in writing to such party at the below addresses or as the Company and Employee may otherwise agree in writing.

 

f to the Company, to:

 

Specialized Technology Resources, Inc.

10 Water Street

Enfield, Connecticut  06082-4899

Attn:  Barry A. Morris

Facsimile:  (860) 749-9158

 

with a copy to:

 

DLJ Merchant Banking

Eleven Madison Avenue, 16th Floor

New York, New York  10010

Attn:  Susan C. Schnabel

Facsimile:  (310) 712-2734

 

If to Employee, at the address set forth on the signature page hereto.

 

6.              Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

7.              Headings .  The headings herein are for convenience only, do not constitute part of this Agreement, and shall not be deemed to limit or affect any of the provisions hereof.

 

8.              Entire Understanding .  This Agreement and the other agreements and instruments incorporated herein constitute the entire agreement and understanding between the parties, and supersede all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

 

9.              Amendments .  This Agreement may not be modified or changed except by written instrument signed by each of the parties hereto that expressly states the intention of the parties to modify or change this Agreement.

 

10.            Governing Law .  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to principles of conflicts of laws.

 

11.            Construction .  Whenever in this Agreement the context so requires, references to the masculine shall be deemed to include feminine and the neuter, references to the neuter shall be deemed to include the masculine and feminine, and references to the plural shall be deemed to include the singular and the singular to include the plural.

 

4



 

12.            Cooperation .  Each party hereto shall cooperate with the other party and shall take such further action and shall execute and deliver such further documents as may be necessary or desirable in order to carry out the provisions and purposes of this Agreement.

 

13.            Waiver .  Employee or the Company may, by express written notice to the other:  (i) waive any inaccuracies in the representations or warranties of the other party contained in this Agreement or in any document delivered pursuant to this Agreement; (ii) waive compliance with any of the covenants of the other party contained in this Agreement; or (iii) waive or modify performance of any of the obligations of the other party.  No action taken pursuant to this Agreement shall be deemed to constitute a waiver by the party taking such action, possessing such knowledge or performing such investigation of compliance with the representations, warranties, covenants and agreements contained herein.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be constituted as a waiver of any subsequent breach.  The failure of any party to insist, in any one or more instances, upon performance of any of the terms, covenants or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or any such term, covenant or condition.

 

14.            Knowledge and Skill .  THE EMPLOYEE REPRESENTS AND WARRANTS THAT THE KNOWLEDGE, SKILLS AND ABILITIES HE OR SHE POSSESSES AT THE TIME OF COMMENCEMENT OF EMPLOYMENT HEREUNDER ARE SUFFICIENT TO PERMIT HIM OR HER, IN THE EVENT OF TERMINATION OF HIS OR HER EMPLOYMENT HEREUNDER, TO EARN A LIVELIHOOD SATISFACTORY TO HIMSELF WITHOUT VIOLATING ANY PROVISION HEREOF, FOR EXAMPLE, BY USING SUCH KNOWLEDGE, SKILLS AND ABILITIES, OR SOME OF THEM, IN THE SERVICE OF A NON-COMPETITOR.

 

15.            Interpretation of Agreement .  Each party hereto cooperated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto shall be deemed the work product of the parties and may not be construed against any party by reason of its preparation.  Accordingly, any rule of law, or any legal decision that would require interpretation of any ambiguities in this Agreement against the party that drafted it, is of no application and is hereby expressly waived.  The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intentions of the parties regarding this Agreement.

 

16.            Parties in Interest; Assignment .  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective permitted successors, assigns, heirs and/or personal representatives, except that neither this Agreement nor any interest herein shall be assigned or assignable by operation of law or otherwise by Employee without the prior written consent of the Company.  Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties and their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.

 

17.            Severability .  If, notwithstanding the express, carefully considered agreement of the Company and Employee set forth herein, any provision of this Agreement shall be deemed invalid, unenforceable or illegal, or if the period during which this Agreement is to remain effective is found to exceed the legally permissible period or the territory with respect to which this Agreement is to be effective is found to exceed the legally permissible territory, then notwithstanding such invalidity, unenforceability or illegality the remainder of this Agreement

 

5



 

shall continue in full force and effect during the maximum period and for the maximum territory legally permissible.

 

18.            Waiver of Jury Trial .  Consistent with the intention of Section 10, the Company and Employee each further waives its or his respective right to a jury trial of any claim or cause of action arising out of this Agreement or any dealings between them relating to the subject matter of this Agreement.  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, including, without limitation, contract claims, tort claims, and all other common law and statutory claims.  This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, supplements or other modifications to this Agreement or to any other document or agreement relating to the transactions contemplated by this Agreement.

 

19.            Specific Performance and Other Equitable Relief .  Without in any way limiting the provisions of Section 4, Employee acknowledges that the remedies at law of the Company and Company Affiliates for failure of Employee to perform any act required to be performed by Employee under this Agreement are inadequate and, therefore, that the Company and Company Affiliates shall be entitled to specific performance of this Agreement by Employee and to such other equitable relief as a court may deem appropriate to prevent any further violation of this Agreement by Employee, and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided by law or under this Agreement.

 

20.            Full Understanding .  Employee represents that he fully understands his right to discuss all aspects of this Agreement with his private attorney, and that to the extent, if any, Employee desired, Employee availed himself of this right.  Employee further represents that he has carefully read and fully understands all of the provisions of this Agreement, that Employee is competent to execute this Agreement, that Employee’s agreement to execute and deliver this Agreement has not been obtained by any duress and that Employee freely and voluntarily enters into it, and that Employee has read this Agreement in its entirety and fully understands the meaning, intent and consequences of this Agreement.

 

6



 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement Not to Compete as of the date first written above.

 

 

 

 

Robert S. Yorgensen

 

 

 

 

 

SPECIALIZED TECHNOLOGY

RESOURCES, INC.,

 

 

 

 

 

By: Barry A. Morris

 

Its: Vice President and Chief Financial Officer

 

 

SIGNATURE PAGE FOR NON-COMPETE AGREEMENT (Yorgensen)

 




Exhibit 10.7

 

EXECUTION COPY

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “ Agreement ”), dated as of August 17, 2009, is made by and between SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (together with any successor thereto, the “ Company ”), and MARK A. DUFFY, of Naperville, Illinois (the “ Executive ”).

 

Recitals

 

A.             The Company desires to engage the Executive to perform services under the terms hereof and the Executive desires to be employed by the Company.

 

B.             The Company desires to be assured that the unique and expert services of the Executive will be substantially available to the Company, and that the Executive is willing and able to render such services on the terms hereinafter set forth.

 

C.             The Company desires to be assured that the confidential information and goodwill of the Company will be preserved for the exclusive benefit of the Company.

 

Terms

 

In consideration of such employment and the respective agreements of the parties set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.              Certain Definitions

 

(a)            Annual Base Salary ” shall have the meaning set forth in Section 3(a).

 

(b)            Annual Bonus ” shall have the meaning set forth in Section 3(b).

 

(c)            Board ” shall mean the Board of Managers of Parent.

 

(d)            The Company shall have “ Cause ” to terminate the Executive’s employment hereunder upon:  (i) the Executive’s breach of Section 2(c) (other than any such failure resulting from the Executive’s Disability), which is not remedied within 30 days after receipt by the Executive of written notice from the Company specifying such failure in reasonable detail or the Executive’s breach of Section 21; (ii) the Executive’s failure or refusal to follow the reasonable instructions of the Board or the board of directors of any Subsidiary of the Company, which failure or refusal is not cured within 30 days following written notice; (iii) the Executive’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 ; (iv) the Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s or any of its Subsidiaries’ premises; (v) the Executive’s commission of any act of fraud, embezzlement, misappropriation of funds, material misrepresentation, breach of fiduciary duty or other act of dishonesty detrimental to the Company or any of its Subsidiaries; or (vi) the Executive’s intentional wrongful act or gross negligence that has a material detrimental effect on the Company or its Subsidiaries.

 

(e)            Company ” shall have the meaning set forth in the preamble hereto.

 



 

(f)             Date of Termination ” shall mean (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated due to his Disability, the date determined pursuant to Section 4(a)(ii); (iii) if the Executive’s employment is terminated pursuant to Section 4(a)(iii)-(vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier; or (iv) if the Executive’s employment is terminated pursuant to Section 4(a)(vii) the date on which the Term expires.

 

(g)            Disability ” shall mean any physical or mental illness, injury or infirmity which prevents the Executive from performing the Executive’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 in consultation with a qualified physician or physicians selected by the Board and reasonably acceptable to the Executive.  The failure of the Executive to submit to a reasonable examination by such physician or physicians shall act as an estoppel to any objection by the Executive to the determination of disability by the Board.

 

(h)            Effective Date ” shall have the meaning set forth in Section 2(b).

 

(i)             Executive ” shall have the meaning set forth in the preamble hereto.

 

(j)             The Executive shall have “ Good Reason ” to resign his employment upon the occurrence (without the Executive’s prior written consent) of any of the following:  (A) a material diminution in the nature or scope of the Executive’s responsibilities, duties or authority in his capacity as President of STR Quality Assurance, without regard to any other responsibilities, duties or authority the Executive may have had or performed for the Company at any time; (B) the Company’s material breach of this Agreement; (C) any change in the Executive’s reporting relationship so that he no longer reports to the Chief Executive Officer; (D) a relocation of the Executive’s place of employment to a location more than thirty miles by road from Enfield, Connecticut; or (E) any decrease in the Executive’s Annual Base Salary, target bonus percentage as set forth in Section 3(a), or benefit plans, programs and arrangements as in effect from time to time (other than a general reduction in base salary, target bonus percentages or benefit plans, programs and arrangements that affects all members of senior management equally); provided, however , that the Executive may not resign his employment for Good Reason unless:  (x) the Executive provided the Company with at least 30 days prior written notice of his intent to resign for Good Reason (which notice must be provided within 45 days following (i) the occurrence of the event(s) purported to constitute Good Reason, or (ii) if the Executive could not reasonably have known of the occurrence of any of such events, the date on which the Executive had actual knowledge of the occurrence of any of such events); and (y) the Company has not remedied the alleged occurrence(s) within the 30-day period following its receipt of such notice from the Executive.

 

(k)            Notice of Termination ” shall have the meaning set forth in Section 4(b).

 

(l)             Parent ” means STR Holdings LLC, a Delaware limited liability company.

 

(m)           Term ” shall have the meaning set forth in Section 2(b).

 

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2.              Employment

 

(a)            In General .  The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.

 

(b)            Term of Employment .  The initial term of employment under this Agreement (the “ Initial Term ”) shall be for the period beginning on August 24, 2009 (the “ Effective Date ”) and ending on the third anniversary thereof, unless earlier terminated as provided in Section 4.  The employment term hereunder shall automatically be extended for successive one-year periods (“ Extension Terms ” and, collectively with the Initial Term, the “ Term ”) unless either party gives written notice of non-extension to the other no later than 60 days prior to the expiration of the then applicable Term.

 

(c)            Position and Duties .  The Executive shall serve as President of STR Quality Assurance, with responsibilities, duties and authority customary for such position, subject to direction by the Chief Executive Officer.  The Executive shall report to the Chief Executive Officer.  The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company and its subsidiaries.  The Executive agrees to observe and comply with the Company’s rules and policies as adopted by the Company from time to time.  During the Term, it shall not be a violation of this Agreement for the Executive to (i) serve on industry trade, civic or charitable boards or committees; (ii) deliver lectures or fulfill speaking engagements; or (iii) manage personal investments (which shall include (x) investments by the Executive of his personal assets in any business which does not compete directly or indirectly with the Company, in such form or manner as will not require any services on the part of the Executive in the operation of such business and (y) the purchase by the Executive of a total of up to 1% of the regularly traded securities of any entity, whether or not it competes with the Company), as long as, in the reasonable judgment of the Chief Executive Officer of the Company, such activities do not and will not interfere with the performance of the Executive’s duties and responsibilities as an employee of the Company.  The Executive shall perform his duties hereunder at the Company’s corporate headquarters in Enfield, Connecticut and shall travel as necessary or as reasonably requested by the Chief Executive Officer of the Company.

 

3.              Compensation and Related Matters

 

(a)            Annual Base Salary .  During the Term, the Executive shall receive a base salary at a rate of $250,000.00 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to increase as determined by the Board in its sole discretion (the “ Annual Base Salary ”).  The Executive’s Annual Base Salary will be reviewed annually by the Board and the Board may, in its sole discretion, increase the Annual Base Salary considering the Executive’s performance and that of the Company.

 

(b)            Bonus Compensation .

 

(i)             In addition to the Annual Base Salary, for each fiscal year, or portion thereof, during the Term, the Executive shall be eligible to participate in the Company’s management incentive plan (or any successor incentive plan adopted by the Board) pursuant to which Executive may be paid a target amount of 40% of his Annual Base Salary except as the parties may have agreed otherwise in writing (the “ Annual Bonus ”).  The Annual Bonus will be based upon performance measured against goals

 

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established by the Chief Executive Officer and the Board.  For purposes of the 2009 fiscal year, the Executive shall be entitled to not less than a pro-rata share of his Annual Bonus for the portion of the 2009 fiscal year in which the Executive is employed following the Effective Date.  In the discretion of management, Executive shall be eligible to receive incentive units pursuant to the terms of the Third Amended and Restated Limited Liability Company Agreement of STR Holdings LLC (the “ LLC Agreement ”).

 

(ii)            On the Effective Date, Executive shall receive a signing bonus in an amount equal to $125,000 (the “ Signing Bonus ”); provided , however , should Executive terminate within one year after the Effective Date either for Cause or without Good Reason, Executive shall reimburse the Company in an amount equal to the Signing Bonus.

 

(c)            Benefits .  The Executive shall be entitled to participate in employee benefit plans, programs and arrangements of the Company now (or, to the extent determined by the Board, hereafter) in effect which are applicable to the senior management of the Company.

 

(d)            Vacation .  During the Term, the Executive shall be entitled to four weeks paid vacation each calendar year.  Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive.

 

(e)            Expenses .  The Company shall promptly reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures (including, without limitation, (i) transitional living expenses for the one-year period following the Effective Date in an amount not to exceed $25,000 and (ii) relocation expenses paid by Executive within eighteen months from the Effective Date, which shall include reasonable realtor and household moving fees, in an amount not to exceed $175,000).  Commuting expenses during the transition period will also be covered by the Company.

 

(f)             Equity Grant .          On the Effective Date, and pursuant to the terms and subject to the conditions set forth in the Incentive Unit Grant Agreement between Parent and the Executive and the LLC Agreement, Executive shall be granted 145,834 Class C Units, 52,083 Class D Units and 52,083 Class E Units.

 

4.              Termination .  The Executive’s employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:

 

(a)            Circumstances

 

(i)             Death .  The Executive’s employment hereunder shall terminate upon his death.

 

(ii)            Disability .  If the Executive incurs a Disability, the Company may give the Executive written notice of its intention to terminate the Executive’s employment.  In that event, the Executive’s employment with the Company shall terminate effective on the later of the 30th day after receipt of such notice by the

 

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Executive or the date specified in such notice, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties.

 

(iii)           Termination for Cause .  The Company may terminate the Executive’s employment for Cause.

 

(iv)           Termination without Cause .  The Company may terminate the Executive’s employment without Cause.

 

(v)            Resignation for Good Reason .  The Executive may resign his employment for Good Reason.

 

(vi)           Resignation without Good Reason .  The Executive may resign his employment without Good Reason.

 

(vii)          Non-renewal .  Either party may notify the other of his or its intent not to renew this Agreement at least 60 days prior to the expiration of the Term, which shall be treated as a termination without Cause if such notice is given by the Company and the Company does not concurrently waive the Executive’s obligations under Section 2 of the Agreement Not to Compete, or a resignation without Good Reason if such notice is given by the Executive.

 

(b)            Notice of Termination .  Any termination of the Executive’s employment by the Company or by the Executive under this Section 4 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating (i) the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Section 4(a)(iv) or 4(a)(vi), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) specifying a Date of Termination which, if submitted by the Executive (or, in the case of a termination described in Section 4(a)(ii), by the Company), shall be at least 30 days following the receipt of such notice (a “ Notice of Termination ”); provided, however , that a Notice of Termination delivered by the Company pursuant to Section 4(a)(ii) shall not be required to specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii); and provided, further , that in the event that the Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of Company’s receipt of such Notice of Termination (even if such date is prior to the date specified in such Notice of Termination).  A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion.  The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

5.              Company Obligations Upon Termination of Employment

 

(a)            In General .  Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive in a lump sum within 20 business days following the Executive’s termination: the sum of the Executive’s Annual

 

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Base Salary through the Date of Termination and any expenses owed to the Executive under Section 3(e).  The Executive shall also be entitled to receive in a lump sum any awarded but unpaid Annual Bonus for the fiscal year of the Company prior to the fiscal year during which the Date of Termination occurs (except in the event of a termination by the Company for Cause) within 20 business days following the Company’s receipt of audited financial statements for such prior fiscal year.  The Executive shall also be entitled to any accrued vacation pay owed to the Executive pursuant to Section 3(d); any amount arising from the Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(c) (including without limitation, any disability or life insurance benefit plans, programs or arrangements), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements; and any benefits that may be due the Executive under the LLC Agreement or incentive unit agreements between the Executive and the Company.

 

(b)            Termination without Cause or Resignation for Good Reason .  If the Executive’s employment shall be terminated by the Company without Cause or by the Executive for Good Reason (but not by reason of the Executive’s death, Disability, termination by the Company for Cause or termination by the Executive without Good Reason), then, in addition to the payments and benefits described in Section 5(a) (including benefits under stock option agreements), the Company shall:

 

(i)             Continue to pay to the Executive, in accordance with the Company’s regular payroll practice following the Date of Termination, the Executive’s Annual Base Salary, and continue the Executive’s participation at active employee contribution rates in the Company’s health, life insurance and retirement plans through twelve months from the Date of Termination; provided that each payment is intended to constitute a separate payment within the meaning of Code Section 409A and the regulations thereunder; provided , further that in the event that Executive is determined by the Company to be a “specified employee” (as defined in Code Section 409A(2)(B) and determined in accordance with Code 416(i) (without regard to paragraph (5) thereof)) of the Company at a time when its stock is deemed to be publicly traded on an established securities market, any payments determined to be “nonqualified deferred compensation” payable following termination of employment shall be made no earlier than the earlier of (i) the last day of the sixth (6th) complete calendar month following such termination of employment, or (ii) Executive’s death, consistent with the provisions of Code Section 409A.  Any payment delayed by reason of the prior sentence shall be paid out in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule;

 

(ii)            If the Executive otherwise would have been entitled to receive a payment pursuant to the Company’s bonus plan had he been employed on the last day of the Company’s fiscal year, then pay to the Executive on April 30 of the year following the year in which the Executive’s termination occurs, (and in the event that the Company has not received its audited financial statements for the prior year by April 30 of such year, such bonus shall be paid as soon as practicable thereafter, consistent with the provisions of Code Section 409A, but in no event later than the last day of such following year), the amount of such payment, multiplied by a fraction the numerator of which is the number of days during such fiscal year that the Executive was employed and the denominator of which is 365; and

 

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(iii)           Continue paid coverage for the Executive and any eligible dependents under all Company group health benefit plans in which the Executive and any dependents were entitled to participate immediately prior to the Date of Termination through the twelfth month after the Date of Termination, to the extent permitted thereunder.  As of the date that the Executive ceases to receive coverage under any group health plan pursuant to this Section 5(b)(iii), the Executive shall be eligible to elect to receive “COBRA” continuation coverage to the extent permitted by Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended, and if such coverage ceases prior to twelve months from the Date of Termination, the Company shall pay for such COBRA coverage through such twelve month period.

 

6.              Agreement Not To Compete .  As of the date hereof the Executive shall enter into an Agreement Not To Compete, in substantially the form attached hereto as Appendix A , the terms and conditions of which are incorporated herein by this reference.  If the Executive breaches any his covenants in such Agreement Not to Compete, then notwithstanding any other provision of this Agreement, the Executive shall be entitled to no further payments or benefits provided for in this Agreement.

 

7.              Assignment and Successors .  The Company may assign its rights under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, shall use its best efforts to require any such successor or other assignee to assume its obligations under this Agreement, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and entities controlled by the Company or under common control with the Company.  The Executive may not assign his rights or obligations under this Agreement to any individual or entity.  This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.

 

8.              Governing Law .  This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of New York, without reference to the principles of conflicts of law of the State of New York or any other jurisdiction, and where applicable, the laws of the United States.

 

9.              Validity .  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

10.           Notices .  Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party shall have specified by notice in writing to the other party):

 

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If to the Company, to:

 

Specialized Technology Resources, Inc.
10 Water Street
Enfield, Connecticut  06082-4899
Attn:  Barry A. Morris
Facsimile:  (860) 749-9158

 

with a copy to:

 

DLJ Merchant Banking
Eleven Madison Avenue, 16th Floor
New York, New York  10010
Attn:  Susan C. Schnabel
Facsimile:  (310) 712-2734

 

If to the Executive, at the address set forth on the signature page hereto.

 

11.           Counterparts .   This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

 

12.           Entire Agreement .   The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) is intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement.  The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

 

13.           Amendments; Waivers .   This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of Company.  By an instrument in writing similarly executed, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, however , that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.  Notwithstanding anything herein to the contrary, no amendment may be made to this Agreement if it would cause the Agreement or any payment hereunder not to be in compliance with Code Section 409A.

 

14.           No Inconsistent Actions .   The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

 

15.           Construction .   This Agreement shall be deemed drafted equally by both the parties.  Its language shall be construed as a whole and according to its fair meaning.  Any

 

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presumption or principle that the language is to be construed against any party shall not apply.  The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary.  Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) “or” is used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

 

16.           Enforcement .   If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

 

17.           Withholding .   The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges that the Company is required to withhold.  The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

 

18.           Employee Acknowledgement .   The Executive acknowledges that he has read and understands this Agreement, is fully aware of its legal effect and has consulted with legal counsel as to its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his judgment.

 

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19.           Survival .   The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.

 

20.           Disputes .  All disputes between the parties arising from or in connection with this Agreement or the Executive’s employment hereunder, including those relating to the existence and validity of this agreement to arbitrate, shall be submitted to full and binding arbitration in Hartford, Connecticut, before a panel of three arbitrators and administered by the American Arbitration Association under its National Rules for the Resolution of Employment Disputes, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.  Each party shall be responsible for its own costs and expenses of such arbitration.  Notwithstanding the foregoing, nothing in this Section 20 shall prevent or otherwise hinder the ability of the Company to seek injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions in connection with any controversy or claim arising out of or relating to the Agreement Not to Compete.

 

21.           Representation by the Executive .  The Executive represents and warrants that his entering into this Agreement does not, and that his performance under this Agreement will not, violate the provisions of any agreement or instrument to which the Executive is a party or any decree, judgment or order to which the Executive is subject, and that this Agreement constitutes a valid and binding obligation of the Executive in accordance with its terms.  Breach of the representation contained in this Section 21 will render all of the Company’s obligations under this Agreement void ab initio.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

 

 

/s/ Mark A. Duffy

 

Mark A. Duffy

 

970 East Porter Avenue

 

Naperville, IL 60540-5528

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.

 

 

 

 

 

By:

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Executive Vice President and Chief Financial Officer

 

signature page for employment agreement (DUFFY)

 



 

Appendix A

 

Agreement Not To Compete

 

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EXECUTION COPY

 

AGREEMENT NOT TO COMPETE

 

This Agreement Not To Compete (this Agreement ”) dated as of August         , 2009 (the Effective Date ”), is made by and between SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (together with any successor thereto, the Company ”), and MARK A. DUFFY, of Naperville, Illinois (the Employee ”).

 

Recitals

 

A.            Contemporaneously with the execution hereof, the Company and Employee are executing an Employment Agreement (the Employment Agreement ”) pursuant to which the Company will employ Employee as its President of STR Quality Assurance.

 

B.            Pursuant to the Employment Agreement, Employee has agreed to enter into this Agreement as a condition of his employment.

 

Terms

 

In consideration of the Employment Agreement, the respective agreements of the parties herein and other good and valuable consideration received by each party from the other, the parties agree as follows:

 

1.             Defined Terms . Any capitalized term used herein but not defined shall have the meaning ascribed to such term in the Employment Agreement.

 

2.             Agreement Not to Compete . For a period equal to the term of Employee’s employment with the Company and through the date which is twelve (12) months following the Employee’s Date of Termination for any reason (the Initial Noncompetition Period ”), Employee shall not, without the prior written consent of the Company, and whether as employee, principal, agent, shareholder, partner, consultant, advisor, limited liability company manager or member, director, or otherwise, directly or indirectly, compete with the Company or any subsidiary of the Company in the business of manufacturing solar panel encapsulent, or the business of providing consumer product quality assurance services to third parties (collectively, the Business ”). The making or guarantying of a loan, lease or any other financial arrangement to, with or for any person or entity that engages in any of the activities described in the preceding sentence shall be deemed a breach of the covenant set forth in the preceding sentence. However, Employee may purchase or own up to 1% of the outstanding stock of any publicly traded corporation that competes with the Company or any Company Affiliate, but may not be employed by or otherwise participate in the activities of such corporation. For purposes of this agreement, Company Affiliate means any entity directly or indirectly controlled by the Company, and also includes STR Holdings LLC and any of its direct or indirect subsidiaries.

 

The Company shall have the option to extend the Initial Noncompetition Period for an additional twelve (12) months (the Extended Noncompetition Period and, together with the Initial Noncompetition Period, the Noncompetition Period ”); provided, that the Company gives the Executive written notice of such extension at least six (6) months prior to the expiration of the Initial Noncompetition Period, and agrees to pay to the Employee, in accordance with the Company’s regular payroll practice, the Executive’s Annual Base Salary, and to continue the Executive’s participation in the Company’s health and life insurance and retirement plans through the Extended Noncompetition Period.

 



 

Employee represents and warrants that he does not own, directly, indirectly, in whole or in part, beneficially or otherwise, any company or enterprise that competes with or participates in the Business, or otherwise engage in any activity that would violate this Section 1.

 

3.             Confidential Information; Non-Solicitation; Non-Disparagement; Inventions .

 

(a)           Employee acknowledges that he will occupy a position of trust and confidence with the Company and may become familiar with the following, any and all of which constitute confidential information of the Company or Company Affiliates (collectively, the “ Confidential Information ”): (i) all information related to vendors, suppliers and customers, including, without limitation, customer lists, the identities of existing, past or prospective customers and acquisition targets, prices charged or proposed to be charged to customers, customer contacts, special customer requirements and all related information; (ii) all marketing plans, materials and techniques; (iii) all methods of business operation and related procedures of the Company or Company Affiliates; and (iv) all patterns, devices, compilations of information, copyrightable material and technical information, if any, in each case that relates in any way to the Business of the Company or any Company Affiliate.

 

(b)           Employee acknowledges and agrees that all Confidential Information learned or obtained by him is the property of the Company or a Company Affiliate. Therefore, Employee shall not at any time disclose to any unauthorized persons or use for his own account or for the benefit of any third party any Confidential Information, whether Employee has such information in his memory or embodied in writing or other physical form, without the Company’s prior written consent (which it may grant or withhold in its sole discretion), unless and to the extent that the Confidential Information is or becomes generally known to and available for use by the public other than as a result of Employee’s fault or, to Employee’s knowledge, the fault of any other person bound by a duty of confidentiality to the Company or any Company Affiliate. Employee agrees to deliver to the Company at any time the Company may request, all documents, memoranda, notes, plans, records, reports, and other documentation, models, components, devices, or computer software, whether embodied in a disk or in other form (and all copies of all of the foregoing), relating to the businesses, operations, or affairs of the Company or any Company Affiliate and any other Confidential Information that Employee may then possess or have under Employee’s control.

 

(c)           If the Employee or any entity controlled by Employee (an “ Employee Affiliate ”) is required by law to disclose any Confidential Information, Employee shall promptly notify the Company in writing so that the Company may seek a protective order or other motion to prevent or limit the production or disclosure of such information. If such motion has been denied, then the person required to disclose such information may disclose only such portion of such information that, based on advice of Employee’s outside legal counsel, is required by law to be disclosed (provided that the person required to disclose such information shall use all reasonable efforts to preserve the confidentiality of the remainder of such information). Employee shall continue to be bound by his obligations pursuant to this Agreement for any information that is not required to be disclosed, or that has been afforded protective treatment, pursuant to such motion.

 

(d)           During the Noncompetition Period, Employee will not, and will not permit any Employee Affiliate to, directly or indirectly, (a) recruit or otherwise solicit or induce any employee, customer, subscriber or supplier of the Company or any Company Affiliate to

 

2



 

terminate its employment or arrangement with the Company or any Company Affiliate, otherwise change its relationship with the Company or any Company Affiliate, or establish any relationship with Employee or any Employee Affiliate to compete in the Business or (b) without the Company’s prior written consent, hire any employee of the Company or any Company Affiliate, including any person whose employment with the Company or any Company Affiliate is terminated by such employee without Good Reason.

 

(e)           During the Noncompetition Period, Employee agrees not to disparage in any material respect the Company or any Company Affiliate, any of their respective products or practices, or any of their respective directors, officers, managers, agents, representatives, stockholders, members or affiliates, either orally or in writing. The Company and any Company Affiliates (including without limitation any officers or directors of the Company or any Company Affiliate) agree not to disparage in any material respect the Employee either orally or in writing. Notwithstanding the forgoing, nothing contained herein shall limit the ability of either party, as applicable, to provide truthful testimony as required by law or any judicial or administrative process.

 

(f)            All rights to discoveries, inventions, improvements and innovations (including all data and records pertaining thereto) related to the Business of the Company or any Company Affiliate, whether or not patentable, copyrightable, registrable as a trademark, or reduced to writing, that Employee may discover, invent or originate during the term of Employee’s consulting arrangement or employment with the Company or any Company Affiliate, and for a period of 12 months thereafter, either alone or with others and whether or not during working hours or by the use of the facilities of either the Company or any of its subsidiaries (“ Inventions ”), shall be the exclusive property of the Company. Employee shall promptly disclose all Inventions to the Company, shall execute at the request of the Company any assignments or other documents the Company may deem necessary to protect or perfect its rights therein, and shall assist the Company, at the Company’s expense, in obtaining, defending and enforcing the Company’s rights therein. Employee hereby appoints the Company as his attorney-in-fact to execute on his behalf any assignments or other documents deemed necessary by the Company to protect or perfect its rights to any Inventions.

 

4.             Remedies . The necessity of protection against the competition of Employee and the nature and scope of such protection has been carefully considered and agreed upon by the parties hereto. Employee and the Company acknowledge that the duration, scope and geographic area applicable to the restrictions set forth in this Agreement are fair, reasonable and necessary. Employee acknowledges that the consideration provided for herein is sufficient and adequate to compensate Employee for agreeing to the restrictions contained in this Agreement and that such restrictions will not cause him undue hardship. If, however, any court determines that the foregoing restrictions are unreasonable and for that reason unenforceable, such restrictions shall be modified, rewritten or interpreted to include as much of their nature and scope as will render them enforceable. Employee and the Company agree that a monetary remedy for a breach of this Agreement will be inadequate and will be impracticable and extremely difficult to prove, and further agree that such a breach would cause the Company irreparable harm, and that the Company and the Company Affiliates shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damages. Employee agrees that the Company and the Company Affiliates shall be entitled to such injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bond or other undertaking in connection therewith.

 

3



 

5.             Notices . Notices sent by the Company or Employee hereunder shall be made in writing to such party at the below addresses or as the Company and Employee may otherwise agree in writing.

 

If to the Company, to:

 

Specialized Technology Resources, Inc.

10 Water Street

Enfield, Connecticut 06082-4899

Attn: Barry A. Morris

Facsimile: (860) 749-9158

 

with a copy to:

 

DLJ Merchant Banking

Eleven Madison Avenue, 16th Floor

New York, New York 10010

Attn: Susan C. Schnabel

Facsimile: (310) 712-2734

 

If to the Employee, at the address set forth on the signature page hereto.

 

6.             Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

7.             Headings . The headings herein are for convenience only, do not constitute part of this Agreement, and shall not be deemed to limit or affect any of the provisions hereof.

 

8.             Entire Understanding . This Agreement and the other agreements and instruments incorporated herein constitute the entire agreement and understanding between the parties, and supersede all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

 

9.             Amendments . This Agreement may not be modified or changed except by written instrument signed by each of the parties hereto that expressly states the intention of the parties to modify or change this Agreement.

 

10.           Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to principles of conflicts of laws.

 

11.           Construction . Whenever in this Agreement the context so requires, references to the masculine shall be deemed to include feminine and the neuter, references to the neuter shall be deemed to include the masculine and feminine, and references to the plural shall be deemed to include the singular and the singular to include the plural.

 

4



 

12.           Cooperation . Each party hereto shall cooperate with the other party and shall take such further action and shall execute and deliver such further documents as may be necessary or desirable in order to carry out the provisions and purposes of this Agreement.

 

13.           Waiver . Employee or the Company may, by express written notice to the other: (i) waive any inaccuracies in the representations or warranties of the other party contained in this Agreement or in any document delivered pursuant to this Agreement; (ii) waive compliance with any of the covenants of the other party contained in this Agreement; or (iii) waive or modify performance of any of the obligations of the other party. No action taken pursuant to this Agreement shall be deemed to constitute a waiver by the party taking such action, possessing such knowledge or performing such investigation of compliance with the representations, warranties, covenants and agreements contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be constituted as a waiver of any subsequent breach. The failure of any party to insist, in any one or more instances, upon performance of any of the terms, covenants or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or any such term, covenant or condition.

 

14.           Knowledge and Skill . THE EMPLOYEE REPRESENTS AND WARRANTS THAT THE KNOWLEDGE, SKILLS AND ABILITIES HE OR SHE POSSESSES AT THE TIME OF COMMENCEMENT OF EMPLOYMENT HEREUNDER ARE SUFFICIENT TO PERMIT HIM OR HER, IN THE EVENT OF TERMINATION OF HIS OR HER EMPLOYMENT HEREUNDER, TO EARN A LIVELIHOOD SATISFACTORY TO HIMSELF WITHOUT VIOLATING ANY PROVISION HEREOF, FOR EXAMPLE, BY USING SUCH KNOWLEDGE, SKILLS AND ABILITIES, OR SOME OF THEM, IN THE SERVICE OF A NON-COMPETITOR.

 

15.           Interpretation of Agreement . Each party hereto cooperated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto shall be deemed the work product of the parties and may not be construed against any party by reason of its preparation. Accordingly, any rule of law, or any legal decision that would require interpretation of any ambiguities in this Agreement against the party that drafted it, is of no application and is hereby expressly waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intentions of the parties regarding this Agreement.

 

16.           Parties in Interest; Assignment . This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective permitted successors, assigns, heirs and/or personal representatives, except that neither this Agreement nor any interest herein shall be assigned or assignable by operation of law or otherwise by Employee without the prior written consent of the Company. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties and their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.

 

17.           Severability . If, notwithstanding the express, carefully considered agreement of the Company and Employee set forth herein, any provision of this Agreement shall be deemed invalid, unenforceable or illegal, or if the period during which this Agreement is to remain effective is found to exceed the legally permissible period or the territory with respect to which this Agreement is to be effective is found to exceed the legally permissible territory, then notwithstanding such invalidity, unenforceability or illegality the remainder of this Agreement

 

5



 

shall continue in full force and effect during the maximum period and for the maximum territory legally permissible.

 

18.           Waiver of Jury Trial . Consistent with the intention of Section 10, the Company and Employee each further waives its or his respective right to a jury trial of any claim or cause of action arising out of this Agreement or any dealings between them relating to the subject matter of this Agreement. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, including, without limitation, contract claims, tort claims, and all other common law and statutory claims. This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, supplements or other modifications to this Agreement or to any other document or agreement relating to the transactions contemplated by this Agreement.

 

19.           Specific Performance and Other Equitable Relief . Without in any way limiting the provisions of Section 4, Employee acknowledges that the remedies at law of the Company and Company Affiliates for failure of Employee to perform any act required to be performed by Employee under this Agreement are inadequate and, therefore, that the Company and Company Affiliates shall be entitled to specific performance of this Agreement by Employee and to such other equitable relief as a court may deem appropriate to prevent any further violation of this Agreement by Employee, and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided by law or under this Agreement.

 

20.           Full Understanding . Employee represents that he fully understands his right to discuss all aspects of this Agreement with his private attorney, and that to the extent, if any, Employee desired, Employee availed himself of this right. Employee further represents that he has carefully read and fully understands all of the provisions of this Agreement, that Employee is competent to execute this Agreement, that Employee’s agreement to execute and deliver this Agreement has not been obtained by any duress and that Employee freely and voluntarily enters into it, and that Employee has read this Agreement in its entirety and fully understands the meaning, intent and consequences of this Agreement.

 

6



 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement Not to Compete as of the date first written above.

 

 

 

/s/ Mark A. Duffy

 

Mark A. Duffy

 

970 East Porter Avenue

 

Naperville, IL 60540-5528

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.,

 

 

 

 

 

/s/ Barry A. Morris

 

By: Barry A. Morris

 

Its: Executive Vice President and Chief Financial Officer

 

SIGNATURE PAGE FOR NON-COMPETE AGREEMENT (DUFFY)

 




Exhibit 10.8

 

EXECUTION COPY

 

 

FIRST LIEN CREDIT AGREEMENT

 

dated as of

 

June15, 2007

 

among

 

STR ACQUISITION, INC.,

(to be merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC.)

 

STR HOLDINGS LLC,

 

THE LENDERS PARTY HERETO,

 

CREDIT SUISSE,
as Administrative Agent and Collateral Agent

 


 

CREDIT SUISSE SECURITIES (USA) LLC

 

as Sole Bookrunner and Sole Lead Arranger

 

 



 

Table of Contents

 

 

Page

 

 

ARTICLE I

 

Definitions

 

 

SECTION 1.01.

Defined Terms

1

SECTION 1.02.

Terms Generally

27

SECTION 1.03.

Pro Forma Calculations

27

SECTION 1.04.

Classification of Loans and Borrowings

28

 

 

ARTICLE II

 

The Credits

 

 

SECTION 2.01.

Commitments

28

SECTION 2.02.

Loans

29

SECTION 2.03.

Borrowing Procedure

31

SECTION 2.04.

Evidence of Debt; Repayment of Loans

31

SECTION 2.05.

Fees

32

SECTION 2.06.

Interest on Loans

33

SECTION 2.07.

Default Interest

33

SECTION 2.08.

Alternate Rate of Interest

33

SECTION 2.09.

Termination and Reduction of Commitments

34

SECTION 2.10.

Conversion and Continuation of Borrowings

34

SECTION 2.11.

Repayment of Term Borrowings

36

SECTION 2.12.

Optional Prepayment

37

SECTION 2.13.

Mandatory Prepayments

37

SECTION 2.14.

Reserve Requirements; Change in Circumstances

39

SECTION 2.15.

Change in Legality

41

SECTION 2.16.

Indemnity

41

SECTION 2.17.

Pro Rata Treatment

42

SECTION 2.18.

Sharing of Setoffs

42

SECTION 2.19.

Payments

43

SECTION 2.20.

Taxes

43

SECTION 2.21.

Assignment of Commitments Under Certain Circumstances; Duty to Mitigate

46

SECTION 2.22.

Swingline Loans

47

SECTION 2.23.

Letters of Credit

49

SECTION 2.24.

Incremental Term Loans

53

SECTION 2.25.

Increase in Revolving Commitments

54

 



 

 

Page

 

 

ARTICLE III

 

Representations and Warranties

 

 

SECTION 3.01.

Organization; Powers

56

SECTION 3.02.

Authorization

56

SECTION 3.03.

Enforceability

56

SECTION 3.04.

Governmental Approvals

57

SECTION 3.05.

Financial Statements

57

SECTION 3.06.

No Material Adverse Change

57

SECTION 3.07.

Title to Properties; Possession Under Leases

58

SECTION 3.08.

Subsidiaries

58

SECTION 3.09.

Litigation; Compliance with Laws

58

SECTION 3.10.

Agreements

59

SECTION 3.11.

Federal Reserve Regulations

59

SECTION 3.12.

Investment Company Act

59

SECTION 3.13.

Use of Proceeds

59

SECTION 3.14.

Tax Returns

59

SECTION 3.15.

No Material Misstatements

60

SECTION 3.16.

Employee Benefit Plans

60

SECTION 3.17.

Environmental Matters

61

SECTION 3.18.

Insurance

61

SECTION 3.19.

Security Documents

61

SECTION 3.20.

Location of Real Property and Leased Premises

62

SECTION 3.21.

Labor Matters

62

SECTION 3.22.

Solvency

62

SECTION 3.23.

Transaction Documents

63

SECTION 3.24.

Sanctioned Persons

63

 

 

 

ARTICLE IV

 

Conditions of Lending

 

SECTION 4.01.

All Credit Events

63

SECTION 4.02.

First Credit Event

64

 

 

 

ARTICLE V

 

Affirmative Covenants

 

 

 

SECTION 5.01.

Existence; Compliance with Laws; Businesses and Properties

67

SECTION 5.02.

Insurance

68

SECTION 5.03.

Obligations and Taxes

69

SECTION 5.04.

Financial Statements, Reports, etc.

69

 



 

 

 

Page

 

 

 

SECTION 5.05.

Litigation and Other Notices

71

SECTION 5.06.

Information Regarding Collateral

71

SECTION 5.07.

Maintaining Records; Access to Properties and Inspections; Maintenance of Ratings

72

SECTION 5.08.

Use of Proceeds

73

SECTION 5.09.

Employee Benefits

73

SECTION 5.10.

Compliance with Environmental Laws

73

SECTION 5.11.

Further Assurances

73

SECTION 5.12.

Interest Rate Protection

74

SECTION 5.13.

Post-Closing Items

74

SECTION 5.14.

Funds Update

74

SECTION 5.15.

Purchase Price Adjustments

74

 

 

 

ARTICLE VI

 

Negative Covenants

 

SECTION 6.01.

Indebtedness

75

SECTION 6.02.

Liens

76

SECTION 6.03.

Sale/LeaseBack Transactions

78

SECTION 6.04.

Investments, Loans and Advances

78

SECTION 6.05.

Mergers, Consolidations, Sales of Assets and Acquisitions

80

SECTION 6.06.

Restricted Payments; Restrictive Agreements

81

SECTION 6.07.

Transactions with Affiliates

82

SECTION 6.08.

Business of Holdings, Borrower and Subsidiaries

82

SECTION 6.09.

Other Indebtedness and Agreements

82

SECTION 6.10.

Capital Expenditures

83

SECTION 6.11.

Interest Coverage Ratio

84

SECTION 6.12.

First Lien Debt Ratio

85

SECTION 6.13.

Maximum Total Leverage Ratio

85

SECTION 6.14.

Fiscal Year

86

SECTION 6.15.

Certain Equity Securities

86

 



 

 

Page

 

ARTICLE VII

 

Events of Default

 

ARTICLE VIII

 

The Administrative Agent and the Collateral Agent

 

ARTICLE IX

 

Miscellaneous

 

SECTION 9.01.

Notices

 

93

SECTION 9.02.

Survival of Agreement

 

93

SECTION 9.03.

Binding Effect

 

94

SECTION 9.04.

Successors and Assigns

 

94

SECTION 9.05.

Expenses; Indemnity

 

98

SECTION 9.06.

Right of Setoff

 

100

SECTION 9.07.

Applicable Law

 

100

SECTION 9.08.

Waivers; Amendment

 

100

SECTION 9.09.

Interest Rate Limitation

 

102

SECTION 9.10.

Entire Agreement

 

102

SECTION 9.11.

WAIVER OF JURY TRIAL

 

102

SECTION 9.12.

Severability

 

103

SECTION 9.13.

Counterparts

 

103

SECTION 9.14.

Headings

 

103

SECTION 9.15.

Jurisdiction; Consent to Service of Process

 

103

SECTION 9.16.

Confidentiality

 

104

SECTION 9.17.

USA PATRIOT Act Notice

 

104

SECTION 9.18.

Effect of Certain Inaccuracies

 

104

 



 

 

 

Page

 

 

SCHEDULES

 

 

 

Schedule 1.01(a)

-

Subsidiary Guarantors

Schedule 1.01(b)

-

Mortgaged Property

Schedule 2.01

-

Lenders and Commitments

Schedule 3.08

-

Subsidiaries

Schedule 3.09

-

Litigation

Schedule 3.17

-

Environmental Matters

Schedule 3.18

-

Insurance

Schedule 3.19(a)

-

UCC Filing Offices

Schedule 3.19(c)

-

Mortgage Filing Offices

Schedule 3.20(a)

-

Owned Real Property

Schedule 3.20(b)

-

Leased Real Property

Schedule 6.01

-

Existing Indebtedness

Schedule 6.02

-

Existing Liens

 

EXHIBITS

 

 

 

 

 

Exhibit A

-

Form of Administrative Questionnaire

Exhibit B

-

Form of Assignment and Acceptance

Exhibit C

-

Form of Borrowing Request

Exhibit D

-

Form of Guarantee and Collateral Agreement

Exhibit E

-

Form of Mortgage

Exhibit F-1

-

Form of Opinion of Weil, Gotshal & Manges LLP

Exhibit F-2

-

Form of Opinion of Murtha Cullina LLP

 



 

FIRST LIEN CREDIT AGREEMENT dated as of June 15, 2007, among STR ACQUISITION, INC., a Delaware corporation, which substantially simultaneously with the execution hereof shall be merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (the Borrow er ), STR HOLDINGS LLC, a Delaware limited liability company ( Holdings ) the Lenders (as defined in Article I), and CREDIT SUISSE, as administrative agent (in such capacity, the Administrative Agent ) and as collateral agent (in such capacity, the Collateral Agent ) for the Lenders.

 

The Borrower has requested the Lenders to extend credit in the form of (a) Term Loans (such term and each other capitalized term used but not defined in this introductory statement having the meaning given it in Article I) on the Closing Date, in an aggregate principal amount not in excess of $185,000,000, and (b) Revolving Loans at any time and from time to time prior to the Revolving Credit Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $20,000,000. The Borrower has requested the Swingline Lender to extend credit, at any time and from time to time prior to the Revolving Credit Maturity Date, in the form of Swingline Loans, in an aggregate principal amount at any time outstanding not in excess of $10,000,000. The Borrower has requested the Issuing Bank to issue Letters of Credit, in an aggregate face amount at any time outstanding not in excess of $15,000,000, to support payment obligations incurred in the ordinary course of business by the Borrower and its Subsidiaries. The proceeds of the Term Loans are to be used together with the proceeds of the Second Lien Term Loan and cash to be contributed by Holdings solely (a) to pay consideration, fees and expenses related hereto and to the Acquisition and (b) to refinance the Existing Debt. The proceeds of the Revolving Loans and the Swingline Loans are to be used solely for general corporate purposes of the Borrower and its Subsidiaries.

 

The Lenders are willing to extend such credit to the Borrower, and the Issuing Bank is willing to issue Letters of Credit for the account of the Borrower, in each case on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:

 

ARTICLE I

 

Def initions

 

SECTION 1.01. Defined Terms . As used in this Agreement, the following terms shall have the meanings specified below:

 

ABR , when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

 

Acquisition shall mean the acquisition by Holdings of the Company and its subsidiaries pursuant to the Merger Agreement, pursuant to which on the Closing Date

 



 

the Borrower will merge with and into the Company with the Company surviving as a wholly owned direct subsidiary of Holdings.

 

Adjusted LIBO Rate shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.

 

Administrative Agent Fees shall have the meaning assigned to such term in Section 2.05(b).

 

Administrative Questionnaire shall mean an Administrative Questionnaire in the form of Exhibit A, or such other form as may be supplied from time to time by the Administrative Agent.

 

Advisory Services and Monitoring Agreements shall mean (i) the Advisory Services and Monitoring Agreement dated as of the Closing Date, between the Borrower and Evergreen Capital Partners, LLC and (ii) the Monitoring Agreement dated as of the Closing Date, among the Borrower, DLJ Merchant Banking, Inc., Westwind STR Advisors LLC and Dennis L. Jilot.

 

Affiliate shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified; provided, however, that, (i) for purposes of Section 6.07, the term “Affiliate” shall also include any person that directly or indirectly owns 5% or more of any class of Equity Interests of the person specified or that is an officer or director of the person specified and (ii) Credit Suisse and its Affiliates (other than Permitted Investors, Parent and Parent’s subsidiaries) shall be deemed not to be Affiliates of Parent or any of its subsidiaries.

 

Aggregate Revolving Credit Exposure shall mean the aggregate amount of the Lenders’ Revolving Credit Exposures.

 

Alternate Base Rate shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, as the case may be.

 

Applicable Percentage shall mean, for any day (a) with respect to any Eurodollar Term Loan, 2.50% per annum, (b) with respect to any ABR Term Loan, 1.50% per annum, and (c) with respect to any Eurodollar Revolving Loan or ABR

 

2



 

Revolving Loan, the applicable percentage set forth below under the caption “Eurodollar Spread—Revolving Loans” or “ABR Spread—Revolving Loans”, as the case may be, based upon the Total Leverage Ratio as of the relevant date of determination:

 

Total Leverage Ratio

 

Eurodollar Spread—
Revolving Loans

 

ABR Spread—
Revolving Loans

 

Greater than or equal to 5.25 to 1.00

 

2.50

%

1.50

%

Greater than or equal to 4.50 to 1.00 but less than 5.25 to 1.00

 

2.25

%

1.25

%

Less than 4.50 to 1.00

 

2.00

%

1.00

%

 

Each change in the Applicable Percentage resulting from a change in the Total Leverage Ratio shall be effective with respect to all Loans and Letters of Credit outstanding on and after the date of delivery to the Administrative Agent of the financial statements and certificates required by Section 5.04(a) or (b) and Section 5.04(c), respectively, indicating such change until the date immediately preceding the next date of delivery of such financial statements and certificates indicating another such change. Notwithstanding the foregoing and so long as no Default shall have occurred and be continuing, until the Borrower shall have delivered the financial statements and certificates required by Section 5.04(a) and Section 5.04(c), respectively, for the period ended December 31, 2007, the Total Leverage Ratio shall be deemed to be in Category 1 for purposes of determining the Applicable Percentage. In addition, (a) at any time during which the Borrower has failed to deliver the financial statements and certificates required by Section 5.04(a) or (b) and Section 5.04(c), respectively, or (b) at any time after the occurrence and during the continuance of a Default, the Total Leverage Ratio shall be deemed to be in Category 1 for purposes of determining the Applicable Percentage.

 

Arranger shall mean Credit Suisse Securities (USA) LLC.

 

Asset Sale shall mean the sale, transfer or other disposition (by way of merger, casualty, condemnation or otherwise) by the Borrower or any of the Subsidiaries to any person other than the Borrower or any Subsidiary Guarantor of (a) any Equity Interests of any of the Subsidiaries (other than directors’ qualifying shares) or (b) any other assets of the Borrower or any of the Subsidiaries (other than (i) inventory, damaged, obsolete or worn out assets, scrap and Permitted Investments, in each case disposed of in the ordinary course of business, (ii) dispositions between or among Foreign Subsidiaries and (iii) any sale, transfer or other disposition or series of related sales, transfers or other dispositions having a value not in excess of $500,000).

 

Assignment and Acceptance shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit B or such other form as shall be approved by the Administrative Agent.

 

3


 

Attributable Debt in respect of a Sale/Leaseback Transaction means, as of the time of determination, the present value (discounted at the interest rate borne by the Loans, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended); provided, however, that if such Sale/Leaseback Transaction results in a Capital Lease Obligation the amount of Indebtedness represented thereby will be determined in accordance with the definition of “Capital Lease Obligations”.

 

Baseline EBITDA shall mean, (i) for the fiscal year ended December 31, 2007, $42,000,000, (ii) for the fiscal year ended December 31, 2008, $45,000,000, (iii) for the fiscal year ended on December 31, 2009, $50,000,000, (iv) for the fiscal year ended December 31, 2010, $55,000,000, (v) for the fiscal year ended December 31, 2011, $60,000,000, (vi) for the fiscal year ended December 31, 2012, $65,000,000, and (vii) for the fiscal year ended December 31, 2013, $70,000,000.

 

Board shall mean the Board of Governors of the Federal Reserve System of the United States of America.

 

Borrowing shall mean (a) Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan.

 

Borrowing Request shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C, or such other form as shall be approved by the Administrative Agent.

 

Business Day shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term Business Day shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

 

Capital Expenditures shall mean, for any period, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and its consolidated Subsidiaries that are (or should be) set forth in a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP and (b) Capital Lease Obligations or Synthetic Lease Obligations incurred by the Borrower and its consolidated Subsidiaries during such period, but excluding in each case any such expenditure made to restore, replace or rebuild property to the condition of such property immediately prior to any damage, loss, destruction or condemnation of such property, to the extent such expenditure is made with insurance proceeds, condemnation awards or damage recovery proceeds relating to any such damage, loss, destruction or condemnation.

 

Capital Lease Obligations of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are

 

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required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

 

A Change in Control shall be deemed to have occurred if (a) prior to a Qualified Public Offering, the Permitted Investors shall fail to own, directly or indirectly, beneficially and of record, shares representing at least 51% of each of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings, (b) after a Qualified Public Offering, any “person” or “group” (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the date hereof), other than the Permitted Investors, shall own, directly or indirectly, beneficially or of record, shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of Holdings, (c) a majority of the seats (other than vacant seats) on the board of directors of Holdings shall at any time be occupied by persons who were neither (i) nominated by the board of directors of Holdings nor (ii) appointed by directors so nominated, (d) any change in control (or similar event, however denominated) with respect to Holdings, the Borrower or any Subsidiary shall occur under and as defined in any indenture or agreement in respect of Material Indebtedness to which Holdings, the Borrower or any Subsidiary is a party, or (e) Holdings shall cease to directly own, beneficially and of record, 100% of the issued and outstanding Equity Interests of the Borrower.

 

Change in Law shall mean (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.14, by any lending office of such Lender or by such Lender’s or Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

 

Class ”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term Loans, Other Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Credit Commitment, Term Loan Commitment, Incremental Term Loan Commitment or Swingline Commitment.

 

Closing Date shall mean June 15, 2007.

 

Code shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

Collateral shall mean all the “Collateral” as defined in any Security Document and shall also include the Mortgaged Properties.

 

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Commitment shall mean, with respect to any Lender, such Lender’s Revolving Credit Commitment, Term Loan Commitment, Incremental Term Loan Commitment and Swingline Commitment.

 

Commitment Fee shall have the meaning assigned to such term in Section 2.05(a).

 

Company shall mean Specialized Technology Resources, Inc., a Delaware corporation.

 

Confidential Information Memorandum shall mean the Confidential Information Memorandum of the Borrower dated May, 2007.

 

Consolidated EBITDA shall mean, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period and any commitment, agency, letter of credit or similar fees paid during such period with respect to Indebtedness permitted pursuant to Section 6.01 and other bank service fees, (ii) consolidated income tax expense for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) any non-cash charges (other than the write-down of current assets) for such period, (v) fees and expenses accrued during such period with respect to the Transactions and to the extent not consummated, any acquisition, disposition, equity issuance, investment or incurrence of Indebtedness that would have been permitted under this Agreement, (vi) charges in respect of management, monitoring, consulting and advising fees payable to the Sponsor pursuant to the Advisory Services and Monitoring Agreements as in effect as of the Closing Date in respect of such period, (vii) one-time costs, payments and expenses (including severance costs) incurred during such period in respect of the termination of employment of employees, officers and management of the Borrower or any Subsidiary outside the ordinary course of business, (viii) all cash payments received during such period on account of non-cash income deducted from Consolidated Net Income pursuant to clause (b)(ii) below in a previous period, (ix) consulting, legal, accounting, integration, brokerage and variable commission fees, costs and expenses incurred in connection with any Permitted Acquisition, (x) consulting fees incurred in connection with a one-time strategic review of the Borrower in an aggregate amount not to exceed $1,000,000, (xi) net after-tax extraordinary losses or charges, including any such losses or charges relating to relocation costs, one-time compensation charges and the Transactions, (xii) non-recurring or unusual cash charges for such period in an aggregate amount not to exceed $1,000,000 in any fiscal year, (xiii) non-cash compensation charges, (xiv) foreign currency transaction and translation losses, and (xv) any net after-tax gains or losses (less fees, expenses or charges related thereto) attributable to the early extinguishment of Indebtedness pursuant to the agreement governing such Indebtedness, and minus (b) without duplication (i) all cash payments made during such period on account of reserves, restructuring charges and other non-cash charges added to Consolidated Net Income pursuant to clause (a)(iv) above in a previous period, (ii) foreign currency transaction and translation gains, and (iii) to the extent included in determining such Consolidated Net Income, any unusual and extraordinary gains, and all non-cash items of

 

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income for such period, all determined on a consolidated basis in accordance with GAAP. For purposes of determining the First Lien Debt Ratio, the Interest Coverage Ratio and the Total Leverage Ratio as of or for the periods ended on September 30, 2007 and December 31, 2007, Consolidated EBITDA will be deemed to be equal to (i) for the fiscal quarter ended December 31, 2006, $12,013,000, and (ii) for the fiscal quarter ended March 31, 2007, $7,273,000.

 

Consolidated Interest Expense shall mean, for any period, the cash interest expense (including imputed interest expense in respect of Capital Lease Obligations and Synthetic Lease Obligations) of the Borrower and the Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. For purposes of the foregoing, interest expense shall be determined after giving effect to any net payments made or received by the Borrower or any Subsidiary with respect to interest rate Hedging Agreements. For purposes of determining the Interest Coverage Ratio for the period of four consecutive quarters ended September 30, 2007, December 31, 2007 and March 31 2008, Consolidated Interest Expense shall be deemed to be equal to (a) the Consolidated Interest Expense for the fiscal quarter ended September 30, 2007, multiplied by 4, (b) the Consolidated Interest Expense for the two consecutive fiscal quarters ended December 31, 2007, multiplied by 2 and (c) the Consolidated Interest Expense for the three consecutive fiscal quarters ended March 31, 2008, multiplied by 4/3, respectively.

 

Consolidated Net Income shall mean, for any period, the net income or loss of the Borrower and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP (adjusted to reflect any charge, tax or expense incurred or accrued by Holdings during such period as though such charge, tax or expense had been incurred by the Borrower, to the extent that the Borrower has made or would be entitled under the Loan Documents to make any payment to or for the account of Holdings in respect thereof); provided that there shall be excluded (a) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by the Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or governmental regulation applicable to such Subsidiary, (b) the income or loss of any person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary or the date that such person’s assets are acquired by the Borrower or any Subsidiary, (c) the income of any person in which any other person (other than the Borrower or a wholly owned Subsidiary or any director holding qualifying shares in accordance with applicable law) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or a wholly owned Subsidiary by such person during such period, and (d) any gains or losses attributable to sales of assets (including pursuant to a Sale/Leaseback Transaction) out of the ordinary course of business.

 

Control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms Controlling and Controlled shall have meanings correlative thereto.

 

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Credit Event shall have the meaning assigned to such term in Section 4.01. For greater certainty, the payment by Revolving Credit Lenders to the Administrative Agent of amounts as contemplated by clause (ii) of the parenthetical set forth in the second sentence of Section 2.02(f) shall not constitute a Credit Event.

 

Credit Facilities shall mean the revolving credit, swingline, letter of credit and term loan facilities provided for by this Agreement.

 

Cure Amount shall have the meaning assigned to such term in Article VII.

 

Cure Right shall have the meaning assigned to such term in Article VII.

 

Current Assets shall mean, at any time, the consolidated current assets (other than cash and Permitted Investments) of the Borrower and the Subsidiaries.

 

Current Liabilities shall mean, at any time, the consolidated current liabilities of the Borrower and the Subsidiaries at such time, but excluding, without duplication, (a) the current portion of any long-term Indebtedness and (b) outstanding Revolving Loans and Swingline Loans.

 

Default shall mean any event or condition that upon notice, lapse of time or both would constitute an Event of Default.

 

Defau lting Lender shall mean any Revolving Credit Lender that has (a) defaulted in its obligation to make a Revolving Loan or to fund its participation in a Letter of Credit or Swingline Loan required to be made or funded by it hereunder, (b) notified the Administrative Agent or a Loan Party in writing that it does not intend to satisfy any such obligation or (c) become insolvent or the assets or management of which has been taken over by any Governmental Authority.

 

Disqualified Stock shall mean any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, or requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in each case at any time on or prior to the 91st day following the Term Loan Maturity Date, or (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interest referred to in clause (a) above, in each case at any time prior to the 91st day following the Term Loan Maturity Date.

 

dollars or $ shall mean lawful money of the United States of America.

 

Domestic Subsidiaries shall mean all Subsidiaries incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia.

 

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Eligible Assignee shall mean any commercial bank, insurance company, investment or mutual fund or other entity (but not any natural person) that is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as amended) that extends credit or invests in bank loans as one of its businesses; provided that neither the Borrower nor any of its Affiliates shall be an Eligible Assignee.

 

EM U shall mean the economic and monetary union as contemplated in the Treaty on European Union.

 

Environmental Laws shall mean all applicable Federal, state, local and foreign laws (including common law), treaties, regulations, rules, ordinances, codes, decrees, judgments, directives and orders (including consent orders), in each case, relating to pollution or protection of the environment, natural resources, human health and safety as related to exposure to Hazardous Materials, or the generation, use, treatment, storage, transport or handling of, or the arrangement for such activities with respect to, Hazardous Materials.

 

Environmental Liability shall mean all liabilities, obligations, damages, losses, claims, actions, suits, judgments, orders, fines, penalties, fees, expenses and costs (including administrative oversight costs, natural resource damages and remediation costs), whether contingent or otherwise, arising out of or relating to (a) requirements of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

Equity Contribution shall mean the contribution by DLJ Merchant Banking Partners IV, L.P., its affiliated funds, certain existing investors in the Company and certain other investors reasonably acceptable to the Arranger of not less than 30.0% of the pro forma consolidated capitalization of Holdings after giving effect to the Transactions on the Closing Date in cash to Holdings as cash common equity and/or preferred equity that does not provide for any cash dividends, redemption or other cash payment at any time prior to 91 days after repayment in full in cash of the Credit Facilities.

 

Equity In terest s shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any person, and any option, warrant or other right entitling the holder thereof to purchase or otherwise acquire any such equity interest.

 

ERISA shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

 

ERISA Affiliate shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or

 

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(c)  of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

 

ERISA Event shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived), (b) prior to the effectiveness of the applicable provisions of the Pension Act, the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA) or, on and after the effectiveness of the applicable provisions of the Pension Act, any failure by any Plan to satisfy the minimum funding standard (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Plan, in each case whether or not waived, (c) the filing pursuant to, prior to the effectiveness of the applicable provisions of the Pension Act, Section 412(d) of the Code or Section 303(d) of ERISA or, on and after the effectiveness of the applicable provisions of the Pension Act, Section 412(c) of the Code or Section 302(c) of ERISA, of an application for a waiver of the minimum funding standard with respect to any Plan, (d) on and after the effectiveness of the applicable provisions of the Pension Act, a determination that any Plan is, or is expected to be, in “at-risk” status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code), (e) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan, (f) the receipt by the Borrower or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, (g) prior to the effectiveness of the applicable provisions of the Pension Act, the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, (h) the receipt by the Borrower or any of its ERISA Affiliates of any notice, or the receipt by any Multiemployer Plan from the Borrower or any of its ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA or, on and after the effectiveness of the applicable provisions of the Pension Act, in endangered or critical status, within the meaning of Section 305 of ERISA, (i) any Foreign Benefit Event or (j) any other event (other than the initial adoption or assumption of a Plan) or condition with respect to a Plan or Multiemployer Plan that could result in liability of the Borrower or any Subsidiary.

 

Eurodollar , when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

 

Event of Default shall have the meaning assigned to such term in Article VII.

 

Excess Cash Flow shall mean, for any fiscal year of the Borrower (or, in the case of the fiscal year ended December 31, 2007 (except for purposes of determining changes in noncash working capital), the portion thereof commencing on the Closing

 

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Date and ending on December 31, 2007), the excess of (a) the sum, without duplication, of (i) Consolidated EBITDA for such fiscal year and (ii) reductions to noncash working capital of the Borrower and the Subsidiaries for such fiscal year ( i.e., the decrease, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year) over (b) the sum, without duplication, of (i) the amount of any Taxes payable in cash by the Borrower and the Subsidiaries or amounts payable pursuant to Sections 6.06(a)(iii)(y) or (iv) if applicable, with respect to such fiscal year, (ii) Consolidated Interest Expense for such fiscal year, (iii) Capital Expenditures made in cash in accordance with Section 6.10 during such fiscal year except to the extent financed with the proceeds of Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or other proceeds that would not be included in Consolidated EBITDA, (iv) permanent repayments of Indebtedness (other than mandatory prepayments of Loans under Section 2.13) made in cash by the Borrower and the Subsidiaries during such fiscal year, but only to the extent that the Indebtedness so prepaid by its terms cannot be reborrowed or redrawn and such prepayments do not occur in connection with a refinancing of all or any portion of such Indebtedness and (v) additions to noncash working capital for such fiscal year ( i.e., the increase, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year).

 

Excluded Taxes shall mean, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income, franchise or other similar taxes imposed on (or measured by) its income by (i) the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located or (ii) by reason of a present or former connection between the recipient and the jurisdiction of the Borrower (other than such connection arising solely from such recipient having executed, delivered, or performed its obligations under, or enforced, this Agreement or any other Loan Documents), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above, (c) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 2.20(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.20(a), and (d) backup withholding taxes imposed on amounts payable to a recipient at the time such Lender becomes a party hereto (or designates a new lending office) or is attributable to such Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 2.20(e) except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such backup withholding tax pursuant to Section 2.20(a).

 

Existing Credit Agreement shall mean that certain Credit Agreement dated as of September 29, 2005 among the Company, Webster Bank, National Association, as Administrative Agent and L/C Issuer, Newstar Financial, Inc., as Syndication Agent, The

 

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Governor and Company of the Bank of Ireland and National City Bank, as Co-Documentation Agents and the Lenders party thereto, as amended.

 

Existing Debt shall mean the indebtedness of the Company under the Existing Credit Agreement.

 

Federal Funds Effective Rate shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

 

Fee Letter shall mean the Fee Letter dated April 21, 2007, among the Borrower, Holdings, the Arranger and the Administrative Agent.

 

Fees shall mean the Commitment Fees, the Administrative Agent Fees, the L/C Participation Fees and the Issuing Bank Fees.

 

Financial Officer of any person shall mean the chief financial officer, principal accounting officer, treasurer or controller of such person.

 

First Lien Debt Ratio shall mean, on any date, the ratio of the Indebtedness represented by the Obligations (net of unrestricted cash and cash equivalents of the Borrower and the Subsidiaries (in each case in the amount determined by GAAP)) on such date to Consolidated EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date. In any period of four consecutive fiscal quarters in which a Permitted Acquisition or Significant Asset Sale occurs, the First Lien Debt Ratio shall be determined on a pro forma basis in accordance with Section 1.03.

 

Foreign Benefit Event shall mean, with respect to any Foreign Pension Plan, (a) the existence of unfunded liabilities in excess of the amount permitted under any applicable law, or in excess of the amount that would be permitted absent a waiver from a Governmental Authority, (b) the failure to make the required contributions or payments, under any applicable law, on or before the due date for such contributions or payments, (c) the receipt of a notice by a Governmental Authority relating to the intention to terminate any such Foreign Pension Plan or to appoint a trustee or similar official to administer any such Foreign Pension Plan, or alleging the insolvency of any such Foreign Pension Plan or (d) the incurrence of any liability in excess of $5,000,000 by Holdings, the Borrower or any Subsidiary under applicable law on account of the complete or partial termination of such Foreign Pension Plan or the complete or partial withdrawal of any participating employer therein.

 

Foreign Lender shall mean any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

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Fo reign Pension Plan shall mean any benefit plan that covers employees of the Borrower or any Subsidiaries who are employed outside of the United States and that is subject to any statutory funding requirement permitting any Governmental Authority to accelerate the obligation of the Borrower or any Subsidiaries to fund all or a portion of the unfunded accrued benefit liabilities under such plan.

 

Foreign Subsidiary shall mean any Subsidiary that is not a Domestic Subsidiary.

 

GAAP shall mean United States generally accepted accounting principles applied on a consistent basis

 

Governmental Authority shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.

 

Granting Lender shall have the meaning assigned to such term in Section 9.04(i).

 

Guarantee of or by any person shall mean any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other person (the primary obligor ) in any manner, whether directly or indirectly, and including any obligation of such person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligation, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment of such Indebtedness or other obligation or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation; provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.

 

Gua rantee and Collateral Agreement shall mean the First Lien Guarantee and Collateral Agreement, substantially in the form of Exhibit D, among the Borrower, Holdings, the Subsidiaries party thereto and the Collateral Agent for the benefit of the Secured Parties.

 

Guarantors shall mean Holdings and the Subsidiary Guarantors.

 

Hazardous Materials shall mean (a) any petroleum products or byproducts and all other hydrocarbons, radon gas, asbestos, polychlorinated biphenyls, chlorofluorocarbons and all other ozone-depleting substances and (b) any chemical, material, substance or waste that is prohibited, limited or regulated by or pursuant to any Environmental Law.

 

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Hedging Agreement shall mean any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

 

Inactive Subsidiary shall mean any Subsidiary that (a) does not conduct any business operations, (b) has assets with a book value not in excess of $250,000 and (c) does not have any Indebtedness outstanding.

 

Incremental Revolving Facility Amount shall mean, at any time, the excess, if any, of (a) $25,000,000 over (b) the sum of (i) the aggregate increase in the Revolving Commitments established prior to such time pursuant to Section 2.25 and (ii) the aggregate amount of all Incremental Term Commitments established prior to such time pursuant to Section 2.24.

 

Incremental Term Borrowing shall mean a Borrowing comprised of Incremental Term Loans.

 

Incremental Term Lender shall mean a Lender with an Incremental Term Loan Commitment or an outstanding Incremental Term Loan.

 

Incremental Term Loan Amount shall mean, at any time, the excess, if any, of (a) $25,000,000 over (b) the sum of (i) the aggregate amount of all Incremental Term Commitments established prior to such time pursuant to Section 2.24 and (ii) the aggregate increase in Revolving Commitments established prior to such time pursuant to Section 2.25.

 

Incremental Term Loan Assumption Agreement shall mean an Incremental Term Loan Assumption Agreement in form and substance reasonably satisfactory to the Administrative Agent, among the Borrowers, the Administrative Agent and one or more Incremental Term Lenders.

 

Incremental Term Loan Commitment shall mean the commitment of any Lender, established pursuant to Section 2.24, to make Incremental Term Loans to the Borrower.

 

Incremental Term Loan Maturity Date shall mean the final maturity date of any Incremental Term Loan, as set forth in the applicable Incremental Term Loan Assumption Agreement.

 

Incremental Term Loan Repayment Dates shall mean the dates scheduled for the repayment of principal of any Incremental Term Loan, as set forth in the applicable Incremental Term Loan Assumption Agreement.

 

Incremental Term Loans shall mean Term Loans made by one or more Lenders to the Borrower pursuant to Section 2.01(b). Incremental Term Loans may be made in the form of additional Term Loans or, to the extent permitted by Section 2.24 and provided for in the relevant Incremental Term Loan Assumption Agreement, Other Term Loans.

 

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Indebtedness of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or with respect to deposits or advances of any kind (excluding customer advances or deposits received in the ordinary course of business), (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person upon which interest charges are customarily paid, (d) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all Capital Lease Obligations and Synthetic Lease Obligations of such person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such person, (i) all obligations of such person as an account party in respect of letters of credit and (j) all obligations of such person in respect of bankers’ acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner, to the extent such person is liable therefor as a result of such person’s ownership interest in, or other relationship with, such other person, except to the extent the terms of such Indebtedness expressly provide that such person is not liable therefor. Notwithstanding the foregoing, “Indebtedness” shall not include indemnification, adjustment of purchase price, earn out, contingent purchase obligations, hold back or other similar obligations, in each case, incurred or assumed in connection with an acquisition or disposition permitted hereunder of any business, assets or a Subsidiary, except to the extent not paid when due (unless the same are being contested in good faith). The amount of Indebtedness for which recourse is limited to either a specific amount or to identified assets shall be equal to the lesser of such specified amount or the fair market value of such asset, as the case may be.

 

Indemnified Taxes shall mean Taxes other than Excluded Taxes and Other Taxes.

 

Int er creditor Agreement shall mean that certain Intercreditor Agreement dated as of the date hereof, among the Borrower, the Subsidiaries party thereto, the Collateral Agent and Second Lien Collateral Agent (as defined therein).

 

Interest Coverage Ratio shall mean, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.

 

Int e rest Payment Date shall mean (a) with respect to any ABR Loan including any Swingline Loan), the last Business Day of each March, June, September and December, commencing September 28, 2007 and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and in the case of a Eurodollar Borrowing with an Interest Period of more than

 

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three months’ duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months’ duration been applicable to such Borrowing.

 

Int e rest Period shall mean, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1,2,3 or 6 months thereafter, as the Borrower may elect (provided that for a Borrowing on the Closing Date, the Borrower may only elect a 1 month Interest Period); provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

 

I s suing Bank shall mean, as the context may require, (a) Credit Suisse, acting through any of its Affiliates or branches, in its capacity as the issuer of Letters of Credit hereunder, and (b) any other Lender that may become an Issuing Bank pursuant to Section 2.23(i) or 2.23(k), with respect to Letters of Credit issued by such Lender. The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates or branches of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate or branch with respect to Letters of Credit issued by such Affiliate or branch.

 

I s suing Bank Fees shall have the meaning assigned to such term in Section 2.05(c).

 

L/C Commitment shall mean the commitment of the Issuing Bank to issue Letters of Credit pursuant to Section 2.23.

 

L/ C Disbursement shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit.

 

L/C Exposure shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time and (b) the aggregate amount of all L/C Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The L/C Exposure of any Revolving Credit Lender at any time shall equal its Pro Rata Percentage of the aggregate L/C Exposure at such time.

 

L/C Part icipation Fee shall have the meaning assigned to such term in Section 2.05(c).

 

Lenders shall mean (a) the persons listed on Schedule 2.01 (other than any such person that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any person that has become a party hereto pursuant to an Assignment and

 

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Acceptance or an Incremental Term Loan Assumption Agreement. Unless the context clearly indicates otherwise, the term “Lenders” shall include the Swingline Lender.

 

Letter of Credit shall mean any letter of credit issued pursuant to Section 2.23.

 

LIBO Rate shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers’ Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the “LIBO Rate” shall be the interest rate per annum determined by the Administrative Agent to be the average of the rates per annum at which deposits in dollars are offered for such relevant Interest Period to major banks in the London interbank market in London, England by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such Interest Period.

 

Lien shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

Loan Documents shall mean this Agreement, the Letters of Credit, the Security Documents, each Incremental Term Loan Assumption Agreement and the promissory notes, if any, executed and delivered pursuant to Section 2.04(e).

 

Loan Parties shall mean the Borrower and the Guarantors.

 

Loans shall mean the Revolving Loans, the Term Loans and the Swingline Loans.

 

Margin Stock shall have the meaning assigned to such term in Regulation U.

 

Ma terial Adverse Effect shall mean (a)   a materially adverse effect on the business, assets, liabilities, operations, financial condition or operating results of the Borrower and the Subsidiaries, taken as a whole or (b) a material impairment of the rights and remedies of or benefits available to the Lenders under any Loan Document.

 

Ma t erial Indebtedness shall mean Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of Holdings, the Borrower or any Subsidiary in an aggregate principal amount exceeding $7,500,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of Holdings, the Borrower or any Subsidiary in

 

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respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Holdings, the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.

 

Material Subsidiary shall mean, at any time, any Subsidiary that at such time shall have assets in excess of $10,000,000 or shall have $10,000,000 in revenues in the most recently ended fiscal year.

 

Merger Agreement shall mean the Agreement and Plan of Merger dated as of April 21, 2007, among the Borrower, the Company and Parent.

 

Moody’s shall mean Moody’s Investors Service, Inc., or any successor thereto.

 

Mortgaged Properties shall mean, initially, the owned real properties of the Loan Parties specified on Schedule 1.01(b), and shall include each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.11.

 

Mortgages shall mean the mortgages, deeds of trust, assignments of leases and rents, modifications and other security documents delivered pursuant to clause (i) of Section 4.02(g) or pursuant to Section 5.11, each substantially in the form of Exhibit E.

 

Multiemployer Plan shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

 

Net Cash Proceeds shall mean (a) with respect to any Asset Sale, the cash proceeds (including cash proceeds subsequently received (as and when received) in respect of noncash consideration initially received), net of (i) selling expenses (including reasonable broker’s fees or commissions, legal fees, transfer and similar taxes and the Borrower’s good faith estimate of income taxes paid or payable in connection with such sale), (ii) amounts provided as a reserve, in accordance with GAAP, against any liabilities under any indemnification obligations or purchase price adjustment associated with such Asset Sale ( provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money that is secured by the asset sold in such Asset Sale and that is required to be repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such asset); provided, however, that, if (x) the Borrower shall deliver a certificate of a Financial Officer to the Administrative Agent at the time of receipt thereof setting forth the Borrower’s intent to reinvest such proceeds in productive assets of a kind then used or usable in the business of the Borrower and its Subsidiaries within 365 days of receipt of such proceeds and (y) no Default or Event of Default shall have occurred and shall be continuing at the time of such certificate or at the proposed time of the application of such proceeds, such proceeds shall not constitute Net Cash Proceeds except to the extent not so used at the end of such 365-day period, at which time such proceeds shall be deemed to be Net Cash Proceeds; and (b) with respect to any issuance or incurrence of Indebtedness or any Specified Equity Issuance, the cash

 

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proceeds thereof, net of all taxes and customary fees, commissions, costs and other expenses incurred in connection therewith.

 

Ob ligations shall mean all obligations defined as “Obligations” in the Guarantee and Collateral Agreement and the other Security Documents.

 

Ot her Taxes shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of or otherwise with respect to, any Loan Document.

 

Ot her Term Loans shall have the meaning assigned to such term in Section 2.24(a).

 

Parent shall mean STR Holdings Inc. and its successors and assigns.

 

PBGC shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.

 

Pension Act shall mean the Pension Protection Act of 2006, as amended from time to time.

 

Perfection Certificate shall mean the Perfection Certificate substantially in the form of Exhibit B to the Guarantee and Collateral Agreement.

 

Pe rmitted Acquisition shall have the meaning assigned to such term in Section 6.04(g).

 

Pe rmitted Investments shall mean:

 

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

 

(b) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, any participating member state of the EMU (or by any agency thereof to the extent such obligations are backed by the full faith and credit of such participating member state of the EMU), in each case with a rating equal to or higher than Baa3 by Moody’s and BBB- by S&P (or the equivalent rating and rating agency applicable for such member state) and maturing within one year from the date of acquisition thereof;

 

(c)  investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;

 

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(d) investments in certificates of deposit, banker’s acceptances, time deposits and eurodollar time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof or any foreign commercial bank organized under the laws of a participating member state of the EMU that has a combined capital and surplus and undivided profits of not less than $500,000,000 in the case of U.S. banks (or the dollar equivalent as of the date of determination in the case of non-U.S. banks);

 

(e) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria of clause (d) above;

 

(f) investments in “money market funds” within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (e) above;

 

(g) investments in so-called “auction rate” securities rated AAA or higher by S&P or Aaa or higher by Moody’s and which have a reset date not more than 90 days from the date of acquisition thereof; and

 

(h) other short-term investments utilized by Foreign Subsidiaries in accordance with normal investment practices for cash management in investments of a type analogous to the foregoing and denominated in dollars or foreign currencies.

 

Permitted Investors shall mean DLJ Merchant Banking Partners IV, L.P. and its affiliated funds.

 

person shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership, Governmental Authority or other entity.

 

Plan shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

Pledged Collateral shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

 

Prime Rate shall mean the rate of interest per annum determined from time to time by Credit Suisse as its prime rate in effect at its principal office in New York City and notified to the Borrower.

 

Pro Rata Percentage of any Revolving Credit Lender at any time shall mean the percentage of the Total Revolving Credit Commitment represented by such Lender’s

 

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Revolving Credit Commitment. In the event the Revolving Credit Commitments shall have expired or been terminated, the Pro Rata Percentages shall be determined on the basis of the Revolving Credit Commitments most recently in effect, giving effect to any subsequent assignments.

 

Qua lified Capital Stock of any person shall mean any Equity Interest of such person that is not Disqualified Stock.

 

Qualified Public Offering shall mean the initial underwritten public offering of common Equity Interests of Holdings or the Borrower pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended, that results in at least $50,000,000 of Net Cash Proceeds to Holdings.

 

Register shall have the meaning assigned to such term in Section 9.04(d).

 

Regulation T shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

Regulation U shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

Regulation X shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

Related Fund shall mean, with respect to any Lender that is a fund or commingled investment vehicle that invests in bank loans, any other fund that invests in bank loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

 

Related Parties shall mean, with respect to any specified person, such person’s Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such person and such person’s Affiliates.

 

Release shall mean any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment or within or upon any building, structure, facility or fixture.

 

Repayment Date shall have the meaning assigned to such term in Section 2.11. Unless the context otherwise requires, the term Repayment Date shall also include each Incremental Term Loan Repayment Date.

 

Required Lenders shall mean, at any time, Lenders having Loans (excluding Swingline Loans), L/C Exposure, Swingline Exposure and unused Revolving Credit Commitments and Term Loan Commitments representing more than 50% of the sum of all Loans outstanding (excluding Swingline Loans), L/C Exposure, Swingline Exposure and unused Revolving Credit Commitments and Term Loan Commitments at such time; provided that the Revolving Loans, L/C Exposure, Swingline Exposure and unused

 

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Revolving Credit Commitments of any Defaulting Lender shall be disregarded in the determination of the Required Lenders at any time.

 

Required Prepayment Percentage shall mean in the case of any Excess Cash Flow, 50% or, if on the date of the applicable prepayment (and after giving effect thereto, in whole or in part), the Total Leverage Ratio is less than 5.25 to 1.00 but greater than or equal to 4.50 to 1.00, 25%, or, if on the date of the applicable prepayment, the Total Leverage Ratio is less than 4.50 to 1.00, 0%.

 

Responsible Officer of any person shall mean any executive officer or Financial Officer of such person and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Agreement.

 

Restricted Indebtedness shall mean Indebtedness of Holdings, the Borrower or any Subsidiary, the payment, prepayment, repurchase or defeasance of which is restricted under Section 6.09(b).

 

Restricted Payment shall mean any dividend or other distribution (whether in cash, securities or other property (other than Qualified Capital Stock)) with respect to any Equity Interests in Holdings, the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property (other than Qualified Capital Stock)), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in Holdings, the Borrower or any Subsidiary. For greater certainty, the payment of fees pursuant to the Advisory Services and Monitoring Agreements shall not constitute a Restricted Payment under Section 6.06(a).

 

Revo lving Credit Borrowing shall mean a Borrowing comprised of Revolving Loans.

 

Revolving Credit Commitment shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder (and to acquire participations in Swingline Loans and Letters of Credit as provided for herein) as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Revolving Credit Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.09, (b) increased from time to time pursuant to Section 2.25 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The aggregate amount of Revolving Commitments on the Closing Date is $20,000,000.

 

Revolving Credit Exposure shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender, plus the aggregate amount at such time of such Lender’s L/C Exposure, plus the aggregate amount at such time of such Lender’s Swingline Exposure.

 

Revolving Credit Lender shall mean a Lender with a Revolving Credit Commitment or an outstanding Revolving Loan.

 

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Re volving Credit Maturity Date shall mean June 15, 2012.

 

Revolving Loans shall mean the revolving loans made by the Lenders to the Borrower pursuant to clause (a) of Section 2.01.

 

Sale/Leaseback Transaction means an arrangement, directly or indirectly, with any person relating to property, real or personal or mixed, used or useful in the business of the Borrower or any Subsidiary, whether now owned or acquired after the Closing Date, whereby the Borrower or any Subsidiary sells or transfers such property to a person and thereafter rents or leases such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred.

 

Second Lien Term Loan Agreement shall mean the Second Lien Credit Agreement dated as of the date hereof among the Borrower, Holdings, Credit Suisse, as administrative agent and as collateral agent, and the lenders from time to time party thereto.

 

Second Lien Term Loan Documents shall mean the Second Lien Term Loan Agreement and all other instruments, agreements and other documents evidencing or governing the Second Lien Term Loan or providing for any Guarantee or other right in respect thereof.

 

Second Lien Term Loan shall mean the $75,000,000 Senior Secured Second Lien Term Loan contemplated by the Second Lien Term Loan Agreement.

 

Second Priority Liens shall have the meaning assigned to such term in the Intercreditor Agreement.

 

Secured Parties shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

 

Security Documents shall mean the Mortgages, the Guarantee and Collateral Agreement, the Intercreditor Agreement and each of the security agreements, mortgages and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.11.

 

Significant Asset Sale shall mean the sale, transfer, lease or other disposition by Holdings or any Subsidiary to any person other than the Borrower or a Subsidiary Guarantor of all or substantially all of the assets of, or a majority of the Equity Interests in, a person, or a division or line of business or other business unit of a person.

 

S&P shall mean Standard & Poor’s Ratings Service, or any successor thereto.

 

Spanish Subs idized Loans shall mean government-subsidized loans in advance made as part of an official program of the Ministry of Economic Development of Spain (the Spanish Ministry ) , representing funds pledged to STR España as incentive for economic development in the country of Spain and/or the region of Asturias, Spain, the interest and principal of which are relieved by the Spanish Ministry upon completion of

 

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STR España’s approved development program (capital investment, job creation, employee training, etc).

 

SPC shall have the meaning assigned to such term in Section 9.04(i).

 

Specified Equity Issuance shall mean any public issuance or sale by Holdings, the Borrower or any of their respective subsidiaries of any Equity Interests of Holdings, the Borrower or any such subsidiary, as applicable, other than public offerings with respect to Holding’s, the Borrower’s or any of their respective subsidiaries’ Equity Interests registered on Form S-4 or Form S-8.

 

Statutory Reserves shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate or other fronting office making or holding a Loan) is subject for Eurocurrency Liabilities (as defined in Regulation D of the Board). Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities (as defined in Regulation D of the Board) and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

STR Espa ñ a shall mean Specialized Technology Resources España S.A., a stock corporation formed under the laws of Spain and wholly owned by the Borrower.

 

subsidiary shall mean, with respect to any person (herein referred to as the pare nt ), any corporation, partnership, limited liability company, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, Controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

 

Subsidiary shall mean any subsidiary of the Borrower.

 

Subs idiary Guarantor shall mean each Subsidiary listed on Schedule 1.01(a), and each other Subsidiary that is or becomes a party to the Guarantee and Collateral Agreement.

 

Swingline Commitment shall mean the commitment of the Swingline Lender to make loans pursuant to Section 2.22, as the same may be reduced from time to time pursuant to Section 2.09.

 

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Swingline Exposure shall mean at any time the aggregate principal amount at such time of all outstanding Swingline Loans. The Swingline Exposure of any Revolving Credit Lender at any time shall equal its Pro Rata Percentage of the aggregate Swingline Exposure at such time.

 

Swingline Lender shall mean Credit Suisse, acting through any of its Affiliates or branches, in its capacity as lender of Swingline Loans hereunder.

 

Swingline Loan shall mean any loan made by the Swingline Lender pursuant to Section 2.22.

 

Synthetic Lease shall mean, as to any person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income tax purposes, other than any such lease under which such person is the lessor.

 

Synthetic Lease Obligations shall mean, as to any person, an amount equal to the capitalized amount of the remaining lease payments under any Synthetic Lease that would appear on a balance sheet of such person in accordance with GAAP if such obligations were accounted for as Capital Lease Obligations.

 

Synthetic Purchase Agreement shall mean any swap, derivative or other agreement or combination of agreements pursuant to which Holdings, the Borrower or any Subsidiary is or may become obligated to make (a) any payment in connection with a purchase by any third party from a person other than Holdings, the Borrower or any Subsidiary of any Equity Interest or Restricted Indebtedness or (b) any payment (other than on account of a permitted purchase by it of any Equity Interest or Restricted Indebtedness) the amount of which is determined by reference to the price or value at any time of any Equity Interest or Restricted Indebtedness; provided that no phantom stock or similar plan providing for payments only to current or former directors, officers or employees of Holdings, the Borrower or the Subsidiaries (or to their heirs or estates) shall be deemed to be a Synthetic Purchase Agreement.

 

Taxes shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

 

Term Borrowing shall mean a Borrowing comprised of Term Loans or Incremental Term Loans.

 

Term Lender shall mean a Lender with a Term Loan Commitment or an outstanding Term Loan. Unless the context shall otherwise require, the term Term Lenders shall also include the Incremental Term Lenders.

 

Term Loan Commitment shall mean, with respect to each Lender, the commitment of such Lender to make Term Loans hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Term Loan Commitment, as applicable, as the same may be (a) reduced from

 

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time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. Unless the context shall otherwise require the term Term Loan Commitments shall include the Incremental Term Commitments.

 

Term Loan Maturity Date shall mean June 15, 2014.

 

Term Loan Repayment Dates shall mean the Repayment Dates and the Incremental Term Loan Repayment Dates.

 

Term Loans shall mean the term loans made by the Lenders to the Borrower pursuant to clause (a) of Section 2.01. Unless the context shall otherwise require, the term Term Loans shall include any Incremental Term Loans.

 

Total Debt shall mean, at any time, the total Indebtedness of the Borrower and the Subsidiaries at such time (excluding Indebtedness of the type described in clause (i) of the definition of such term, except to the extent of any unreimbursed drawings thereunder).

 

Total Leverage Ratio shall mean, on any date, the ratio of Total Debt (net of unrestricted cash and cash equivalents of the Borrower and the Subsidiaries (in each case in the amount determined by GAAP)) on such date to Consolidated EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date. In any period of four consecutive fiscal quarters in which a Permitted Acquisition or Significant Asset Sale occurs, the Total Leverage Ratio shall be determined on a pro forma basis in accordance with Section 1.03.

 

Total Revolving Credit Commitment shall mean, at any time, the aggregate amount of the Revolving Credit Commitments, as in effect at such time. The initial Total Revolving Credit Commitment is $20,000,000.

 

Transactions shall mean, collectively, (a) the execution, delivery and performance by Parent, the Company and the Borrower of the Merger Agreement and the consummation of the transactions contemplated thereby, (b) the execution, delivery and performance by Holdings, the Borrower and the Subsidiaries party thereto of the Second Lien Term Loan Documents and the incurrence of the Second Lien Term Loan, (c) the execution, delivery and performance by the Loan Parties of the Loan Documents to which they are a party and the making of the Borrowings hereunder, (d) the repayment of all amounts due or outstanding under or in respect of, and the termination of, the Existing Credit Agreement and (e) the payment of related fees and expenses.

 

Type , when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term Rate shall mean the Adjusted LIBO Rate and the Alternate Base Rate.

 

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USA PATRIOT Act shall mean The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)).

 

wholly owned Subsidiary of any person shall mean a subsidiary of such person of which securities (except for directors’ qualifying shares) or other ownership interests representing 100% of the Equity Interests are, at the time any determination is being made, owned, Controlled or held by such person or one or more wholly owned Subsidiaries of such person or by such person and one or more wholly owned Subsidiaries of such person.

 

Withdrawal Liability shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

 

SECTION 1.02. Terms Generally . The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”; and the words “asset” and “property” shall be construed as having the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time and (b) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article VI or any related definition to eliminate the effect of any change in GAAP occurring after the date of this Agreement on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VI or any related definition for such purpose), then the Borrower’s compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders.

 

SECTION 1.03. Pro Forma Calculations . With respect to any period of four consecutive fiscal quarters during which any Permitted Acquisition or Significant Asset Sale occurs (and for purposes of determining whether an acquisition is a Permitted Acquisition under Section 6.04(g) or would result in a Default or an Event of Default), the First Lien Debt Leverage Ratio, the Total Leverage Ratio shall be calculated with respect to such period on a pro forma basis after giving effect to such Permitted Acquisition or Significant Asset Sale (including, without duplication, (a) all pro forma

 

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adjustments permitted or required by Article 11 of Regulation S-X under the Securities Act of 1933, as amended, and (b) pro forma adjustments for cost savings (net of continuing associated expenses) to the extent such cost savings are factually supportable, are expected to have a continuing impact and have been realized or are reasonably expected to be realized within 12 months following such Permitted Acquisition; provided that all such adjustments shall be set forth in a reasonably detailed certificate of a Financial Officer of the Borrower), using, for purposes of making such calculations, the historical financial statements of the Borrower and the Subsidiaries which shall be reformulated as if such Permitted Acquisition or Significant Asset Sale, and any other Permitted Acquisitions and Significant Asset Sales that have been consummated during the period, had been consummated on the first day of such period.

 

SECTION 1.04. Classification of Loans and Borrowings . For purposes of this Agreement, Loans may be classified and referred to by Class ( e.g., a “Revolving Loan”) or by Type ( e.g., a “Eurodollar Loan”) or by Class and Type ( e.g., a “Eurodollar Revolving Loan”). Borrowings also may be classified and referred to by Class ( e.g., a “Revolving Borrowing”) or by Type ( e.g., a “Eurodollar Borrowing”) or by Class and Type ( e.g., a “Eurodollar Revolving Borrowing”).

 

ARTICLE II

 

The Credits

 

SECTION 2.01. Commitments . (a) Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, (i) to make a Term Loan to the Borrower on the Closing Date in a principal amount not to exceed its Term Loan Commitment, and (ii) to make Revolving Loans to the Borrower, at any time and from time to time on or after the date hereof, and until the earlier of the Revolving Credit Maturity Date and the termination of the Revolving Credit Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Lender’s Revolving Credit Exposure exceeding such Lender’s Revolving Credit Commitment; provided that the aggregate principal amount of Revolving Loans made on the Closing Date shall not exceed $1,000,000. Within the limits set forth in clause (ii) of the preceding sentence and subject to the terms, conditions and limitations set forth herein, the Borrower may borrow, pay or prepay and reborrow Revolving Loans. Amounts paid or prepaid in respect of Term Loans may not be reborrowed.

 

(b)           Each Lender having an Incremental Term Loan Commitment, severally and not jointly, hereby agrees, on the terms and subject to the conditions set forth herein and in the applicable Incremental Term Loan Assumption Agreement and relying upon the representations and warranties set forth herein and in the applicable Incremental Term Loan Assumption Agreement, to make Incremental Term Loans to the Borrower, in an aggregate principal amount not to exceed its Incremental Term Loan Commitment. Amounts paid or prepaid in respect of Incremental Term Loans may not be reborrowed.

 

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SECTION 2.02. Loans. (a) Each Loan (other than Swingline Loans) shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Except for Loans deemed made pursuant to Section 2.02(f), the Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $100,000 and not less than $500,000 (except, with respect to any Incremental Term Borrowing, to the extent otherwise provided in the related Incremental Term Loan Assumption Agreement) or (ii) equal to the remaining available balance of the applicable Commitments.

 

(b)           Subject to Sections 2.02(f), 2.08 and 2.15, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than five Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.

 

(c)           Except with respect to Loans made pursuant to Section 2.02(f), each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 1:00 p.m., New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account designated by the Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders.

 

(d)           Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower to but excluding the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, a rate per annum equal to

 

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the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement.

 

(e)           Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request any Revolving Credit Borrowing if the Interest Period requested with respect thereto would end after the Revolving Credit Maturity Date.

 

(f)            If the Issuing Bank shall not have received from the Borrower the payment required to be made by Section 2.23(e) within the time specified in such Section, the Issuing Bank will promptly notify the Administrative Agent of the L/C Disbursement and the Administrative Agent will promptly notify each Revolving Credit Lender of such L/C Disbursement and its Pro Rata Percentage thereof. Each Revolving Credit Lender shall pay by wire transfer of immediately available funds to the Administrative Agent not later than 2:00 p.m., New York City time, on such date (or, if such Revolving Credit Lender shall have received such notice later than 12:00 (noon), New York City time, on any day, not later than 10:00 a.m., New York City time, on the immediately following Business Day), an amount equal to such Lender’s Pro Rata Percentage of such L/C Disbursement (it being understood that (i) if the conditions precedent to borrowing set forth in Sections 4.01(b) and (c) have been satisfied, such amount shall be deemed to constitute an ABR Revolving Loan of such Lender and, to the extent of such payment, the obligations of the Borrower in respect of such L/C Disbursement shall be discharged and replaced with the resulting ABR Revolving Credit Borrowing, and (ii) if such conditions precedent to borrowing have not been satisfied, then any such amount paid by any Revolving Credit Lender shall not constitute a Loan and shall not relieve the Borrower from its obligation to reimburse such L/C Disbursement), and the Administrative Agent will promptly pay to the Issuing Bank amounts so received by it from the Revolving Credit Lenders. The Administrative Agent will promptly pay to the Issuing Bank any amounts received by it from the Borrower pursuant to Section 2.23(e) prior to the time that any Revolving Credit Lender makes any payment pursuant to this paragraph (f); any such amounts received by the Administrative Agent thereafter will be promptly remitted by the Administrative Agent to the Revolving Credit Lenders that shall have made such payments and to the Issuing Bank, as their interests may appear. If any Revolving Credit Lender shall not have made its Pro Rata Percentage of such L/C Disbursement available to the Administrative Agent as provided above, such Lender and the Borrower severally agree to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with this paragraph (f) to but excluding the date such amount is paid, to the Administrative Agent for the account of the Issuing Bank at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable to Revolving Loans pursuant to Section 2.06(a), and (ii) in the case of such Lender, for the first such day, the Federal Funds Effective Rate, and for each day thereafter, the Alternate Base Rate.

 

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SECTION 2.03. Borrowing Procedure . In order to request a Borrowing (other than a Swingline Loan or a deemed Borrowing pursuant to Section 2.02(f), as to which this Section 2.03 shall not apply), the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 (noon), New York City time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before a proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable, and shall be confirmed promptly by hand delivery or fax to the Administrative Agent of a written Borrowing Request and shall specify the following information: (i) whether the Borrowing then being requested is to be a Term Borrowing, an Incremental Term Borrowing or a Revolving Credit Borrowing, and whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall be a Business Day); (iii) the number and location of the account to which funds are to be disbursed; (iv) the amount of such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; provided, however, that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.02. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. The Administrative Agent shall promptly advise the applicable Lenders of any notice given pursuant to this Section 2.03 (and the contents thereof), and of each Lender’s portion of the requested Borrowing.

 

SECTION 2.04. Evidence of Debt; Repayment of Loans . (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender (i) the principal amount of each Term Loan of such Lender as provided in Section 2.11 and (ii) the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Credit Maturity Date. The Borrower hereby promises to pay to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the Revolving Credit Maturity Date.

 

(b)            Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

 

(c)           The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Class and Type thereof and, if applicable, the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower or any Guarantor and each Lender’s share thereof.

 

(d)           The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the

 

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obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms.

 

(e)            Any Lender may request that Loans made by it hereunder be evidenced by a promissory note. In such event, the Borrower shall execute and deliver to such Lender a promissory note payable to such Lender and its registered assigns and in a form and substance reasonably acceptable to the Administrative Agent and the Borrower. Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive such a promissory note, the interests represented by such note shall at all times (including after any assignment of all or part of such interests pursuant to Section 9.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns.

 

SECTION 2.05. Fees . (a) The Borrower agrees to pay to each Revolving Credit Lender, through the Administrative Agent, on the last Business Day of March, June, September and December in each year, commencing September 28, 2007 and on each date on which any Revolving Credit Commitment of such Lender shall expire or be terminated as provided herein, a commitment fee (a Commitment Fee ) equal to 0.50% per annum on the daily unused amount of the Revolving Credit Commitment of such Lender during the preceding quarter (or other period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which the Revolving Credit Commitments of such Lender shall expire or be terminated). All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. For purposes of calculating Commitment Fees only, no portion of the Revolving Credit Commitments shall be deemed utilized as a result of outstanding Swingline Loans.

 

(b)           The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees set forth in the Fee Letter at the times and in the amounts specified therein (the Administrative Agent Fees ) .

 

(c)           The Borrower agrees to pay (i) to each Revolving Credit Lender, through the Administrative Agent, on the last Business Day of March, June, September and December of each year, commencing September 28, 2007 and on the date on which the Revolving Credit Commitment of such Lender shall be terminated as provided herein, a fee (an L/C Participation Fee ) calculated on such Lender’s Pro Rata Percentage of the daily aggregate L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements) during the preceding quarter (or shorter period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which all Letters of Credit have been canceled or have expired and the Revolving Credit Commitments of all Lenders shall have been terminated) at a rate per annum equal to the Applicable Percentage from time to time used to determine the interest rate on Revolving Credit Borrowings comprised of Eurodollar Loans pursuant to Section 2.06, and (ii) to the Issuing Bank with respect to each Letter of Credit the standard fronting, issuance and drawing fees specified from time to time by the Issuing Bank (the Issuing Bank Fees ) .

 

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All L/C Participation Fees and Issuing Bank Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days.

 

(d)           All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that the Issuing Bank Fees shall be paid directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances.

 

SECTION 2.06. Interest on Loans . (a) Subject to the provisions of Section 2.07, the Loans comprising each ABR Borrowing, including each Swingline Loan, shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate is determined by reference to the Prime Rate and over a year of 360 days at all other times and calculated from and including the date of such Borrowing to but excluding the date of repayment thereof) at a rate per annum equal to the Alternate Base Rate plus the Applicable Percentage in effect from time to time.

 

(b)           Subject to the provisions of Section 2.07, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage in effect from time to time.

 

(c)           Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

 

SECTION 2.07. Default Interest . If the Borrower shall default in the payment of any principal of or interest on any Loan or any other amount due hereunder, by acceleration or otherwise, or under any other Loan Document, then, until such defaulted amount shall have been paid in full, to the extent permitted by law, all overdue amounts outstanding under this Agreement and the other Loan Documents shall bear interest (after as well as before judgment), payable on demand, (a) in the case of principal, at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus 2.00% per annum and (b) in all other cases, at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when determined by reference to the Prime Rate and over a year of 360 days at all other times) equal to the rate that would be applicable to an ABR Loan plus 2.00% per annum.

 

SECTION 2.08. Alternate Rate of Interest . In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that the rates at which such dollar deposits are being offered will not adequately and fairly reflect the cost to any Lender of

 

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making or maintaining its Eurodollar Loan during such Interest Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or fax notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent under this Section 2.08 shall be conclusive absent manifest error.

 

SECTION 2.09. Termination and Reduction of Commitments. (a) The Term Loan Commitments (other than any Incremental Term Loan Commitments, which shall terminate as provided in the related Incremental Term Loan Assumption Agreement) shall automatically terminate upon the making of the Term Loans on the Closing Date. The Revolving Credit Commitments and the Swingline Commitment shall automatically terminate on the Revolving Credit Maturity Date. The L/C Commitment shall automatically terminate on the earlier to occur of (i) the termination of the Revolving Credit Commitments and (ii) the date 30 days prior to the Revolving Credit Maturity Date. Notwithstanding the foregoing, all the Commitments shall automatically terminate at 5:00 p.m., New York City time, on June 30, 2007, or such earlier date on which the Merger Agreement terminates, if the initial Credit Event shall not have occurred by such time.

 

(b)           Upon at least three Business Days’ prior irrevocable written or fax notice to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Term Loan Commitments, the Revolving Credit Commitments or the Swingline Commitment; provided, however, that (i) each partial reduction of the Revolving Credit Commitments shall be in an integral multiple of $1,000,000 and in a minimum amount of $1,000,000, (ii) each partial reduction of the Swingline Commitment shall be in an integral multiple of $1,000,000 and in a minimum amount of $1,000,000 and (iii) the Total Revolving Credit Commitment shall not be reduced to an amount that is less than the Aggregate Revolving Credit Exposure at the time.

 

(c)           Each reduction in the Term Loan Commitments or the Revolving Credit Commitments hereunder shall be made ratably among the Lenders in accordance with their respective applicable Commitments. The Borrower shall pay to the Administrative Agent for the account of the applicable Lenders, on the date of each termination or reduction, the Commitment Fees on the amount of the Commitments so terminated or reduced accrued to but excluding the date of such termination or reduction.

 

SECTION 2.10. Conversion and Continuation of Borrowings . The Borrower shall have the right at any time upon prior irrevocable notice to the Administrative Agent (a) not later than 12:00 (noon), New York City time, one Business Day prior to conversion, to convert any Eurodollar Borrowing into an ABR Borrowing, (b) not later than 12:00 (noon), New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Borrowing or to continue

 

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any Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest Period, and (c) not later than 12:00 (noon), New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Borrowing to another permissible Interest Period, subject in each case to the following:

 

(i) until the Administrative Agent shall have notified the Borrower that the primary syndication of the Commitments has been completed (which notice shall be given as promptly as practicable and, in any event, within 30 days after the Closing Date), no LIBOR Borrowing may have an Interest Period in excess of one month;

 

(ii) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing;

 

(iii) if less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting Borrowing shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal amount and maximum number of Borrowings of the relevant Type;

 

(iv) each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on any Eurodollar Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion;

 

(v) if any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.16;

 

(vi) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing;

 

(vii) any portion of a Eurodollar Borrowing that cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing;

 

(viii) no Interest Period may be selected for any Eurodollar Term Borrowing that would end later than a Term Loan Repayment Date occurring on or after the first day of such Interest Period if, after giving effect to such selection, the aggregate outstanding amount of (A) the Eurodollar Term Borrowings comprised of Term Loans or Other Term Loans, as applicable, with Interest Periods ending on or prior to such Term Loan Repayment Date and (B) the ABR Term Borrowings comprised of Term Loans or Other Term Loans, as

 

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applicable, would not be at least equal to the principal amount of Term Borrowings to be paid on such Term Loan Repayment Date; and

 

(ix) upon notice to the Borrower from the Administrative Agent given at the request of the Required Lenders, after the occurrence and during the continuance of a Default or Event of Default, no outstanding Loan may be converted into, or continued as, a Eurodollar Loan.

 

Each notice pursuant to this Section 2.10 shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the Borrower requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month’s duration. The Administrative Agent shall advise the Lenders of any notice given pursuant to this Section 2.10 and of each Lender’s portion of any converted or continued Borrowing. If the Borrower shall not have given notice in accordance with this Section 2.10 to continue any Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued into an ABR Borrowing.

 

SECTION 2.11. Repayment of Term Borrowings . (a) (i) The Borrower shall pay to the Administrative Agent, for the account of the Lenders, on the last Business Day of each March, June, September and December, commencing September 28, 2007 (each such date being called a Repayment Date ) , a principal amount of the Term Loans other than Other Term Loans (as adjusted from time to time pursuant to Sections 2.11(b), 2.12, and 2.13(f) and 2.24(d)) equal to 0.25% of the principal amount of the Term Loans, together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment.

 

(ii) The Borrower shall pay to the Administrative Agent, for the account of the Incremental Term Lenders, on each Incremental Term Loan Repayment Date, a principal amount of the Other Term Loans (as adjusted from time to time pursuant to Sections 2.11(b), 2.12 and 2.13(f)) equal to the amount set forth for such date in the applicable Incremental Term Loan Assumption Agreement, together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment.

 

(b) In the event and on each occasion that the Term Loan Commitments shall be reduced or shall expire or terminate other than as a result of the making of a Term Loan, the installments payable on each Repayment Date shall be reduced pro rata by an aggregate amount equal to the amount of such reduction, expiration or termination.

 

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(c)   To the extent not previously paid, all Term Loans and Other Term Loans shall be due and payable on the Term Loan Maturity Date and the Incremental Term Loan Maturity Date, respectively, together with accrued and unpaid interest on the principal amount to be paid to but excluding the date of payment.

 

(d)   All repayments pursuant to this Section 2.11 shall be subject to Section 2.16, but shall otherwise be without premium or penalty.

 

SECTION 2.12. Optional Prepayment . (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, upon at least three Business Days’ prior written or fax notice (or telephone notice promptly confirmed by written or fax notice) in the case of Eurodollar Loans, or written or fax notice (or telephone notice promptly confirmed by written or fax notice) at least one Business Day prior to the date of prepayment in the case of ABR Loans, to the Administrative Agent before 12:00 (noon), New York City time; provided, however, that each partial prepayment shall be in an amount that is an integral multiple of $100,000 and not less than $1,000,000.

 

(b)   Optional prepayments of Term Loans shall be allocated among the Term Loans and the Other Term Loans, if any, as determined by the Borrower and shall be applied against the remaining scheduled installments of principal due in respect of the Term Loans under Section 2.11 as instructed by the Borrower in the notice set forth in Section 2.12(c), provided that if such notice omits such instructions, optional prepayments of Term Loans shall be applied pro rata against such remaining scheduled installments of principal due in respect of the Term Loans under Section 2.11.

 

(c)   Each notice of prepayment shall specify the prepayment date, the principal amount of each Borrowing (or portion thereof) to be prepaid and instructions with respect to the application under Section 2.12(b) of any prepayments of Term Loans, shall be irrevocable (unless such notice is expressly conditioned upon a refinancing of the Credit Facilities, in which case such notice may be rescinded if such refinancing shall not be consummated or shall otherwise be delayed) and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments under this Section 2.12 shall be subject to Section 2.16 but otherwise without premium or penalty. All prepayments under this Section 2.12 (other than prepayments of ABR Revolving Loans that are not made in connection with the termination or permanent reduction of the Revolving Credit Commitments) shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.

 

SECTION 2.13. Mandatory Prepayments . (a) In the event of any termination of all the Revolving Credit Commitments, the Borrower shall, on the date of such termination, repay or prepay all its outstanding Revolving Credit Borrowings and all outstanding Swingline Loans and replace or cause to be canceled (or make other arrangements satisfactory to the Administrative Agent and the Issuing Bank with respect to) all outstanding Letters of Credit. If, after giving effect to any partial reduction of the Revolving Credit Commitments or at any other time, the Aggregate Revolving Credit

 

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Exposure would exceed the Total Revolving Credit Commitment, then the Borrower shall, on the date of such reduction or at such other time, repay or prepay Revolving Credit Borrowings or Swingline Loans (or a combination thereof) and, after the Revolving Credit Borrowings and Swingline Loans shall have been repaid or prepaid in full, replace or cause to be canceled (or make other arrangements satisfactory to the Administrative Agent and the Issuing Bank with respect to) Letters of Credit in an amount sufficient to eliminate such excess.

 

(b)   Not later than the third Business Day following the receipt of Net Cash Proceeds in respect of any Asset Sale, the Borrower shall apply 100% of the Net Cash Proceeds received with respect thereto to prepay outstanding Term Loans in accordance with Section 2.13(g).

 

(c)   In the event and on each occasion that an Specified Equity Issuance occurs, the Borrower shall, substantially simultaneously with (and in any event not later than the third Business Day next following) the occurrence of such Specified Equity Issuance, apply 50% of the Net Cash Proceeds therefrom to prepay outstanding Term Loans in accordance with Section 2.13(g).

 

(d)   No later than the later of (i) 120 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending on December 31, 2007, and (ii) the 10th day subsequent to the date on which the financial statements with respect to such period are delivered pursuant to Section 5.04(a), the Borrower shall prepay outstanding Term Loans in accordance with Section 2.13(g) in an aggregate principal amount equal to the Required Prepayment Percentage of Excess Cash Flow for the fiscal year then ended.

 

(e)   In the event that any Loan Party or any subsidiary of a Loan Party shall receive Net Cash Proceeds from the issuance or incurrence of Indebtedness for money borrowed of any Loan Party or any subsidiary of a Loan Party (other than any cash proceeds from the issuance or renewal of Indebtedness permitted pursuant to Section 6.01), the Borrower shall, substantially simultaneously with (and in any event not later than the third Business Day next following) the receipt of such Net Cash Proceeds by such Loan Party or such subsidiary, apply an amount equal to 100% of such Net Cash Proceeds to prepay outstanding Term Loans in accordance with Section 2.13(g).

 

(f)   Notwithstanding the foregoing, any Term Lender may elect, by written notice to the Administrative Agent at the time and in the manner specified by the Administrative Agent, to decline all (but not less than all) of its pro rata share of such mandatory prepayment of its Term Loans pursuant to this Section 2.13 (such declined amounts, the Declined Proceeds ) . Any Declined Proceeds shall be offered to the Term Lenders not so declining such prepayment (with such Term Lenders having the right to decline any prepayment with Declined Proceeds at the time and in the manner specified by the Administrative Agent). To the extent such Term Lenders elect to decline their pro rata shares of such Declined Proceeds, such remaining Declined Proceeds shall be applied in accordance with the mandatory prepayment provisions of the Second Lien Term Loan Agreement, and any portion remaining thereafter may be retained by the Borrower.

 

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(g)   Mandatory prepayments of outstanding Term Loans under this Agreement shall be allocated pro rata between the Term Loans and the Other Term Loans and applied first against the remaining scheduled installments of principal due in respect of the Term Loans under Section 2.11(a)(i) in the direct order of repayment for the next six Repayment Dates after such prepayment and thereafter pro rata against the remaining scheduled installments of principal due in respect of the Term Loans and the Other Term Loans under Sections 2.11 (a)(i) and (ii), respectively; provided, however, that, if at the time of any prepayment pursuant to this Section 2.13 there shall be Term Borrowings of different Types or Eurodollar Term Borrowings with different Interest Periods, and if some but not all Term Lenders shall have accepted such mandatory prepayment, then the aggregate amount of such mandatory prepayment shall be allocated ratably to each outstanding Term Borrowing of the accepting Term Lenders. If no Term Lenders exercise the right to waive a given mandatory prepayment of the Term Loans pursuant to Section 2.13(f), then, with respect to such mandatory prepayment, the amount of such mandatory prepayment shall be applied first to Term Loans that are ABR Loans to the full extent thereof before application to Term Loans that are Eurodollar Loans in a manner that minimizes the amount of any payments required to be made by the Borrower pursuant to Section 2.16.

 

(h)   Notwithstanding anything in this Section 2.13, at such time as no Term Loans or Other Term Loans are outstanding, if Revolving Loans or Letters of Credit are outstanding at such time, all amounts required to be prepaid pursuant to Sections 2.13(b), (c), (d) and (e) shall be applied mutatis mutandis: first, ratably to prepay outstanding Revolving Loans and Swingline Loans, second, at such time as no Revolving Loans are outstanding, to cash collateralize any outstanding Letters of Credit and third, as may be required pursuant to the mandatory prepayment provisions of the Second Lien Term Loan Agreement.

 

(i)    The Borrower shall deliver to the Administrative Agent, at the time of each prepayment required under this Section 2.13, (i) a certificate signed by a Financial Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment and (ii) to the extent practicable, at least three days prior written notice of such prepayment. Each notice of prepayment shall specify the prepayment date, the Type of each Loan being prepaid (or the cash collateralization of a Letter of Credit) and the principal amount of each Loan (or portion thereof) to be prepaid (or Letter of Credit to be cash collateralized). All prepayments of Borrowings under this Section 2.13 shall be subject to Section 2.16, but shall otherwise be without premium or penalty, and shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.

 

SECTION 2.14. Reserve Requirements; Change in Circumstances . (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assess of, deposits with or for the account of or credit extended by any Lender or the Issuing Bank (except any such reserve requirement which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such

 

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Lender or any Letter of Credit or participation therein, and the result of any of the foregoing shall be to increase the cost to such Lender or the Issuing Bank of making or maintaining any Eurodollar Loan or increase the cost to any Lender of issuing or maintaining any Letter of Credit or purchasing or maintaining a participation therein or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender or the Issuing Bank to be material, then the Borrower will pay to such Lender or the Issuing Bank, as the case may be, upon demand such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

 

(b)   If any Lender or the Issuing Bank shall have determined that any Change in Law regarding capital adequacy has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made or participations in Letters of Credit purchased by such Lender pursuant hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy) by an amount deemed by such Lender or the Issuing Bank to be material, then from time to time the Borrower shall pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

 

(c)   A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) above shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank the amount shown as due on any such certificate delivered by it within 10 Business Days after its receipt of the same.

 

(d)   Failure or delay on the part of any Lender or the Issuing Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be under any obligation to compensate any Lender or the Issuing Bank under paragraph (a) or (b) above with respect to increased costs or reductions with respect to any period prior to the date that is 120 days prior to such request if such Lender or the Issuing Bank knew or could reasonably have been expected to know of the circumstances giving rise to such increased costs or reductions and of the fact that such circumstances would result in a claim for increased compensation by reason of such increased costs or reductions; provided further that the foregoing limitation shall not apply to any increased costs or reductions arising out of the retroactive application of any Change in Law within such 120-day period. The protection of this Section 2.14 shall be available to each Lender and

 

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the Issuing Bank regardless of any possible contention of the invalidity or inapplicability of the Change in Law that shall have occurred or been imposed.

 

SECTION 2.15. Change in Legality . (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent:

 

(i) such Lender may declare that Eurodollar Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods) and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Loans, whereupon any request for a Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing for an additional Interest Period) shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan as such for an additional Interest Period or to convert a Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration shall be subsequently withdrawn; and

 

(ii) such Lender may require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below.

 

In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.

 

(b)   For purposes of this Section 2.15, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period then applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.

 

SECTION 2.16. Indemnity . The Borrower shall indemnify each Lender against any loss or expense that such Lender may sustain or incur as a consequence of (a) any event, other than a default by such Lender in the performance of its obligations hereunder, which results in (i) such Lender receiving or being deemed to receive any amount on account of the principal of any Eurodollar Loan prior to the end of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period with respect to any Eurodollar, Loan, in each case other than on the last day of the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made by such Lender, including any Eurodollar Loan to be made pursuant to a conversion or continuation under Section 2.10) not being made after notice of such Loan shall have been given by the Borrower hereunder (any of the events referred to in

 

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this clause (a) being called a Breakage Event ) or (b) any default in the making of any payment or prepayment required to be made hereunder. In the case of any Breakage Event, such loss shall include an amount equal to the excess, as reasonably determined by such Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that is the subject of such Breakage Event for the period from the date of such Breakage Event to the last day of the Interest Period in effect (or that would have been in effect) for such Loan over (ii) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such Breakage Event for such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrower and shall be conclusive absent manifest error.

 

SECTION 2.17. Pro Rata Treatment . Except as provided below in this Section 2.17 with respect to Swingline Loans and as required under Section 2.13(f), 2.13(h) or 2.15, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment of the Commitment Fees, each reduction of the Term Loan Commitments or the Revolving Credit Commitments and each conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans). For purposes of determining the available Revolving Credit Commitments of the Lenders at any time, each outstanding Swingline Loan shall be deemed to have utilized the Revolving Credit Commitments of the Lenders (including those Lenders which shall not have made Swingline Loans) pro rata in accordance with such respective Revolving Credit Commitments. Each Lender agrees that in computing such Lender’s portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender’s percentage of such Borrowing to the next higher or lower whole dollar amount.

 

SECTION 2.18. Sharing of Setoffs . Each Lender agrees that if it shall, through the exercise of a right of banker’s lien setoff or counterclaim against the Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans or L/C Disbursement as a result of which the unpaid principal portion of its Loans and participations in L/C Disbursements shall be proportionately less than the unpaid principal portion of the Loans and participations in L/C Disbursements of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Loans and L/C Exposure of such other Lender, so that the aggregate unpaid principal amount of the Loans and L/C Exposure and participations in Loans and L/C Exposure held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Loans and L/C Exposure then outstanding as the principal amount of its Loans and L/C Exposure prior to such exercise of banker’s lien, setoff or counterclaim or other event was to the principal

 

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amount of all Loans and L/C Exposure outstanding prior to such exercise of banker’s lien, setoff or counterclaim or other event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.18 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. The Borrower and Holdings expressly consent to the foregoing arrangements and agree that any Lender holding a participation in a Loan or L/C Disbursement deemed to have been so purchased may exercise any and all rights of banker’s lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower and Holdings to such Lender by reason thereof as fully as if such Lender had made a Loan directly to the Borrower in the amount of such participation.

 

SECTION 2.19. Payments . (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any L/C Disbursement or any Fees or other amounts) hereunder and under any other Loan Document not later than 12:00 (noon), New York City time, on the date when due in immediately available dollars, without setoff, defense or counterclaim. Each such payment (other than (i) Issuing Bank Fees, which shall be paid directly to the Issuing Bank, and (ii) principal of and interest on Swingline Loans, which shall be paid directly to the Swingline Lender except as otherwise provided in Section 2.22(e)) shall be made to the Administrative Agent at its offices at Eleven Madison Avenue, New York, NY 10010. The Administrative Agent shall promptly distribute to each Lender any payments received by the Administrative Agent on behalf of such Lender.

 

(b)   Except as otherwise expressly provided herein, whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable.

 

(c)   Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower does not in fact make such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender, and to pay interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error).

 

SECTION 2.20. Taxes . (a) Any and all payments by or on account of any obligation of the Borrower or any other Loan Party hereunder or under any other Loan

 

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Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that, if the Borrower or any other Loan Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.20) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Loan Party shall make such deductions and (iii) the Borrower or such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

 

(b)   The Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c)    The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower or any other Loan Party hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.20) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto (other than penalties, interest or other expenses payable by reason of the deliberate action or inaction of the Administrative Agent, such Lender or the Issuing Bank, as the case may be), whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on behalf of itself, a Lender or the Issuing Bank, shall be conclusive absent manifest error.

 

(d)   As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or any other Loan Party to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

(e)   Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement or any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by Borrower or the Administrative Agent as will enable the

 

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Borrower or the Administrative Agent to determine whether or not such Lender is subject to withholding or information reporting requirements. Without limiting the generality of the foregoing, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent), two of whichever of the following is applicable:

 

(i) duly completed original signed copies of Internal Revenue Service ( IRS ) Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

 

(ii) duly completed original signed copies of IRS Form W-8ECI,

 

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” within the meaning of Section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (y) duly completed original signed copies of IRS Form W-BEN, or

 

(iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit Borrower to determine the withholding or deduction required to be made.

 

(f)   Any Lender that is a “United States person”, as defined in Section 7701(a)(30) of the Code, shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent) duly completed original signed copies of IRS Form W-9, or any successor form, in order to comply with U.S. backup withholding requirements.

 

(g)   If the Administrative Agent, any Lender or the Issuing Bank receives a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.20, it shall promptly notify the Borrower of such refund and shall, within 30 days after receipt of such refund, pay to the Borrower an amount equal to such refund, net of all out-of-pocket expenses of the Administrative Agent, such Lender or such Issuing Bank, as the case may be; provided, however, that the Borrower, upon the request of the Administrative Agent, such Lender or the Issuing Bank, as applicable, agrees to repay the amount paid over to the Borrower to the Administrative Agent, such Lender or the Issuing Bank, as applicable, in the event of the Administrative Agent, such Lender or the Issuing Bank is required to repay such refund. This paragraph shall not be construed to require the Administrative Agent, any Lender or any Issuing Bank to make available

 

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its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other person.

 

SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice described in Section 2.15, (iii) the Borrower is required to pay any additional amount to any Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank pursuant to Section 2.20 or (iv) any Lender refuses to consent to any amendment, waiver or other modification of any Loan Document requested by the Borrower that requires the consent of a greater percentage of the Lenders than the Required Lenders and such amendment, waiver or other modification is consented to by the Required Lenders, the Borrower may, at its sole expense and effort (including with respect to the processing and recordation fee referred to in Section 9.04(b)), upon notice to such Lender or the Issuing Bank, as the case may be, and the Administrative Agent, require such Lender or the Issuing Bank to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all of its interests, rights and obligations under this Agreement (or, in the case of clause (iv) above, all of its interests, rights and obligation with respect to the Class of Loans or Commitments that is the subject of the related consent, amendment, waiver or other modification) to an Eligible Assignee that shall assume such assigned obligations and, with respect to clause (iv) above, shall consent to such requested amendment, waiver or other modification of any Loan Document (which Eligible Assignee may be another Lender, if a Lender accepts such assignment); provided that (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (y) the Borrower shall have received the prior written consent of the Administrative Agent (and if a Revolving Credit Commitment is being assigned, of the Issuing Bank and the Swingline Lender), which consents shall not unreasonably be withheld or delayed, and (z) the Borrower or such Eligible Assignee shall have paid to the affected Lender or the Issuing Bank in immediately available funds an amount equal to the sum of the principal of and interest accrued to the date of such payment on the outstanding Loans or L/C Disbursements of such Lender or the Issuing Bank, respectively, plus all Fees and other amounts accrued for the account of such Lender or the Issuing Bank hereunder with respect thereto (including any amounts under Sections 2.14 and 2.16); provided further that, if prior to any such transfer and assignment the circumstances or event that resulted in such Lender’s or the Issuing Bank’s claim for compensation under Section 2.14, notice under Section 2.15 or the amounts paid pursuant to Section 2.20, as the case may be, cease to cause such Lender or the Issuing Bank to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital, or cease to have the consequences specified in Section 2.15, or cease to result in amounts being payable under Section 2.20, as the case may be (including as a result of any action taken by such Lender or the Issuing Bank pursuant to paragraph (b) below), or if such Lender or the Issuing Bank shall waive its right to claim further compensation under Section 2.14 in respect of such circumstances or event or shall withdraw its notice under Section 2.15 or shall waive its right to further payments under Section 2.20 in respect of such circumstances or event or shall consent to the proposed amendment, waiver, consent or other modification, as the

 

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case may be, then such Lender or the Issuing Bank shall not thereafter be required to make any such transfer and assignment hereunder. Each Lender hereby grants to the Administrative Agent an irrevocable power of attorney (which power is coupled with an interest) to execute and deliver, on behalf of such Lender as assignor, any Assignment and Acceptance necessary to effectuate any assignment of such Lender’s interests hereunder in the circumstances contemplated by this Section 2.21(a).

 

(b)   If (i) any Lender or the Issuing Bank shall request compensation under Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice described in Section 2.15 or (iii) the Borrower is required to pay any additional amount to any Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank, pursuant to Section 2.20, then such Lender or the Issuing Bank shall use reasonable efforts (which shall not require such Lender or the Issuing Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be significant) (x) to file any certificate or document reasonably requested in writing by the Borrower or (y) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.14 or enable it to withdraw its notice pursuant to Section 2.15 or would reduce amounts payable pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or the Issuing Bank in connection with any such filing or assignment, delegation and transfer.

 

SECTION 2.22. Swingline Loans. (a) Swingline Commitment. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, the Swingline Lender agrees to make loans to the Borrower at any time and from time to time on and after the Closing Date and until the earlier of the Revolving Credit Maturity Date and the termination of the Revolving Credit Commitments, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of all Swingline Loans exceeding $10,000,000 in the aggregate or (ii) the Aggregate Revolving Credit Exposure, after giving effect to any Swingline Loan, exceeding the Total Revolving Credit Commitment. Each Swingline Loan shall be in an aggregate principal amount that is an integral multiple of $100,000 and not less than $500,000. The Swingline Commitment may be terminated or reduced from time to time as provided herein. Within the foregoing limits, the Borrower may borrow, pay or prepay and reborrow Swingline Loans hereunder, subject to the terms, conditions and limitations set forth herein.

 

(b)    Swingline Loans. The Borrower shall notify the Swingline Lender by fax, or by telephone (promptly confirmed by fax), not later than 12:00 (noon), New York City time, on the day of a proposed Swingline Loan. Such notice shall be delivered on a Business Day, shall be irrevocable and shall refer to this Agreement and shall specify the requested date (which shall be a Business Day) and amount of such Swingline Loan and the wire transfer instructions for the account of the Borrower to which the proceeds of the

 

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Swingline Loan should be disbursed. The Swingline Lender shall make each Swingline Loan by wire transfer to the account specified in such request.

 

(c)     Prepayment. The Borrower shall have the right at any time and from time to time to prepay any Swingline Loan, in whole or in part, upon giving written or fax notice (or telephone notice promptly confirmed by written, or fax notice) to the Swingline Lender before 12:00 (noon), New York City time, on the date of prepayment at the Swingline Lender’s address for notices specified in Section 9.01.

 

(d)     Interest. Each Swingline Loan shall be an ABR Loan and, subject to the provisions of Section 2.07, shall bear interest as provided in Section 2.06(a).

 

(e)    Participations. The Swingline Lender may by written notice given to the Administrative Agent not later than 1:00 p.m., New York City time, on any Business Day require the Revolving Credit Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Credit Lenders will participate. The Administrative Agent will, promptly upon receipt of such notice, give notice to each Revolving Credit Lender, specifying in such notice such Lender’s Pro Rata Percentage of such Swingline Loan or Loans. In furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Revolving Credit Lender’s Pro Rata Percentage of such Swingline Loan or Loans. Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Credit Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.02(c) with respect to Loans made by such Lender (and Section 2.02(c) shall apply, mutatis mutandis, to the payment obligations of the Lenders) and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other person on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower (or other person liable for obligations of the Borrower) of any default in the payment thereof.

 

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SECTION 2.23.   Letters of Credit .   (a) General.   The Borrower may request the issuance of a Letter of Credit for its own account or for the account of any of its wholly owned Subsidiaries (in which case the Borrower and such wholly owned Subsidiary shall be co-applicants with respect to such Letter of Credit), in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time while the L/C Commitment remains in effect in accordance with Section 2.09(a). This Section 2.23 shall not be construed to impose an obligation upon the Issuing Bank to issue any Letter of Credit that is inconsistent with the terms and conditions of this Agreement.

 

(b)     No tice of Issuance, Amendment, Renewal, Extension; Certain Conditions. In order to request the issuance of a Letter of Credit (or to amend, renew or extend an existing Letter of Credit), the Borrower shall hand deliver or fax to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) below), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare such Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if, and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that, after giving effect to such issuance, amendment, renewal or extension (i) the L/C Exposure shall not exceed $15,000,000 and (ii) the Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit Commitment.

 

(c)     Exp iration Date.   Each Letter of Credit shall expire at the close of business on the earlier of the date one year after the date of the issuance of such Letter of Credit and the date that is five Business Days prior to the Revolving Credit Maturity Date, unless such Letter of Credit expires by its terms on an earlier date; provided, however, that a Letter of Credit may, upon the request of the Borrower, include a provision whereby such Letter of Credit shall be renewed automatically for additional consecutive periods of 12 months or less (but not beyond the date that is five Business Days prior to the Revolving Credit Maturity Date) unless the Issuing Bank notifies the beneficiary thereof at least 30 days (or such longer period as may be specified in such Letter of Credit) prior to the then-applicable expiration date that such Letter of Credit will not be renewed.

 

(d)     Part icipations.   By the issuance of a Letter of Credit and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving Credit Lender, and each such Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender’s Pro Rata Percentage of each L/C Disbursement made by the Issuing Bank and not reimbursed by the Borrower (or, if applicable, another party pursuant to its obligations under any

 

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other Loan Document) forthwith on the date due as provided in Section 2.02(f). Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

 

(e)    Reimbursement.   If the Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower shall pay to the Administrative Agent an amount equal to such L/C Disbursement not later than two hours after the Borrower shall have received notice from the Issuing Bank that payment of such draft will be made, or, if the Borrower shall have received such notice later than 10:00 a.m, New York City time, on any Business Day, not later than 10:00 a.m., New York City time, on the immediately following Business Day; provided that if the conditions precedent to borrowing set forth in Sections 4.01(b) and (c) have been satisfied, the Borrower may elect to have such reimbursement amount treated as an ABR Revolving Loan under Section 2.02(f).

 

(f)    Obligations Absolute.   The Borrower’s obligations to reimburse L/C Disbursements as provided in paragraph (e) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, and irrespective of:

 

(i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein;

 

(ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document;

 

(iii) the existence of any claim, setoff, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other person may at any time have against the beneficiary under any Letter of Credit, the Issuing Bank, the Administrative Agent or any Lender or any other person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction;

 

(iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

 

(v) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and

 

(vi) any other act or omission to act or delay of any kind of the Issuing Bank, the Lenders, the Administrative Agent or any other person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing,

 

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that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower’s obligations hereunder.

 

Without limiting the generality of the foregoing, it is expressly understood and agreed that the absolute and unconditional obligation of the Borrower hereunder to reimburse L/C Disbursements will not be excused by the gross negligence or wilful misconduct of the Issuing Bank. However, the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s gross negligence or wilful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. It is further understood and agreed that the Issuing Bank may accent documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary and, in making any payment under any Letter of Credit (i) the Issuing Bank’s exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute gross negligence or wilful misconduct of the Issuing Bank.

 

(g)    Disbursement Procedures.   The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall as promptly as possible give telephonic notification, confirmed by fax, to the Administrative Agent and the Borrower of such demand for payment and whether the Issuing Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Revolving Credit Lenders with respect to any such L/C Disbursement.

 

(h)     Interim Interest .   If the Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, then, unless the Borrower shall reimburse such L/C Disbursement in full on such date, the unpaid amount thereof shall bear interest for the account of the Issuing Bank, for each day from and including the date of such L/C Disbursement, to but excluding the earlier of the date of payment by the Borrower or the date on which interest shall commence to accrue thereon as provided in Section 2.02(f), at the rate per annum that would apply to such amount if such amount were an ABR Revolving Loan.

 

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(i)    Resignation or Removal of the Issuing Bank.   The Issuing Bank may resign at any time by giving 30 days’ prior written notice to the Administrative Agent, the Lenders and the Borrower, and may be removed at any time by the Borrower by notice to the Issuing Bank, the Administrative Agent and the Lenders. Upon the acceptance of any appointment as the Issuing Bank hereunder by a Lender that shall agree to serve as successor Issuing Bank, such successor shall succeed to and become vested with all the interests, rights and obligations of the retiring Issuing Bank. At the time such removal or resignation shall become effective, the Borrower shall pay all accrued and unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any appointment as the Issuing Bank hereunder by a successor Lender shall be evidenced by an agreement entered into by such successor, in a form satisfactory to the Borrower and the Administrative Agent, and, from and after the effective date of such agreement (i) such successor Lender shall have all the rights and obligations of the previous Issuing Bank under this Agreement and the other Loan Documents and (ii) references herein and in the other Loan Documents to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the resignation or removal of the Issuing Bank hereunder, the retiring Issuing Bank, shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement and the other Loan Documents with respect to Letters of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit.

 

(j)    Cash Collateralization.   If any Event of Default shall occur and be continuing, the Borrower shall, on the Business Day it receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Credit Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit) thereof and of the amount to be deposited, deposit in an interest-bearing account (which shall bear interest at the Federal Funds Effective Rate) with the Collateral Agent, for the benefit of the Revolving Credit Lenders, an amount in cash equal to the L/C Exposure as of such date. Such deposit shall be held by the Collateral Agent as collateral for the payment and performance of the Obligations. The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall (i) automatically be applied by the Administrative Agent to reimburse the Issuing Bank for L/C Disbursements for which it has not been reimbursed (ii) be held for the satisfaction of the reimbursement obligations of the Borrower for the L/C Exposure at such time and (iii) if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Credit Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit), be applied to satisfy the Obligations. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.

 

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(k)    Additional Issuing Banks.   The Borrower may, at any time and from time to time with the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed) and such Lender, designate one or more additional Lenders to act as an issuing bank under the terms of this Agreement. Any Lender designated as an issuing bank pursuant to this paragraph (k) shall be deemed to be an “Issuing Bank” (in addition to being a Lender) in respect of Letters of Credit issued or to be issued by such Lender, and, with respect to such Letters of Credit, such term shall thereafter apply to the other Issuing Bank and such Lender.

 

SECTION 2.24.   Incremental Term Loans.   (a) The Borrower may, by written notice to the Administrative Agent from time to time, request Incremental Term Loan Commitments in an aggregate amount not to exceed the Incremental Term Loan Amount from one or more Incremental Term Lenders, which may include any existing Lender; provided that each Incremental Term Lender, if not already a Lender hereunder, shall be subject to the prior approval of the Administrative Agent (which approval shall not be unreasonably withheld or delayed). Such notice shall set forth (i) the amount of the Incremental Term Loan Commitments being requested (which shall be in minimum increments of $1,000,000 and a minimum amount of $5,000,000 or such lesser amount equal to the remaining Incremental Term Loan Amount), (ii) the date on which such Incremental Term Loan Commitments are requested to become effective (which shall not be less than 10 Business Days nor more than 60 days after the date of such notice), and (iii) whether such Incremental Term Loan Commitments are commitments to make additional Term Loans or commitments to make term loans with terms different from the Term Loans (“ Other Term Loans ).

 

(b)   The Borrower and each Incremental Term Lender shall execute and deliver to the Administrative Agent an Incremental Term Loan Assumption Agreement and such other documentation as the Administrative Agent shall reasonably specify to evidence the Incremental Term Loan Commitment of each Incremental Term Lender. Each Incremental Term Loan Assumption Agreement shall specify the terms of the Incremental Term Loans to be made thereunder; provided that, without the prior written consent of the Required Lenders, (i) the final maturity date of any Other Term Loans shall be no earlier than the Term Loan Maturity Date, (ii) the average life to maturity of the Other Term Loans shall be no shorter than the average life to maturity of the Term Loans and (iii) if the initial yield on such Other Term Loans (as determined by the Administrative Agent to be equal to the sum of (x) the margin above the Adjusted LIBO Rate on such Other Term Loans and (y) if such Other Term Loans are initially made at a discount or the Lenders making the same receive a fee directly or indirectly from Holdings, the Borrower or any Subsidiary for doing so (the amount of such discount or fee, expressed as a percentage of the Other Term Loans, being referred to herein as OID ), the amount of such OID divided by the lesser of (A) the average life to maturity of such Other Term Loans and (B) four) exceeds by more than 50 basis points (the amount of such excess above 50 basis points being referred to herein as the Yield Differential ) the Applicable Percentage then in effect for Eurodollar Term Loans, then the Applicable Percentage then in effect for Term Loans shall automatically be increased by the Yield Differential, effective upon the making of the Other Term Loans. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each

 

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Incremental Term Loan Assumption Agreement. Each of the parties hereto hereby agrees that, upon the effectiveness of any Incremental Term Loan Assumption, Agreement this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Incremental Term Loan Commitments and the Incremental Term Loans evidenced thereby.

 

(c)   Notwithstanding the foregoing, no Incremental Term Loan Commitment shall become effective under this Section 2.24 unless (i) on the date of such effectiveness, the conditions set forth in paragraphs (b), (c) and (d) of Section 4.01 shall be satisfied (treating the effectiveness of the Incremental Commitment as a “Credit Event” for such purposes) and the Administrative Agent shall have received a certificate to that effect dated such date and executed by a Financial Officer of the Borrower, and (ii) except as otherwise specified in the applicable Incremental Term Loan Assumption Agreement, the Administrative Agent shall have received (with sufficient copies for each of the Incremental Term Lenders) legal opinions, board resolutions and other closing certificates reasonably requested by the Administrative Agent and consistent with those delivered on the Closing Date under Section 4.02.

 

(d)   Each of the parties hereto hereby agrees that the Administrative Agent may, in consultation with the Borrower, take any and all action as may be reasonably necessary to ensure that all Incremental Term Loans (other than Other Term Loans), when originally made, are included in each Borrowing of outstanding Term Loans on a pro rata basis. This may be accomplished by requiring each outstanding Eurodollar Term Borrowing to be converted into an ABR Term Borrowing on the date of each Incremental Term Loan, or by allocating a portion of each Incremental Term Loan to each outstanding Eurodollar Term Borrowing on a pro rata basis. Any conversion of Eurodollar Term Loans to ABR Term Loans required by the preceding sentence shall be subject to Section 2.16. If any Incremental Term Loan is to be allocated to an existing Interest Period for a Eurodollar Term Borrowing, then the interest rate thereon for such Interest Period and the other economic consequences thereof shall be as set forth in the applicable Incremental Term Loan Assumption Agreement. In addition, to the extent any Incremental Term Loans are not Other Term Loans, the scheduled amortization payments under Section 2.11(a)(i) required to be made after the making of such Incremental Term Loans shall be ratably increased by the aggregate principal amount of such Incremental Term Loans.

 

SECTION 2.25.   Increase in Revolving Commitments.   (a) The Borrower may, by written notice to the Administrative Agent from time to time, request that the total Revolving Commitment be increased by an aggregate amount not to exceed the Incremental Revolving Facility Amount at such time. Upon the receipt of such request by the Administrative Agent, the Administrative Agent shall deliver a copy thereof to each Revolving Lender. Such notice shall set forth the amount of the requested increase (which shall be in minimum increments of $500,000 and a minimum amount of $2,500,000 or equal to the remaining Incremental Revolving Facility Amount) and the date on which such increase is requested to become effective (which shall be not less than 10 Business Days nor more than 60 days after the date of such notice and which, in any event, must be prior to the Revolving Credit Maturity Date), and shall offer each

 

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Revolving Lender the opportunity to increase its Revolving Commitment by its Pro Rata Percentage of the proposed increased amount. Each Revolving Lender shall, by notice to the Borrower and the Administrative Agent given not more than 10 days after the date of the Administrative Agent’s notice, either agree to increase its Revolving Commitment by all or a portion of the offered amount (each Revolving Lender so agreeing being an Increasing Revolving Lender ) or decline to increase its Revolving Commitment (and any Revolving Lender that does not deliver such a notice within such period of 10 days shall be deemed to have declined to increase its Revolving Commitment) (each Revolving Lender so declining or being deemed to have declined being a Non-Increasing Revolving Lender ) . In the event that, on the 10th day after the Administrative Agent shall have delivered a notice pursuant to the second sentence of this paragraph, the Increasing Revolving Lenders shall have agreed pursuant to the preceding sentence to increase their Revolving Commitments by an aggregate amount less than the increase requested by the Borrower, such Borrower may arrange for one or more banks or other entities (any such bank or other entity being called an Augmenting Revolving Lender ), which may include any Lender, to extend Revolving Commitments or increase their existing Revolving Commitments in an aggregate amount equal to the unsubscribed amount; provided, however, that each Augmenting Revolving Lender shall be subject to the prior written approval of the Administrative Agent, the Swingline Lender and the Issuing Bank (which approvals shall not be unreasonably withheld or delayed), and the Borrower and each Augmenting Revolving Lender shall execute all such documentation as the Administrative Agent shall reasonably specify to evidence its Revolving Commitment and/or its status as a Revolving Lender hereunder, Any such increase may be made in an amount that is less than the increase requested by the Borrower if such Borrower is unable to arrange for, or chooses not to arrange for, Augmenting Revolving Lenders.

 

(b)   Each of the parties hereto hereby agrees that the Administrative Agent may, in consultation with the Borrower, take any and all action as may be reasonably necessary to ensure that after giving effect to any increase pursuant to this Section 2.25, the outstanding Revolving Loans (if any) are held by the Revolving Lenders in accordance with their new Pro Rata Percentages. This may be accomplished at the discretion of the Administrative Agent, following consultation with the Borrower, (i) by requiring the outstanding Revolving Loans to be prepaid with the proceeds of a new Revolving Borrowing, (ii) by causing Non-Increasing Revolving Lenders to assign portions of their outstanding Revolving Loans to Increasing Revolving Lenders and/or Augmenting Revolving Lenders, or (iii) by any combination of the foregoing. Any prepayment or assignment described in this paragraph (b) shall be subject to Section 2.16, but shall otherwise be without premium or penalty.

 

(c)   Notwithstanding the foregoing, no increase in the Revolving Commitments shall become effective under this Section 2.25 unless (i) on the date of such effectiveness, the conditions set forth in paragraphs (b), (c) and (d) of Section 4.01 shall be satisfied (treating the effectiveness of the increase in the Revolving Commitments as a “Credit Event” for such purposes) and the Administrative Agent shall have received a certificate to that effect dated such date and executed by a Financial Officer of the Borrower, and (ii) if requested, the Administrative Agent shall have received legal opinions, board

 

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resolutions and other closing certificates reasonably requested by the Administrative Agent and consistent with those delivered on the Closing Date under Section 4.02.

 

ARTICLE III

 

Representations and Warranties

 

Each of Holdings and the Borrower represents and warrants to the Administrative Agent, the Collateral Agent, the Issuing Bank and each of the Lenders that:

 

SECTION 3.01.   Organization; Powers.   Holdings, the Borrower and each of the Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and, to the extent such concept is applicable in such jurisdiction, is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Borrower, to borrow hereunder.

 

SECTION 3.02.   Authorization.   The Transactions (a) have been duly authorized by all requisite corporate and, if required, stockholder action and (b) will not (i) violate (A) any provision of law, statute, rule or regulation in a manner that could reasonably be expected to result in a Material Adverse Effect, or of the certificate or articles of incorporation or other constitutive documents or by-laws of Holdings, the Borrower or any Subsidiary, (B) any order of any Governmental Authority in a manner that could reasonably be expected to result in a Material Adverse Effect, or (C) any provision of any indenture, agreement or other instrument to which Holdings, the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound in a manner that could reasonably be expected to result in a Material Adverse Effect, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument in a manner that could reasonably be expected to result in a Material Adverse Effect, or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by Holdings, the Borrower or any Subsidiary (other than any Lien created hereunder or under the Security Documents or any Second Priority Lien).

 

SECTION 3.03.   Enforceability.   This Agreement has been duly executed and delivered by Holdings and the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against such Loan Party in accordance with its terms.

 

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SECTION 3.04.   Governmental Approvals.   No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for (a) the filing of Uniform Commercial Code financing statements and filings with the United States Patent and Trademark Office and the United States Copyright Office, (b) recordation of the Mortgages, (c) such as have been made or obtained and are in full force and effect and (d) those that, if not obtained or made, could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

 

SECTION 3.05.   Financial Statements.   (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheets and related statements of income, stockholder’s equity and cash flows; (i) as of and for the fiscal years ended December 31, 2004, 2005 and 2006, audited by and accompanied by the opinion of UHY LLP, independent public accountants, (ii) as of and for the fiscal quarter and the portion of the fiscal year ended March 31, 2007, certified by a Financial Officer, and (iii) as of and for each fiscal month ended after March 31, 2007 and at least 30 days before the Closing Date, certified by a Financial Officer. Such financial statements present fairly the financial condition and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods. Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the dates thereof. Such financial statements were prepared in accordance with GAAP applied on a consistent basis, subject, in the case of unaudited financial statements, to year-end audit adjustments, the absence of footnotes and an exception for the calculation of taxes and tax accruals.

 

(b)   The Borrower has heretofore delivered to the Lenders its unaudited pro forma consolidated balance sheet and related pro forma statements of income, as of March 31, 2007, prepared giving effect to the Transactions as if they had occurred, with respect to such balance sheet, on such date and, with respect to such other financial statements, on the first day of the 12-month period ending on such date. Such pro forma financial statements have been prepared in good faith by the Borrower, based on the assumptions used to prepare the pro forma financial information contained in the Confidential Information Memorandum (which assumptions are believed by the Borrower on the date hereof and on the Closing Date to be reasonable), are based on the best information available to the Borrower as of the date of delivery thereof, accurately reflect all adjustments required to be made to give effect to the Transactions and present fairly on a pro forma basis the estimated consolidated financial position of the Borrower and its consolidated Subsidiaries as of such date and for such period, assuming that the Transactions had actually occurred at such date or at the beginning of such period, as the case may be.

 

SECTION 3.06.   No Material Adverse Change.   No event, change or condition has occurred that has had, or could reasonably be expected to have a material adverse effect on the business, assets, liabilities, operations, financial condition or operating results of Holdings, the Borrower and the Subsidiaries, taken as a whole, since December 31, 2006.

 

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SECTION 3.07.   Title to Properties; Possession Under Leases.   (a) Each of Holdings the Borrower and the Subsidiaries has good and marketable title to, or valid leasehold interests in, all its material properties and assets (including all Mortgaged Property), except for minor defects in title that do not interfere in any material respect with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. All such material properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.02.

 

(b)   Except to the extent that failure to do so could not reasonably be expected to result in a Material Adverse Effect, (i) each of Holdings, the Borrower and the Subsidiaries has complied with all obligations under all leases to which it is a party and all such leases are in full force and effect and (ii) each of Holdings, the Borrower and the Subsidiaries enjoys peaceful and undisturbed possession under all such leases.

 

(c)   As of the Closing Date, neither Holdings nor the Borrower has received any notice of, nor has any knowledge of, any pending or contemplated condemnation proceeding affecting the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation.

 

(d)   As of the Closing Date, none of Holdings, the Borrower or any of the Subsidiaries is obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein.

 

SECTION 3.08.   Subsidiaries.   Schedule 3.08 sets forth as of the Closing Date a list of all Subsidiaries and the percentage ownership interest of Holdings or the Borrower therein. The shares of capital stock or other ownership interests so indicated on Schedule 3.08 are fully paid and non-assessable and are owned by Holdings or the Borrower, directly or indirectly, free and clear of all Liens (other than Liens created under the Security Documents or any Second Priority Lien).

 

SECTION 3.09.   Litigation; Compliance with Laws.   (a) Except as set forth on Schedule 3.09, there are no actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of Holdings or the Borrower, threatened against or affecting Holdings or the Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve any Loan Document or the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

 

(b)   Since the date of this Agreement, there has been no change in the status of the matters disclosed on Schedule 3.09 that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

 

(c)   None of Holdings, the Borrower or any of the Subsidiaries or any of their respective material properties or assets is in violation of, nor will the continued operation of their material properties and assets as currently conducted violate, any law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or

 

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approval or any building permits) or any restrictions of record or agreements affecting the Mortgaged Property, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect.

 

(d)   Certificates of occupancy and permits are in effect for each Mortgaged Property as currently constructed, and true and complete copies of such certificates of occupancy have been delivered to the Collateral Agent as mortgagee with respect to each Mortgaged Property.

 

SECTION 3.10.   Agreements.   (a) None of Holdings, the Borrower or any of the Subsidiaries is a party to any agreement or instrument or subject to any corporate restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect.

 

(b)    None of Holdings, the Borrower or any of the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect.

 

SECTION 3.11.   Federal Reserve Regulations .   (a) None of Holdings, the Borrower or any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.

 

(b)   No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation T, U or X.

 

SECTION 3.12.   Investment Company Act.   None of Holdings, the Borrower or any Subsidiary is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

 

SECTION 3.13.   Use of Proceeds.   The Borrower will (a) use the proceeds of the Loans (other than any Incremental Term Loans) and will request the issuance of Letters of Credit only for the purposes specified in the introductory statement to this Agreement and (b) use the proceeds of Incremental Term Loans only for the purposes specified in the applicable Incremental Term Loan Assumption Agreement.

 

SECTION 3.14.   Tax Returns.   Each of Holdings, the Borrower and the Subsidiaries has filed or caused to be filed all Federal, and all material state, local and foreign tax returns or materials required to have been filed by it and has paid or caused to be paid all material taxes due and payable by it and all assessments received by it, except taxes that are being contested in good faith by appropriate proceedings and for which Holdings, the Borrower or such Subsidiary, as applicable, shall have set aside on its books adequate reserves.

 

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SECTION 3.15. No Material Misstatements. None of (a) the Confidential Information Memorandum or (b) any other information, report, financial statement, exhibit or schedule furnished by or on behalf of Holdings or the Borrower to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, each of Holdings and the Borrower represents only that it acted in good faith and utilized reasonable assumptions (based upon accounting principles consistent with the historical audited financial statements of the Borrower) and due care in the preparation of such information, report, financial statement, exhibit or schedule.

 

SECTION 3.16. Employee Benefit Plans. (a) Each of the Borrower and its ERISA Affiliates is in compliance with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder, except as could not reasonably be expected to have a Material Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur that, alone or when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect. The fair market value of all the assets under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) was not, as of the last annual valuation date applicable thereto, less than 80% of the present value of all benefit liabilities under such Plan, and the fair market value of all assets of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) was not, as of the last annual valuation dates applicable thereto, less than 80% of the present value of all benefit liabilities of such underfunded Plans.

 

(b)   Each Foreign Pension Plan is in compliance in all material respects with all requirements of law applicable thereto and the respective requirements of the governing documents for such plan, except as, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. With respect to each Foreign Pension Plan, none of Holdings, its Affiliates or any of their respective directors, officers, employees or agents has engaged in a transaction that could subject Holdings, the Borrower or any Subsidiary, directly or indirectly, to a tax or civil penalty that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. With respect to each Foreign Pension Plan, reserves have been established in the financial statements furnished to Lenders in respect of any unfunded liabilities in accordance with applicable law and prudent business practice or, where required, in accordance with ordinary accounting practices in the jurisdiction in which such Foreign Pension Plan is maintained, except as could not reasonably be expected to have a Material Adverse Effect. The aggregate unfunded liabilities with respect to such Foreign Pension Plans could not reasonably be expected to result in a Material Adverse Effect; the fair market value of the assets of all such Foreign Pension Plans (based on those assumptions used to fund each such Foreign Pension Plan) was not, as of the last annual

 

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valuation date applicable thereto, less than 80% of the present value of all the aggregate accumulated benefit liabilities of such Foreign Pension Plans.

 

SECTION 3.17. Environmental Matters. (a) Except as set forth in Schedule 3.17 and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, none of Holdings, the Borrower or any of the Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

 

(b)   Since the date of this Agreement, there has been no change in the status of any matters disclosed on Schedule 3.17 or any new matters that, individually or in the aggregate, have resulted in, or materially increased the likelihood of, a Material Adverse Effect.

 

SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and correct description of all insurance maintained by the Borrower or by the Borrower for its Subsidiaries as of the date hereof and the Closing Date. As of each such date, such insurance is in full force and effect and all premiums have been duly paid. The Borrower and its Subsidiaries have insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice for each applicable jurisdiction.

 

SECTION 3.19. Security Documents. (a) The Guarantee and Collateral Agreement, upon execution and delivery thereof by the parties thereto, will create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Guarantee and Collateral Agreement) and the proceeds thereof and (i) when the Pledged Collateral (as defined in the Guarantee and Collateral Agreement) is delivered to the Collateral Agent, the Lien created under Guarantee and Collateral Agreement shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the Loan Parties in such Pledged Collateral, in each case prior and superior in right to any other person, and (ii) when financing statements in appropriate form are filed in the offices specified on Schedule 3.19(a), the Lien created under the Guarantee and Collateral Agreement will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral (other than Intellectual Property, as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other person, other than with respect to Liens expressly permitted by Section 6.02.

 

(b)   Upon the recordation of the Guarantee and Collateral Agreement (or a short-form security agreement in form and substance reasonably satisfactory to the Borrower and the Collateral Agent) with the United States Patent and Trademark Office and the United States Copyright Office, together with the financing statements in appropriate form filed in the offices specified on Schedule 3.19(a), Lien created under the Guarantee

 

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and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Guarantee and Collateral Agreement) in which a security interest may be perfected by filing in the United States and its territories and possessions, in each case prior and superior in right to any other person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks and patents, trademark and patent applications and registered copyrights acquired by the Loan Parties after the date hereof).

 

(c)   The Mortgages are effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the Loan Parties’ right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.19(c), the Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Property and the proceeds thereof, in each case prior and superior in right to any other person, other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.02.

 

SECTION 3.20. Location of Real Property and Leased Premises. (a) Schedule 3.20(a) lists completely and correctly as of the Closing Date all real property owned by the Borrower and the Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries own in fee all the real property set forth on Schedule 3.20(a).

 

(b)   Schedule 3.20(b) lists completely and correctly as of the Closing Date all real property leased by the Borrower and the Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries have valid leases in all the real property set forth on Schedule 3.20(b).

 

SECTION 3.21. Labor Matters. As of the date hereof and the Closing Date, there are no strikes, lockouts or slowdowns against Holdings, the Borrower or any Subsidiary pending or, to the knowledge of Holdings or the Borrower, threatened that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Except to the extent that the same could not reasonably be expected to result in a Material Adverse Effect, the hours worked by and payments made to employees of Holdings, the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters.

 

SECTION 3.22. Solvency. Immediately after the consummation of the Transactions to occur on the Closing Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of each Loan, (a) the fair value of the assets of the Loan Parties, taken as a whole, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Loan Parties, taken as a whole, will be greater than

 

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the amount that will be required to pay the probable liability of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Loan Parties, taken as a whole, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Loan Parties, taken as a whole, will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Closing Date.

 

SECTION 3.23. Tra nsaction Documents. Holdings and the Borrower have delivered to the Administrative Agent a complete and correct copy of the Merger Agreement (including all schedules, exhibits, amendments, supplements and modifications thereto). Neither Holdings, the Borrower nor any Loan Party or, to the knowledge of Holdings or the Borrower, any other person party thereto is in default in the performance or compliance with any material provisions thereof.

 

SECTION 3.24. Sanctioned Persons. None of Holdings, the Borrower or any Subsidiary nor, to the knowledge of the Borrower, any director, officer, agent, employee or Affiliate of Holdings, the Borrower or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ( OFAC ); and the Borrower will not directly or indirectly use the proceeds of the Loans or the Letters of Credit or otherwise make available such proceeds to any person, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

ARTICLE IV

 

Condi tions of Lending

 

The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions:

 

SECTION 4.01. All Credit Events. On the date of each Borrowing (other than a conversion or a continuation of a Borrowing), including each Borrowing of a Swingline Loan and on the date of each issuance, amendment, extension or renewal of a Letter of Credit (each such event being called a Credit Even t ):

 

(a)   The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 (or such notice shall have been deemed given in accordance with Section 2.02) or, in the case of the issuance, amendment, extension or renewal of a Letter of Credit, the Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance, amendment, extension or renewal of such Letter of Credit as required by Section 2.23(b) or, in the case of the Borrowing of a Swingline Loan, the Swingline Lender and the Administrative Agent shall have received a notice requesting such Swingline Loan as required by Section 2.22(b).

 

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(b)   Except with respect to the Credit Event to occur on the Closing Date, the representations and warranties set forth in Article III and in each other Loan Document shall be true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date.

 

(c)   At the time of and immediately after such Credit Event, no Default or Event of Default shall have occurred and be continuing.

 

(d)   Except with respect to the Credit Event to occur on the Closing Date, the Administrative Agent shall have received a certificate of a Financial Officer of the Borrower to the effect that, on the date of such Credit Event and after giving pro forma effect thereto and to the use of the proceeds thereof, the Borrower would be in pro forma compliance with the covenants set forth in Sections 6.11, 6.12 and 6.13.

 

Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower and Holdings on the date of such Credit Event as to the matters specified in paragraphs (b), (c) and (d) of this Section 4.01 (or, with respect to the Credit Event to occur on the Closing Date, as to the matters specified in Section 4.02(n)).

 

SECTION 4.02. First Credit Event. On the Closing Date:

 

(a)   The Administrative Agent shall have received, on behalf of itself, the Lenders and the Issuing Bank, a written opinion of (i) Weil, Gotshal & Manges LLP, counsel for Holdings and the Borrower, substantially to the effect set forth in Exhibit F-1 and (ii) Murtha Cullina LLP, substantially to the effect set forth in Exhibit F-2, in each case (A) dated the Closing Date, (B) addressed to the Issuing Bank, the Administrative Agent and the Lenders, and (C) covering such other matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request, and Holdings and the Borrower hereby request such counsel to deliver such opinions.

 

(b)   The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation (or other similar formation document), including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State (or equivalent) of the state of its organization, and a certificate of legal existence and, if available in such jurisdiction, a certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws (or equivalent) of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions (or equivalent) duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation of such Loan Party have not been amended since the date of the last amendment thereto shown on the

 

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certificate of legal existence or good standing (or equivalent) or state certified copies of such documents furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; and (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above.

 

(c)   The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Responsible Officer of the Borrower, confirming compliance with the conditions precedent set forth in paragraph (n) of this Section 4.02 as of the Closing Date.

 

(d)   The Administrative Agent shall have received all Fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced prior to the Closing Date, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder or under any other Loan Document.

 

(e)   The Security Documents shall have been duly executed by each Loan Party that is to be a party thereto and shall be in full force and effect on the Closing Date. The Collateral Agent on behalf of the Secured Parties shall have been granted a security interest in the Collateral of the type and priority described in each Security Document.

 

(f)   The Collateral Agent shall have received a Perfection Certificate with respect to the Loan Parties dated the Closing Date and duly executed by a Responsible Officer of Holdings and the Borrower, and shall have received the results of a search of the Uniform Commercial Code filings (or equivalent filings) made with respect to the Loan Parties in the states (or other jurisdictions) of formation of such persons, in which the chief executive office of each such person is located and in the other jurisdictions in which such persons maintain property, in each case as indicated on such Perfection Certificate, together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence satisfactory to the Collateral Agent that the Liens indicated in any such financing statement (or similar document) would be permitted under Section 6.02 or have been or will be contemporaneously released or terminated.

 

(g)   Except as otherwise specifically contemplated hereunder or by the Security Documents, (i) each of the Security Documents, in form and substance satisfactory to the Lenders, relating to each of the Mortgaged Properties shall have been duly executed by the parties thereto and delivered to the Collateral Agent and shall be in full force and effect, (ii) each of such Mortgaged Properties shall not be subject to any Lien other than those permitted under Section 6.02 or Liens which shall be paid from the proceeds of the First Credit Event and for which the Borrower has received a commitment from the holder thereof to release the same upon payoff from the proceeds of the First Credit Event and (iii) each of such Security Documents shall be in proper form for filing and recording in the recording office as specified on Schedule 3.19(c); provided that to the extent a perfected security interest in any assets of a type that cannot be perfected by the filing of a UCC financing statement or the delivery of stock certificates is not able to be provided on the Closing Date after the Borrower’s use of commercially reasonable efforts

 

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to do so, the providing of a perfected security interest in such assets shall not constitute a condition precedent to the first Credit Event but such requirement to create a perfected security interest in such assets shall be satisfied after the Closing Date pursuant to Section 5.13

 

(h)   The Administrative Agent shall have received a copy of, or a certificate as to coverage under, the insurance policies required by Section 5.02 and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a customary lender’s loss payable endorsement and to name the Collateral Agent as additional insured, in form and substance satisfactory to the Administrative Agent.

 

(i)   The Acquisition and the other Transactions shall be consummated substantially simultaneously with the initial funding of Loans on the Closing Date in accordance with applicable law and on the terms in this Agreement and in the Merger Agreement (without any amendment, modification or waiver thereof that is materially adverse to the Lenders (as reasonably determined by the Administrative Agent) without the prior written consent of the Administrative Agent). The Administrative Agent shall have received copies of the Merger Agreement and all certificates, opinions and other documents delivered thereunder, certified by a Financial Officer as being complete and correct.

 

(j)   The Equity Contribution shall have been made and the Administrative Agent shall be satisfied with the capitalization and structure of Holdings and the Borrower.

 

(k)   All principal, premium, if any, interest, fees and other amounts due or outstanding under the Existing Debt shall have been, or substantially simultaneously with the initial funding of Loans on the Closing Date shall be, paid in full, the commitments thereunder terminated and all guarantees and security in support thereof discharged and released, and the Administrative Agent shall have received reasonably satisfactory evidence thereof. Immediately after giving effect to the Transactions and the other transactions contemplated hereby, Holdings, the Borrower and the Subsidiaries shall have outstanding no Indebtedness or preferred stock other than (a) Indebtedness outstanding under this Agreement, (b) the Second Lien Term Loan, (c) Indebtedness set forth on Schedule 6.01 and (d) other Indebtedness in an outstanding principal amount not to exceed $100,000 in the aggregate.

 

(l)   The Administrative Agent shall have received a certificate from the chief financial officer of Holdings certifying that Holdings and its subsidiaries, on a consolidated basis after giving effect to the Transactions to occur on the Closing Date, are solvent.

 

(m)   The Lenders shall have received, to the extent reasonably requested, at least five Business Days prior to the Closing Date, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act.

 

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(n)    (i) The representations and warranties set forth in Sections 3.01, 3.02, 3.03, 3.11, 3.12, 3.19 (subject to paragraph (g) above) and 3.24 shall be true and correct in all material respects on the Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date and (ii) the condition relating to the accuracy of the representations and warranties of the Company in the Merger Agreement as are material to the interests of the Lenders shall have been satisfied.

 

(o)   The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Responsible Officer of the Company, certifying that not less than $10,000,000 in aggregate cash liquidity is in bank accounts in jurisdictions appropriate for carrying out the Company’s operational objectives (which, for greater certainty, shall not include financing in whole or in part any Permitted Acquisition), including planned Capital Expenditures, during the period from the Closing Date to the first anniversary of the Closing Date.

 

ARTICLE V

 

Affirmative Covenants

 

Each of Holdings and the Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired (or cash collateralized on terms reasonably acceptable to the Administrative Agent and the Issuing Bank) and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, each of Holdings and the Borrower will, and will cause each of the Subsidiaries to:

 

SECTION 5.01. Existence; Compliance with Laws; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05.

 

(b)   Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; maintain and operate such business in substantially the manner in which it is presently conducted and operated; comply in all material respects with all applicable laws, rules, regulations and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted; and at all times maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times.

 

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SECTION 5.02. Insurance. (a) Keep its insurable properties adequately insured at all times by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations or jurisdictions, including, where applicable, public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it; and maintain such other insurance as may be required by applicable law.

 

(b)   Cause all such policies covering any Collateral to be endorsed or otherwise amended to include a customary lender’s loss payable endorsement, in form and substance satisfactory to the Administrative Agent and the Collateral Agent, which endorsement shall provide that, from and after the Closing Date, if the insurance carrier shall have received written notice from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to the Borrower or the Loan Parties under such policies directly to the Collateral Agent; cause all such policies to provide that neither the Borrower, the Administrative Agent, the Collateral Agent nor any other party shall be a coinsurer thereunder and to contain a “Replacement Cost Endorsement”, without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably require from time to time to protect their interests; deliver evidence reasonably satisfactory to the Collateral Agent of all such policies; cause each such policy to provide that it shall not be canceled or not renewed (i) by reason of nonpayment of premium upon not less than 10 days’ prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent (giving the Administrative Agent and the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason upon not less than 30 days’ prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent; deliver evidence reasonably satisfactory to the Administrative Agent and the Collateral Agent, prior to the cancellation or nonrenewal of any such policy of insurance, of renewal of a policy previously delivered to the Administrative Agent and the Collateral Agent, together with evidence reasonably satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium therefor.

 

(c)   If at any time the area in which the Premises (as defined in the Mortgages) are located is designated (i) a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time reasonably require, and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time, or (ii) a “Zone 1” area, obtain earthquake insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time reasonably require.

 

(d)   With respect to any Mortgaged Property, carry and maintain comprehensive general liability insurance including the “broad form CGL endorsement” or its equivalent

 

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and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all causes of loss, in no event for a combined single limit of less than $10,000,000, naming the Collateral Agent as an additional insured, on forms satisfactory to the Collateral Agent.

 

(e)   Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.02 is taken out by any Loan Party; and promptly deliver evidence reasonably satisfactory to the Administrative Agent and the Collateral Agent of such policy or policies.

 

SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other material obligations promptly and in accordance with their terms and pay and discharge all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP.

 

SECTION 5.04. Financial Statements, Reports, etc. In the case of the Borrower, furnish to the Administrative Agent, which shall furnish to each Lender:

 

(a)    within 120 days after the end of each fiscal year, its consolidated balance sheet and related statements of income, stockholders’ equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal year and the results of its operations and the operations of such Subsidiaries during such year, together with comparative figures for the immediately preceding fiscal year, all audited by UHY LLP or other independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which opinion shall be without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

 

(b)   within 45 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheet and related statements of income, stockholders’ equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal quarter and the results of its operations and the operations of such Subsidiaries during such fiscal quarter and the then elapsed portion of the fiscal year, and comparative figures for the same periods in the immediately preceding fiscal year, all certified by one of its Financial Officers as fairly presenting the financial condition and results of operations of the Borrower and its

 

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consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

 

(c)   concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of the accounting firm (in the case of paragraph (a)) or Financial Officer (in the case of paragraph (b)) opining on or certifying such statements (which certificate, when furnished by an accounting firm, may be limited to accounting matters and disclaim responsibility for legal interpretations) (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.10, 6.11, 6.12 and 6.13 and, in the case of a certificate delivered with the financial statements required by paragraph (a) above, setting forth the Borrower’s calculation of Excess Cash Flow;

 

(d)   within 90 days after the beginning of each fiscal year of the Borrower, a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flows as of the end of and for such fiscal year and setting forth the assumptions used for purposes of preparing such budget) and, promptly when available, any significant revisions of such budget;

 

(e)   promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Holdings, the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed to its shareholders, as the case may be;

 

(f)   promptly after the receipt thereof by Holdings or the Borrower or any of their respective subsidiaries, a copy of any “management letter” received by any such person from its certified public accountants and the management’s response thereto;

 

(g)   promptly after the request by any Lender, all documentation and other information that such Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act;

 

(h)   promptly after the request by the Administrative Agent or any Lender, on and after the effectiveness of the applicable provisions of the Pension Act, copies of (i) any documents described in Section 101(k)(1) of ERISA that the Borrower or any of its ERISA Affiliates may request with respect to any Multiemployer Plan and (ii) any notices described in Section 101(l)(1) of ERISA that the Borrower or any of its ERISA Affiliates may request with respect to any Multiemployer Plan; provided that if the Borrower or any of its ERISA Affiliates has not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, the Borrower or the applicable ERISA Affiliate shall promptly make a request for such documents or

 

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notices from such administrator or sponsor and shall provide copies of such documents and notices promptly after receipt thereof; and

 

(i)   promptly, from time to time, such other information regarding the operations, business affairs and financial condition of Holdings, the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.

 

Documents required to be delivered pursuant to Section 5.04(e) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto at http://www.strlab.com/www/strlab/; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or sponsored by the Administrative Agent); provided that: (x) the Borrower shall deliver paper copies of such documents to the Administrative Agent if it so requests or to any Lender that so requests the Borrower to deliver such paper copies and (y) the Borrower shall notify the Administrative Agent and each Lender of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e. soft copies) of such documents.

 

SECTION 5.05. Litigation and Other Notices .   Furnish to the Administrative Agent, the Issuing Bank and each Lender prompt written notice of the following:

 

(a)   any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto;

 

(b)   the filing or commencement of, or any written threat or written notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against the Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect;

 

(c)   the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

 

(d)   any development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect; and

 

(e)   any change in the Borrower’s corporate rating by S&P, in the Borrower’s corporate family rating by Moody’s or in the ratings of the Credit Facilities by S&P or Moody’s, or any notice from either such agency indicating its intent to effect such a change or to place the Borrower or the Credit Facilities on a “CreditWatch” or “WatchList” or any similar list, in each case with negative implications, or its cessation of, or its intent to cease, rating the Borrower or the Credit Facilities.

 

SECTION 5.06. Information Regarding Collateral. (a) Furnish to the Administrative Agent prompt written notice of any change (i) in any Loan Party’s

 

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corporate name, (ii) in the jurisdiction of organization or formation of any Loan Party, (iii) in any Loan Party’s identity or corporate structure or (iv) in any Loan Party’s Federal Taxpayer Identification Number. Holdings and the Borrower agree not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are reasonably required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. Holdings and the Borrower also agree promptly to notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed.

 

(b)   In the case of the Borrower, each year, at the time of delivery of the annual financial statements with respect to the preceding fiscal year pursuant to Section 5.04(a), deliver to the Administrative Agent a certificate of a Financial Officer (i)   setting forth the information required pursuant to Section 2 of the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Closing Date or the date of the most recent certificate delivered pursuant to this Section 5.06 and (ii) to the extent applicable, certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings recordings or registrations, including all refilings, recordings and registrations, containing a description of the Article 9 Collateral (as defined in the Guarantee and Collateral Agreement) have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) of this Section 5.06(b) to the extent necessary to protect and perfect the security interest for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). Each certificate delivered pursuant to this Section 5.06(b)(ii) shall identify in the format of Section 13 of the Perfection Certificate all Intellectual Property of any Loan Party in existence on the date thereof and not then listed on the Perfection Certificate or previously so identified to the Collateral Agent.

 

SECTION 5.07. Maintaining Records; Access to Properties and Inspections; Ma intenance of Ratings. (a) Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law are made of all dealings and transactions in relation to its business and activities. Each Loan Party will, and will cause each of its subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender to visit and inspect the financial records and the properties of such person at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances and condition of such person with the officers thereof and independent accountants therefor; provided that as long as no Default or Event of Default shall have occurred and shall be continuing, no more than one such site inspection may be conducted in any calendar year (which shall be conducted by representatives designated by the Administrative Agent).

 

(b)   In the case of Holdings and the Borrower, use commercially reasonable efforts to cause the Credit Facilities to be continuously rated by S&P and Moody’s, and in the case of the Borrower, use commercially reasonable efforts to maintain a corporate

 

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rating from S&P and a corporate family rating from Moody’s, in each case in respect of the Borrower.

 

SECTION 5.08. Use of Proceeds . Use the proceeds of the Loans and request the issuance of Letters of Credit only for the purposes specified in the introductory statement to this Agreement (or, in the case of the Incremental Term Loans, as set forth in the applicable Incremental Term Loan Assumption Agreement), it being understood that up to $1,000,000 of Revolving Loans may be made on the Closing Date.

 

SECTION 5.09. Employee Benefits. (a) With respect to any Plan or Foreign Pension Plan sponsored or maintained by Borrower or any Subsidiary, comply in all material respects with the applicable provisions of ERISA and the Code and the laws applicable to any Foreign Pension Plan and (b) furnish to the Administrative Agent as soon as possible after, and in any event within ten days after any responsible officer of Holdings, the Borrower or any ERISA Affiliate knows or has reason to know that, any ERISA Event has occurred that, alone or together with any other ERISA Event could reasonably be expected to result in a Material Adverse Effect, a statement of a Financial Officer of Holdings or the Borrower setting forth details as to such ERISA Event and the action, if any, that Holdings or the Borrower proposes to take with respect thereto.

 

SECTION 5.10. Compliance with Environmental Laws . Comply, and use commercially reasonable efforts to cause all lessees and other persons occupying its properties to comply, in all respects with all Environmental Laws applicable to its operations and properties; obtain and renew all environmental permits necessary for its operations and properties; and conduct any remedial action in accordance with Environmental Laws, except where the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; provided, however, that none of Holdings, the Borrower or any Subsidiary shall be required to undertake any remedial action required by Environmental Laws to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP.

 

SECTION 5.11. Further Assurances . Execute any and all further documents, financing statements, agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements, mortgages and deeds of trust) that may be required under applicable law, or that the Required Lenders, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority of the security interests created or intended to be created by the Security Documents. The Borrower will cause any subsequently acquired or organized Domestic Subsidiary to become a Loan Party by executing the Guarantee and Collateral Agreement and each applicable Security Document in favor of the Collateral Agent. In addition, from time to time, the Borrower will, at its cost and expense, promptly secure the Obligations by pledging or creating, or causing to be pledged or created, perfected security interests with respect to such of its assets and properties as the Administrative Agent or the Required Lenders shall designate

 

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(it being understood that it is the intent of the parties that the Obligations shall be secured by substantially all the assets of the Borrower and its Domestic Subsidiaries (including real and other properties acquired subsequent to the Closing Date)). Such security interests and Liens will be created under the Security Documents and other security agreements, mortgages, deeds of trust, leasehold mortgages, assignments of leases and rents, modifications and other instruments and documents in form and substance satisfactory to the Collateral Agent, and the Borrower shall deliver or cause to be delivered to the Lenders all such instruments and documents (including lien searches, surveys, abstracts, appraisals, legal opinions and a policy or policies of title insurance issued by a nationally recognized title insurance company, together with such endorsements, coinsurance and reinsurance as may be requested by the Collateral Agent and the Lenders, insuring the Mortgages as valid first liens, free of Liens other than those permitted under Section 6.02) as the Collateral Agent shall reasonably request to evidence compliance with this Section. The Borrower agrees to provide such evidence as the Collateral Agent shall reasonably request as to the perfection and priority status of each such security interest and Lien. In furtherance of the foregoing, the Borrower will give prompt notice to the Administrative Agent of the acquisition by it or any of the Subsidiaries of any real property (or any interest in real property) having a value in excess of $1,000,000.

 

SECTION 5.12. Interest Rate Protection. No later than the 90th day after the Closing Date, the Borrower shall enter into, and for a minimum of three years thereafter maintain, Hedging Agreements acceptable to the Administrative Agent that result in at least 50% of the aggregate principal amount of its funded long-term Indebtedness being effectively subject to a fixed or maximum interest rate acceptable to the Administrative Agent.

 

SECTION 5.13. Post-Closing Items . Holdings and the Borrower shall, and shall cause each of the Subsidiaries to, take all necessary actions to satisfy the requirements set forth on Schedule 5.13 within the period specified on such schedule (or such longer period as may be consented to by the Administrative Agent).

 

SECTION 5.14 . Funds Update . The Borrower shall, with respect to each of the first four fiscal quarters ending after the Closing Date, provide the Administrative Agent with reasonably detailed information about the uses of the $10,000,000 described in Section 4.02(o), all of which such uses to be consistent with those contemplated by Section 4.02(o).

 

SECTION 5.15. Purchase Price Adjustments. Holdings and the Borrower shall, take all actions reasonably necessary to ensure that all purchase price adjustments related to the Transactions payable by the sellers shall be paid to the Borrower.

 

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ARTICLE VI

 

Negative Covenants

 

Each of Holdings and the Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been cancelled or have expired (or cash collateralized on terms reasonably acceptable to the Administrative Agent and the Issuing Bank) and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, neither Holdings nor the Borrower will, nor will they cause or permit any of the Subsidiaries to:

 

SECTION 6.01. Indebtedness . Incur, create, assume or permit to exist any Indebtedness, except:

 

(a) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and any extensions, renewals or replacements of such Indebtedness to the extent the principal amount of such Indebtedness is not increased, neither the final maturity nor the weighted average life to maturity of such Indebtedness is decreased, such Indebtedness, if subordinated to the Obligations, remains so subordinated on terms no less favorable to the Lenders, and the original obligors in respect of such Indebtedness remain the only obligors thereon;

 

(b) Indebtedness created hereunder and under the other Loan Documents (including, for greater certainty, any Indebtedness incurred under Section 2.24 or Section 2.25);

 

(c) intercompany Indebtedness of the Borrower and the Subsidiaries to the extent permitted by Section 6.04(c);

 

(d) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this Section 6.01(d), when combined with the aggregate principal amount of all Capital Lease Obligations and Synthetic Lease Obligations incurred pursuant to Section 6.01(e), shall not exceed $10,000,000 at any time outstanding;

 

(e) Capital Lease Obligations and Synthetic Lease Obligations in an aggregate principal amount, when combined with the aggregate principal amount of all Indebtedness incurred pursuant to Section 6.01(d), not in excess of $10,000,000 at any time outstanding;

 

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(f) Attributable Debt in respect of Sale/Leaseback Transactions; provided, however, that the aggregate principal amount of all Indebtedness then outstanding and incurred pursuant to this clause (f) does not exceed (i) $5,000,000 in respect of property owned by the Borrower or any Subsidiary on the Closing Date or (ii) $5,000,000 in respect of any property acquired by the Borrower or any Subsidiary after the Closing Date;

 

(g) Indebtedness under performance bonds or with respect to workers’ compensation claims, in each case incurred in the ordinary course of business;

 

(h) Indebtedness incurred by Foreign Subsidiaries in an aggregate principal amount not exceeding $10,000,000 at any time outstanding;

 

(i) Indebtedness under the Second Lien Term Loan Agreement in an aggregate principal amount at any time outstanding not to exceed $75,000,000, and any refinancings thereof to the extent permitted by the Intercreditor Agreement;

 

(j) Indebtedness under the Spanish Subsidized Loans in an aggregate principal amount not exceeding $5,000,000 at any time outstanding; and

 

(k) other unsecured Indebtedness of the Borrower or the Subsidiaries in an aggregate principal amount not exceeding $5,000,000 at any time outstanding.

 

SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including Equity Interests or other securities of any person, including the Borrower or any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except:

 

(a)  Liens on property or assets of the Borrower and its Subsidiaries existing on the date hereof and set forth in Schedule 6.02; provided that such Liens shall secure only those obligations which they secure on the date hereof and extensions, renewals and replacements thereof permitted hereunder;

 

(b) any Lien created under the Loan Documents;

 

(c) any Second Priority Liens;

 

(d) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or assets of any person that becomes a Subsidiary after the date hereof prior to the time such person becomes a Subsidiary, as the case may be; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such person becoming a Subsidiary, (ii) such Lien does not apply to any other property or assets of Holdings, the Borrower or any Subsidiary and (iii) such Lien secures only those obligations which it secures on the date of such acquisition or the date such person becomes a Subsidiary, as the case may be;

 

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(e) Liens for taxes not yet due or which are being contested in compliance with Section 5.03 or are immaterial in amount;

 

(f) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business and securing obligations that are not due and payable or which are being contested in compliance with Section 5.03;

 

(g) pledges and deposits made in the ordinary course of business in compliance with workmen’s compensation, unemployment insurance and other social security laws or regulations;

 

(h) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

 

(i) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;

 

(j) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary; provided that (i) such security interests secure Indebtedness permitted by Section 6.01, (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 90 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 100% of the lesser of the cost or the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) and (iv) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary;

 

(k) Liens arising out of judgments or awards in respect of which Holdings, the Borrower or any of the Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such appeal or proceedings; provided that the aggregate amount of all such judgments or awards (and any cash and the fair market value of any property subject to such Liens) does not exceed $5,000,000 at any time outstanding;

 

(1) any Lien securing Indebtedness incurred by the Borrower or any Subsidiary pursuant to Section 6.01(f); provided that any such Liens attach only to the property that is the subject of, and proceeds thereof in connection with, the applicable Sale/Leaseback Transaction and shall not attach to any other property

 

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of the Borrower or any Subsidiary theretofore existing or (except for any such proceeds) which arises after the date thereof

 

(m) Liens on assets of Foreign Subsidiaries; provided that (i) such Liens do not extend to, or encumber, assets that constitute Collateral or the Equity Interests of the Borrower or any of the Subsidiaries, and (ii) such Liens extending to the assets of any Foreign Subsidiary secure only Indebtedness incurred by such Foreign Subsidiary pursuant to Section 6.01(h); and

 

(n) other Liens that do not, individually or in the aggregate, secure obligations (or encumber property with a fair market value) in excess of $2,500,000 at any one time.

 

SECTION 6.03. Sale/LeaseBack Transactions. Enter into any Sale/Leaseback Transaction unless (a)   the sale or transfer of such property is permitted by Section 6.05 and (b) any Capital Lease Obligations, Synthetic Lease Obligations or Liens arising in connection therewith are permitted by Sections 6.01 and 6.02, as the case may be.

 

SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire any Equity Interests, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other person, except:

 

(a) (i) investments by Holdings, the Borrower and the Subsidiaries existing on the date hereof in the Equity Interests of the Borrower and the Subsidiaries, (ii) additional investments by Holdings, the Borrower and the Subsidiaries in the Equity Interests of the Borrower and the Subsidiaries and (iii) investments in STR India Pvt. Ltd. in an amount not to exceed $5,000,000 in the aggregate; provided that (A) any such Equity Interests held by a Loan Party other than Equity Interests in Excluded Assets (as defined in the Guarantee and Collateral Agreement) shall be pledged pursuant to the Guarantee and Collateral Agreement (subject to the limitations applicable to voting stock of a Foreign Subsidiary referred to therein) and (B) the aggregate amount of investments made after the Closing Date (other than pursuant to clause (iii) above) by Loan Parties in, and loans and advances made after the Closing Date by Loan Parties to Subsidiaries that are not Loan Parties (determined without regard to any write-downs or write-offs of such investments, loans and advances) shall not exceed $10,000,000 at any time outstanding;

 

(b) Permitted Investments;

 

(c) loans or advances made by the Borrower to any Subsidiary and made by any Subsidiary to Holdings, the Borrower or any other Subsidiary; provided that (i) any such loans and advances made by a Loan Party to Subsidiaries that are not Loan Parties shall be evidenced by a promissory note pledged to the Collateral Agent for the ratable benefit of the Secured Parties pursuant to the Guarantee and Collateral Agreement and (ii) the amount of such loans and advances made by

 

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Loan Parties to Subsidiaries that are not Loan Parties shall be subject to the limitation set forth in clause (a) above;

 

(d) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

 

(e)   the Borrower and the Subsidiaries may make loans and advances in the ordinary course of business to their respective employees so long as the aggregate principal amount thereof at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $2,000,000;

 

(f) the Borrower and the Subsidiaries may enter into Hedging Agreements that (i) are required by Section 5.12 or (ii) are not speculative in nature and are related to income derived from foreign operations of the Borrower or any Subsidiary or otherwise related to purchases from foreign suppliers;

 

(g) the Borrower or any Subsidiary may acquire all or substantially all the assets of a person or line of business of such person, or not less than 85% of the Equity Interests (other than directors’ qualifying shares) of a person (referred to herein as the “Acquired Entity” ); provided that (i) such acquisition was not preceded by an unsolicited tender offer for such Equity Interests by, or proxy contest initiated by, Holdings, the Borrower or any Subsidiary; (ii) the Acquired Entity shall be in a similar or reasonably related or incidental line of business to those of the Borrower and the Subsidiaries as conducted during the current and most recently concluded calendar year; and (iii) at the time of such transaction (A)   both before and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; (B) the Borrower would be in compliance with the covenants set forth in Sections 6.11, 6.12 and 6.13 as of the most recently completed period of four consecutive fiscal quarters ending prior to such transaction for which the financial statements and certificates required by Section 5.04(a) or 5.04(b), as the case may be, and 5.04(c) have been delivered, after giving pro forma effect to such transaction and to any other event occurring after such period as to which pro forma recalculation is appropriate (including any other transaction described in this Section 6.04(g) occurring after such period) as if such transaction had occurred as of the first day of such period; (C) the total consideration paid in connection with such acquisition and any other acquisitions pursuant to this Section 6.04(g) (including any Indebtedness of the Acquired Entity that is assumed by the Borrower or any Subsidiary following such acquisition and any payments following such acquisition pursuant to earn-out provisions or similar obligations) shall not in the aggregate exceed $50,000,000 and (D) the Borrower shall have delivered a certificate of a Financial Officer, certifying as to the foregoing and containing reasonably detailed calculations in support thereof, in form and substance satisfactory to the Administrative Agent; (iv) the Borrower shall comply, and shall cause the Acquired Entity to comply, with the applicable provisions of Section 5.11 and the Security Documents; and

 

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(v) if the Acquired Entity would not constitute a wholly owned Subsidiary of the Borrower and would be required to become a Subsidiary Guarantor hereunder, each holder of an Equity Interest therein (other than the Borrower or any wholly owned Subsidiary) shall have executed and delivered to the Collateral Agent a consent and waiver in form and substance reasonably satisfactory to the Collateral Agent permitting such Acquired Entity to become a Subsidiary Guarantor hereunder and a party to the Security Documents (any acquisition of an Acquired Entity meeting all the criteria of this Section 6.04(g) being referred to herein as a “Permitted Acquisition” ); and

 

(h) in addition to investments permitted by paragraphs (a) through (g) above, additional investments, loans and advances by the Borrower and the Subsidiaries so long as the aggregate amount invested, loaned or advanced pursuant to this paragraph (h) (determined without regard to any write-downs or write-offs of such investments, loans and advances) does not exceed $5,000,000 in the aggregate.

 

SECTION 6.05. Mergers,  Consolidations, Sales of Assets and Acquisitions. (a) Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all the assets (whether now owned or hereafter acquired) of the Borrower or less than all the Equity Interests of any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person, except that (i) the Borrower and any Subsidiary may purchase and sell inventory in the ordinary course of business and (ii)   if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing (u) any wholly owned Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (v) Holdings may merge, liquidate, reorganize or otherwise be restructured into a newly-formed Loan Party in a transaction the purpose of which is to re-organize Holdings as a corporation; provided that (1) such transaction (or series of transactions) does not result in a material increase in the Tax obligations payable in cash (on a consolidated basis) for Holdings, the Borrower, each Subsidiary of the Borrower and the holders of Equity Interests in Holdings and (2) immediately following such transaction, Holdings is in compliance with all requirements of the Guarantee and Collateral Agreement and has satisfied its obligations under Section 5.11 (including the execution of any further documents, financing statements, agreements and instruments, and the taking of all other actions, that may be reasonably requested by the Required Lenders, the Administrative Agent or the Collateral Agent), (w) any wholly owned Subsidiary may merge into or consolidate with any other wholly owned Subsidiary in a transaction in which the surviving entity is a wholly owned Subsidiary and no person other than the Borrower or a wholly owned Subsidiary receives any consideration ( provided that if any party to any such transaction is a Loan Party, the surviving entity of such transaction shall be a Loan Party) (x) the Borrower and the Subsidiaries may make Permitted Acquisitions and (y) any Inactive Subsidiary of the Borrower may be dissolved or liquidated.

 

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(b) Make any Asset Sale otherwise permitted under paragraph (a) above unless (i) such Asset Sale is for consideration at least 75% of which is cash (ii)   such consideration is at least equal to the fair market value of the assets being sold, transferred, leased or disposed of and (iii) the fair market value of all assets sold, transferred, leased or disposed of pursuant to this paragraph (b) shall not exceed (x) $10,000,000 in any fiscal year or (y) $50,000,000 in the aggregate.

 

SECTION 6.06. Restricted Payments; Restrictive Agreements.   (a) Declare or make, or agree to declare or make, directly or indirectly, any Restricted Payment (including pursuant to any Synthetic Purchase Agreement), or incur any obligation (contingent or otherwise) to do so; provided, however, that (i) any Subsidiary may declare and pay dividends or make other distributions ratably to its equity holders, (ii) so long as no Event of Default or Default shall have occurred and be continuing or would result therefrom, the Borrower may, or the Borrower may make distributions to Holdings so that Holdings may, repurchase its Equity Interests owned by employees of Holdings, the Borrower or the Subsidiaries or make payments to employees of Holdings, the Borrower or the Subsidiaries upon termination of employment in connection with the exercise of stock options, stock appreciation rights or similar equity incentives or equity based incentives pursuant to management incentive plans or in connection with the death or disability of such employees in an aggregate amount not to exceed $2,000,000 in any fiscal year, (iii) the Borrower may make Restricted Payments to Holdings (x) in an amount not to exceed $500,000 in any fiscal year, to the extent necessary to pay general corporate and overhead expenses incurred by Holdings in the ordinary course of business and (y) if Borrower is a member of a consolidated, combined or unitary group of which Borrower is not the common parent, in an amount necessary to pay the Tax liabilities of the common parent (the “Common Parent” ) of the consolidated, combined or unitary group of which Borrower is not the common parent directly attributable to (or arising as a result of) the operations of the Borrower and the Subsidiaries; provided, however, that ( A)   the amount of such dividends shall not exceed the amount that the Borrower and the Subsidiaries would be required to pay in respect of Federal, state and local taxes were the Borrower and the Subsidiaries to pay such taxes as members of a consolidated, combined, or unitary group of which Borrower is the common parent and (B) all Restricted Payments made to Holdings pursuant to this clause (iii) are used by Holdings to make Restricted Payments as specified in clause (iv) within 20 days of the receipt thereof and (iv) if Borrower is a member of a consolidated, combined or unitary group of which Borrower is not the common parent, then Holdings may make Restricted Payments to the Common Parent (x) in an amount not to exceed $500,000 in any fiscal year, to the extent necessary to pay general corporate and overhead expenses incurred by the Common Parent in the ordinary course of business and (y) in an amount necessary to pay the Tax liabilities of the Common Parent directly attributable to (or arising as a result of) the operations of the Borrower and the Subsidiaries; provided, however, that (A) the amount of such dividends shall not exceed the amount that the Borrower and the Subsidiaries would be required to pay in respect of Federal, state and local taxes were the Borrower and the Subsidiaries to pay such taxes as members of a consolidated, combined or unitary group of which Borrower is the common parent and (B) all Restricted Payments made to the Common Parent pursuant to this clause (iv) are used by the Common Parent for the purposes specified herein within 20 days of the receipt thereof.

 

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(b) Enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (i) the ability of Holdings, the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets to secure the Obligations, or (ii) the ability of any Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (A) the foregoing shall not apply to restrictions and conditions imposed by law or by any Loan Document or any Second Lien Term Loan Document, (B) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (C) the foregoing shall not apply to restrictions and conditions imposed on any Foreign Subsidiary by the terms of any Indebtedness of such Foreign Subsidiary permitted to be incurred hereunder, (D) clause (i) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (E) clause (i) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.

 

SECTION 6.07. Tran sactions with Affiliates. Except for transactions between or among Loan Parties and transactions pursuant to the Advisory Services and Monitoring Agreements as in effect as of the Closing Date, sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except that the Borrower or any Subsidiary may engage in any of the foregoing transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties.

 

SECTION 6.08. Business of Holdings, Borrower and Subsidiaries (a)   With respect to Holdings, engage in any business activities or have any assets or liabilities other than its ownership of the Equity Interests of the Borrower and liabilities incidental thereto, including its liabilities as a Guarantor pursuant to the Guarantee and Collateral Agreement and its Guarantees of obligations under the Second Lien Term Loan Documents.

 

(b) With respect to the Borrower and its Subsidiaries, engage at any time in any business or business activity other than the business currently conducted by it and business activities reasonably incidental thereto.

 

SECTION 6.09. Other Ind ebtedness and Agreements. (a)   Permit (i) any waiver, supplement, modification, amendment, termination or release of any indenture, instrument or agreement pursuant to which the Second Lien Term Loan or any subordinated Material Indebtedness of Holdings, the Borrower or any of the Subsidiaries is outstanding if the effect of such waiver, supplement, modification, amendment, termination or release would materially increase the obligations of the obligor or confer additional material rights on the holder of such Indebtedness in a manner adverse to

 

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Holdings, the Borrower, any of the Subsidiaries or the Lenders; provided that the Second Lien Term Loan Documents may be amended in accordance with the Intercreditor Agreement, or (ii) any waiver, supplement, modification or amendment of its certificate of incorporation, by-laws, operating, management or partnership agreement or other organizational documents to the extent any such waiver, supplement, modification or amendment would be adverse to the Lenders in any material respect.

 

(b) (i) Make any distribution, whether in cash, property, securities or a combination thereof, other than regular scheduled payments of principal and interest as and when due (to the extent not prohibited by applicable subordination provisions), in respect of, or pay, or commit to pay, or directly or indirectly (including pursuant to any Synthetic Purchase Agreement) redeem, repurchase, retire or otherwise acquire for consideration, or set apart any sum for the aforesaid purposes any Indebtedness (other than the Loans), other than in respect of Indebtedness under the Second Lien Term Loan Agreement, with Declined Proceeds applied in accordance with the mandatory prepayment provisions of the Second Lien Term Loan Agreement as contemplated by Section 2.13(h), or in the case of Declined Proceeds that are retained by the Borrower after having been declined by (x) the Lenders pursuant to Section 2.13(f) and (y) the lenders under the Second Lien Term Loan Agreement pursuant to the mandatory prepayment provisions thereof, with such Declined Proceeds in accordance with the voluntary prepayment provisions of the Second Lien Term Loan Agreement, or (ii) pay in cash any amount in respect of any Indebtedness or preferred Equity Interests that may at the obligor’s option be paid in kind or in other securities (other than the Second Lien Term Loans).

 

SECTION 6.10. Capital Expenditures. (a) Permit the aggregate amount of Capital Expenditures made by the Borrower and the Subsidiaries in any period set forth below to exceed the amount set forth below for such period:

 

Period

 

Amount

 

Closing Date - December 31, 2007

 

$

15,000,000

 

January 1, 2008 - December 31, 2008

 

$

10,000,000

 

January 1, 2009 - December 31, 2009

 

$

12,000,000

 

January 1, 2010 - December 31, 2010

 

$

14,000,000

 

January 1, 2011 - December 31, 2011

 

$

15,000,000

 

January 1, 2012 - December 31, 2012

 

$

16,000,000

 

January 1, 2013 - December 31, 2013

 

$

17,000,000

 

January 1, 2014 - Term Loan Maturity

 

$

18,000,000

 

Date

 

 

 

 

If, in any fiscal year, the Consolidated EBITDA exceeds the Baseline EBITDA for such fiscal year, the amount of permitted Capital Expenditures set forth above in respect of such fiscal year shall be increased (but not decreased) by 40% of the excess of (i) the Consolidated EBITDA for such fiscal year over (ii) the Baseline EBITDA for such fiscal year.

 

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Any unused amount of Capital Expenditures permitted to be made during each fiscal year may be carried forward to, and made, at any time during the next succeeding two fiscal years; provided that, for purposes of this sentence, Capital Expenditures made in any fiscal year shall be deemed to use the amount permitted to be made during such fiscal year set forth above before using the amount carried forward to such fiscal year.

 

(b) Notwithstanding subsection (a) above, the Borrower and its Subsidiaries may make Capital Expenditures with the Net Cash Proceeds of (A) Specified Equity Issuances by Holdings, the Borrower or any of their respective subsidiaries permitted hereunder or (B) any Asset Sale, or any sale of used, worn out or surplus equipment, in each case to the extent such Net Cash Proceeds are not required to be applied to prepay Loans, or cash collateralize, Letters of Credit, hereunder or prepay loans under the Second Lien Term Loan Agreement.

 

SECTION 6.11. Interest Coverage Ratio. Permit the Interest Coverage Ratio for any period of four consecutive fiscal quarters, in each case taken as one accounting period, ending on a date or during any period set forth below to be less than the ratio set forth opposite such date or period below:

 

Date or Period

 

Ratio

September 30, 2007

 

1.35 to 1.00

 

 

 

December 31, 2007

 

1.35 to 1.00

 

 

 

March 31, 2008

 

1.35 to 1.00

 

 

 

June 30, 2008

 

1.35 to 1.00

 

 

 

September 30, 2008

 

1. 40 to 1.00

 

 

 

December 31, 2008

 

1.50 to 1.00

 

 

 

March 31, 2009

 

1.65 to 1.00

 

 

 

June 30, 2009

 

1.65 to 1.00

 

 

 

September 30, 2009

 

1.65 to 1.00

 

 

 

December 31, 2009

 

1.65 to 1.00

 

 

 

March 31, 2010

 

1.80 to 1.00

 

 

 

June 30, 2010

 

1.80 to 1.00

 

 

 

September 30, 2010

 

1.80 to 1.00

 

 

 

December 31, 2010

 

1.80 to 1.00

 

 

 

March 31, 2011

 

2.00 to 1.00

 

 

 

June 30, 2011

 

2.00 to 1.00

 

 

 

September 30, 2011

 

2.00 to 1.00

 

 

 

December 31, 2011

 

2.00 to 1.00

 

 

 

March 31, 2012

 

2.00 to 1.00

 

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SECTION 6.12. First Lien Debt Ratio.  Permit the First Lien Debt Ratio for any period of four consecutive fiscal quarters, in each case taken as one accounting period, ending on any date or during any period set forth below to be greater than the ratio set forth opposite such date or period below:

 

Date or Period

 

Ratio

September 30, 2007

 

5.65 to 1.00

 

 

 

December 31, 2007

 

5.65 to 1.00

 

 

 

March 31, 2008

 

5.65 to 1.00

 

 

 

June 30, 2008

 

5.65 to 1.00

 

 

 

September 30, 2008

 

5.25 to 1.00

 

 

 

December 31, 2008

 

5.00 to 1.00

 

 

 

March 31, 2009

 

4.25 to 1.00

 

 

 

June 30, 2009

 

4.25 to 1.00

 

 

 

September 30, 2009

 

4.25 to 1.00

 

 

 

December 31, 2009

 

4.25 to 1.00

 

 

 

March 31, 2010

 

4.00 to 1.00

 

 

 

June 30, 2010

 

4.00 to 1.00

 

 

 

September 30, 2010

 

4.00 to 1.00

 

 

 

December 31, 2010

 

4.00 to 1.00

 

 

 

March 31, 2011

 

3.00 to 1.00

 

 

 

June 30, 2011

 

3.00 to 1.00

 

 

 

September 30, 2011

 

3.00 to 1.00

 

 

 

December 31, 2011

 

3.00 to 1.00

 

 

 

March 31, 2012

 

3 00 to 1.00

 

SECTION 6.13. Maximum Total Leverage Ratio. Permit the Total Leverage Ratio at any time during a period set forth below to be greater than the ratio set forth opposite such period below:

 

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Period

 

Ratio

September 30, 2007

 

7.75 to 1.00

 

 

 

December 31, 2007

 

7.75 to 1.00

 

 

 

March 31, 2008

 

7.75 to 1.00

 

 

 

June 30, 2008

 

7.75 to 1.00

 

 

 

September 30, 2008

 

7.50 to 1.00

 

 

 

December 31, 2008

 

7.00 to 1.00

 

 

 

March 31, 2009

 

6.25 to 1.00

 

 

 

June 30, 2009

 

6.25 to 1.00

 

 

 

September 30, 2009

 

6.25 to 1.00

 

 

 

December 31, 2009

 

6.25 to 1.00

 

 

 

March 31, 2010

 

6.00 to 1.00

 

 

 

June 30, 2010

 

6.00 to 1.00

 

 

 

September 30, 2010

 

6.00 to 1.00

 

 

 

December 31, 2010

 

6.00 to 1.00

 

 

 

March 31, 2011

 

5.00 to 1.00

 

 

 

June 30, 2011

 

5.00 to 1.00

 

 

 

September 30, 2011

 

5.00 to 1.00

 

 

 

December 31, 2011

 

5.00 to 1.00

 

 

 

March 31, 2012

 

5.00 to 1.00

 

SECTION 6.14. Fiscal Year.     With respect to Holdings and the Borrower, change their fiscal year-end to a date other than December 31.

 

SECTION 6.15. Certain Equity Securities.    Issue any Equity Interest that is not Qualified Capital Stock.

 

ARTICLE VII

 

Events of Default

 

In case of the happening of any of the following events (“ Events of Default ”):

 

(a) any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to

 

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have been false or misleading in any material respect when so made, deemed made or furnished;

 

(b) default shall be made in the payment of any principal of any Loan or the reimbursement with respect to any L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;

 

(c) default shall be made in the payment of any interest on any Loan or any Fee or L/C Disbursement or any other amount (other than an amount referred to in (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days;

 

(d) default shall be made in the due observance or performance by Holdings, the Borrower or any Subsidiary of any covenant, condition or agreement contained in Section 5.01(a), 5.05(a), 5.05(d) or 5.08 or in Article VI;

 

(e) default shall be made in the due observance or performance by Holdings, the Borrower or any Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or the Required Lenders to the Borrower;

 

(f) (i) Holdings, the Borrower or any Subsidiary shall fail to pay any principal, interest or other amount due in respect of any Material Indebtedness, when and as the same shall become due and payable after giving effect to any grace periods applicable thereto or (ii) any other event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity or that results in the termination or permits any counterparty to terminate any Hedging Agreement the obligations under which constitute Material Indebtedness; provided that this clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness or to mandatory prepayments of Second Lien Term Loans with Declined Proceeds as contemplated by Section 2.13(f);

 

(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Holdings, the Borrower or any Material Subsidiary (or any group of Subsidiaries that, when taken together, would constitute a Material Subsidiary), or of a substantial part of the property or assets of Holdings, the Borrower or a

 

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Material Subsidiary (or any group of Subsidiaries that, when taken together, would constitute a Material Subsidiary), under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Material Subsidiary (or any group of Subsidiaries that, when taken together, would constitute a Material Subsidiary) or for a substantial part of the property or assets of Holdings, the Borrower or a Material Subsidiary (or any group of Subsidiaries that, when taken together, would constitute a Material Subsidiary) or (iii) the winding-up or liquidation of Holdings, the Borrower or any Material Subsidiary (or any group of Subsidiaries that, when taken together, would constitute a Material Subsidiary); and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

 

(h) Holdings, the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Subsidiary or for a substantial part of the property or assets of Holdings, the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing;

 

(i) one or more judgments shall be rendered against Holdings, the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of Holdings, the Borrower or any Subsidiary to enforce any such judgment and such judgment either (i) is for the payment of money in an aggregate amount in excess of $5,000,000 or (ii) is for injunctive relief and could reasonably be expected to result in a Material Adverse Effect;

 

(j) an ERISA Event shall have occurred that, when taken together with all other such ERISA Events, could reasonably be expected to result in actual liability to Holdings, the Borrower or any Subsidiary (or any combination thereof), including directly or indirectly through their ERISA Affiliates, in an aggregate amount exceeding $5,000,000;

 

(k) any Guarantee under the Guarantee and Collateral Agreement for any reason shall cease to be in full force and effect (other than in accordance with its

 

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terms), or any Guarantor shall deny in writing that it has any further liability under the Guarantee and Collateral Agreement (other than as a result of the discharge of such Guarantor in accordance with the terms of the Loan Documents);

 

(1) any security interest purported to be created by any Security Document shall cease to be, or shall be asserted by the Borrower or any other Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Collateral Agent to maintain possession of certificates representing securities pledged under the Guarantee and Collateral Agreement and except to the extent that such loss is covered by a lender’s title insurance policy and the related insurer promptly after such loss shall have acknowledged in writing that such loss is covered by such title insurance policy;

 

(m) the Intercreditor Agreement shall, in whole or in part, cease to be effective or cease to be legally valid, binding and enforceable against any party thereto (or against any person on whose behalf any such party makes any covenants or agreements therein), or otherwise not be effective to create the rights and obligations purported to be created thereunder unless the same results directly from the action or inaction of the Collateral Agent; or

 

(n) there shall have occurred a Change in Control;

 

then, and in every such event (other than an event with respect to Holdings or the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event with respect to Holdings or the Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.

 

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Notwithstanding anything to the contrary contained in the foregoing provisions of this Article VII, in the event that the Borrower fails to comply with Section 6.11, 6.12 or 6.13, until the expiration of the 10th day subsequent to the date the certificate calculating such compliance is required to be delivered pursuant to Section 5.04(c), the Borrower shall have the right to issue common equity for cash or otherwise receive cash contributions to the capital of the Borrower (collectively, the “ Cure Right ”), and upon receipt by the Borrower of such cash (the “ Cure Amount ) pursuant to the exercise of the Borrower of such Cure Right the applicable covenants shall be recalculated giving effect to the following pro forma adjustments:

 

(i) Consolidated EBITDA for the immediately preceding fiscal quarter shall be increased, solely for the purpose of measuring compliance with Sections 6.11, 6.12 and 6.13 for such fiscal quarter and each period thereafter in which the Consolidated EBITDA for such fiscal quarter is contained, and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; and

 

(ii) if, after giving effect to the foregoing recalculations, the Borrower shall then be in compliance with Sections 6.11, 6.12 and 6.13 as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, then the applicable breach or default of the covenants set forth in Sections 6.11, 6.12 and 6.13 that had occurred shall be deemed cured for all purposes of this Agreement as fully as if such breach or default had never occurred.

 

Notwithstanding anything herein to the contrary, (A) in each four quarter period there shall be a period of at least two fiscal quarters in which the Cure Right is not exercised, (B) in each eight quarter period there shall be a period of at least four fiscal quarters in which the Cure Right is not exercised, (C) the amount of any Cure Amount shall be no greater than the amount required to cause the Borrower to be in compliance with Sections 6.11, 6.12 and 6.13 and (D) all Cure Amounts shall be disregarded for all other purposes under this Agreement, including any baskets in Article VI and the definitions of Applicable Margin and Required Prepayment Percentage.

 

ARTICLE VIII

 

The Adm inistrative Agent and the Collateral Agent

 

Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent and the Collateral Agent (for purposes of this Article VIII, the Administrative Agent and the Collateral Agent are referred to collectively as the “ Agents ”) its agent and authorizes the Agents to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents.

 

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The Lenders acknowledge and agree that the Administrative Agent shall also act, subject to and in accordance with the terms of the Intercreditor Agreement, as the administrative agent and collateral agent for the lenders under the Second Lien Term Loan Agreement.

 

The bank serving as the Administrative Agent and/or the Collateral Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Holdings, the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

 

Neither Agent shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) neither Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) neither Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is instructed in writing to exercise by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.08), and (c) except as expressly set forth in the Loan Documents, neither Agent shall have any duty to disclose, nor shall it be liable for the failure to disclose, any information relating to Holdings, the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent and/or Collateral Agent or any of its Affiliates in any capacity. Neither Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.08) or in the absence of its own gross negligence or willful misconduct. Neither Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by Holdings, the Borrower or a Lender, and neither Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to such Agent.

 

Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper person. Each Agent may also rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and

 

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shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by it. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Credit Facilities as well as activities as Agent.

 

Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, with the consent of the Borrower (not to be unreasonably withheld or delayed), unless a default of payment or bankruptcy is continuing, in which case no such consent shall be required, to appoint a successor, which shall be a bank with an office in the United States or an Affiliate of such bank with an office in the United States. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation (including, for greater certainty, due to the failure of the Borrower to consent to such appointment), then the retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After an Agent’s resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while acting as Agent.

 

Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder.

 

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ARTICLE IX

 

Miscellaneous

 

SECTION 9.01. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or nationally recognized overnight courier service, mailed by certified or registered mail or sent by fax, as follows:

 

(a)     if to the Borrower or Holdings, to it at 10 Water Street, Enfield, CT 06082-4899, Attention of Chief Financial Officer (Fax No. (860) 749-9158); with a copy to STR Holdings LLC, c/o DLJ Merchant Banking, Attention of Dan Gerwitz (Fax No. (860) 749-9158);

 

(b)    if to the Administrative Agent, to Credit Suisse, Eleven Madison Avenue, New York, NY 10010, Attention of Matthew Carter RDU-2 (Fax No. (212) 743-1842); and

 

(c)     if to a Lender, to it at its address (or fax number) set forth on Schedule 2.01 or in the Assignment and Acceptance or the Incremental Term Loan Assumption Agreement, as the case may be, pursuant to which such Lender shall have become a party hereto.

 

All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or nationally recognized overnight courier service or sent by fax or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. As agreed to among Holdings, the Borrower, the Administrative Agent and the applicable Lenders from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable person provided from time to time by such person so long as a copy of such notice or other communication is also sent by one of the other methods set forth above; provided, however, that notices given by the Borrower to the Administrative Agent pursuant to Article II may not be delivered by email unless otherwise agreed to by the Administrative Agent on a case by case basis.

 

SECTION 9.02. Survival of Agreement.   All covenants, agreements, representations and warranties made by the Borrower or Holdings herein and in the certificates or other instruments prepared or delivered in connection with, or pursuant to, this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and the Issuing Bank and shall survive the making by the Lenders of the Loans and the issuance of Letters of Credit by the Issuing Bank, regardless of any investigation made by the Lenders or the Issuing Bank or on their behalf, and shall continue in full force and effect as long as the principal of, or any accrued interest on, any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding (unless cash

 

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collateralized on terms reasonably acceptable to the Administrative Agent and the Issuing Bank) and so long as the Commitments have not been terminated. The provisions of Sections 2.14, 2.16, 2.20, 9.05 and 9.18 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank.

 

SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower, Holdings and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto.

 

SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower, Holdings, the Administrative Agent, the Collateral Agent, the Issuing Bank or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

 

(b) Each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it), with notice to the Borrower delivered from time to time and the prior written consent of the Administrative Agent (not to be unreasonably withheld or delayed); provided, however, that (i) in the case of an assignment of a Revolving Credit Commitment, each of the Borrower, the Issuing Bank and the Swingline Lender must also give its prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed) ( provided , that the consent of the Borrower shall not be required to any such assignment made (1) to another Lender or an Affiliate or Related Fund of a Lender, (2) after the occurrence and during the continuance of an Event of Default under paragraphs (b), (c), (g) or (h) of Article VII or (3) of a Revolving Commitment prior to a Successful Syndication of the Revolving Facility (as defined in the Fee Letter), (ii) the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall be in an integral multiple of, and not less than, $1,000,000 (or, if less, the entire remaining amount of such Lender’s Commitment or Loans of the relevant Class), (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent (or, if previously agreed with the Administrative Agent, manually), and shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent), and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and all applicable tax forms. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and

 

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after the effective date specified in each Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued for its account and not yet paid).

 

(c)     By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Term Loan Commitment and Revolving Credit Commitment, and the outstanding balances of its Term Loans and Revolving Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance; (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrower or any Subsidiary or the performance or observance by the Borrower or any Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is an Eligible Assignee and is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 3.05(a) or delivered pursuant to Section 5.04, the Intercreditor Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee agrees to be bound by the terms of the Intercreditor Agreement; (vii) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent and the Collateral Agent, respectively, by the terms hereof, together with such powers as are reasonably incidental thereto; and (viii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

 

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(d)   The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”) . The entries in the Register shall be conclusive and the Borrower, the Administrative Agent, the Issuing Bank, the Collateral Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank, the Collateral Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

(e)   Upon its receipt of, and consent to, a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above, if applicable, and the written consent of the Administrative Agent and, if required, the Borrower, the Swingline Lender and the Issuing Bank to such assignment and any applicable tax forms, the Administrative Agent shall promptly (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e).

 

(f)   Each Lender may without the consent of the Borrower, the Swingline Lender, the Issuing Bank or the Administrative Agent sell participations to one or more banks or other persons in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other persons shall be entitled to the benefit of the cost protection provisions contained in Sections 2.14, 2.16 and 2.20 to the same extent as if they were Lenders (but, with respect to any particular participant, to no greater extent than the Lender that sold the participation to such participant), (iv) the Borrower, the Administrative Agent, the Issuing Bank and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans or L/C Disbursements and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable to such participating bank or person hereunder or the amount of principal of or the rate at which interest is payable on the Loans in which such participating bank or person has an interest, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans in which such participating bank or person has an interest, increasing or extending the Commitments in which such participating bank or person has an interest or releasing all or substantially all of the value of the Guarantees (other than in connection with the sale of such Guarantor in a transaction permitted by

 

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Section 6.05) or all or substantially all of the Collateral) and (v) such Lender, acting solely for this purpose as an agent of the Borrower, shall maintain a register for the recordation of the names and addresses of the participating bank or other person, and the Commitments of, and principal amounts of and interest on the Loans and L/C Disbursements owing and paid to, such participating banks pursuant to the terms hereof from time to time and the amounts received by such Lender from the Borrower and whether such amounts constitute principal, interest, fees or other amounts and each participating bank’s share thereof.

 

(g)   Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.16.

 

(h)   Any Lender may at any time assign all or any portion of its rights under this Agreement to secure extensions of credit to such Lender or in support of obligations owed by such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.

 

(i)   Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender” ) may grant to a special purpose funding vehicle (an “ SPC ”), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii)   if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 9.04, any SPC may (i) with notice to but without the prior written consent of the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a

 

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portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC.

 

(j)   Neither Holdings nor the Borrower shall assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent, the Issuing Bank and each Lender, and any attempted assignment without such consent shall be null and void.

 

(k)   In the event that any Revolving Credit Lender shall become a Defaulting Lender or S&P, Moody’s and Thompson’s BankWatch (or InsuranceWatch Ratings Service, in the case of Lenders that are insurance companies (or Best’s Insurance Reports, if such insurance company is not rated by Insurance Watch Ratings Service)) shall, after the date that any Lender becomes a Revolving Credit Lender, downgrade the long-term certificate deposit ratings of such Lender, and the resulting ratings shall be below BBB-, Baa3 and C (or BB, in the case of a Lender that is an insurance company (or B, in the case of an insurance company not rated by InsuranceWatch Ratings Service)) (or, with respect to any Revolving Credit Lender that is not rated by any such ratings service or provider, the Issuing Bank or the Swingline Lender shall have reasonably determined that there has occurred a material adverse change in the financial condition of any such Lender, or a material impairment of the ability of any such Lender to perform its obligations hereunder, as compared to such condition or ability as of the date that any such Lender became a Revolving Credit Lender) then the Issuing Bank and the Swingline Lender shall have the right, but not the obligation, at its own expense, upon notice to such Lender and the Administrative Agent, to replace such Lender with an assignee (in accordance with and subject to the restrictions contained in paragraph (b) above), and such Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in paragraph (b) above) all its interests, rights and obligations in respect of its Revolving Credit Commitment to such assignee; provided, however, that (i) no such assignment shall conflict with any law, rule and regulation or order of any Governmental Authority and (ii) the Issuing Bank, the Swingline Lender or such assignee, as the case may be, shall pay to such Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans made by such Lender hereunder and all other amounts accrued for such Lender’s account or owed to it hereunder.

 

SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent, the Issuing Bank and the Swingline Lender in connection with the syndication of the Credit Facilities and the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions hereby or thereby contemplated shall be consummated) or incurred by the Administrative Agent, the Collateral Agent or any Lender in connection with the

 

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enforcement or protection of its rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made or Letters of Credit issued hereunder, including the reasonable and documented fees, charges and disbursements of Cravath, Swaine & Moore LLP, counsel for the Administrative Agent and the Collateral Agent, and, in connection with any such enforcement or protection, the fees, charges and disbursements of any other counsel for the Administrative Agent, the Collateral Agent or any Lender.

 

(b)   The Borrower agrees to indemnify the Administrative Agent, the Collateral Agent, each Lender, the Issuing Bank and each Related Party of any of the foregoing persons, their successors and assigns and members of each of the foregoing (each such person being called an “ Indemnitee ”) against, and to hold each Indemnitee harmless from, any and all reasonable and documented losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby (including the syndication of the Credit Facilities), (ii) the use of the proceeds of the Loans or issuance of Letters of Credit, or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (and regardless of whether such matter is initiated by a third party or by the Borrower, any other Loan Party or any of their respective Affiliates); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealeble judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee or (y) result from the release of Hazardous Materials or a violation of Environmental Laws that first occurs at a particular owned real property after such property has been transferred to any Indemnitees or its successor or assigns by foreclosure, deed-in-lieu of foreclosure or similar transfer except to the extent caused by, or attributable to the actions of or failure to act by, the Borrower or any of its Subsidiaries.

 

(c)   To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender in its capacity as such. For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its share of the sum of the Aggregate Revolving Credit Exposure, outstanding Term Loans and unused Commitments at the time.

 

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(d)   To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

 

(e)   The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank.  All amounts due under this Section 9.05 shall be payable on written demand therefor.

 

SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, except to the extent prohibited by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower or Holdings against any of and all the obligations of the Borrower or Holdings now or hereafter existing under this Agreement and other Loan Documents held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 9.06 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

 

SECTION 9.07. App licable Law.   THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH 1N OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS MOST RECENTLY PUBLISHED AND IN EFFECT, ON THE DATE SUCH LETTER OF CREDIT WAS ISSUED, BY THE 1NTERNATIONAL CHAMBER OF COMMERCE (THE “UNIFORM CUSTOMS”) AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 9.08. Waivers; Amendment.   (a) No failure or delay of the Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any

 

100



 

other or further exercise thereof or the exercise of any other right or power.  The rights and remedies of the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Borrower or Holdings in any case shall entitle the Borrower or Holdings to any other or further notice or demand in similar or other circumstances.

 

(b)   Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower, Holdings and the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan or any date for reimbursement of an L/C Disbursement, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan or L/C Disbursement, without the prior written consent of each Lender directly adversely affected thereby, (ii)   increase or extend the Commitment or decrease or extend the date for payment of any Fees of any Lender without the prior written consent of such Lender, (iii) amend or modify the pro rata requirements of Section 2.17, the provisions of Section 9.04(j) or the provisions of this Section or release all or substantially all of the value of the Guarantees (other than in connection with the sale of such Guarantor in a transaction permitted by Section 6.05) or all or substantially all of the Collateral, without the prior written consent of each Lender, (iv) change the provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of one Class differently from the rights of Lenders holding Loans of any other Class without the prior written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each adversely affected Class, (v) modify the protections afforded to an SPC pursuant to the provisions of Section 9.04(i) without the written consent of such SPC or (vi) reduce the percentage contained in the definition of the term “Required Lenders” without the prior written consent of each Lender (it being understood that with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Term Loan Commitments and Revolving Credit Commitments on the date hereof); provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender.

 

(c)   Notwithstanding the foregoing, technical and conforming modifications to the Loan Documents may be made with the consent of the Borrower and the Administrative Agent to the extent necessary to integrate any Incremental Term

 

101



 

Commitments or Incremental Revolving Credit Commitments on substantially the same basis as the Term Loans or Revolving Credit Commitments, as applicable.

 

SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan or participation in any L/C Disbursement, together with all fees, charges and other amounts which are treated as interest on such Loan or participation in such L/C Disbursement under applicable law (collectively the “ Charges ”) , shall exceed the maximum lawful rate (the “ Maximum Rate ”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan or participation in accordance with applicable law, the rate of interest payable in respect of such Loan or participation hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or participation but were not payable as a result of the operation of this Section 9.09 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or participations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

 

SECTION 9.10. Entire Agreement.   This Agreement, the Fee Letter and the other Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Any other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any person (other than the parties hereto and thereto, their respective successors and assigns permitted hereunder (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders) any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.

 

SECTION 9.11. WAIVER OF JURY TRIAL.   EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY 1N RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

 

102



 

SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 9.13. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 9.03. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

SECTION 9.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

 

SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party hereto may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any other party hereto or their respective properties in the courts of any jurisdiction.

 

(b)   Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

103



 

(c)   Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

 

SECTION 9.16. Confidentiality. Each of the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a)   to its and its Affiliates’ officers, directors, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) upon notice to the Borrower (to the extent practicable and permitted under applicable laws or regulations), to the extent requested by any regulatory authority or quasi-regulatory authority (such as the National Association of Insurance Commissioners), (c) upon notice to the Borrower (to the extent practicable and permitted under applicable laws or regulations), to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) in connection with the exercise of any remedies hereunder or under the other Loan Documents or any suit, action or proceeding relating to the enforcement of its rights hereunder or thereunder, (e) subject to an agreement containing provisions substantially the same as those of this Section 9.16, to (i) any actual or prospective assignee of or participant in any of its rights or obligations under this Agreement and the other Loan Documents or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower or any Subsidiary or any of their respective obligations, (f) with the consent of the Borrower or (g)   to the extent such Information becomes publicly available other than as a result of a breach of this Section 9.16. For the purposes of this Section, “ Information shall mean all information received from the Borrower or Holdings and related to the Borrower or Holdings or their business, other than any such information that was available to the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to its disclosure by the Borrower or Holdings. Any person required to maintain the confidentiality of Information as provided in this Section 9.16 shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person would accord its own confidential information.

 

SECTION 9.17. USA PATRIOT Act Notice. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies Holdings and the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies Holdings and the Borrower, which information includes the name and address of Holdings and the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify Holdings and the Borrower in accordance with the USA PATRIOT Act.

 

SECTION 9.18. Effect of Certain Inaccuracies. In the event that any financial statement or certificate delivered pursuant to Section 5.04(a) or (b) and Section 5.04(c),

 

104



 

respectively, is inaccurate (regardless of whether this Agreement or the Commitments are in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Percentage or a higher Commitment Fee for any period (an “ Applicable Period ”) than the Applicable Percentage or Commitment Fee applied for such Applicable Period, then (i) the Borrower shall promptly deliver to the Administrative Agent a corrected financial statement and a corrected compliance certificate for such Applicable Period, (ii) the Applicable Percentage and the Commitment Fee shall be determined based on the corrected compliance certificate for such Applicable Period, and (iii) the Borrower shall promptly pay to the Administrative Agent (for the accounts of the applicable Lenders during the Applicable Period or their successors and assigns) the accrued additional interest or additional Commitment Fees (or both) owing as a result of such increased Applicable Percentage or Commitment Fee for such Applicable Period.  This Section 9.18 shall not limit the rights of the Administrative Agent or the Lenders with respect to Section 2.07 or Article VII.

 

105


 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

 

STR ACQUISITION, INC.,

 

 

 

by

/s/ Jason Metakis

 

 

Name:

Jason Metakis

 

 

Title:

VP & Treasurer

 

 

 

 

 

STR HOLDINGS LLC,

 

 

 

by

/s/ Jason Metakis

 

 

Name:

Jason Metakis

 

 

Title:

VP & Treasurer

 

[First Lien Credit Agreement]

 



 

 

CREDIT SUISSE, CAYMAN ISLANDS

 

BRANCH, individually and as

 

Administrative Agent, Collateral Agent,

 

Swingline Lender and Issuing Bank,

 

 

 

by

/s/ Shanka Mohan

 

 

Name:

Shanka Mohan

 

 

Title:

Vice President

 

 

 

 

 

by

/s/ James Neira

 

 

Name:

James Neira

 

 

Title:

Associate

 

[First Lien Credit Agreement]

 



 

 

THE GOVERNOR AND COMPANY

 

OF THE BANK OF IRELAND,

 

as Lender,

 

 

 

by

/s/ Edward A. Boyle

 

 

Name:

Edward A. Boyle

 

 

Title:

Vice President

 

 

 

 

 

 

 

 

 

By

/s/ Paul Clarke

 

 

Name:

Paul Clarke

 

 

Title:

Director

 

[First Lien Credit Agreement]

 

2



 

 

       NATIXIS ,

 

as Lender,

 

 

 

 

 

 

by

/s/ Patric Lager

 

 

Name:

Patric Lager

 

 

Title:

Managing Director

 

 

 

 

 

 

 

 

 

by

/s/ Kelvin Cheng

 

 

Name:

Kelvin Cheng

 

 

Title:

Director

 

[First Lien Credit Agreement]

 

2


 

 

SCHEDULE 1.01(a)

Subsidiary Guarantors

 

Cal Safety Compliance Corporation

Specialized Technology Resources (International), Inc.

Shuster Laboratories, Inc.

Supply Chain Consulting Services Corporation

Specialized Technology Resources (Florida), Inc

STR Materials Science, Inc.

 

2



 

SCHEDULE 1.01(b)

Mortgaged Property

 

Property located at 10 Water Street, Enfield, CT 06082, described as follows:

 

That certain piece or parcel of land on the south side of Hazard Avenue (Route 190) in the Town of Enfield, County of Hartford and State of Connecticut, shown as “Parcel A” on Sheet 1 of 2 on a map or plan entitled: “Prepared for Springborn Laboratories, Inc. Hazard Avenue & Abbe Road, Enfield, Conn. . . Scale: 1 in. = 100 ft. Date: June 30, 1987. . . Rev. 2-24-88. . . Alford Associates, Inc. Civil Engineers, Windsor, Connecticut,” which map or plan is on file with the Enfield Town Clerk in Volume 220, Page 3033, and more particularly bounded and described as follows:

 

Beginning at a point on the south side of Hazard Avenue, which point is the northwest corner of the herein described premises and the northeast corner of land now or formerly of Raymond F. and Suzanne Aquilio, as shown on said map; running thence along the arc of a curve to the right having a radius of 933.00 feet and a delta angle of 9° 34' 03" a distance of 155.79 feet to a CHD marker; running thence N 83° 19' 04" E a distance of 414.00 feet to a CHD monument; running thence N 82° 58' 24" E a distance of 143.64 feet to a point, the last three courses running along the south side of Hazard Avenue; running thence S 09° 53' 12" E a distance of 435.66 feet along land now or formerly of National Railroad Passenger Corporation as shown on said map; running thence S 89° 20' 43" W a distance of 143.38 feet to a point; S 64° 08' 57" W a distance of 9.72 feet to a point; S 00° 09' 17" W a distance of 14.24 feet to a point; S 89° 08' 16" W a distance of 51.12 feet to a point; S 86° 57' 00" W a distance of 105.15 feet to a point; N 89° 55' 46" W a distance of 384.08 feet to a point; S 79° 44' 15" W a distance of 139.61 feet to a set iron pin; N 69° 59' 38" W a distance of 129.11 feet to a set iron pin, the last eight (8) courses being along the Scantic River as shown on said map; running thence N 24° 34' 57" E a distance of 401.37 feet along land now or formerly of Thomas E. and Diane S. Eastwood, James C. and Nancy A. Miczak and Raymond F. and Suzanne Aquilia, in part by each, to the point or place of beginning.

 

TOGETHER WITH an easement from the State of Connecticut to Springborn Testing & Research, Inc. dated December 31, 1997 and recorded in Volume 1156, Page 123 of the Enfield Land Records.

 

3



 

Schedule 2.01
Lenders and Commitments

 

 

 

First Lien

 

Revolver

 

 

 

 

 

Term Loan

 

Loan

 

 

 

 

 

Commitment

 

Commitment

 

 

 

 

 

on Closing

 

on Closing

 

Total Commitment on

 

Lender

 

Date

 

Date

 

Closing Date

 

Credit Suisse

 

$

160,000,000

 

$

9,500,000

 

$

169,500,000

 

 

 

 

 

 

 

 

 

Natixis

 

Patric Lager

Business Phone: 212-872-5030

EMail: patric.lager@nyc.nxbp.com

 

Kelvin Cheng

Business Phone: 212-872-5067

EMail: kelvin.cheng@natixis.us

 

$

15,000,000

 

$

7,500,000

 

$

22,500,000

 

 

 

 

 

 

 

 

 

Bank of Ireland

 

Ed Boyle

Business Phone: 203-391-5922

EMail: ed.boyle@boimail.com

 

Paul Clarke

Business Phone: 203-861-8983

EMail: paul.clarke@boimail.com

 

$

10,000,000

 

$

3,000,000

 

$

13,000,000

 

 

 

 

 

 

 

 

 

TOTAL COMMITMENT

 

$

185,000,000

 

$

20,000,000

 

$

205,000,000

 

 



 

SCHEDULE 3.08

 

Subsidiaries

 

STR Acquisition, Inc. — 100% owned by STR Holdings LLC

 

Specialized Technology Resources, Inc. (“STR”) (to be the survivor of merger with STR Acquisition, Inc.; thereafter to be 100% owned by STR Holdings LLC.

 

(a)

 

(Unless otherwise noted, STR owns 100% of the equity securities of each subsidiary)

 

 

 

1.

 

Specialized Technology Resources (Singapore) Pte Ltd (100% of voting stock owned by STR; small portion of non-voting stock owned by STR-HK)

 

 

 

2.

 

Specialised Technology Resources (UK) Limited (“STR-UK”)

 

 

 

3.

 

Cal Safety Compliance Corporation (“CSCC”)

 

 

 

4.

 

Cal Safety Compliance Corporation de CV (Gregory Gardner owns one share of the 50 outstanding shares; remaining shares owned by CSCC)

 

 

 

5.

 

Specialized Technology Resources Laboratuar Hizmetleri Anonim Sirketi (99% owned by Company, .25% owned by each of STR-UK, STR-HK, STRAG and CSCC).

 

 

 

6.

 

STR Laboratuar Hizmetleri ve Gozetim Ltd. (dormant)

 

 

 

7.

 

STR-Registrar LLC (51% owned by STR; 49% owned by Science, Technology and Registration Holdings, Inc. (formerly Quality Paradigms))

 

 

 

8.

 

Specialized Technology Resources (International), Inc. (“STR-I”)

 

 

 

9.

 

Specialized Technology Resources (Taiwan) Ltd. (owned by STR-I)

 

 

 

10.

 

Specialized Technology Resources (Hong Kong) Ltd. (“STR-HK”) (Dennis Jilot owns one share of the 120,002 outstanding shares and remaining shares owned by STR-I)

 

 

 

11.

 

Specialized Technology Resources (Shanghai) Ltd. (owned by STR-HK)

 

 

 

12.

 

STR Testing & Inspection AG (“STR AG”) (owned by STR-I)

 

 

 

13.

 

Specialized Technology Resources España S.A.

 

 

 

14.

 

Shuster Laboratories, Inc.

 

 

 

15.

 

Supply Chain Consulting Services Corporation (dormant)

 

 

 

16.

 

Specialized Technology Resources (India) Pvt Ltd. (Samir Rastogi owns 1 share of the 5,000 outstanding shares; remaining shares owned by STR)

 

 

 

17.

 

Specialized Technology Resources (Florida), Inc.

 

 

 

18.

 

Specialised Technology Resources Lanka (Private) Limited (50% owned by STR; 50% owned by STR-I)

 

 

 

19.

 

STR Materials Science, Inc. (dormant)

 

 

 

20.

 

Tex Analysis Laboratory Private Limited (owned by STR-HK)

 

 

 

21.

 

STR Vietnam Co. Ltd. (owned by STR-HK)

 

5



 

(b)               Joint Ventures

 

STR France S.A.S. (STR-UK owns a 50% interest)

 

CTC Asia Ltd. (STR owns 50%)

 

6



 

SCHEDULE 3.09

 

Litigation

 

1.             Specialized Technology Resources, Inc. (“STR”) is aware of certain inquiries in India with respect to the former operations of Cal Safety Compliance Corporation (“CSCC”) in India by the Enforcement Directorate concerning the manner in which it was conducting business in India and its authority to do so. These inquiries are ongoing and during the course of them a current employee of STR in India was questioned but no further steps have been taken.

 

2.             The local manager of CSCC in India has received a complaint dated August 19, 2005, filed in the Court of the Judicial Magistrate at Gurgaon, alleging certain improprieties on a website maintained by CSCC with respect to the display of the map of India and the Indian national flag. This matter is ongoing.

 

3.             On April 17, 2006, a proceeding was initiated against Specialized Technology Resources Espana S.A. by the family of a worker injured at its plant in Spain. The proceeding is criminal in nature at this time, but as is custom in Spain, it is expected that civil claims will arise relating to this claim. Specialized Technology Resources España S.A. has local counsel and has referred the matter to its insurer.

 

7



 

SCHEDULE 3.17

 

Environmental Matters

 

None.

 

8



 

Schedule 3.18
Insurance

Type of Insurance

 

Policy Number

 

Carrier

Domestic Commercial General Liability

 

10CESOA9276

 

The Hartford (Twin City Fire)

 

 

 

 

 

Commercial Umbrella Liability

 

AUC591925100

 

American Guarantee & Liability (Zurich)

 

 

 

 

 

D & O/EPL

 

626-00-58

 

AIG — Illinois National Ins. Co.

 

 

 

 

 

Forefront Portfolio Crime & Fiduciary Liability

 

8185-3181

 

Federal Insurance Company (Chubb)

 

 

 

 

 

Forefront Portfolio Kidnap/Ransom & Extortion

 

6804-1625

 

Federal Insurance Company (Chubb)

 

 

 

 

 

Errors & Omissions (Professional Liability)

 

1155784

 

Lexington Insurance

 

 

 

 

 

Foreign General Liability

 

GBO2901067

 

St. Paul Travelers

 

 

 

 

 

Global Marine/War Cargo

 

M-20159, WC-20159

 

Falvey Cargo

 

 

 

 

 

Flood Policies

 

2043437800
1011190076
2044479400
2044479500

 

American Bankers Ins. Co. of Florida

 

 

 

 

 

War Risk Coverage

 

8034573

 

AIG Life Ins. Co.

 

 

 

 

 

Adjustable Premium Term Life Insurance Policy (John F. Gual)

 

11305750

 

Massachusetts Mutual Life Insurance Company

 

 

 

 

 

Adjustable Premium Term Life Insurance Policy (Dennis Jilot)

 

1116S207

 

Massachusetts Mutual Life Insurance Company

 

 

 

 

 

Worldwide Property

 

GPAD3601751-A

 

ACE American Insurance Company

 

 

 

 

 

Workers Compensation

 

WCJZ91445093027

 

WAUSAU, Member of Liberty Mutual Group

 

 

 

 

 

Commercial Automobile

 

ASJZ91445093017

 

WAUSAU, Member of Liberty Mutual Group

 

9


 

Schedule 3.19(a)

UCC Filing Offices

 

Grantor

 

Filing Office(s)

STR Holdings LLC

 

Delaware Secretary of State

 

 

 

STR Acquisition, Inc.

 

Delaware Secretary of State

 

 

 

Specialized Technology Resources, Inc.

 

Delaware Secretary of State

Enfield, Connecticut Town Clerk

Somers, Connecticut Town Clerk

 

 

 

Cal Safety Compliance Corporation

 

California Secretary of State

Los Angeles County Registrar-Recorder/County Clerk

Hudson County, NJ

 

 

 

Specialized Technology Resources (International), Inc.

 

Delaware Secretary of State

 

 

 

Shuster Laboratories, Inc.

 

Delaware Secretary of State

Norfolk County (MA) Registry of Deeds

 

 

 

Supply Chain Consulting Services Corporation

 

Delaware Secretary of State

Los Angeles County Registrar-Recorder/County Clerk

 

 

 

Specialized Technology Resources (Florida), Inc.

 

FloridaUCC, Inc.

St. Johns County Circuit Court

 

 

 

STR Materials Science, Inc.

 

Delaware Secretary of State

 



 

Schedule 3.19(c)

 

Mortgage Filing Offices

 

Mortgage on the property owned by Specialized Technology Resources, Inc. located at 10 Water Street, Enfield, Connecticut to be filed in the Land Records of the Town of Enfield, Connecticut maintained by the Town Clerk of Enfield, Connecticut.

 



 

Schedule 3.20(a)

 

Owned Real Property

 

Address

 

Owned

 

Entity

10 Water Street
Enfield, CT 06082

 

Owned

 

Specialized Technology Resources, Inc.

 

Credit Agreement

 



 

Schedule 3.20(b)

 

Leased Real Property

 

Address

 

Leased

 

Entity

24 Scitico Road
Somers, CT

 

Leased

 

Specialized Technology Resources, Inc.

 

 

 

 

 

66 Hudson Street, 1 st
Floor, Hoboken, NJ

 

Leased

 

Cal Safety Compliance Corporation

 

 

 

 

 

1122 West Washington
Boulevard, Los Angeles,
CA

 

Leased

 

Cal Safety Compliance Corporation

 

 

 

 

 

Units 425-427, 4 th  Floor,
Hankow Center, 5-155
Hankow Road, Tsim Sha
Tsui, Kowloon, HK

 

Leased

 

Cal Safety Compliance Corporation

 

 

 

 

 

House #162, 3 rd  Floor,
Road #1 (East), D.O.S.H.,
Baridhara, Gulshan,
Bangladesh 12121

 

Leased

 

Cal Safety Compliance Corporation

 

 

 

 

 

JL Barito II No. 33
Kebayoran Baru, Jakarta,
Indonesia 12130

 

Leased

 

Cal Safety Compliance Corporation

 

 

 

 

 

85 John Road, Canton,
MA 02021

 

Leased

 

Shuster Laboratories, Inc.

 

 

 

 

 

30 Iroquois Street, Saint
Augustine, FL 32085

 

Leased

 

Specialized Technology Resources (Florida), Inc.

 



 

Schedule 6.01

 

Existing Indebtedness

 

1.                                        Letter of Support dated February 2, 2006 to Lee Seng Chan & Co. (the auditors of Specialized Technology Resources (Singapore) Pte. Ltd.).

 

2.                                        Master Equipment Lease with Key Equipment Finance, dated September 16, 2005.

 

3.                                        Reimbursement Agreement dated January 14, 2007 between Specialized Technology Resources, Inc. and Webster Bank relating to Letter of Credit number 10304 dated January 9, 2007 for $821,684 in favor of Macro Engineering & Technology, Inc.

 

4.                                        Assignment of Certificate of Deposit dated June 14, 2007 made by Specialized Technology Resources, Inc. in favor of Webster Bank relating to the Assignment of an $862,768 Certificate of Deposit as collateral for Specialized Technology Resources, Inc.’s obligations under the Reimbursement Agreement set forth in item 3 above.

 



 

Schedule 6.02

 

Existing Liens

 

UCC Liens

 

Grantor

 

Secured Party

 

Jurisdiction

 

Date and File
Number

STR Holdings LLC

 

None

 

Delaware Secretary of State

 

 

 

 

 

 

 

 

 

STR Acquisition, Inc.

 

None

 

Delaware Secretary of State

 

 

 

 

 

 

 

 

 

Specialized Technology Resources, Inc.

 

ISO Capital, LLC

 

 

Key Equipment Finance, Inc.

 

 

None

 

 

None

 

Delaware Secretary of State

 

 

Delaware Secretary of State

 

 

 

Enfield, Connecticut Town Clerk

 

Somers, Connecticut Town Clerk

 

12/11/02

2309129 9

 

9/21/05

 

5292107 1

 

 

 

 

 

 

 

Cal Safety Compliance Corporation

 

None

 

 

 

None

 

Los Angeles County Registrar-Recorder/County Clerk

 

Hudson County (NJ) Register

 

 

 

 

 

 

 

 

 

Specialized Technology Resources (International), Inc.

 

None

 

 

 

 

 



 

Shuster Laboratories, Inc.

 

Key Equipment Finance, Inc.

 

 

None

 

Delaware Secretary of State

 

 

Norfolk County (MA) Registry of Deeds

 

9/21/05

5292107 1

 

 

 

 

 

 

 

STR Acquisition Sub, Inc. (now known as Shuster Laboratories, Inc.)

 

None

 

 

None

 

Delaware Secretary of State

 

Norfolk County (MA) Registry of Deeds

 

 

 

 

 

 

 

 

 

Supply Chain Consulting Services Corporation

 

None

 

Los Angeles County Registrar- Recorder/County Clerk

 

 

 

 

 

 

 

 

 

Specialized Technology Resources (Florida), Inc.

 

None

 

St. Johns County Circuit Court

 

 

 

 

 

 

 

 

 

Conplex, Inc., (now known as Specialized Technology Resources (Florida), Inc.)

 

Toyota Motor Credit Corporation

 

Florida Secured Transaction Registry

 

7/1/04
200407315878

 

 

 

 

 

 

 

 

 

None

 

St. Johns County Circuit Court

 

 

 

 

 

 

 

 

 

STR Materials Science, Inc.

 

None

 

Delaware Secretary of State

 

 

 

Permitted Encumbrances

 

1.

 

Taxes to the Town of Enfield not yet due and payable.

 

 

 

2.

 

Fire Taxes to the City of Enfield; which payments are current and not yet due and payable.

 

 

 

3.

 

The following matters as shown on the map filed in Map Volume 220, Page 3033 in the Office of the Enfield Town Clerk:

 

 

 

 

 

a.

Sanitary sewer easement and rights to construct and maintain drainage structures; and

 

 

 

 

 

 

b.

Notes shown thereon.

 



 

4.

 

Pole line easement in favor of the Connecticut Light and Power Company dated August 6, 1956 and recorded in Volume 151, Page 241 of the Enfield Land Records.

 

 

 

5.

 

Pole line easement in favor of the Connecticut Light and Power Company dated July 21, 1938 and recorded in Volume 84, Page 240 of the Enfield Land Records.

 

 

 

6.

 

Easement in favor of Hazardville Water Company recorded in Volume 107, Page 2 of the Enfield Land Records.

 

 

 

7.

 

Easement in favor of the Town of Enfield described in deed from DeBell & Richardson, Inc. dated July 10, 1984 and recorded in Volume 386, Page 443 of the Enfield Land Records.

 

 

 

8.

 

Permanent Right of Way Easement in favor of the State of Connecticut dated July 29, 1996 and recorded in Volume 1156, Page 131 of the Enfield Land Records. See also maps filed in Map Volume 220, Page 3037 and Map Volume 239, Pages 3968 and 3969 in the Office of the Enfield Town Clerk.

 

 

 

9.

 

Rights of others in and to any water courses on, touching or flowing through the premises.

 

 

 

10.

 

Possible public easement of use and enjoyment of the beach or shore area above the low water mark of the Scantic River.

 

 

 

11.

 

Terms and conditions of Easement from the State of Connecticut to Springborn Testing & Research, Inc. dated December 31, 1997 and recorded in Volume 1156, Page 123 of the Enfield Land Records (affects appurtenant rights only).

 

 

 

12.

 

Matters on a survey entitled “Improvement Location Survey Prepared For Specialized Technology Resources 504 Hazard Avenue a.k.a 10 Water Street Enfield, Conn.” Prepared by Alford Associates, Inc. Scale 1 In.= 30 Ft. Date: Feb. 20, 1996 Rev. 8-13-01 Updated Survey, Change Title Block:

 

 

 

 

 

a.

25’ side yard set back lines;

 

 

b.

concrete supports for oil tanks (oil tanks removed);

 

 

c.

encroaching drainage on the easterly property line;

 

 

d.

lean to shed encroaches 3.4” on the easterly property line;

 

 

e.

conc. retaining wall on the southerly property line;

 

 

f.

property line follows face of building on the southerly property line;

 

 

g.

dam on the southerly property line;

 

 

h.

Scantic River along southerly property line;

 

 

i.

Brook;

 

 

j.

Outlet pipes which encroach on the northerly property line;

 

 

k.

Existing culvert on the northerly property line;

 

 

l.

40’ set back line;

 

 

m.

water lines;

 

 

n.

gas lines; and

 

 

o.

Water Street (abandoned).

 

 

p.

Notes on said map.

 



 

13.

 

Sanitary Sewer Easement is shown per Water Street Sanitary Sewer Plan and Easement reserved to the Town of Enfield per Council Action Feb.10, 1975.

 

 

 

14.

 

Parcel may be subject to rights to construct and maintain drainage structure and rip rap acquired from Gordon Brothers by Connecticut D.O.T. per plan number 266, Sheet 2 of 2, April 30, 1930.

 

 

 

15.

 

Possible rights of others for ingress and egress over abandoned portion of Water Street.

 

 

 

16.

 

Possible rights of others as defined in the Council Minutes dated February 10, 1975 for the abandonment of Water Street.

 

 

 

17.

 

Assignment of Certificate of Deposit dated June 14, 2007 made by Specialized Technology Resources, Inc. in favor of Webster Bank relating to the Assignment of an $862,768 Certificate of Deposit as collateral for Specialized Technology Resources, Inc.’s obligations under the Reimbursement Agreement set forth in item 3 of Schedule 6.01 above.

 


 

EXHIBIT A

 

[FORM OF]

 

ADMINISTRATIVE QUESTIONNAIRE

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.

 

Agent Information

Agent Closing Contact

Credit Suisse

Fay Rollins

Eleven Madison Avenue

Tel: 212-325-9041

New York, NY 10010

Fax: 212-743-1422

 

E-Mail: fay.rollins@credit-suisse.com

 

Agent Wire Instructions

Bank of New York

ABA 021000018

Account Name: CSFB Agency Cayman Account

Account Number: 8900492627

 

It is very important that all of the requested information be completed accurately and that this questionnaire be returned promptly. If your institution is sub-allocating its allocation, please fill out an administrative questionnaire for each legal entity.

 

Legal Name of Lender to appear in Documentation:

 

 

Signature Block Information:

 

 

 

·

Signing Credit Agreement

o Yes

o No

 

 

 

 

 

 

·

Coming in via Assignment

o Yes

o No

 

Type of Lender:

 

 

(Bank, Asset Manager, Broker/Dealer, CLO/CDO; Finance Company, Hedge Fund, Insurance, Mutual Fund, Pension Fund, Other Regulated Investment Fund, Special Purpose Vehicle, Other-please specify)

 

Lender Parent:

 

 

Lender Domestic Address

 

Lender Eurodollar Address

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Contacts/Notification Methods: Borrowings, Paydowns, Interest, Fees, etc.

 

 

 

Primary Credit Contact

 

Secondary Credit Contact

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

Company:

 

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Telephone:

 

 

 

 

 

 

 

 

 

Facsimile:

 

 

 

 

 

 

 

 

 

E-Mail Address:

 

 

 

 

 

 

 

Primary Operations Contact

 

Secondary Operations Contact

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

Company:

 

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

Address:

 

 

 

 

 

Lender’s Domestic Wire Instructions

 

Bank Name:

 

 

 

ABA/Routing No.:

 

 

 

Account Name:

 

 

 

Account No.:

 

 

 

FFC Account Name:

 

 

 

FFC Account No.:

 

 

 

Attention:

 

 

 

Reference:

 

 

2



 

Tax Documents

 

NON-U.S. LENDER INSTITUTIONS :

 

I. Corporations :

If your institution is incorporated outside of the United States for U.S. federal income tax purposes, and is the beneficial owner of the interest and other income it receives, you must complete one of the following three tax forms, as applicable to your institution: a.) Form W-8BEN (Certificate of Foreign Status of Beneficial Owner), b.) Form W-8ECI (Income Effectively Connected to a U.S. Trade or Business), or c.) Form W-8EXP (Certificate of Foreign Government or Governmental Agency).

 

A U.S. taxpayer identification number is required for any institution submitting Form W-8ECI. It is also required on Form W-8BEN for certain institutions claiming the benefits of a tax treaty with the U.S. Please refer to the instructions when completing the form applicable to your institution. In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms. An original tax form must be submitted.

 

II. Flow-Through Entities :

If your institution is organized outside the U.S., and is classified for U.S. federal income tax purposes as either a Partnership, Trust, Qualified or Non-Qualified Intermediary, or other non-U.S. flow-through entity, an original Form W-8IMY (Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding) must be completed by the intermediary together with a withholding statement. Flow-through entities other than Qualified Intermediaries are required to include tax forms for each of the underlying beneficial owners.

 

Please refer to the instructions when completing this form. In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms. Original tax form(s) must be submitted.

 

U.S. LENDER INSTITUTIONS :

 

If your institution is incorporated or organized within the United States, you must complete and return Form W-9 (Request for Taxpayer Identification Number and Certification). Please be advised that we request that you submit an original Form W-9.

 

Pursuant to the language contained in the tax section of the Credit Agreement, the applicable tax form for your institution must be completed and returned prior to the first payment of income. Failure to provide the proper tax form when requested may subject your institution to U.S. tax withholding.

 

3



 

EXHIBIT B

 

[FORM OF]

 

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the First Lien Credit Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ”), among Specialized Technology Resources, Inc. (successor by merger to STR Acquisition, Inc.), a Delaware corporation (the Borrower ”), STR Holdings LLC, a Delaware limited liability company (“ Holdings ”), the lenders from time to time party thereto (the Lenders ”) and Credit Suisse, as administrative agent (in such capacity, the Administrative Agent ”) and as collateral agent for the Lenders. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Credit Agreement.

 

1.          The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below (but not prior to the registration of the information contained herein in the Register pursuant to Section 9.04(e) of the Credit Agreement), the interests set forth below (the Assigned Interest ”) in the Assignor’s rights and obligations under the Credit Agreement and the other Loan Documents, including, without limitation, the amounts and percentages set forth below of (i) the Commitments of the Assignor on the Effective Date and (ii) the Loans owing to the Assignor which are outstanding on the Effective Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 9.04(c) of the Credit Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement; provided that the obligations of the Assignor under Section 9.16 of the Credit Agreement shall survive the execution of this Assignment and Acceptance and the assignment of interests effected hereby.

 

2.           This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is organized under the laws of a jurisdiction outside the United States, any forms referred to in Section 2.20(e) of the Credit Agreement, duly completed and executed by such Assignee, (ii) if the Assignee is not already a Lender under the Credit Agreement, a completed Administrative Questionnaire and (iii) if required by Section 9.04(b) of the Credit Agreement, a processing and recordation fee of $3,500.

 

3.           This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York.

 



 

Date of Assignment:

 

Legal Name of Assignor (“ Assignor ”):

 

Legal Name of Assignee (“ Assignee ”):

 

Effective Date of Assignment (“ Effective Date ”):

 

Facility/Commitment

 

Principal Amount
Assigned(1)

 

Percentage Assigned of
Commitment(1) (set forth, to at least

8 decimals, as a percentage of the
Facility and the aggregate
Commitments of all Lenders
thereunder)

 

Loans/Commitments

 

$

 

%

 

 

[Remainder of page intentionally left blank]

 


(1) Amount of Commitments and/or Loans assigned is governed by Section 9.04(b) of the Credit Agreement.

 

2



 

The terms set forth above are hereby agreed to:

 

Accepted:

 

 

 

                                         , as Assignor,

 

[CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent]( 2),

 

 

 

by:

 

 

 

 

 

 

 

 

 

 

Name:

 

by:

 

 

Title:

 

 

 

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

 

                                        , as Assignee,

 

by:

 

 

 

 

 

 

 

 

 

 

Name:

by:

 

 

 

Title:

 

 

 

 

 

Name:

 

 

 

Title:

 

 

 


(2) To the extent required under the Credit Agreement.

 

3



 

EXHIBIT C

 

[FORM OF]

 

BORROWING REQUEST

 

Credit Suisse, as Administrative Agent

Eleven Madison Avenue

New York, New York 10010

 

ATTN: Agency Group

[DATE](l)

 

Ladies and Gentlemen:

 

The undersigned, STR ACQUISITION, INC., a Delaware corporation (the Borrower ”), refers to the First Lien Credit Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ”), among the Borrower, STR Holdings LLC, a Delaware limited liability company (“ Holdings ”), the lenders from time to time party thereto (the Lenders ”) and Credit Suisse, as administrative agent (in such capacity, the Administrative Agent ”) and as collateral agent for the Lenders. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

 

The Borrower hereby gives you notice pursuant to Section 2.03 of the Credit Agreement that it requests a Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Borrowing is requested to be made:

 

(A)

 

Type of Borrowing:(2)

 

 

 

 

 

 

 

(B)

 

Date of Borrowing:(3)

 

 

 

 

 

 

 

(C)

 

Account Number and Location:

 

 

 

 

 

 

 

(D)

 

Principal Amount of Borrowing:

 

 

 

 

 

 

 

(E)

 

Interest Period:(4)

 

 

 


(1)

 

Must be notified irrevocably by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon (New York City time), three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 noon (New York City time), one Business Day before a proposed Borrowing, in each case to be promptly confirmed by hand delivery or fax.

 

 

 

(2)

 

Specify whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing.

 

 

 

(3)

 

Date of Borrowing must be a Business Day.

 

 

 

(4)

 

If such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto.

 



 

The Borrower hereby represents and warrants to the Administrative Agent and the Lenders that, on the date of this Borrowing Request and on the date of the related Borrowing, the conditions to lending specified in paragraphs (b) and (c) of Section 4.01 of the Credit Agreement have been satisfied.

 

 

STR ACQUISITION, INC.

 

 

 

by

 

 

 

 

 

 

Name:

 

 

Title:

 

2


 

EXHIBIT D

 

[FORM OF]

FIRST LIEN GUARANTEE AND COLLATERAL AGREEMENT



 

EXECUTION COPY

 

 

 

FIRST LIEN GUARANTEE AND COLLATERAL AGREEMENT

 

dated as of

 

June 15, 2007

 

among

 

STR ACQUISITION, INC.,

 

STR HOLDINGS LLC,

 

the Subsidiaries of the Borrower

from time to time party hereto

 

and

 

CREDIT SUISSE,

as Collateral Agent

 

 

[CS&M Ref. No. 5865-531]

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

 

 

Definitions

 

 

 

SECTION 1.01.

Credit Agreement

1

SECTION 1.02.

Other Defined Terms

2

 

 

 

ARTICLE II

 

 

Guarantee

 

 

 

SECTION 2.01.

Guarantee

6

SECTION 2.02.

Guarantee of Payment

6

SECTION 2.03.

No Limitations, Etc.

7

SECTION 2.04.

Reinstatement

8

SECTION 2.05.

Agreement To Pay; Subrogation

8

SECTION 2.06.

Information

8

 

 

 

ARTICLE III

 

 

Pledge of Securities

 

 

 

SECTION 3.01.

Pledge

9

SECTION 3.02.

Delivery of the Pledged Collateral

9

SECTION 3.03.

Representations, Warranties and Covenants

10

SECTION 3.04.

Certification of Limited Liability Company Interests and Limited Partnership Interests

11

SECTION 3.05.

Registration in Nominee Name; Denominations

11

SECTION 3.06.

Voting Rights; Dividends and Interest, Etc.

12

 

 

 

ARTICLE IV

 

 

Security Interests in Personal Property

 

 

 

SECTION 4.01.

Security Interest

14

SECTION 4.02.

Representations and Warranties

15

SECTION 4.03.

Covenants

17

SECTION 4.04.

Other Actions

20

SECTION 4.05.

Covenants Regarding Patent, Trademark and Copyright Collateral

23

 



 

ARTICLE V

 

 

Remedies

 

 

 

SECTION 5.01.

Remedies Upon Default

25

SECTION 5.02.

Application of Proceeds

26

SECTION 5.03.

Grant of License to Use Intellectual Property

27

SECTION 5.04.

Securities Act, Etc.

27

 

 

 

ARTICLE VI

 

 

Indemnity, Subrogation and Subordination

 

 

 

SECTION 6.01.

Indemnity and Subrogation

28

SECTION 6.02.

Contribution and Subrogation

29

SECTION 6.03.

Subordination

29

 

 

 

ARTICLE VII

 

 

Miscellaneous

 

 

 

SECTION 7.01.

Notices

29

SECTION 7.02.

Security Interest Absolute

30

SECTION 7.03.

Survival of Agreement

30

SECTION 7.04.

Binding Effect; Several Agreement

30

SECTION 7.05.

Successors and Assigns

30

SECTION 7.06.

Collateral Agent’s Fees and Expenses; Indemnification

31

SECTION 7.07.

Collateral Agent Appointed Attorney-in-Fact

31

SECTION 7.08.

Applicable Law

32

SECTION 7.09.

Waivers; Amendment

32

SECTION 7.10.

WAIVER OF JURY TRIAL

33

SECTION 7.11.

Severability

33

SECTION 7.12.

Counterparts

33

SECTION 7.13.

Headings

33

SECTION 7.14.

Jurisdiction; Consent to Service of Process

34

SECTION 7.15.

Termination or Release

34

SECTION 7.16.

Additional Subsidiaries

35

SECTION 7.17.

Right of Setoff

35

 

ii



 

Schedules

 

 

 

 

 

Schedule I

Subsidiary Guarantors

 

Schedule II

Equity Interests; Pledged Debt Securities

 

Schedule III

Intellectual Property

 

 

 

 

Exhibits

 

 

 

 

 

Exhibit A

Form of Supplement

 

Exhibit B

Form of Perfection Certificate

 

 

iii



 

FIRST LIEN GUARANTEE AND COLLATERAL AGREEMENT dated as of June 15, 2007 (this Agreement ), among STR ACQUISITION, INC., a Delaware corporation, which substantially simultaneously with the execution hereof shall be merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation ( STR ), with STR being the surviving entity (the Borrower ), STR HOLDINGS LLC, a Delaware limited liability company ( Holdings ) , the Subsidiaries of the Borrower from time to time party hereto and CREDIT SUISSE ( Credit Suisse ), as collateral agent (in such capacity, the Collateral Agent ).

 

PRELIMINARY STATEMENT

 

Reference is made to the First Lien Credit Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement” ) , among the Borrower, Holdings, the lenders from time to time party thereto (the Lenders ) and Credit Suisse, as administrative agent (in such capacity, the Administrative Agent ) and Collateral Agent.

 

The Lenders and the Issuing Bank (such term and each other capitalized term used but not defined in this preliminary statement having the meaning given or ascribed to it in Article I) have agreed to extend credit to the Borrower pursuant to, and upon the terms and conditions specified in, the Credit Agreement. The obligations of the Lenders and the Issuing Bank to extend credit to the Borrower are conditioned upon, among other things, the execution and delivery of this Agreement by the Borrower and each Guarantor. Each Guarantor is an affiliate of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement and is willing to execute and deliver this Agreement in order to induce the Lenders and the Issuing Bank to extend such credit. Accordingly, the parties hereto agree as follows:

 

ARTICLE I

 

Definitions

 

SECTION 1.01. Credit Agreement. (a)   Capitalized terms used in this Agreement and not otherwise defined herein have the meanings set forth in the Credit Agreement. All capitalized terms defined in the New York UCC (as such term is defined herein) and not defined in this Agreement have the meanings specified therein. All references to the Uniform Commercial Code shall mean the New York UCC.

 

(b) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to this Agreement.

 



 

SECTION 1.02. Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

 

“Accounts Receivable” shall mean all Accounts and all right, title and interest in any returned goods, together with all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired.

 

“Administrative Agent” shall have the meaning assigned to such term in the preliminary statement.

 

“Article 9 Collateral” shall have the meaning assigned to such term in Section 4.01.

 

“Assignment of Distributions” shall mean the assignment of distribution substantially in the form of Exhibit C.

 

“Borrower” shall have the meaning assigned to such term in the preamble.

 

“Collateral” shall mean the Article 9 Collateral and the Pledged Collateral.

 

“Collateral Agent” shall have the meaning assigned to such term in the preamble.

 

“Copyright License” shall mean any written agreement, now or hereafter in effect, granting any right to any third person under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third person, and all rights of such Grantor under any such agreement.

 

“Copyrights” shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office (or any successor office or any similar office in any other country), including those listed on Schedule III.

 

“Excluded Assets” shall mean (a) any lease, license, contract, property right or agreement to which any Grantor is a party or any of its rights or interests thereunder if and only for so long as the grant of a security interest hereunder shall constitute or result in a breach, termination or default under any such lease, license, contract, property right or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of any relevant jurisdiction or any other applicable law or principles of equity); provided,

 

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however, that any portion of any such lease, license , contract, property right or agreement shall cease to constitute an Excluded Asset pursuant to this clause at the time and to the extent that the grant of security interest therein does not result in any of the consequences specified above, (b) motor vehicles the perfection of a security interest in which is excluded from the Uniform Commercial Code in the relevant jurisdiction, (c) interests in real property, (d) any Equity Interest in an Excluded Entity and (e) any application to register Trademarks in the U.S. Patent and Trademark Office based upon Grantor’s “intent to use” such Trademark (but only if the grant of security interest to such intent-to-use Trademark violates 15 U.S.C. § 1060(a)) unless and until a “Statement of Use” or “Amendment to Allege Use” is filed in the U.S. Patent and Trademark Office with respect thereto, at which point the Collateral shall include, and the security interest granted hereunder shall attach to, such application.

 

“Excluded Entity” shall mean each of (i) STR-Registrar LLC, (ii) CTC Asia Ltd. and (iii) Specialized Technology Resources (India) Pvt Ltd. to the extent that the necessary governmental consents to make a valid and enforceable pledge of 66% of its issued and outstanding stock to the Collateral Agent have not been obtained.

 

“Federal Securities Laws” shall have the meaning assigned to such term in Section 5.04.

 

“General Intangibles” shall mean all choses in action and causes of action and all other intangible personal property of any Grantor of every kind and nature (other than Accounts) now owned or hereafter acquired by any Grantor, including all rights and interests in partnerships, limited partnerships, limited liability companies and other unincorporated entities, corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Hedging Agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts.

 

“Grantors” shall mean the Borrower and the Guarantors.

 

“Guarantors” shall mean Holdings and the Subsidiary Guarantors.

 

“Holdings” shall have the meaning assigned to such term in the preamble.

 

“Intellectual Property” shall mean all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

 

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“License” shall mean any Patent License, Trademark License, Copyright License or other license or sublicense agreement relating to Intellectual Property to which any Grantor is a party, including those listed on Schedule III.

 

“Loan Document Obligations” shall mean (a) the due and punctual payment of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations of the Borrower to any of the Secured Parties under the Credit Agreement and each of the other Loan Documents, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower under or pursuant to the Credit Agreement and each of the other Loan Documents, and (c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to this Agreement and each of the other Loan Documents.

 

“New York UCC” shall mean the Uniform Commercial Code as from time to time in effect in the State of New York.

 

“Obligations” shall mean (a) the Loan Document Obligations and (b) the due and punctual payment and performance of all obligations of each Loan Party under each Hedging Agreement that (i) is in effect on the Closing Date with a counterparty that is the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender as of the Closing Date or (ii) is entered into after the Closing Date with any counterparty that is the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender at the time such Hedging Agreement is entered into.

 

“Patent License” shall mean any written agreement, now or hereafter in effect, granting to any third person any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now or hereafter owned by any third person, is in existence, and all rights of any Grantor under any such agreement.

 

“Patents” shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office (or any successor or any similar offices in any other country),

 

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including those listed on Schedule III, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

 

“Perfection Certificate” shall mean a certificate substantially in the form of Exhibit B, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of the Borrower.

 

“Pledged Collateral” shall have the meaning assigned to such term in Section 3.01.

 

“Pledged Debt Securities” shall have the meaning assigned to such term in Section 3.01.

 

“Pledged Securities” shall mean any promissory notes, stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

 

“Pledged Stock” shall have the meaning assigned to such term in Section 3.01.

 

“Secured Parties” shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) any Issuing Bank, (e) each counterparty to any Hedging Agreement with a Loan Party that either (i) is in effect on the Closing Date if such counterparty is the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender as of the Closing Date or (ii) is entered into after the Closing Date if such counterparty is the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender at the time such Hedging Agreement is entered into, (f) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (g) the successors and assigns of each of the foregoing.

 

“Security Interest” shall have the meaning assigned to such term in Section 4.01.

 

“Subsidiary Guarantor” shall mean (a) the Subsidiaries identified on Schedule I hereto as Subsidiary Guarantors and (b) each other Subsidiary that becomes a party to this Agreement as a Subsidiary Guarantor after the Closing Date; provided, however, that in no event shall STR-Registrar LLC become a Subsidiary Guarantor.

 

“Trademark License” shall mean any written agreement, now or hereafter in effect, granting to any third person any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third person, and all rights of any Grantor under any such agreement.

 

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“Trademarks” shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office (or any successor office) or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule III, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.

 

“Unfunded Advances/Participations” shall mean (a) with respect to the Administrative Agent, the aggregate amount, if any (i) made available to the Borrower on the assumption that each Lender has made its portion of the applicable Borrowing available to the Administrative Agent as contemplated by Section 2.02(d) of the Credit Agreement and (ii) with respect to which a corresponding amount shall not in fact have been returned to the Administrative Agent by the Borrower or made available to the Administrative Agent by any such Lender, (b) with respect to the Swingline Lender, the aggregate amount, if any, of participations in respect of any outstanding Swingline Loan that shall not have been funded by the Revolving Facility Lenders in accordance with Section 2.22(e) of the Credit Agreement and (c) with respect to any Issuing Bank, the aggregate amount, if any, of participations in respect of any outstanding L/C Disbursement that shall not have been funded by the Revolving Facility Lenders in accordance with Sections 2.23(d) and 2.02(f) of the Credit Agreement.

 

ARTICLE II

 

Guarantee

 

SECTION 2.01.   Guarantee.   Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Obligations. Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation for the ratable benefit of the Secured Parties. Each Guarantor waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of any Obligation, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.

 

SECTION 2.02.   Guarantee of Payment.   Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any security held for the payment of the Obligations or to

 

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any balance of any Deposit Account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other person.

 

SECTION 2.03.   Nature of Guarantee.   (a)   If and to the extent required in order for the Obligations to be enforceable under applicable federal, state and other laws relating to the insolvency of debtors, the maximum liability of such Guarantor hereunder shall be limited to the greatest amount which can lawfully be guaranteed by such Guarantor under such laws, after giving effect to any rights of contribution, reimbursement and subrogation arising under Article VI. Each Guarantor acknowledges and agrees that, to the extent not prohibited by applicable law, (i) such Guarantor (as opposed to its creditors, representatives of creditors or bankruptcy trustee, including such Guarantor in its capacity as debtor in possession exercising any powers of a bankruptcy trustee) has no personal right under such laws to reduce, or request any judicial relief that has the effect of reducing, the amount of its liability under this Agreement, (ii) such Guarantor (as opposed to its creditors, representatives of creditors or bankruptcy trustee, including such Guarantor in its capacity as debtor in possession exercising any powers of a bankruptcy trustee) has no personal right to enforce the limitation set forth in this Section 2.03(a) or to reduce, or request judicial relief reducing, the amount of its liability under this Agreement, and (iii) the limitation set forth in this Section 2.03(a) may be enforced only to the extent required under such laws in order for the obligations of such Guarantor under this Agreement to be enforceable under such laws and only by or for the benefit of a creditor, representative of creditors or bankruptcy trustee of such Guarantor or other person entitled, under such laws, to enforce the provisions thereof.

 

(b) Except for termination of a Guarantor’s obligations hereunder as expressly provided in Section 7.15, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement, (iii) the release of, or any impairment of or failure to perfect any Lien on or security interest in, any security held by the Collateral Agent or any other Secured Party for the Obligations or any of them, (iv) any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). Subject to the terms of this Agreement, each Guarantor expressly authorizes the Collateral Agent to take and hold security for the payment and performance of the Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and

 

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manner of any sale thereof in its sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder.

 

(c) To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise any other right or remedy available to them against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Loan Party, as the case may be, or any security.

 

SECTION 2.04.   Reinstatement.   Each Guarantor agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Collateral Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower, any other Loan Party or otherwise.

 

SECTION 2.05.   Agreement To Pay; Subrogation.   In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, if the Borrower or any other Loan Party shall fail to pay any Obligation when and as the same shall become due (after taking into account any applicable grace period), whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation. Upon payment by any Guarantor of any sums to the Collateral Agent as provided above, all rights of such Guarantor against the Borrower or any other Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article VI, provided that each Guarantor reserves any and all other rights of reimbursement, contribution or subrogation at any time available to it against any other Guarantor.

 

SECTION 2.06.   Information.   Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s and each other Loan Party’s financial condition and assets and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such

 

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Guarantor assumes and incurs hereunder , and agrees that neither the Collateral Agent nor any other Secured Party will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

 

ARTICLE III

 

Pledge of Securities

 

SECTION 3.01.   Pledge.   As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest in, to and under (a)(i) the Equity Interests owned by such Grantor on the date hereof (including all such Equity Interests listed on Schedule II), (ii) any other Equity Interests obtained in the future by such Grantor and (iii) the certificates representing all such Equity Interests (all the foregoing collectively referred to herein as the Pledged Stock ); provided, however, that the Pledged Stock shall not include (x) more than 66% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary or (y) an Excluded Asset, (b)(i) the debt securities held by such Grantor on the date hereof (including all such debt securities listed opposite the name of such Grantor on Schedule II), (ii) any debt securities in the future issued to such Grantor and (iii) the promissory notes and any other instruments evidencing such debt securities (all the foregoing collectively referred to herein as the Pledged Debt Securities ), (c)   all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 3.01, (d) subject to Section 3.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a) and (b) above, (e) subject to Section 3.06, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above, and (f) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the Pledged Collateral ); provided, however, that notwithstanding any other provision in this agreement, this Section 3.01 shall not, at any time, constitute a grant of security interest in an Excluded Asset.

 

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

 

SECTION 3.02.   Delivery of the Pledged Collateral.   (a)   Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all certificates, instruments or other documents representing or evidencing Pledged Securities.

 

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(b) Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Debt Securities.

 

(c) Upon delivery to the Collateral Agent, (i) any certificate, instrument or document representing or evidencing Pledged Securities shall be accompanied by undated stock powers duly executed in blank or other undated instruments of transfer satisfactory to the Collateral Agent and duly executed in blank and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the applicable securities, which schedule shall be attached hereto as Schedule II and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of the pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

 

SECTION 3.03.   Representations, Warranties and Covenants.   The Grantors jointly and severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the Secured Parties, that:

 

(a) Schedule II correctly sets forth in all material respects the percentage of the issued and outstanding shares of each class of the Equity Interests of the issuer thereof represented by such Pledged Stock and includes all Equity Interests, debt securities and promissory notes required to be pledged hereunder;

 

(b) the Pledged Stock and Pledged Debt Securities have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable and (ii) in the case of Pledged Debt Securities, are legal, valid and binding obligations of the issuers thereof;

 

(c) except for the security interests granted hereunder (or otherwise permitted under the Credit Agreement), each Grantor (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Grantor, (ii) holds the same free and clear of all Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than transfers made in compliance with the Credit Agreement, and (iv) subject to Section 3.06, will cause any and all Pledged Collateral, whether for value paid by such Grantor or otherwise, to be forthwith deposited with the Collateral Agent and pledged or assigned hereunder;

 

(d) except for restrictions and limitations imposed by the Loan Documents or securities laws generally, the Pledged Collateral is and will continue to be freely transferable and assignable, and none of the Pledged

 

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Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

 

(e) each Grantor (i) has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than any Lien created or permitted by the Loan Documents), however arising, of all persons whomsoever;

 

(f) no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect or those that, if not obtained, could not reasonably be expected to result in a Material Adverse Effect, );

 

(g) by virtue of the execution and delivery by each Grantor of this Agreement, when any Pledged Securities are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a legal, valid and perfected first priority lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations; and

 

(h) the pledge effected hereby is effective to vest in the Collateral Agent, for the ratable benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth herein and all action by any Grantor necessary or desirable to protect and perfect the Lien on the Pledged Collateral has been duly taken.

 

SECTION 3.04.   Certification of Limited Liability Company Interests and Limited Partnership Interests.   No interest of any Grantor in any limited liability company or limited partnership which is a Subsidiary and pledged hereunder is represented by a certificate. The Grantors shall not, without the consent of the Administrative Agent, agree to any amendment of the certificate of formation or limited liability company agreement (or other comparable constituent document) governing Pledged Stock which has the effect of turning previously uncertificated capital stock or membership interests into certificated capital stock or membership interests or which elects to treat any membership interest that is part of the Pledged Stock as a “security” under Section 8-103 of the New York UCC.

 

SECTION 3.05.   Registration in Nominee Name; Denominations.   The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent. Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications

 

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received by it with respect to Pledged Securities in its capacity as the registered owner thereof. The Collateral Agent shall at any time during the occurrence and continuation of an Event of Default have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

 

SECTION 3.06.   Voting Rights; Dividends and Interest, Etc.  (a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given the Grantors reasonable advance notice of its intent to exercise its rights under this Agreement (which notice shall be deemed to have been given immediately upon the occurrence of an Event of Default under paragraph (g) or (h) of Article VII of the Credit Agreement):

 

(i)            Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided, however, that such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Securities or the rights and remedies of any of the Collateral Agent or the other Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

 

(ii)           The Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to each Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (i) above.

 

(iii)          Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable law; provided, however , that any noncash dividends, interest, principal or other distributions that would constitute Pledged Stock or Pledged Debt Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but

 

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shall be held separate and apart therefrom, shall be held in trust for the ratable benefit of the Secured Parties and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement or instrument of assignment). This paragraph (iii) shall not apply to dividends between or among the Borrower, the Guarantors and any Subsidiaries only of property subject to a perfected security interest under this Agreement; provided that the Borrower notifies the Collateral Agent in writing, specifically referring to this Section 3.06 at the time of such dividend and takes any actions the Collateral Agent specifies to ensure the continuance of its perfected security interest in such property under this Agreement.

 

(b) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified (or shall be deemed to have notified pursuant to Section 3.06(a)) the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 3.06, then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.06 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 3.06 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement or instrument of assignment). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and each applicable Grantor has delivered to the Administrative Agent certificates to that effect, the Collateral Agent shall, promptly after all such Events of Default have been cured or waived, repay to each applicable Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.06 and that remain in such account.

 

(c) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified (or shall be deemed to have notified pursuant to Section 3.06(a)) the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 3.06, then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.06, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 3.06, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights.

 

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(d) Any notice given by the Collateral Agent to the Grantors exercising its rights under paragraph (a) of this Section 3.06 (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

 

ARTICLE IV

 

Security Interests in Personal Property

 

SECTION 4.01.   Security Interest.  (a)   As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest (the “Security Interest” ), in all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “Article 9 Collateral” ):

 

(i)

all Accounts;

 

 

(ii)

all Chattel Paper;

 

 

(iii)

all cash and Deposit Accounts;

 

 

(iv)

all Documents;

 

 

(v)

all Equipment;

 

 

(vi)

all General Intangibles;

 

 

(vii)

all Instruments;

 

 

(viii)

all Inventory;

 

 

(ix)

all Investment Property;

 

 

(x)

all Letter-of-Credit Rights;

 

 

(xi)

all Commercial Tort Claims;

 

 

(xii)

all books and records pertaining to the Article 9 Collateral; and

 

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   (xiii)     to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any person with respect to any of the foregoing.

 

Notwithstanding any provision in this Agreement, this Section 4.01(a) shall not, at any time, constitute a grant of security interest in an Excluded Asset.

 

(b)  Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i) indicate the Article 9 Collateral as “all assets” of such Grantor or words of similar effect, and (ii) contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (B) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Article 9 Collateral relates. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

 

Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

 

The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party.

 

(c)  The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.

 

SECTION 4.02.   Representations and Warranties.   The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that:

 

(a)  Each Grantor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent, for the ratable benefit of the Secured Parties, the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than (i) any consent or approval that has been obtained or (ii) those that, if not obtained, could not reasonably be expected to result in a Material Adverse Effect.

 

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(b)  The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein (including (x) the exact legal name of each Grantor and (y) the jurisdiction of organization of each Grantor) is correct and complete as of the Closing Date. Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations containing a description of the Article 9 Collateral have been prepared by the Collateral Agent based upon the information provided to the Administrative Agent and the Secured Parties in the Perfection Certificate for filing in each governmental, municipal or other office specified in Section 2 of the Perfection Certificate (or specified by notice from the Borrower to the Administrative Agent after the Closing Date in the case of filings, recordings or registrations required by Sections 5.06 or 5.11 of the Credit Agreement), which are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in the Article 9 Collateral consisting of United States Patents, Trademarks and Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. Each Grantor represents and warrants that a fully executed short form agreement in the form requested by the Collateral Agent and containing a description of all material Article 9 Collateral consisting of Intellectual Property with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights has been delivered to the Collateral Agent for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. §261, 15 U.S.C. §1060 or 17 U.S.C. §205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof).

 

(c)  The Security Interest constitutes (i) a legal and valid security interest in all Article 9 Collateral securing the payment and performance of the

 

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Obligations, (ii) upon completion of the filings described in Section 4.02(b), a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a security interest that shall be perfected in all Article 9 Collateral to the extent that a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable. The Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral, other than Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement that have priority as a matter of law.

 

(d)  The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement. As of the Closing Date, no Grantor has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office, (iii) any notice under the Assignment of Claims Act, or (iv) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement and prior existing Liens no longer in effect. No Grantor holds any Commercial Tort Claims seeking damages in excess of $250,000 except as indicated on the Perfection Certificate.

 

SECTION 4.03.   Covenants.  (a) Each Grantor agrees promptly to notify the Collateral Agent in writing of any change in (i) its legal name, (ii) its identity or type of organization or corporate structure, (iii) its Federal Taxpayer Identification Number or organizational identification number or (iv) its jurisdiction of organization. Each Grantor agrees promptly to provide the Collateral Agent with certified organizational documents reflecting any of the changes described in the first sentence of this paragraph. Each Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Article 9 Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any material portion of the Article 9 Collateral owned or held by such Grantor is damaged or destroyed.

 

(b) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Article 9 Collateral owned by it as is

 

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consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any material part of the Article 9 Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any material Article 9 Collateral, provided that, unless an Event of Default has occurred and is continuing, the Collateral Agent shall be limited to one such requests in each calendar year.

 

(c)  Each Grantor shall, at its own expense, take any and all actions reasonably necessary to defend title to the Article 9 Collateral against all persons and to defend the Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement.

 

(d)  Each Grantor agrees, at its own expense, promptly to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, obtain, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and Taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing or continuation statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable to any Grantor under or in connection with any of the Article 9 Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper, in excess of $250,000 individually or $500,000 in the aggregate, then such Instrument or Tangible Chattel Paper shall be promptly pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent, except to the extent the costs of such actions are, in the Collateral Agent’s reasonable judgment, excessive in relation to the value of the security to be afforded thereby or to the extent prohibited by applicable law (or in the case of an amount payable by any Foreign Subsidiary, to the extent such actions would, in the Borrower’s good faith determination, result in adverse tax consequences).

 

Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule III or adding additional schedules hereto to identify specifically any asset or item of a Grantor that may, in the Collateral Agent’s reasonable judgment, constitute material Copyrights, Licenses, Patents or Trademarks; provided that any Grantor shall have the right, exercisable within 10 days after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any material inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use its commercially reasonable efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct in all material respects with respect to such Collateral

 

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within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Collateral.

 

(e)  The Collateral Agent and such persons as the Collateral Agent may designate shall have the right, at the applicable Grantor’s own cost and expense, to inspect the Article 9 Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Article 9 Collateral is located, to discuss the applicable Grantor’s affairs with the officers of such Grantor and its independent accountants and to verify the existence, validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, in the case of Accounts or other Article 9 Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party.

 

(f)  At its option, upon the occurrence and continuance of an Event of Default, the Collateral Agent may discharge past due Taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not expressly permitted pursuant to Section 5.03 or Section 6.02 of the Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any reasonable and documented payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to Taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

 

(g)  If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other person to secure payment and performance of an Account, the value of which exceeds $250,000 individually or $500,000 in the aggregate, such Grantor shall promptly assign such security interest to the Collateral Agent for the ratable benefit of the Secured Parties. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other person granting the security interest.

 

(h)  Each Grantor shall remain liable to observe and perform all the material conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance.

 

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(i)  No Grantor shall make or permit to be made an assignment, pledge or hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9 Collateral or permit any notice to be filed under the Assignment of Claims Act, except, in each case, as expressly permitted by Section 6.02 of the Credit Agreement. No Grantor shall make or permit to be made any transfer of the Article 9 Collateral and each Grantor shall remain at all times in possession or otherwise in control of the Article 9 Collateral owned by it, except as permitted by the Credit Agreement.

 

(j)  No Grantor will, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises, compoundings or settlements granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practice used in industries that are the same as or similar to those in which such Grantor is engaged.

 

(k)  In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required under the Credit Agreement or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of any Grantor hereunder or any Default or Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this paragraph, including attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby.

 

(l)  Each Grantor shall maintain, in form and manner satisfactory to the Collateral Agent, records of its Chattel Paper and its books, records and documents evidencing or pertaining thereto.

 

SECTION 4.04.   Other Actions.   In order to further insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Security Interest in the Article 9 Collateral, each Grantor agrees, in each case at such Grantor’s own expense, to take the following actions with respect to the following Article 9 Collateral:

 

(a)  Instruments. If any Grantor shall at any time hold or acquire any Instruments having a value in excess of $250,000, such Grantor shall forthwith endorse, assign and deliver the same to the Collateral Agent, accompanied by such undated instruments of endorsement, transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably specify, except to the extent the costs of such actions are, in the Collateral Agent’s reasonable judgment, excessive in relation to the value of the security to be afforded thereby or to the extent prohibited by applicable law (or in the case of an amount payable

 

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by any Foreign Subsidiary, to the extent such actions would, in the Borrower’s good faith determination, result in adverse tax consequences).

 

(b)   Deposit Accounts. For each Deposit Account that any Grantor at any time opens or maintains, other than Deposit Accounts (A) that are payroll accounts, withholdings tax accounts, petty cash accounts or flexible spending benefit accounts or trust, escrow or other fiduciary accounts or (B) which do not hold for any period of five consecutive days, an aggregate amount in excess of $1,000,000, such Grantor shall, upon the Collateral Agent’s request, either (i) cause the depositary bank to agree to comply at any time with instructions from the Collateral Agent to such depositary bank directing the disposition of funds from time to time credited to such Deposit Account, without further consent of such Grantor or any other person, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, or (ii) arrange for the Collateral Agent to become the customer of the depositary bank with respect to the Deposit Account, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw funds from such Deposit Account. The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such instructions or withhold any withdrawal rights from any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any withdrawal, would occur; provided, however, upon the waiver by the applicable Required Lenders of such Event of Default, so long as no other Event of Default shall then exist or be continuing, the Collateral Agent shall revoke any such instruction. The provisions of this paragraph shall not apply to any Deposit Account for which any Grantor, the depositary bank and the Collateral Agent have entered into a cash collateral agreement specially negotiated among such Grantor, the depositary bank and the Collateral Agent for the specific purpose set forth therein.

 

(c)   Investment Property. If any securities, whether certificated or uncertificated, or other Investment Property having a value in excess of $50,000 in the aggregate now or hereafter acquired by any Grantor are held by such Grantor or its nominee through a Securities Intermediary or Commodity Intermediary, such Grantor shall promptly notify the Collateral Agent thereof and, at the Collateral Agent’s request and option, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause such Securities Intermediary or Commodity Intermediary, as the case may be, to agree to comply with Entitlement Orders from the Collateral Agent to such Securities Intermediary as to such securities or other Investment Property, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such Commodity Intermediary, in each case without further consent of any Grantor or such nominee, or (ii) in the case of Financial Assets (as governed by Article 8 of the New York UCC) or other Investment Property held through a Securities Intermediary, arrange for the Collateral Agent to become the Entitlement Holder with respect to such Investment Property, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such

 

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Investment Property. The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such Entitlement Orders or instructions or directions to any such issuer, Securities Intermediary or Commodity Intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur; provided, however, upon the waiver by the applicable Required Lenders of such Event of Default, so long as no other Event of Default shall then exist or be continuing, the Collateral Agent shall revoke any such instruction. The provisions of this paragraph shall not apply to any Financial Assets credited to a Securities Account for which the Collateral Agent is the Securities Intermediary.

 

(d)  Electronic Chattel Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any Electronic Chattel Paper or any “ transferable record , as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, shall take such action as the Collateral Agent may request to vest in the Collateral Agent control under New York UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Collateral Agent agrees with such Grantor that the Collateral Agent will arrange, pursuant to procedures satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent’s loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such Electronic Chattel Paper or transferable record.

 

(e)  Letter-of-Credit Rights. If any Grantor is at any time a beneficiary under a letter of credit having a value in excess of $500,000 now or hereafter issued in favor of such Grantor (other than Letters of Credit and Letters of Credit Rights that do not constitute Supporting Obligations in respect of other Collateral), such Grantor shall promptly notify the Collateral Agent thereof and, at the request and option of the Collateral Agent, such Grantor shall, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of the letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds

 

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of any drawing under the letter of credit are to be paid to the applicable Grantor unless an Event of Default has occurred or is continuing.

 

(f)  Commercial Tort Claims. If any Grantor shall at any time hold or acquire a Commercial Tort Claim seeking damages in an amount reasonably estimated to exceed $250,000, the Grantor shall promptly notify the Collateral Agent thereof in a writing signed by such Grantor including a summary description of such claim and grant to the Collateral Agent, for the ratable benefit of the Secured Parties, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Collateral Agent.

 

SECTION 4.05.   Covenants Regarding Patent, Trademark and Copyright Collateral.  (a) Each Grantor agrees that it will not, and will not permit any of its licensees to, do any act, or omit to do any act, whereby any Patent that is material to the conduct of such Grantor’s business may become abandoned, invalidated or dedicated to the public, and agrees that it shall use commercially reasonable efforts to continue to mark any products covered by a material Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

 

(b)  Except as could not reasonably be expected to result in a Material Adverse Effect, each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) use commercially reasonable efforts to maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights.

 

(c)  Each Grantor (either itself or through its licensees or sublicensees) will, for each work covered by a Copyright material to the conduct of such Grantor’s business, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

 

(d)  Each Grantor shall notify the Collateral Agent promptly if it knows or has reason to know that any Patent, Trademark or Copyright material to the conduct of its business may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor’s ownership of any Patent, Trademark or Copyright, its right to register the same, or its right to keep and maintain the same.

 

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(e)  Except as could not reasonably be expected to result in a Material Adverse Effect, no Grantor shall, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly notifies the Collateral Agent, and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Security Interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

 

(f)  Except as could not reasonably be expected to result in a Material Adverse Effect, each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties.

 

(g)  In the event that any Grantor knows or has reason to believe that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor’s business has been or is about to be infringed, misappropriated or diluted by a third person, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Article 9 Collateral.

 

(h)  Upon the occurrence and during the continuance of an Event of Default, each Grantor shall use its commercially reasonable efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License, and each other material License, to effect the assignment of all such Grantor’s right, title and interest thereunder to the Collateral Agent, for the ratable benefit of the Secured Parties, or its designee.

 

SECTION 4.06.   Assignment of Distributions.  The Borrower shall execute the Assignment of Distributions in the form attached hereto as Exhibit C in favor of the Collateral Agent with respect to its rights to any distributions of STR-Registrar LLC.

 

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ARTICLE V

 

Remedies

 

SECTION 5.01. Remedies Upon Default.   Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Grantor to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice (except any notice required by law) or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

 

The Collateral Agent shall give each applicable Grantor 10 days’ written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the

 

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Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by applicable law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by applicable law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, subject to Section 5.02 of this Agreement, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

 

SECTION 5.02. Application of Proceeds.   The Collateral Agent shall apply the proceeds of any collection, sale, foreclosure or other realization upon any Collateral, including any Collateral consisting of cash, as follows:

 

FIRST, to the payment of all costs and expenses incurred by the Administrative Agent or the Collateral Agent (in their respective capacities as such hereunder or under any other Loan Document) in connection with such collection, sale, foreclosure or realization or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Administrative Agent and/or the

 

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Collateral Agent hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;

 

SECOND, to the payment in full of Unfunded Advances/Participations (the amounts so applied to be distributed between or among the Administrative Agent, the Swingline Lender and any Issuing Bank pro rata in accordance with the amounts of Unfunded Advances /Participations owed to them on the date of any such distribution);

 

THIRD, to the payment in full of all other Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution);

 

FOURTH, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

 

The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

 

SECTION 5.03. Grant of License to Use Intellectual Property.   For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors), to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent may be exercised, at the option of the Collateral Agent, only upon the occurrence and during the continuation of an Event of Default; provided, however, that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon each Grantor notwithstanding any subsequent cure of an Event of Default.

 

SECTION 5.04. Securities Act, Etc.   In view of the position of the Grantors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the U.S. Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the

 

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“Federal Securities Laws”) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable “blue sky” or other state securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Collateral, limit the purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a limited number of potential purchasers (including a single potential purchaser) to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a limited number of purchasers (or a single purchaser) were approached. The provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

 

ARTICLE VI

 

Indemnity, Subrogation and Subordination

 

SECTION 6.01. Indemnity and Subrogation.   In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor under this Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part a claim of any Secured Party, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.

 

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SECTION 6.02. Contribution and Subrogation.   Each Guarantor (a “Contributing Guarantor”) agrees (subject to Section 6.03) that, in the event a payment shall be made by any other Guarantor hereunder in respect of any Obligation, or assets of any other Guarantor shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party, and such other Guarantor (the “Claiming Guarantor”) shall not have been fully indemnified by the Borrower as provided in Section 6.01, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to (i) the amount of such payment or (ii) the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 7.16, the date of the supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 6.02 shall be subrogated to the rights of such Claiming Guarantor under Section 6.01 to the extent of such payment.

 

SECTION 6.03. Subordination.   (a)   Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 6.01 and 6.02 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 6.01 and 6.02 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of its obligations hereunder.

 

(b) The Borrower and each Guarantor hereby agree that all Indebtedness and other monetary obligations owed by it to any Subsidiary that is not a Loan Party (or, in the case of the Borrower, any Subsidiary) shall be fully subordinated to the indefeasible payment in full in cash of the Obligations, it being agreed that, for greater certainty, other than upon the occurrence and during the continuance of an Event of Default, the Borrower and each Guarantor shall be allowed to make payments with respect to Indebtedness permitted to be incurred pursuant to Section 6.01 of the Credit Agreement in accordance with the terms thereof.

 

ARTICLE VII

 

Miscellaneous

 

SECTION 7.01. Notices.   All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Guarantor shall be given to it in care of the Borrower as provided in Section 9.01 of the Credit Agreement.

 

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SECTION 7.02. Security Interest Absolute.   All rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument relating to the foregoing, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement.

 

SECTION 7.03. Survival of Agreement.   All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and the Issuing Bank and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any Lender or Issuing Bank or on their behalf and notwithstanding that the Collateral Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under any Loan Document is outstanding and unpaid or the aggregate L/C Exposure does not equal zero and so long as the Commitments have not expired or terminated.

 

SECTION 7.04. Binding Effect; Several Agreement.   This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Loan Party and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Loan Party, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Loan Party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated or permitted by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

 

SECTION 7.05. Successors and Assigns.   Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the

 

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permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

 

SECTION 7.06. Collateral Agent’s Fees and Expenses; Indemnification. (a)   The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.05 of the Credit Agreement.

 

(b)   Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other indemnitees against, and hold each indemnitee harmless from, any and all losses, claims, damages, liabilities, and related out of pocket expenses, including the fees, charges and disbursements of any counsel for any indemnitee, incurred by or asserted against any indemnitee arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any agreement or instrument contemplated hereby or any claim, litigation, investigation or proceeding relating to any of the foregoing or to the Collateral, regardless of whether any indemnitee is a party thereto or whether initiated by a third party or by a Loan Party or any Affiliate thereof; provided, however, that such indemnity shall not, as to any indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such indemnitee. To the extent permitted by applicable law, no Grantor shall assert, and each Grantor hereby waives any claim against any indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of proceeds thereof.

 

(c)   Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.06 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 7.06 shall be payable on written demand therefor and shall bear interest, on and from the date of demand, at the rate specified in Section 2.06(a) of the Credit Agreement.

 

SECTION 7.07. Collateral Agent Appointed Attorney-in-Fact.   Each Grantor hereby appoints the Collateral Agent as the attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with

 

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full power of substitution either in the Collateral Agent’s name or in the name of such Grantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof, (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral, (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral, (d) to send verifications of Accounts Receivable to any Account Debtor, (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral, (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral, (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent, and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement in accordance with its terms, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence, wilful misconduct or bad faith. Notwithstanding anything to the contrary in this Section 7.07, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for herein unless an Event of Default shall have occurred and be continuing.

 

SECTION 7.08. Applicable Law.   THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 7.09. Waivers; Amendment.   (a)   No failure or delay by the Collateral Agent, the Administrative Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver hereof or thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power , preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent, the Administrative Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 7.09, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the

 

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generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Collateral Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.

 

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement.

 

SECTION 7.10. WAIVER OF JURY TRIAL.   EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

 

SECTION 7.11. Severability.   In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 7.12. Counterparts.   This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 7.04. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

SECTION 7.13. Headings.   Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this

 

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Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

 

SECTION 7.14. Jurisdiction; Consent to Service of Process.   (a)   Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America, sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each party hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Collateral Agent, the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Grantor or its properties in the courts of any jurisdiction.

 

(b)             Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (a) of this Section 7.14. Each party hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(c)             Each party hereto hereby irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement or any other Loan Document will affect the right of the Collateral Agent to serve process in any other manner permitted by law.

 

SECTION 7.15. Termination or Release.   (a)   This Agreement, the guarantees made herein, the Security Interest, the pledge of the Pledged Collateral and all other security interests granted hereby shall terminate when all the Loan Document Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the aggregate L/C Exposure has been reduced to zero (or cash collateralized on terms reasonably acceptable to the Administrative Agent and the Issuing Bank) and the Issuing Banks have no further obligations to issue Letters of Credit under the Credit Agreement.

 

(b)             A Subsidiary Guarantor shall automatically be released from its obligations hereunder and the Security Interests created hereunder in the Collateral of such Subsidiary Guarantor shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Subsidiary Guarantor ceases to be a Subsidiary.

 

34



 

(c)             Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Credit Agreement to any person that is not the Borrower or a Guarantor, or, upon the effectiveness of any written consent to the release of the Security Interest granted hereby in any Collateral pursuant to Section 9.08 of the Credit Agreement, the Security Interest in such Collateral shall be automatically released.

 

(d)             In connection with any termination or release pursuant to paragraph (a), (b) or (c) above, the Collateral Agent shall promptly execute and deliver to any Grantor, at such Grantor’s expense, all Uniform Commercial Code termination statements and similar documents that such Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 7.15 shall be without recourse to or representation or warranty by the Collateral Agent or any Secured Party. Without limiting the provisions of Section 7.06, the Borrower shall reimburse the Collateral Agent upon demand for all costs and out of pocket expenses, including the fees, charges and expenses of counsel, incurred by it in connection with any action contemplated by this Section 7.15.

 

SECTION 7.16. Additional Subsidiaries.  Any Subsidiary that is required to become a party hereto pursuant to Section 5.11 of the Credit Agreement shall enter into this Agreement as a Subsidiary Guarantor and a Grantor upon becoming such a Subsidiary. Upon execution and delivery by the Collateral Agent and such Subsidiary of a supplement in the form of Exhibit A hereto, such Subsidiary shall become a Subsidiary Guarantor and a Grantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor and a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any other Loan Party hereunder. The rights and obligations of each Loan Party hereunder shall remain in full force and effect notwithstanding the addition of any new Loan Party as a party to this Agreement.

 

SECTION 7.17. Right of Setoff.  If an Event of Default shall have occurred and is continuing, each Secured Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all Collateral (including any deposits (general or special, time or demand, provisional or final)) at any time held and other obligations at any time owing by such Secured Party to or for the credit or the account of any Grantor against any and all of the obligations of such Grantor now or hereafter existing under this Agreement and the other Loan Documents held by such Secured Party, irrespective of whether or not such Secured Party shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Secured Party under this Section 7.17 are in addition to other rights and remedies (including other rights of setoff) which such Secured Party may have.

 

[Remainder of page intentionally left blank]

 

35


 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

 

STR ACQUISITION, INC.,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

/s/ Jason Metakis

 

 

 

Name:  Jason Metakis

 

 

 

Title:  Treasurer

 

 

 

 

 

STR HOLDINGS LLC,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

/s/ Jason Metakis

 

 

 

Name:  Jason Metakis

 

 

 

Title:  Treasurer

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

CAL SAFETY COMPLIANCE CORPORATION,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

Name:

 

 

 

Title:

 

[First Lien Guarantee and Collateral Agreement]

 



 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

 

STR ACQUISITION, INC.,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

STR HOLDINGS LLC,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:  Barry A. Morris

 

 

 

Title:  Secretary

 

 

 

 

 

CAL SAFETY COMPLIANCE CORPORATION,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:  Barry A. Morris

 

 

 

Title:  Assistant Secretary

 

[First Lien Guarantee and Collateral Agreement]

 



 

 

SPECIALIZED TECHNOLOGY RESOURCES (INTERNATIONAL), INC.,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:  Barry A. Morris

 

 

 

Title:  Secretary

 

 

 

 

 

SHUSTER LABORATORIES, INC.,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:  Barry A. Morris

 

 

 

Title:  Secretary

 

 

 

 

 

SUPPLY CHAIN CONSULTING SERVICES CORPORATION,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES (FLORIDA), INC.,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:  Barry A. Morris

 

 

 

Title:  Secretary

 

 

 

 

 

STR MATERIALS SCIENCE, INC.,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:  Barry A. Morris

 

 

 

Title:  Secretary

 

[First Lien Guarantee and Collateral Agreement]

 



 

 

SUPPLY CHAIN CONSULTING SERVICES CORPORATION

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

/s/ Thomas D. Vitro

 

 

 

Name:  Thomas D. Vitro

 

 

 

Title:  Assistant Secretary

 

[First Lien Guarantee and Collateral Agreement]

 



 

 

CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Collateral Agent,

 

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

 

 

/s/ Rianka Mohan

 

 

 

Name:  RIANKA MOHAN

 

 

 

Title:  VICE PRESIDENT

 

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

 

 

/s/ James Neira

 

 

 

Name:  JAMES NEIRA

 

 

 

Title:  ASSOCIATE

 

[First Lien Guarantee and Collateral Agreement]

 


 

EXHIBIT E

 

[FORM OF]

 

FIRST LIEN MORTGAGE

 



 

 

OPEN-END MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY

AGREEMENT AND FINANCING STATEMENT

 

From

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.

 

To

 

CREDIT SUISSE

 


 

Dated: June 15, 2007
Premises: Enfield, Connecticut
Hartford County

 


 

 

1



 

THIS OPEN-END MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FINANCING STATEMENT dated as of June 15, 2007 (this “Mortgage”), by SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation, having an office at 10 Water Street, Enfield, CT 06082-4899 (the “Mortgagor”), to CREDIT SUISSE, having an office at Eleven Madison Avenue, New York, New York 10010 (the “Mortgagee”) as Collateral Agent for the Secured Parties (as such terms are defined below).

 

WITNESSETH THAT:

 

Reference is made to (i) the First Lien Credit Agreement dated as of even date hereof (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among STR Acquisition, Inc., a Delaware corporation (“Acquisition”), which substantially simultaneously with the execution hereof shall be merged with and into Specialized Technology Resources, Inc., a Delaware corporation (“STR”), with STR being the surviving entity (the “Borrower”), STR Holdings LLC, a Delaware limited liability company (“Holdings”), the lenders from time to time party thereto (the “Lenders”) and Credit Suisse, as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders, collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties, swingline lender (in such capacity, the “Swingline Lender”) and issuing bank (in such capacity, the “Issuing Bank”) with respect to any letters of credit (the “Letters of Credit”) issued pursuant to the terms of the Credit Agreement and (ii) the First Lien Guarantee and Collateral Agreement dated as of even date hereof (as amended, supplemented or otherwise modified from time to time, the “Guarantee and Collateral Agreement”) among Acquisition, Holdings, the subsidiaries of Acquisition from time to time party thereto and Credit Suisse. Capitalized terms used but not defined herein have the meanings given to them in the Credit Agreement and the Guarantee and Collateral Agreement.

 

In the Credit Agreement, (i) the Lenders have agreed to make term loans (the “Term Loans”) and revolving loans (the “Revolving Loans”) to the Borrower, (ii) the Swingline Lender has agreed to make swingline loans (the “Swingline Loans”, together with Term Loans and Revolving Loans, the “Loans”) to the Borrower and (iii) the Issuing Bank has issued or agreed to issue from time to time Letters of Credit for the account of the Borrower, in each case pursuant to, upon the terms, and subject to the conditions specified in, the Credit Agreement. Amounts paid in respect of Term Loans may not be reborrowed. Subject to the terms of the Credit Agreement, Borrower may borrow, prepay and reborrow Revolving Loans. The Credit Agreement provides that the sum of the principal amount of the Loans and the Letters of Credit from time to time outstanding and secured hereby shall not exceed $230,000,000, comprised of (a) a Term Loan in the aggregate principal amount not to exceed $185,000,000 to be advanced and fully funded on the date hereof, (b) Revolving Loans in an aggregate principal amount not to exceed $20,000,000, (c) Swingline Loans in an aggregate principal amount not to exceed $10,000,000; and Letters of Credit in an aggregate face amount not in excess of $15,000,000, (provided, however, that the overall limit of all such Revolving Loans, Swingline Loans and Letters of Credit outstanding at any time shall not exceed $20,000,000) and (d) Incremental Term Loans and increases in the Revolving Credit

 

2



 

Commitment in an amount not to exceed the then available Incremental Revolving Facility Amount in a combined aggregate principal amount not to exceed $25,000,000 at any time.

 

Mortgagor will be the Borrower subsequent to the merger referenced above and will derive substantial benefit from the making of the Loans by the Lenders and the issuance of the Letters of Credit by the Issuing Bank. In order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, the Mortgagor has agreed to grant this Mortgage to secure, among other things, the due and punctual payment and performance of all of the obligations of the Borrower under the Credit Agreement.

 

The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned upon, among other things, the execution and delivery by the Mortgagor of this Mortgage in the form hereof to secure the Obligations. As used in this Mortgage, the term “Obligations” shall mean (a) the Loan Document Obligations and (b) the due and punctual payment and performance of all obligations of each Loan Party under each Hedging Agreement that (i) is in effect on the Closing Date with a counterparty that is the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender as of the Closing Date or (ii) is entered into after the Closing Date with any counterparty that is the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender at the time such Hedging Agreement is entered into.

 

As used in this Mortgage, the term “Secured Parties” shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) any Issuing Bank, (e) each counterparty to any Hedging Agreement with a Loan Party that either (i) is in effect on the Closing Date if such counterparty is the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender as of the Closing Date or (ii) is entered into after the Closing Date if such counterparty is the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender at the time such Hedging Agreement is entered into, (f) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (g) the successors and assigns of each of the foregoing.

 

Pursuant to the requirements of the Credit Agreement, the Mortgagor is granting this Mortgage to create a lien on and a security interest in the Mortgaged Property (as hereinafter defined) to secure the performance and payment by the Mortgagor of the Obligations. The Credit Agreement also requires the granting by other Loan Parties of mortgages, deeds of trust and/or deeds to secure debt (the “Other Mortgages”) that create liens on and security interests in certain real and personal property other than the Mortgaged Property to secure the performance of the Obligations.

 

Granting Clauses

 

NOW, THEREFORE, IN CONSIDERATION OF the foregoing and in order to secure the due and punctual payment and performance of the Obligations for the benefit of the Secured Parties, Mortgagor hereby grants, conveys, mortgages, assigns and pledges to the Mortgagee, a mortgage lien on and a security interest in, all the following described property (the “Mortgaged Property”) whether now owned or held or hereafter acquired:

 

3



 

(1)   the land more particularly described on Exhibit A hereto (the “Land”), together with all rights appurtenant thereto, including the easements over certain other adjoining land granted by any easement agreements, covenant or restrictive agreements and all air rights, mineral rights, water rights, oil and gas rights and development rights, if any, relating thereto, and also together with all of the other easements, rights, privileges, interests, hereditaments and appurtenances thereunto belonging or in any way appertaining and all of the estate, right, title, interest, claim or demand whatsoever of Mortgagor therein and in the streets and ways adjacent thereto, either in law or in equity, in possession or expectancy, now or hereafter acquired (the “Premises”);

 

(2)   all buildings, improvements, structures, paving, parking areas, walkways and landscaping now or hereafter erected or located upon the Land, and all fixtures of every kind and type affixed to the Premises or attached to or forming part of any structures, buildings or improvements and replacements thereof now or hereafter erected or located upon the Land (the “Improvements”);

 

(3)   all apparatus, movable appliances, building materials, equipment, fittings, furnishings, furniture, machinery and other articles of tangible personal property of every kind and nature, and replacements thereof, now or at any time hereafter placed upon or used in any way in connection with the use, enjoyment, occupancy or operation of the Improvements or the Premises, including all of Mortgagor’s books and records relating thereto and including all pumps, tanks, goods, machinery, tools, equipment, lifts (including fire sprinklers and alarm systems, fire prevention or control systems, cleaning rigs, air conditioning, heating, boilers, refrigerating, electronic monitoring, water, loading, unloading, lighting, power, sanitation, waste removal, entertainment, communications, computers, recreational, window or structural, maintenance, truck or car repair and all other equipment of every kind), restaurant, bar and all other indoor or outdoor furniture (including tables, chairs, booths, serving stands, planters, desks, sofas, racks, shelves, lockers and cabinets), bar equipment, glasses, cutlery, uniforms, linens, memorabilia and other decorative items, furnishings, appliances, supplies, inventory, rugs, carpets and other floor coverings, draperies, drapery rods and brackets, awnings, venetian blinds, partitions, chandeliers and other lighting fixtures, freezers, refrigerators, walk-in coolers, signs (indoor and outdoor), computer systems, cash registers and inventory control systems, and all other apparatus, equipment, furniture, furnishings, and articles used in connection with the use or operation of the Improvements or the Premises, it being understood that the enumeration of any specific articles of property shall in no way result in or be held to exclude any items of property not specifically mentioned (the property referred to in this subparagraph (3), the “Personal Property”);

 

(4)   all general intangibles owned by Mortgagor and relating to design, development, operation, management and use of the Premises or the Improvements, all certificates of occupancy, zoning variances, building, use or other permits, approvals, authorizations and consents obtained from and all materials prepared for filing or filed with any governmental agency in connection with the development, use, operation or management of the Premises and Improvements, all construction,

 

4


 

service, engineering, consulting, leasing, architectural and other similar contracts concerning the design, construction, management, operation, occupancy and/or use of the Premises and Improvements, all architectural drawings, plans, specifications, soil tests, feasibility studies, appraisals, environmental studies, engineering reports and similar materials relating to any portion of or all of the Premises and Improvements, and all payment and performance bonds or warranties or guarantees relating to the Premises or the Improvements, all to the extent assignable (the “Permits, Plans and Warranties”);

 

(5)   all now or hereafter existing leases or licenses (under which Mortgagor is landlord or licensor) and subleases (under which Mortgagor is sublandlord), concession, management, mineral or other agreements of a similar kind that permit the use or occupancy of the Premises or the Improvements for any purpose in return for any payment, or the extraction or taking of any gas, oil, water or other minerals from the Premises in return for payment of any fee, rent or royalty (collectively, “Leases”), and all agreements or contracts for the sale or other disposition of all or any part of the Premises or the Improvements, now or hereafter entered into by Mortgagor, together with all charges, fees, income, issues, profits, receipts, rents, revenues or royalties payable thereunder (“Rents”);

 

(6)   all real estate tax refunds and all proceeds of the conversion, voluntary or involuntary, of any of the Mortgaged Property into cash or liquidated claims (“Proceeds”), including Proceeds of insurance maintained by the Mortgagor and condemnation awards, any awards that may become due by reason of the taking by eminent domain or any transfer in lieu thereof of the whole or any part of the Premises or Improvements or any rights appurtenant thereto, and any awards for change of grade of streets, together with any and all moneys now or hereafter on deposit for the payment of real estate taxes, assessments or common area charges levied against the Mortgaged Property, unearned premiums on policies of fire and other insurance maintained by the Mortgagor covering any interest in the Mortgaged Property or required by the Credit Agreement; and

 

(7)   all extensions, improvements, betterments, renewals, substitutes and replacements of and all additions and appurtenances to, the Land, the Premises, the Improvements, the Personal Property, the Permits, Plans and Warranties and the Leases, hereinafter acquired by or released to the Mortgagor or constructed, assembled or placed by the Mortgagor on the Land, the Premises or the Improvements, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, deed of trust, conveyance, assignment or other act by the Mortgagor, all of which shall become subject to the lien of this Mortgage as fully and completely, and with the same effect, as though now owned by the Mortgagor and specifically described herein.

 

TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its successors and assigns, for the ratable benefit of the Secured Parties, forever, subject only to

 

5



 

the applicable permitted Liens set forth in Section 6.02 of the Credit Agreement and to satisfaction and release as provided in Section 3.04 of this Mortgage.

 

ARTICLE I

 

Representations, Warranties and Covenants of Mortgagor

 

Mortgagor agrees, covenants, represents and/or warrants as follows:

 

SECTION 1.01. Title, Mortgage Lien.  (a) Mortgagor has good and marketable fee simple title to the Mortgaged Property, subject only to the applicable permitted Liens set forth in Section 6.02 of the Credit Agreement.

 

(b)        The execution and delivery of this Mortgage is within Mortgagor’s corporate powers and has been duly authorized by all necessary corporate and, if required, stockholder action. This Mortgage has been duly executed and delivered by Mortgagor and constitutes a legal, valid and binding obligation of Mortgagor, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

(c)        The execution, delivery and recordation of this Mortgage (i) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except filings necessary to perfect the lien of this Mortgage, (ii) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of Mortgagor or any order of any Governmental Authority, (iii) will not violate or result in a default under any indenture, agreement or other instrument binding upon Mortgagor or its assets, or give rise to a right thereunder to require any payment to be made by Mortgagor, and (iv) will not result in the creation or imposition of any Lien on any asset of Mortgagor, except the lien of this Mortgage.

 

(d)        This Mortgage and the Uniform Commercial Code Financing Statements described in Section 1.09 of this Mortgage, when duly recorded in the public records identified in the Perfection Certificate will create a valid, perfected and enforceable lien upon and security interest in all of the Mortgaged Property.

 

(e)        Mortgagor will forever warrant and defend its title to the Mortgaged Property, the rights of Mortgagee therein under this Mortgage and the validity and priority of the lien of this Mortgage thereon against the claims of all persons and parties except those having rights under the applicable permitted Liens set forth in Section 6.02 of the Credit Agreement to the extent of those rights.

 

SECTION 1.02. Credit Agreement.  This Mortgage is given pursuant to the Credit Agreement. Mortgagor expressly covenants and agrees to pay when due, and to timely

 

6



 

perform, and to cause the other Loan Parties to pay when due, and to timely perform, the Obligations in accordance with the terms of the Loan Documents.

 

SECTION 1.03. Payment of Taxes, and Other Obligations.  (a)  Mortgagor will pay and discharge from time to time prior to the time when the same shall become delinquent, and before any interest or penalty accrues thereon or attaches thereto, all Taxes and other obligations with respect to the Mortgaged Property or any part thereof or upon the Rents from the Mortgaged Property or arising in respect of the occupancy, use or possession thereof in accordance with, and to the extent required by, the Credit Agreement.

 

(b) In the event of the passage of any state, Federal, municipal or other governmental law, order, rule or regulation subsequent to the date hereof (i) deducting from the value of real property for the purpose of taxation any lien or encumbrance thereon or in any manner changing or modifying the laws now in force governing the taxation of this Mortgage or debts secured by mortgages or deeds of trust (other than laws governing income, franchise and similar taxes generally) or the manner of collecting taxes thereon and (ii) imposing a tax to be paid by Mortgagee, either directly or indirectly, on this Mortgage or any of the Loan Documents, or requiring an amount of taxes to be withheld or deducted therefrom, Mortgagor will promptly (i) notify Mortgagee of such event, (ii) enter into such further instruments as Mortgagee may determine are reasonably necessary or desirable to obligate Mortgagor to make any additional payments necessary to put the Lenders and Secured Parties in the same financial position they would have been if such law, order, rule or regulation had not been passed and (iii) make such additional payments to Mortgagee for the benefit of the Lenders and Secured Parties.

 

SECTION 1.04. Maintenance of Mortgaged Property.   Mortgagor will maintain the Improvements and the Personal Property in the manner required by the Credit Agreement.

 

SECTION 1.05. Insurance .   Mortgagor will keep or cause to be kept the Improvements and Personal Property insured against such risks, and in the manner, described in Section 4.03(k) of the Guarantee and Collateral Agreement and shall purchase such additional insurance as may be required from time to time pursuant to Section 5.02 of the Credit Agreement. Federal Emergency Management Agency Standard Flood Hazard Determination Forms will be purchased by Mortgagor for each Mortgaged Property on which Improvements are located. If any portion of Improvements constituting part of the Mortgaged Property is located in an area identified as a special flood hazard area by Federal Emergency Management Agency or other applicable agency, Mortgagor will purchase flood insurance in an amount satisfactory to Mortgagee, but in no event less than the maximum limit of coverage available under the National Flood Insurance Act of 1968, as amended.

 

SECTION 1.06. Casualty Condemnation/Eminent Domain.   Mortgagor shall give Mortgagee prompt written notice of any casualty or other damage to the Mortgaged Property or any proceeding for the taking of the Mortgaged Property or any portion thereof or interest therein under power of eminent domain or by condemnation or any similar proceeding in accordance with, and to the extent required by, the Credit Agreement. Any Net Cash Proceeds received by or on behalf of the Mortgagor in respect of any such casualty, damage or taking shall constitute trust funds held by the Mortgagor for the benefit of the Secured

 

7



 

Parties to be applied to repair, restore or replace the Mortgaged Property or, if an Asset Sale shall occur with respect to any such Net Cash Proceeds, to be applied in accordance with Section 2.13 of the Credit Agreement.

 

SECTION 1.07. Assignment of Leases and Rents.  (a)  Mortgagor hereby irrevocably and absolutely grants, transfers and assigns all of its right title and interest in all Leases, together with any and all extensions and renewals thereof for purposes of securing and discharging the performance by Mortgagor of the Obligations. Mortgagor has not assigned or executed any assignment of, and will not assign or execute any assignment of, any Leases or the Rents payable thereunder to anyone other than Mortgagee.

 

(b)        All Leases shall be subordinate to the lien of this Mortgage. Mortgagor will not enter into, modify or amend any Lease if such Lease, as entered into, modified or amended, will not be subordinate to the lien of this Mortgage.

 

(c)        Subject to Section 1.07(d), Mortgagor has assigned and transferred to Mortgagee all of Mortgagor’s right, title and interest in and to the Rents now or hereafter arising from each Lease heretofore or hereafter made or agreed to by Mortgagor, it being intended that this assignment establish, subject to Section 1.07(d), an absolute transfer and assignment of all Rents and all Leases to Mortgagee and not merely to grant a security interest therein. Subject to Section 1.07(d), Mortgagee may in Mortgagor’s name and stead (with or without first taking possession of any of the Mortgaged Property personally or by receiver as provided herein) operate the Mortgaged Property and rent, lease or let all or any portion of any of the Mortgaged Property to any party or parties at such rental and upon such terms as Mortgagee shall, in its sole discretion, determine, and may collect and have the benefit of all of said Rents arising from or accruing at any time thereafter or that may thereafter become due under any Lease.

 

(d)        So long as an Event of Default shall not have occurred and be continuing, Mortgagee will not exercise any of its rights under Section 1.07(c), and Mortgagor shall receive and collect the Rents accruing under any Lease; but after the happening and during the continuance of any Event of Default, Mortgagee may, at its option, receive and collect all Rents and enter upon the Premises and Improvements through its officers, agents, employees or attorneys for such purpose and for the operation and maintenance thereof. Mortgagor hereby irrevocably authorizes and directs each tenant, if any, and each successor, if any, to the interest of any tenant under any Lease, respectively, to rely upon any notice of a claimed Event of Default sent by Mortgagee to any such tenant or any of such tenant’s successors in interest, and thereafter to pay Rents to Mortgagee without any obligation or right to inquire as to whether an Event of Default actually exists and even if some notice to the contrary is received from the Mortgagor, who shall have no right or claim against any such tenant or successor in interest for any such Rents so paid to Mortgagee. Each tenant or any of such tenant’s successors in interest from whom Mortgagee or any officer, agent, attorney or employee of Mortgagee shall have collected any Rents, shall be authorized to pay Rents to Mortgagor only after such tenant or any of their successors in interest shall have received written notice from Mortgagee that the Event of Default is no longer continuing, unless and until a further notice of an Event of Default is given by Mortgagee to such tenant or any of its successors in interest.

 

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(e)       Mortgagee will not become a mortgagee in possession so long as it does not enter or take actual possession of the Mortgaged Property. In addition, Mortgagee shall not be responsible or liable for performing any of the obligations of the landlord under any Lease, for any waste by any tenant, or others, for any dangerous or defective conditions of any of the Mortgaged Property, for negligence in the management, upkeep, repair or control of any of the Mortgaged Property or any other act or omission by any other person.

 

(f)       Mortgagor shall furnish to Mortgagee, within 30 days after a request by Mortgagee to do so, a written statement containing the names of all tenants, subtenants and concessionaires of the Premises or Improvements, the terms of any Lease, the space occupied and the rentals and/or other amounts payable thereunder.

 

SECTION 1.08. Restrictions on Transfers and Encumbrances.   Mortgagor shall not directly or indirectly sell, convey, alienate, assign, lease, sublease, license, mortgage, pledge, encumber or otherwise transfer, create, consent to or suffer the creation of any lien, charge or other form of encumbrance upon any interest in or any part of the Mortgaged Property, or be divested of its title to the Mortgaged Property or any interest therein in any manner or way, whether voluntarily or involuntarily (other than resulting from a condemnation), or engage in any common, cooperative, joint, time-sharing or other congregate ownership of all or part thereof, except in each case in accordance with and to the extent permitted by the Credit Agreement; provided , that Mortgagor may, in the ordinary course of business and in accordance with reasonable commercial standards, enter into easement or covenant agreements that relate to and/or benefit the operation of the Mortgaged Property and that do not materially and adversely affect the value, use or operation of the Mortgaged Property. If any of the foregoing transfers or encumbrances results in an Asset Sale, any Net Cash Proceeds received by or on behalf of the Mortgagor in respect thereof shall constitute trust funds to be held by the Mortgagor for the benefit of the Secured Parties and applied in accordance with Section 2.13 of the Credit Agreement.

 

SECTION 1.09. Security Agreement.   This Mortgage is both a mortgage of real property and a grant of a security interest in personal property, and shall constitute and serve as a “Security Agreement” within the meaning of the uniform commercial code as adopted in the state wherein the Premises are located (“UCC”). Mortgagor has hereby granted unto Mortgagee a security interest in and to all the Mortgaged Property described in this Mortgage that is not real property, and simultaneously with the recording of this Mortgage, Mortgagor has filed or will file UCC financing statements, and will file continuation statements prior to the lapse thereof, at the appropriate offices in the jurisdiction of formation of the Mortgagor to perfect the security interest granted by this Mortgage in all the Mortgaged Property that is not real property. Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to execute any document and to file the same in the appropriate offices (to the extent it may lawfully do so), and to perform each and every act and thing reasonably requisite and necessary to be done to perfect the security interest contemplated by the preceding sentence. Mortgagee shall have all rights with respect to the part of the Mortgaged Property that is the subject of a security interest afforded by the UCC in addition to, but not in limitation of, the other rights afforded Mortgagee hereunder and under the Guarantee and Collateral Agreement.

 

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SECTION 1.10. Filing and Recording.   Mortgagor will cause this Mortgage, the UCC financing statements referred to in Section 1.09, any other security instrument creating a security interest in or evidencing the lien hereof upon the Mortgaged Property and each UCC continuation statement and instrument of further assurance to be filed, registered or recorded and, if necessary, refiled, rerecorded and reregistered, in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to perfect the lien hereof upon, and the security interest of Mortgagee in, the Mortgaged Property until this Mortgage is terminated and released in full in accordance with Section 3.04 hereof. Mortgagor will pay all filing, registration and recording fees, all Federal, state, county and municipal recording, documentary or intangible taxes and other taxes, duties, imposts, assessments and charges, and all reasonable expenses incidental to or arising out of or in connection with the execution, delivery and recording of this Mortgage, UCC continuation statements any mortgage supplemental hereto, any security instrument with respect to the Personal Property, Permits, Plans and Warranties and Proceeds or any instrument of further assurance.

 

SECTION 1.11. Further Assurances.   Upon demand by Mortgagee, Mortgagor will, at the cost of Mortgagor and without expense to Mortgagee, do, execute, acknowledge and deliver all such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers and assurances as Mortgagee shall from time to time reasonably require for the better assuring, conveying, assigning, transferring and confirming unto Mortgagee the property and rights hereby conveyed or assigned or intended now or hereafter so to be, or which Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage, or for filing, registering or recording this Mortgage, and on demand, Mortgagor will also execute and deliver and hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to execute and file to the extent it may lawfully do so, one or more financing statements, chattel mortgages or comparable security instruments reasonably requested by Mortgagee to evidence more effectively the lien hereof upon the Personal Property and to perform each and every act and thing requisite and necessary to be done to accomplish the same.

 

SECTION 1.12. Additions to Mortgaged Property.   All right, title and interest of Mortgagor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property hereafter acquired by or released to Mortgagor or constructed, assembled or placed by Mortgagor upon the Premises or the Improvements, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case without any further mortgage, conveyance, assignment or other act by Mortgagor, shall become subject to the lien and security interest of this Mortgage as fully and completely and with the same effect as though now owned by Mortgagor and specifically described in the grant of the Mortgaged Property above, but at any and all times Mortgagor will execute and deliver to Mortgagee any and all such further assurances, mortgages, conveyances or assignments thereof as Mortgagee may reasonably require for the purpose of expressly and specifically subjecting the same to the lien and security interest of this Mortgage.

 

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SECTION 1.13. No Claims Against Mortgagee.   Nothing contained in this Mortgage shall constitute any consent or request by Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof, nor as giving Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Mortgagee in respect thereof.

 

SECTION 1.14. Fixture Filing.  (a)  Certain portions of the Mortgaged Property are or will become “fixtures” (as that term is defined in the UCC) on the Land, and this Mortgage, upon being filed for record in the real estate records of the county wherein such fixtures are situated, shall operate also as a financing statement filed as a fixture filing in accordance with the applicable provisions of said UCC upon such portions of the Mortgaged Property that are or become fixtures.

 

(b) The real property to which the fixtures relate is described in Exhibit A attached hereto. The record owner of the real property described in Exhibit A attached hereto is Mortgagor. The name, type of organization and jurisdiction of organization of the debtor for purposes of this financing statement are the name, type of organization and jurisdiction of organization of the Mortgagor set forth in the first paragraph of this Mortgage, and the name of the secured party for purposes of this financing statement is the name of the Mortgagee set forth in the first paragraph of this Mortgage. The mailing address of the Mortgagor/debtor is the address of the Mortgagor set forth in the first paragraph of this Mortgage. The mailing address of the Mortgagee/secured party from which information concerning the security interest hereunder may be obtained is the address of the Mortgagee set forth in the first paragraph of this Mortgage. Mortgagor’s organizational identification number is 2576119.

 

ARTICLE II

 

Defaults and Remedies

 

SECTION 2.01. Events of Default.   Any Event of Default under the Credit Agreement (as such term is defined therein) shall constitute an Event of Default under this Mortgage.

 

SECTION 2.02. Demand for Payment.   If an Event of Default shall occur and be continuing, then, upon written demand of Mortgagee, Mortgagor will pay to Mortgagee all amounts due hereunder and under the Credit Agreement and the Guarantee and Collateral Agreement and such further amount as shall be sufficient to cover the costs and expenses of collection, including attorneys’ fees, disbursements and expenses incurred by Mortgagee, and Mortgagee shall be entitled and empowered to institute an action or proceedings at law or in equity for the collection of the sums so due and unpaid, to prosecute any such action or proceedings to judgment or final decree, to enforce any such judgment or final decree against Mortgagor and to collect, in any manner provided by law, all moneys adjudged or decreed to be payable.

 

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SECTION 2.03. Rights To Take Possession, Operate and Apply Revenues.  (a)  If an Event of Default shall occur and be continuing, Mortgagor shall, upon demand of Mortgagee, forthwith surrender to Mortgagee actual possession of the Mortgaged Property and, if and to the extent not prohibited by applicable law, Mortgagee itself, or by such officers or agents as it may appoint, may then enter and take possession of all the Mortgaged Property without the appointment of a receiver or an application therefor, exclude Mortgagor and its agents and employees wholly therefrom, and have access to the books, papers and accounts of Mortgagor.

 

(b)        If Mortgagor shall for any reason fail to surrender or deliver the Mortgaged Property or any part thereof after such demand by Mortgagee, Mortgagee may to the extent not prohibited by applicable law, obtain a judgment or decree conferring upon Mortgagee the right to immediate possession or requiring Mortgagor to deliver immediate possession of the Mortgaged Property to Mortgagee, to the entry of which judgment or decree Mortgagor hereby specifically consents. Mortgagor will pay to Mortgagee, upon demand, all reasonable expenses of obtaining such judgment or decree, including reasonable compensation to Mortgagee’s attorneys and agents with interest thereon at the rate per annum applicable to overdue amounts under the Credit Agreement as provided in Section 2.07 of the Credit Agreement (the “Interest Rate”); and all such expenses and compensation shall, until paid, be secured by this Mortgage.

 

(c)        Upon every such entry or taking of possession, Mortgagee may, to the extent not prohibited by applicable law, hold, store, use, operate, manage and control the Mortgaged Property, conduct the business thereof and, from time to time, (i) make all necessary and proper maintenance, repairs, renewals, replacements, additions, betterments and improvements thereto and thereon, (ii) purchase or otherwise acquire additional fixtures, personalty and other property, (iii) insure or keep the Mortgaged Property insured, (iv) manage and operate the Mortgaged Property and exercise all the rights and powers of Mortgagor to the same extent as Mortgagor could in its own name or otherwise with respect to the same, or (v) enter into any and all agreements with respect to the exercise by others of any of the powers herein granted Mortgagee, all as may from time to time be directed or determined by Mortgagee to be in its best interest and Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to perform any of the foregoing acts. Mortgagee may collect and receive all the Rents, issues, profits and revenues from the Mortgaged Property, including those past due as well as those accruing thereafter, and, after deducting (i) all expenses of taking, holding, managing and operating the Mortgaged Property (including compensation for the services of all persons employed for such purposes), (ii) the costs of all such maintenance, repairs, renewals, replacements, additions, betterments, improvements, purchases and acquisitions, (iii) the costs of insurance, (iv) such taxes, assessments and other similar charges as Mortgagee may at its option pay, (v) other proper charges upon the Mortgaged Property or any part thereof and (vi) the compensation, expenses and disbursements of the attorneys and agents of Mortgagee, Mortgagee shall apply the remainder of the moneys and proceeds so received first to the payment of the Mortgagee for the satisfaction of the Obligations, and second, if there is any surplus, to Mortgagor, subject to the entitlement of others thereto under applicable law.

 

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(d)        Whenever, before any sale of the Mortgaged Property under Section 2.06, all Obligations that are then due shall have been paid and all Events of Default fully cured, Mortgagee will surrender possession of the Mortgaged Property back to Mortgagor, its successors or assigns. The same right of taking possession shall, however, arise again if any subsequent Event of Default shall occur and be continuing.

 

SECTION 2.04. Right To Cure Mortgagor’s Failure to Perform.   Should Mortgagor fail in the payment, performance or observance of any term, covenant or condition required by this Mortgage or the Credit Agreement (with respect to the Mortgaged Property), Mortgagee may pay, perform or observe the same, and all payments made or costs or expenses incurred by Mortgagee in connection therewith shall be secured hereby and shall be, without demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at the Interest Rate. Mortgagee shall be the judge using reasonable discretion of the necessity for any such actions and of the amounts to be paid. Mortgagee is hereby empowered to enter and to authorize others to enter upon the Premises or the Improvements or any part thereof for the purpose of performing or observing any such defaulted term, covenant or condition without having any obligation to so perform or observe and without thereby becoming liable to Mortgagor, to any person in possession holding under Mortgagor or to any other person.

 

SECTION 2.05. Right to a Receiver.   If an Event of Default shall occur and be continuing, Mortgagee, upon application to a court of competent jurisdiction, shall be entitled as a matter of right to the appointment of a receiver to take possession of and to operate the Mortgaged Property and to collect and apply the Rents. The receiver shall have all of the rights and powers permitted under the laws of the state wherein the Mortgaged Property is located. Mortgagor shall pay to Mortgagee upon demand all reasonable expenses, including receiver’s fees, reasonable attorney’s fees and disbursements, costs and agent’s compensation incurred pursuant to the provisions of this Section 2.05; and all such expenses shall be secured by this Mortgage and shall be, without demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at the Interest Rate.

 

SECTION 2.06. Foreclosure and Sale.  (a)  If an Event of Default shall occur and be continuing, Mortgagee may elect to sell the Mortgaged Property or any part of the Mortgaged Property by exercise of the power of foreclosure or of sale granted to Mortgagee by applicable law or this Mortgage. In such case, Mortgagee may commence a civil action to foreclose this Mortgage, or it may proceed and sell the Mortgaged Property to satisfy any Obligation. Mortgagee or an officer appointed by a judgment of foreclosure to sell the Mortgaged Property, may sell all or such parts of the Mortgaged Property as may be chosen by Mortgagee at the time and place of sale fixed by it in a notice of sale, either as a whole or in separate lots, parcels or items as Mortgagee shall deem expedient, and in such order as it may determine, at public auction to the highest bidder. Mortgagee or an officer appointed by a judgment of foreclosure to sell the Mortgaged Property may postpone any foreclosure or other sale of all or any portion of the Mortgaged Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement or subsequently noticed sale. Without further notice, Mortgagee or an officer appointed to sell the Mortgaged Property may make such sale at the time fixed by the last postponement, or may, in its discretion, give a new notice of sale. Any person, including Mortgagor or Mortgagee or any designee or affiliate thereof, may purchase at such sale.

 

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(b)        The Mortgaged Property may be sold subject to unpaid taxes and the applicable permitted Liens set forth in Section 6.02 of the Credit Agreement, and, after deducting all costs, fees and expenses of Mortgagee (including costs of evidence of title in connection with the sale), Mortgagee or an officer that makes any sale shall apply the proceeds of sale in the manner set forth in Section 2.08.

 

(c)        Any foreclosure or other sale of less than the whole of the Mortgaged Property or any defective or irregular sale made hereunder shall not exhaust the power of foreclosure or of sale provided for herein; and subsequent sales may be made hereunder until the Obligations have been satisfied, or the entirety of the Mortgaged Property has been sold.

 

(d)        If an Event of Default shall occur and be continuing, Mortgagee may instead of, or in addition to, exercising the rights described in Section 2.06(a) above and either with or without entry or taking possession as herein permitted, proceed by a suit or suits in law or in equity or by any other appropriate proceeding or remedy (i) to specifically enforce payment of some or all of the Obligations, or the performance of any term, covenant, condition or agreement of this Mortgage or any other Loan Document or any other right, or (ii) to pursue any other remedy available to Mortgagee, all as Mortgagee shall determine most effectual for such purposes.

 

SECTION 2.07. Other Remedies.  (a) In case an Event of Default shall occur and be continuing, Mortgagee may also exercise, to the extent not prohibited by law, any or all of the remedies available to a secured party under the UCC.

 

(b)        In connection with a sale of the Mortgaged Property or any Personal Property and the application of the proceeds of sale as provided in Section 2.08, Mortgagee shall be entitled to enforce payment of and to receive up to the principal amount of the Obligations, plus all other charges, payments and costs due under this Mortgage, and to recover a deficiency judgment for any portion of the aggregate principal amount of the Obligations remaining unpaid, with interest.

 

SECTION 2.08. Application of Sale Proceeds and Rents.  After any foreclosure sale of all or any of the Mortgaged Property, Mortgagee shall receive and apply the proceeds of the sale together with any Rents that may have been collected and any other sums that then may be held by Mortgagee under this Mortgage as follows:

 

FIRST, to the payment of all costs and expenses incurred by the Mortgagee, the Administrative Agent or the Collateral Agent (in their respective capacities as such hereunder or under any other Loan Document) in connection with such collection, sale, foreclosure or realization or otherwise in connection with this Mortgage, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Mortgagee, the Administrative Agent and/or the Collateral Agent hereunder or under any other Loan Document on behalf of Mortgagor or any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;

 

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SECOND, to the payment in full of Unfunded Advances/Participations (the amounts so applied to be distributed between or among the Administrative Agent, the Swingline Lender and any Issuing Bank pro rata in accordance with the amounts of Unfunded Advances/Participations owed to them on the date of any such distribution);

 

THIRD, to the payment in full of all other Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution);

 

FOURTH, to the Mortgagor, its successors or assigns, or as a court of competent jurisdiction may otherwise direct.

 

The Mortgagee shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Mortgage. Upon any sale of the Mortgaged Property by the Mortgagee (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Mortgagee or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Mortgaged Property so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Mortgagee or such officer or be answerable in any way for the misapplication thereof.

 

SECTION 2.09. Mortgagor as Tenant Holding Over. If Mortgagor remains in possession of any of the Mortgaged Property after any foreclosure sale by Mortgagee, at Mortgagee’s election Mortgagor shall be deemed a tenant holding over and shall forthwith surrender possession to the purchaser or purchasers at such sale or be summarily dispossessed or evicted according to provisions of law applicable to tenants holding over.

 

SECTION 2.10. Waiver of Appraisement, Valuation, Stay, Extension and Redemption Laws. Mortgagor waives, to the extent not prohibited by law, (i) the benefit of all laws now existing or that hereafter may be enacted (x) providing for any appraisement or valuation of any portion of the Mortgaged Property and/or (y) in any way extending the time for the enforcement or the collection of amounts due under any of the Obligations or creating or extending a period of redemption from any sale made in collecting said debt or any other amounts due Mortgagee, (ii) any right to at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any homestead exemption, stay, statute of limitations, extension or redemption, or sale of the Mortgaged Property as separate tracts, units or estates or as a single parcel in the event of foreclosure or notice of deficiency, and (iii) all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of or each of the Obligations and marshaling in the event of foreclosure of this Mortgage.

 

SECTION 2.11. Discontinuance of Proceedings. In case Mortgagee shall proceed to enforce any right, power or remedy under this Mortgage by foreclosure, entry or otherwise, and such proceedings shall be discontinued or abandoned for any reason, or shall be determined adversely to Mortgagee, then and in every such case Mortgagor and Mortgagee

 

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shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of Mortgagee shall continue as if no such proceeding had been taken.

 

SECTION 2.12. Suits To Protect the Mortgaged Property. Mortgagee shall have power (a) to institute and maintain suits and proceedings to prevent any impairment of the Mortgaged Property by any acts that may be unlawful or in violation of this Mortgage, (b) to preserve or protect its interest in the Mortgaged Property and in the Rents arising therefrom and (c) to restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of or compliance with such enactment, rule or order would impair the security or be prejudicial to the interest of Mortgagee hereunder.

 

SECTION 2.13. Filing Proofs of Claim. In case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting Mortgagor, Mortgagee shall, to the extent permitted by law, be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of Mortgagee allowed in such proceedings for the Obligations secured by this Mortgage at the date of the institution of such proceedings and for any interest accrued, late charges and additional interest or other amounts due or that may become due and payable hereunder after such date.

 

SECTION 2.14. Possession by Mortgagee. Notwithstanding the appointment of any receiver, liquidator or trustee of Mortgagor, any of its property or the Mortgaged Property, Mortgagee shall be entitled, to the extent not prohibited by law, to remain in possession and control of all parts of the Mortgaged Property now or hereafter granted under this Mortgage to Mortgagee in accordance with the terms hereof and applicable law.

 

SECTION 2.15. Waiver. (a)  No delay or failure by Mortgagee to exercise any right, power or remedy accruing upon any breach or Event of Default shall exhaust or impair any such right, power or remedy or be construed to be a waiver of any such breach or Event of Default or acquiescence therein; and every right, power and remedy given by this Mortgage to Mortgagee may be exercised from time to time and as often as may be deemed expedient by Mortgagee. No consent or waiver by Mortgagee to or of any breach or Event of Default by Mortgagor in the performance of the Obligations shall be deemed or construed to be a consent or waiver to or of any other breach or Event of Default in the performance of the same or of any other Obligations by Mortgagor hereunder. No failure on the part of Mortgagee to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall constitute a waiver by Mortgagee of its rights hereunder or impair any rights, powers or remedies consequent on any future Event of Default by Mortgagor.

 

(b) Even if Mortgagee (i) grants some forbearance or an extension of time for the payment of any sums secured hereby, (ii) takes other or additional security for the payment of any sums secured hereby, (iii) waives or does not exercise some right granted herein or under the Loan Documents, (iv) releases a part of the Mortgaged Property from this Mortgage, (v) agrees to change some of the terms, covenants, conditions or agreements of any of the Loan Documents, (vi) consents to the filing of a map, plat or replat affecting the

 

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Premises, (vii) consents to the granting of an easement or other right affecting the Premises or (viii) makes or consents to an agreement subordinating Mortgagee’s lien on the Mortgaged Property hereunder; no such act or omission shall preclude Mortgagee from exercising any other right, power or privilege herein granted or intended to be granted in the event of any breach or Event of Default then made or of any subsequent default; nor, except as otherwise expressly provided in an instrument executed by Mortgagee, shall this Mortgage be altered thereby. In the event of the sale or transfer by operation of law or otherwise of all or part of the Mortgaged Property, Mortgagee is hereby authorized and empowered to deal with any vendee or transferee with reference to the Mortgaged Property secured hereby, or with reference to any of the terms, covenants, conditions or agreements hereof, as fully and to the same extent as it might deal with the original parties hereto and without in any way releasing or discharging any liabilities, obligations or undertakings.

 

SECTION 2.16. Waiver of Trial by Jury. To the fullest extent permitted by applicable law, Mortgagor and Mortgagee each hereby irrevocably and unconditionally waive trial by jury in any action, claim, suit or proceeding relating to this Mortgage and for any counterclaim brought therein. Mortgagor hereby waives all rights to interpose any counterclaim in any suit brought by Mortgagee hereunder and all rights to have any such suit consolidated with any separate suit, action or proceeding.

 

SECTION 2.17. Remedies Cumulative. No right, power or remedy conferred upon or reserved to Mortgagee by this Mortgage is intended to be exclusive of any other right, power or remedy, and each and every such right, power and remedy shall be cumulative and concurrent and in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity or by statute.

 

ARTICLE III

 

Miscellaneous

 

SECTION 3.01. Partial Invalidity. In the event any one or more of the provisions contained in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such validity, illegality or unenforceability shall, at the option of Mortgagee, not affect any other provision of this Mortgage, and this Mortgage shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein or therein.

 

SECTION 3.02. Notices. All notices and communications hereunder shall be in writing and given to Mortgagor in accordance with the terms of the Credit Agreement at the address set forth on the first page of this Mortgage and to the Mortgagee as provided in the Credit Agreement.

 

SECTION 3.03. Successors and Assigns. All of the grants, covenants, terms, provisions and conditions herein shall run with the Premises and the Improvements and shall apply to, bind and inure to, the benefit of the permitted successors and assigns of Mortgagor and the successors and assigns of Mortgagee.

 

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SECTION 3.04. Satisfaction and Cancelation. (a)  The conveyance to Mortgagee of the Mortgaged Property as security created and consummated by this Mortgage shall terminate and be null and void when all the Obligations have been indefeasibly paid in full in accordance with the terms of the Loan Documents and the Lenders have no further commitment to lend under the Credit Agreement, the aggregate L/C Exposure has been reduced to zero and the Issuing Banks have no further obligations to issue Letters of Credit under the Credit Agreement.

 

(b) Mortgagor shall automatically be released from its obligations hereunder upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Mortgagor ceases to be a Subsidiary.

 

(c) Upon any sale or other transfer by Mortgagor of any Collateral that is permitted under the Credit Agreement to any person that is not the Borrower or a Mortgagor, or, upon the effectiveness of any written consent to the release of the Security Interest granted hereby in any Collateral pursuant to Section 9.08 of the Credit Agreement, the Security Interest in such Collateral shall be automatically released.

 

(d) In connection with any termination or release pursuant to paragraph (a), (b) or (c) above, the Mortgagee shall promptly execute and deliver to Mortgagor at such Mortgagor’s expense, all Uniform Commercial Code termination statements and similar documents that such Mortgagor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section shall be without recourse to or representation or warranty by the Mortgagee or any Secured Party. Without limiting the provisions of Section 7.06 of the Guarantee and Collateral Agreement, the Borrower shall reimburse the Mortgagee upon demand for all costs and out of pocket expenses, including the fees, charges and expenses of counsel, incurred by it in connection with any action contemplated by this Section.

 

SECTION 3.05. Definitions. As used in this Mortgage, the singular shall include the plural as the context requires and the following words and phrases shall have the following meanings: (a) “including” shall mean “including but not limited to”; (b) “provisions” shall mean “provisions, terms, covenants and/or conditions”; (c) “lien” shall mean “lien, charge, encumbrance, security interest, mortgage or deed of trust”; (d) “obligation” shall mean “obligation, duty, covenant and/or condition”; and (e) “any of the Mortgaged Property” shall mean “the Mortgaged Property or any part thereof or interest therein”. Any act that Mortgagee is permitted to perform hereunder may be performed at any time and from time to time by Mortgagee or any person or entity designated by Mortgagee. Any act that is prohibited to Mortgagor hereunder is also prohibited to all lessees of any of the Mortgaged Property. Each appointment of Mortgagee as attorney-in-fact for Mortgagor under the Mortgage is irrevocable, with power of substitution and coupled with an interest. Subject to the applicable provisions hereof, Mortgagee has the right to refuse to grant its consent, approval or acceptance or to indicate its satisfaction, in its sole discretion, whenever such consent, approval, acceptance or satisfaction is required hereunder.

 

SECTION 3.06. Multisite Real Estate Transaction. Mortgagor acknowledges that this Mortgage is one of a number of Other Mortgages and Security Documents that secure

 

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the Obligations. Mortgagor agrees that the lien of this Mortgage shall be absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Mortgagee, and without limiting the generality of the foregoing, the lien hereof shall not be impaired by any acceptance by the Mortgagee of any security for or guarantees of any of the Obligations hereby secured, or by any failure, neglect or omission on the part of Mortgagee to realize upon or protect any Obligation or indebtedness hereby secured or any collateral security therefor including the Other Mortgages and other Security Documents. The lien hereof shall not in any manner be impaired or affected by any release (except as to the property released), sale, pledge, surrender, compromise, settlement, renewal, extension, indulgence, alteration, changing, modification or disposition of any of the Obligations secured or of any of the collateral security therefor, including the Other Mortgages and other Security Documents or of any guarantee thereof, and Mortgagee may at its discretion foreclose, exercise any power of sale, or exercise any other remedy available to it under any or all of the Other Mortgages and other Security Documents without first exercising or enforcing any of its rights and remedies hereunder. Such exercise of Mortgagee’s rights and remedies under any or all of the Other Mortgages and other Security Documents shall not in any manner impair the indebtedness hereby secured or the lien of this Mortgage and any exercise of the rights or remedies of Mortgagee hereunder shall not impair the lien of any of the Other Mortgages and other Security Documents or any of Mortgagee’s rights and remedies thereunder. Mortgagor specifically consents and agrees that Mortgagee may exercise its rights and remedies hereunder and under the Other Mortgages and other Security Documents separately or concurrently and in any order that it may deem appropriate and waives any rights of subrogation.

 

SECTION 3.07. No Oral Modification. This Mortgage may not be changed or terminated orally. Any agreement made by Mortgagor and Mortgagee after the date of this Mortgage relating to this Mortgage shall be superior to the rights of the holder of any intervening or subordinate Mortgage, lien or encumbrance.

 

ARTICLE IV


Particular Provisions

 

This Mortgage is subject to the following provisions relating to the particular laws of the state wherein the Premises are located:

 

SECTION 4.01. Applicable Law; Certain Particular Provisions. This Mortgage shall be governed by and construed in accordance with the internal law of the state where the Mortgaged Property is located, except that Mortgagor expressly acknowledges that by their terms, the Credit Agreement and other Loan Documents (aside from those Other Mortgages to be recorded outside New York) shall be governed by the internal law of the State of New York, without regard to principles of conflict of law. Mortgagor and Mortgagee agree to submit to jurisdiction and the laying of venue for any suit on this Mortgage in the state where the Mortgaged Property is located.

 

19



 

SECTION 4.02. Open-End Mortgage. This Mortgage is an “Open-End Mortgage” within the meaning of Connecticut General Statutes §49-2(c), and the holder hereof shall have all of the rights, powers and protections to which the holder of any such Open-End Mortgage is entitled under Connecticut law. The obligations created by the Credit Agreement specifically permits future advances, including advances which may be made pursuant to a commercial revolving loan agreement. The full amount of the Loans and Letters of Credit authorized is $230,000,000 including (a) a Term Loan in the aggregate principal amount not to exceed $185,000,000 to be advanced and fully funded on the date hereof, (b) Revolving Loans in an aggregate principal amount not to exceed $20,000,000, (c) Swingline Loans in an aggregate principal amount not to exceed $10,000,000; and Letters of Credit in an aggregate face amount not in excess of $15,000,000, (provided, however, that the overall limit of all such Revolving Loans, Swingline Loans and Letters of Credit outstanding at any time shall not exceed $20,000,000) and (d) Incremental Term Loans and increases in the Revolving Credit Commitment in an amount not to exceed the then available Incremental Revolving Facility Amount in a combined aggregate principal amount not to exceed $25,000,000 at any time. It is understood that future advances may be made as provided in the Credit Agreement and in this Mortgage, with respect to Revolving Loans, Swingline Loans, Letters of Credit, Incremental Term Loans and Incremental Revolving Facility Amounts. The maximum term(s) (“Maturity Date(s)”) of the Loans and Letters of Credit herein authorized are as follows: The Term Loan, June 15, 2014; the Revolving Loans, June 15, 2012; the Swingline Loans, June 15, 2012; the Letters of Credit, June 15, 2012; the Incremental Term Loans, June 15, 2014 and any Incremental Revolving Facility Amount, June 15, 2012.

 

SECTION 4.03. Prejudgment Remedy Waiver. The Mortgagor represents, warrants and acknowledges that the transaction of which this Mortgage is a part is a commercial transaction and not a consumer transaction. Monies now or in the future to be advanced to or on behalf of Mortgagor are not and will not be used for personal, family or household purposes. MORTGAGOR ACKNOWLEDGES THAT IT HAS THE RIGHT UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, SUBJECT TO CERTAIN LIMITATIONS, TO NOTICE OF AND HEARING ON THE RIGHT OF THE MORTGAGEE TO OBTAIN A PREJUDGEMENT REMEDY, SUCH AS ATTACHMENT, GARNISHEMENT OR REPLEVIN, UPON COMMENCING ANY LITIGATION AGAINST MORTGAGOR. NOTWITHSTANDING SUCH RIGHT, MORTGAGOR HEREBY WAIVES ALL RIGHTS TO NOTICE, JUDICIAL HEARING OR PRIOR COURT ORDER TO WHICH IT MIGHT OTHERWISE HAVE THE RIGHT UNDER SAID STATUTE OR UNDER ANY OTHER STATE OR FEDERAL STATUTE OR CONSTITUTION IN CONNECTION WITH THE OBTAINING BY MORTGAGEE OF ANY PREJUDGMENT REMEDY IN CONNECTION WITH THIS MORTGAGE. MORTGAGOR FURTHER CONSENTS TO THE ISSUANCE OF ANY PREJUDGEMENT REMEDIES WITHOUT A BOND. NOTWITHSTANDING THE FOREGOING WAIVER, NOTHING HEREIN SHALL BE DEEMED TO WAIVE ANY RIGHTS WHICH MORTGAGOR MAY HAVE WITH RESPECT TO ANY PROCEEDINGS WHICH MAY BE PERMITTED BY LAW FOLLOWING THE GRANTING OF SUCH PREJUDGMENT REMEDY.

 

20



 

SECTION 4.04. Loans Subject to Variable Interest Rate. The Loans and Letters of Credit secured by this Mortgage are variable interest rate loans as more particularly described in the Credit Agreement, but changes in the interest rate will not affect the maximum term of such loans or the maturity date(s) of such loans as set forth in Section 4.02, above.

 

SECTION 4.05. Statutory Condition. This Mortgage is made and given upon THE STATUTORY CONDITION. If the Obligations have been indefeasibly paid in full in accordance with the terms of the Loan Documents, if all of the covenants and agreements of the Mortgagor under this Mortgage, the Credit Agreement and the Loan Documents shall be fully and faithfully paid, performed, observed and complied with, in accordance with their terms and if the Lenders have no further commitment to lend under the Credit Agreement, the aggregate L/C Exposure has been reduced to zero and the Issuing Banks have no further obligations to issue Letters of Credit under the Credit Agreement, then this Mortgage shall be absolutely void; otherwise the same shall remain in full force and effect.

 

21



 

IN WITNESS WHEREOF, this Mortgage has been duly executed and delivered to Mortgagee by Mortgagor on the date of the acknowledgment attached hereto.

 

 

WITNESSES:

 

SPECIALIZED TECHNOLOGY RESOURCES,

 

 

INC., a Delaware corporation,

 

 

 

/s/ Kris Villarreal

 

by:

Printed Name: Kris Villarreal

 

/s/ Barry A. Morris

 

 

Name:

/s/ Kristin Blazewicz

 

Title:

Printed Name:  Kristin Blazewicz

 

 

 

22



 

STATE OF NEW YORK

)

 

 

 

 

 

ss

 

 

 

June  15 , 2007

COUNTY OF NEW YORK

)

 

 

 

 

 

On this the 15 day of June, 2007, before me, Ercy Castro, the undersigned officer, personally appeared Barry A. Morris, who acknowledged himself/herself to be the                         of SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation, and that he/she, as such                                           , being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself/herself as such                                  .

 

In Witness Whereof I hereunto set my hand.

 

 

 

/s/ Ercy Castro

 

Name: Ercy Castro

 

Notary Public

 

My Commission Expires: 10/23/2010

 

 

 

 

 

ERCY CASTRO

 

Notary Public, State of New York

 

No. 01CA6155025

 

Qualified in Kings County

 

Commission Expires Oct. 23, 2010

 

23



 

Exhibit A

To Mortgage

Description of the Land

 

That certain piece or parcel of land on the south side of Hazard Avenue (Route 190) in the Town of Enfield, County of Hartford and State of Connecticut, shown as "Parcel A" on Sheet 1 of 2 on a map or plan entitled: "Prepared for Springborn Laboratories, Inc. Hazard Avenue & Abbe Road, Enfield, Conn. . . Scale: 1 in. = 100 ft. Date: June 30, 1987. . . Rev. 2-24-88. . . Alford Associates, Inc. Civil Engineers, Windsor, Connecticut," which map or plan is on file with the Enfield Town Clerk in Map Volume 220, Page 3033, and more particularly bounded and described as follows:

 

Beginning at a point on the south side of Hazard Avenue, which point is the northwest corner of the herein described premises and the northeast corner of land now or formerly of Raymond F. and Suzanne Aquilio, as shown on said map; running thence along the arc of a curve to the right having a radius of 933.00 feet and a delta angle of 9° 34' 03" a distance of 155.79 feet to a CHD marker; running thence N 83° 19' 04" E a distance of 414.00 feet to a CHD monument; running thence N 82° 58' 24" E a distance of 143.64 feet to a point, the last three (3) courses running along the south side of Hazard Avenue; running thence S 09° 53' 12" E a distance of 435.66 feet along land now or formerly of National Railroad Passenger Corporation as shown on said map; running thence S 89° 20' 43" W a distance of 143.38 feet to a point; S 64° 08' 57" W a distance of 9.72 feet to a point; S 00° 09' 17" W a distance of 14.24 feet to a point; S 89° 08' 16" W a distance of 51.12 feet to a point; S 86° 57' 00" W a distance of 105.15 feet to a point; N 89° 55' 46" W a distance of 384.08 feet to a point; S 79° 44' 15" W a distance of 139.61 feet to a set iron pin; N 69° 59' 38" W a distance of 129.11 feet to a set iron pin, the last eight (8) courses being along the Scantic River as shown on said map; running thence N 24° 34' 57" E a distance of 401.37 feet along land now or formerly of Thomas E. and Diane S. Eastwood, James C. and Nancy A. Miczak and Raymond F. and Suzanne Aquilio, in part by each, to the point or place of beginning.

 

TOGETHER WITH an easement from the State of Connecticut to Springborn Testing & Research, Inc. dated December 31, 1997 and recorded in Volume 1156, Page 123 of the Enfield Land Records.

 


 

EXHIBIT F-1

 

[FORM OF]

OPINION OF WEIL, GOTSHAL & MANGES LLP



 

 

WEIL, GOTSHAL & MANGES LLP

 

 

767 FIFTH AVENUE

AUSTIN

 

NEW YORK, NY 10153

BOSTON

 

(212) 310-8000

BRUSSELS

 

FAX: (212) 310-8007

BUDAPEST

 

 

 

 

DALLAS

 

 

 

 

FRANKFURT

 

 

 

 

HOUSTON

 

 

 

 

LONDON

 

 

 

 

MIAMI

WRITER’S DIRECT LINE

 

 

 

PARIS

 

 

 

 

PRAGUE

 

 

 

 

SILICON VALLEY

 

 

 

 

SINGAPORE

 

June 15, 2007

WARSAW

 

 

 

 

WASHINGTON, D.C.

 

Credit Suisse,

as Administrative Agent and

the Lenders party to the

First Lien Credit Agreement

 

Ladies and Gentlemen:

 

We have acted as counsel to STR Acquisition, Inc., a Delaware corporation (the “ Borrower ”), STR Holdings LLC, a Delaware limited liability company (“ Holdings ”), Specialized Technology Resources, Inc., a Delaware corporation (“ STR ”), Cal Safety Compliance Corporation, a California corporation (“ CSCC ”), Specialized Technology Resources (International), Inc., a Delaware corporation (“ STR International ”), Shuster Laboratories, Inc., a Delaware corporation (“ Shuster ”), Supply Chain Consulting Corporation, a Delaware corporation (“ Supply Chain ”), Specialized Technology Resources (Florida), Inc., a Florida corporation (“ STR Florida ”) and STR Materials Science, Inc., a Delaware corporation (“ Materials ”, and together with the Borrower, Holdings, STR, CSCC, STR International, Shuster, Supply Chain, and STR Florida, the “ Loan Parties ”), in connection with the execution and delivery of, and the consummation of the transactions contemplated by, the First Lien Credit Agreement dated as of June 15, 2007 (the “ Credit Agreement ”) among the Borrower, Holdings, the Lenders party thereto, and Credit Suisse, as administrative agent for the Lenders (in such capacity, the “ Administrative Agent ”) and as collateral agent for the Lenders (in such capacity, the “ Collateral Agent ”). This opinion is being delivered pursuant to Section 4.02(a) of the Credit Agreement. Capitalized terms defined in the Credit Agreement and used (but not otherwise defined) herein are used herein as so defined.

 

In so acting, we have examined originals or copies (certified or otherwise identified to our satisfaction) of the following:

 

(a)           the Credit Agreement;

 



 

(b)           the First Lien Guarantee and Collateral Agreement, dated as of the date hereof (the “ Collateral Agreement ”), among the Loan Parties and the Collateral Agent;

 

(c)           the First Lien Assignment of Distributions among STR, STR-Registrar LLC and the Collateral Agent;

 

(d)           the First Lien Patent Security Agreement, dated as of the date hereof, among the Loan Parties and the Collateral Agent;

 

(e)           the First Lien Trademark Security Agreement, dated as of the date hereof, among Holdings, the Borrower and the Collateral Agent;

 

(f)            the Intercreditor Agreement dated as of the date hereof among Holdings, the Borrower, the Collateral Agent and Credit Suisse, as the Second Lien Collateral Agent (as defined therein);

 

(g)           the UCC-1 Financing Statements attached as Exhibit A hereto (the “ Financing Statements ”); and

 

(h)           such corporate and limited liability company records, agreements, documents and other instruments, and such certificates or comparable documents of public officials and of officers and representatives of each of the Loan Parties, and have made such inquiries of such officers and representatives, as we have deemed relevant and necessary as a basis for the opinions hereinafter set forth. The documents set forth in clauses (a) through (f) above shall be referred to as the “ Loan Documents .”

 

In such examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. As to all questions of fact material to these opinions that have not been independently established, we have relied upon certificates or comparable documents of officers and representatives of the Loan Parties and upon the representations and warranties of the Loan Parties contained in the Loan Documents. As used herein, “to our knowledge” and “of which we are aware” mean the conscious awareness of facts or other information by any lawyer in our firm actively involved in the transactions contemplated by the Loan Documents.

 

Based on the foregoing, and subject to the qualifications stated herein, we are of the opinion that:

 

1.     The Borrower is a corporation validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and

 

2



 

authority to own, lease and operate its properties and to carry on its business as now being conducted. Holdings is a limited liability company validly existing and in good standing under the laws of the State of Delaware and has all requisite limited liability company power and authority to own, lease and operate its properties and to carry on its business as now being conducted. CSCC is a corporation validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. STR Florida is a corporation validly existing and in good standing under the laws of the State of Florida and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted.

 

2.     Each of the Borrower, Holdings, CSCC and STR Florida has all requisite corporate or limited liability company power and authority to execute and deliver each of the Loan Documents to which it is a party and to perform its obligations thereunder. The execution, delivery and performance of, and the grant of security interests pursuant to, the Loan Documents by each of the Borrower, Holdings, CSCC and STR Florida have been duly authorized by all necessary corporate action on the part of the Borrower, CSCC and STR Florida and all necessary limited liability company action on the part of Holdings. Each Loan Document has been duly and validly executed and delivered by each of the Loan Parties party thereto. Assuming the due authorization, execution and delivery thereof by the other parties thereto, each Loan Document constitutes the legal, valid and binding obligation of each Loan Party party thereto, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except that (A) rights to indemnification and contribution thereunder may be limited by federal or state securities laws or public policy relating thereto, (B) no opinion is expressed with respect to Section 9.06 of the Credit Agreement, and (C) certain remedial provisions of the Loan Documents are or may be unenforceable in whole or in part under the laws of the State of New York, but the inclusion of such provisions does not affect the validity of the Loan Documents, and the Loan Documents contains adequate provisions for the practical realization of the rights and benefits afforded thereby. No opinion is expressed in this paragraph as to the attachment, perfection or priority of any liens granted pursuant to the Loan Documents.

 

3.     The execution and delivery by each Loan Party of the Loan Documents to which it is a party, the performance by each Loan Party of its obligations thereunder and the grant of security interests by each Loan Party pursuant to the Loan Documents will not conflict with, constitute a default under or violate (i) any of the terms, conditions or provisions of the Certificate of Incorporation or by-laws of the

 

3



 

Borrower, CSCC or STR Florida or the Certificate of Formation or operating agreement of Holdings, (ii) any of the terms, conditions or provisions of any material document, agreement or other instrument to which the Borrower or Holdings is a party of which we are aware (iii) in the case of STR Florida, Florida corporate law, in the case of CSCC, California corporate law, in the case of Holdings, Delaware limited liability company law, in the case of the Borrower, Delaware corporate law, (iv) federal law or regulation (other than federal and state securities or blue sky laws, as to which we express no opinion in this paragraph) or (v) any judgment, writ, injunction, decree, order or ruling of any court or governmental authority binding on the Borrower or Holdings of which we are aware.

 

4.     No consent, approval, waiver, license or authorization or other action by or filing with any New York, California corporate, Florida corporate, Delaware corporate or federal governmental authority is required in connection with the execution and delivery by any Loan Party of the Loan Documents to which it is a party, the consummation by such Loan Party of the transactions contemplated thereby, the performance by such Loan Party of its obligations thereunder or the grant by such Loan Party of the security interests under the Loan Documents, except for (i) filings in connection with perfecting security interests, and federal and state securities or blue sky laws, as to which we express no opinion in this paragraph, (ii) those already obtained and (iii) those which could not reasonably be expected to have a material adverse effect on the business, assets or financial condition of the Borrower, Holdings and each of their subsidiaries taken as a whole.

 

5.     Except as set forth in Schedule 3.09 to the Credit Agreement, to our knowledge, there is no litigation, proceeding or governmental investigation pending or overtly threatened against the Borrower or Holdings that relates to any of the transactions contemplated by the Loan Documents or which could reasonably be expected to have a material adverse effect on the business, assets or financial condition of the Borrower, Holdings and each of their subsidiaries taken as a whole or on the ability of the Borrower to perform it obligations under the Loan Documents.

 

6.     No Loan Party is an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

 

7.     Assuming that the Borrower complies with the provisions of the Credit Agreement relating to the use of proceeds of the Loans, the execution and delivery of the Credit Agreement by the Borrower and the making of the Loans under the Credit Agreement will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve Board.

 

8.     (a) The execution and delivery of the Collateral Agreement by each Loan Party creates a valid security interest in favor of the Collateral Agent in the Article

 

4



 

9 Collateral (as defined in the Collateral Agreement), as security for the Obligations (as defined in the Collateral Agreement). Assuming the filing of the Financing Statements (i) with respect to CSCC, with the Secretary of State of the State of California, (ii) with respect to STR Florida, with the Secretary of State of the State of Florida and (iii) with respect to the Borrower, Holdings, STR, STR International, Shuster, Supply Chain and Materials (collectively, the Delaware Parties ”), with the Secretary of State of the State of Delaware, such security interest is perfected, to the extent a security interest in the Article 9 Collateral may be perfected by the filing of a financing statement under the Uniform Commercial Code in effect (x) with respect to CSCC, in the State of California (the CA UCC ”), (y) with respect to STR Florida, in the State of Florida (the FL UCC ”) or (z) with respect to the Delaware Parties, in the State of Delaware (the DE UCC ”).

 

(b)           The execution and delivery of the Collateral Agreement by each Loan Party creates a valid lien on and security interest in the Pledged Stock and Pledged Debt Securities (each as defined in the Collateral Agreement), in favor of the Collateral Agent as security for the Obligations (as defined in the Collateral Agreement). Assuming (i) delivery in the State of New York to the Collateral Agent (the Pledgee ”) of all certificates and instruments that represent the Pledged Stock and Pledged Debt Securities, together with stock powers or note powers, as the case may be, properly executed in blank with respect thereto, and (ii) that the Pledgee was without notice of any adverse claim (as such phrase is defined in Section 8-105 of the Uniform Commercial Code in effect in the State of New York (the NY UCC and, together with the CA UCC, the FL UCC and the DE UCC, the “ UCC ”)) with respect to the Pledged Stock and Pledged Debt Securities, such security interest is perfected and is free of any adverse claim. The security interest in such Pledged Stock and Pledged Debt Securities, to the extent delivered, will be prior to any security interest, lien, charge or encumbrance that must be perfected by possession or filing under the NY UCC, to the extent that the creation and perfection of security interests in such Pledged Stock and Pledged Debt Securities is governed by the NY UCC.

 

(c)           The execution and delivery by each Loan Party of the Collateral Agreement creates in favor of the Collateral Agent a valid security interest in each Deposit Account described therein. Upon the execution and delivery of the Webster DACA by STR, the Collateral Agent and Webster Bank, the security interest granted to the Collateral Agent in each Deposit Account described in the Webster DACA will be perfected.

 

The opinions in subparagraph (a) and, with respect to subclauses A and B below, subparagraphs (b) and (c) are subject to the following exceptions:

 

A.           that with respect to rights in the Collateral of any Loan Party (as defined in the Collateral Agreement), we express no opinion, and have assumed that such Loan Party has rights in the Collateral;

 

5



 

B.            that with respect to any Collateral as to which the perfection of a lien or security interest is governed by the laws of any jurisdiction other than the State of California, the State of Florida, the State of Delaware or the State of New York, we express no opinion;

 

C.            that with respect to any Collateral which is or may become fixtures (as defined in Section 9-102(a)(41) of the UCC) or a commercial tort claim (as defined in Section 9-102(a)(13) of the UCC), we express no opinion; and

 

D.            that with respect to transactions excluded from Article 9 of the UCC by Section 9-109 thereof, we express no opinion.

 

The opinion set forth in subparagraph (b) is also subject to the following exceptions:

 

E.             that with respect to (i) federal tax liens accorded priority under law and (ii) liens created under Title IV of the Employee Retirement Income Security Act of 1974 which are properly filed after the date hereof, we express no opinion as to the relative priority of such liens and the security interests created by the Collateral Agreement or as to whether such liens may be adverse claims; and

 

F.             that with respect to any claim (including for taxes) in favor of any state or any of its respective agencies, authorities, municipalities or political subdivisions which claim is given lien status and/or priority under any law of such state, we express no opinion as to the relative priority of such liens and the security interests created by the Collateral Agreement or as to whether such liens may be adverse claims.

 

In addition, the opinions in subparagraphs (a) and (b) are subject to (i) the limitations on perfection of security interests in proceeds resulting from the operation of Section 9-315 of the UCC; (ii) the limitations with respect to buyers in the ordinary course of business imposed by Sections 9-318 and 9-320 of the UCC; (iii) the limitations with respect to documents, instruments and securities imposed by Sections 8-302, 9-312 and 9-331 of the UCC; (iv) the provisions of Section 9-203 of the UCC relating to the time of attachment; and (v) Section 552 of Title 11 of the United States Code (the Bankruptcy Code ”) with respect to any Collateral acquired by any Loan Party subsequent to the commencement of a case against or by such Loan Party under the Bankruptcy Code.

 

We further assume that all filings will be timely made and duly filed as necessary (i) in the event of a change in the name, identity or corporate structure of any Loan Party, (ii) in the event of a change in the location of any Loan Party and (iii) to continue to maintain the effectiveness of the original filings.

 

6



 

The opinions expressed herein are limited to the laws of the State of New York, the corporate and limited liability company laws of the State of Delaware, the corporate laws of the State of California, the corporate laws of the State of Florida, Article 9 of the UCC and the federal laws of the United States, and we express no opinion as to the effect on the matters covered by this letter of the laws of any other jurisdiction.

 

The opinions expressed herein are rendered solely for your benefit in connection with the transactions described herein. Those opinions may not be used or relied upon by any other person, nor may this letter or any copies hereof be furnished to a third party, filed with a governmental agency, quoted, cited or otherwise referred to without our prior written consent, other than to bank regulatory authorities or permitted assigns of any Lender.

 

 

Very truly yours,

 

 

 

/s/ Weil, Gotshal & Manges LLP

 

7


 

UCC FINANCING STATEMENT

 

FOLLOW INSTRUCTIONS (front and back) CAREFULLY

 

 

 

A. NAME & PHONE OF CONTACT AT FILER [optional]

 

UCC Filings

800-828-0938

 

 

B. SEND ACKNOWLEDGMENT TO: (Name and Address)

 

National Corporate Research

 

41 State Street, Suite 600

 

Albany, NY 12207

 

 

 

 

 

THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

 

1. DEBTOR’S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b) - do not abbreviate or combine names

 

1a. ORGANIZATION’S NAME

 

CAL SAFETY COMPLIANCE CORPORATION

OR

 

 

1b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

1c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

1122 WEST WASHINGTON BLVD

LOS ANGELES

CA

90015

 

 

 

 

 

 

1d. SEE INSTRUCTIONS

ADD’L INFO RE ORGANIZATION DEBTOR

1e. TYPE OF ORGANIZATION
Corporation

1f. JURISDICTION OF ORGANIZATION
California

1g. ORGANIZATIONAL ID #, if any

C17020913

o NONE

 

2. ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names

 

2a. ORGANIZATION’S NAME

OR

 

 

2b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

2c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

 

 

 

 

 

2d. SEE INSTRUCTIONS

ADD’L INFO RE ORGANIZATION DEBTOR

2e. TYPE OF ORGANIZATION

2f. JURISDICTION OF ORGANIZATION

2g. ORGANIZATIONAL ID #, if any

 

o NONE

 

3. SECURED PARTY’S NAME ( or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - insert only one secured party name (3a or 3b)

 

3a. ORGANIZATION’S NAME

 

CREDIT SUISSE, AS COLLATERAL AGENT

OR

 

 

3b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

3c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

ELEVEN MADISON AVENUE

NEW YORK

NY

10010

 

 

4. This FINANCING STATEMENT covers the following collateral:

ALL ASSETS.

 

 

5. ALTERNATIVE DESIGNATION [if applicable]: o  LESSEE/LESSOR o  CONSIGNEE/CONSIGNOR o  BAILEE/BAILOR o  SELLER/BUYER o  AG. LIEN o  NON-UCC FILING

 

6.  o   This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL ESTATE RECORDS. Attach Addendum [if applicable]

 

7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ADDITIONAL FEE]  [optional]

 

o  All Debtors o  Debtor 1  o  Debtor 2

 

8. OPTIONAL FILER REFERENCE DATA

F#197913

 5865-531 — CA - Secretary of State (SECOND LIEN)

A#301763

 

FILING OFFICE COPY — UCC FINANCING STATEMENT (FORM UCC1) (REV. 05/22/02)

 



 

UCC FINANCING STATEMENT

 

FOLLOW INSTRUCTIONS (front and back) CAREFULLY

 

 

 

A. NAME & PHONE OF CONTACT AT FILER [optional]

 

UCC Filings

800-828-0938

 

 

B. SEND ACKNOWLEDGMENT TO: (Name and Address)

 

National Corporate Research

 

41 State Street, Suite 600

 

Albany, NY 12207

 

 

 

 

 

 

THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

 

1. DEBTOR’S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b) - do not abbreviate or combine names

 

1a. ORGANIZATION’S NAME

 

SHUSTER LABORATORIES, INC.

OR

 

 

1b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

1c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

85 JOHN ROAD

CANCON

MA

02021

 

 

 

 

 

 

1d. SEE INSTRUCTIONS

ADD’L INFO RE ORGANIZATION DEBTOR

1e. TYPE OF ORGANIZATION
Corporation

1f. JURISDICTION OF ORGANIZATION
Delaware

1g. ORGANIZATIONAL ID #, if any

 

o NONE

 

2. ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names

 

2a. ORGANIZATION’S NAME

OR

 

 

2b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

2c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

 

 

 

 

 

2d. SEE INSTRUCTIONS

ADD’L INFO RE ORGANIZATION DEBTOR

2e. TYPE OF ORGANIZATION

2f. JURISDICTION OF ORGANIZATION

2g. ORGANIZATIONAL ID #, if any

 

o NONE

 

3. SECURED PARTY’S NAME ( or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - insert only one secured party name (3a or 3b)

 

3a. ORGANIZATION’S NAME

 

CREDIT SUISSE, AS COLLATERAL AGENT

OR

 

 

3b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

3c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

ELEVEN MADISON AVENUE

NEW YORK

NY

10010

 

 

4. This FINANCING STATEMENT covers the following collateral:

ALL ASSETS.

 

 

5. ALTERNATIVE DESIGNATION [if applicable]: o  LESSEE/LESSOR o  CONSIGNEE/CONSIGNOR o  BAILEE/BAILOR o  SELLER/BUYER o  AG. LIEN o  NON-UCC FILING

 

6.  o   This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL ESTATE RECORDS. Attach Addendum [if applicable]

 

7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ADDITIONAL FEE]  [optional]

 

o  All Debtors o  Debtor 1  o  Debtor 2

 

8. OPTIONAL FILER REFERENCE DATA

F#197914

 5865-531 — DE - Secretary of State (SECOND LIEN)

A#301764

 

FILING OFFICE COPY — UCC FINANCING STATEMENT (FORM UCC1) (REV. 05/22/02)

 



 

UCC FINANCING STATEMENT

 

FOLLOW INSTRUCTIONS (front and back) CAREFULLY

 

 

 

A. NAME & PHONE OF CONTACT AT FILER [optional]

 

UCC Filings

800-828-0938

 

 

B. SEND ACKNOWLEDGMENT TO: (Name and Address)

 

National Corporate Research

 

41 State Street, Suite 600

 

Albany, NY 12207

 

 

 

 

 

THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

 

1. DEBTOR’S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b) - do not abbreviate or combine names

 

1a. ORGANIZATION’S NAME

 

SPECIALIZED TECHNOLOGY RESOURCES (FLORIDA), INC.

OR

 

 

1b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

1c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

30 IRIQUOIS STREET

SAINT AUGUSTINE

FL

32085

 

 

 

 

 

 

1d. SEE INSTRUCTIONS

ADD’L INFO RE ORGANIZATION DEBTOR

1e. TYPE OF ORGANIZATION
Corporation

1f. JURISDICTION OF ORGANIZATION
Florida

1g. ORGANIZATIONAL ID #, if any

G85948

o NONE

 

2. ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names

 

2a. ORGANIZATION’S NAME

OR

 

 

2b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

2c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

 

 

 

 

 

2d. SEE INSTRUCTIONS

ADD’L INFO RE ORGANIZATION DEBTOR

2e. TYPE OF ORGANIZATION

2f. JURISDICTION OF ORGANIZATION

2g. ORGANIZATIONAL ID #, if any

 

o NONE

 

3. SECURED PARTY’S NAME ( or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - insert only one secured party name (3a or 3b)

 

3a. ORGANIZATION’S NAME

 

CREDIT SUISSE, AS COLLATERAL AGENT

OR

 

 

3b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

3c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

ELEVEN MADISON AVENUE

NEW YORK

NY

10010

 

 

4. This FINANCING STATEMENT covers the following collateral:

ALL ASSETS.

 

Florida Documentary Stamp Tax is not required.

 

 

5. ALTERNATIVE DESIGNATION [if applicable]: o  LESSEE/LESSOR o  CONSIGNEE/CONSIGNOR o  BAILEE/BAILOR o  SELLER/BUYER o  AG. LIEN o  NON-UCC FILING

 

6.  o   This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL ESTATE RECORDS. Attach Addendum [if applicable]

 

7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ADDITIONAL FEE]  [optional]

 

o  All Debtors o  Debtor 1  o  Debtor 2

 

8. OPTIONAL FILER REFERENCE DATA

F#197915

 5865-531 — FL - Secretary of State (SECOND LIEN)

A#301765

 

FILING OFFICE COPY — UCC FINANCING STATEMENT (FORM UCC1) (REV. 05/22/02)

 



 

UCC FINANCING STATEMENT

 

FOLLOW INSTRUCTIONS (front and back) CAREFULLY

 

 

 

A. NAME & PHONE OF CONTACT AT FILER [optional]

 

UCC Filings

800-828-0938

 

 

B. SEND ACKNOWLEDGMENT TO: (Name and Address)

 

National Corporate Research

 

41 State Street, Suite 600

 

Albany, NY 12207

 

 

 

 

 

THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

 

1. DEBTOR’S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b) - do not abbreviate or combine names

 

1a. ORGANIZATION’S NAME

 

SPECIALIZED TECHNOLOGY RESOURCES (INTERNATIONAL), INC.

OR

 

 

1b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

1c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

10 WATER STREET

ENFIELD

CT

06082

 

 

 

 

 

 

1d. SEE INSTRUCTIONS

ADD’L INFO RE ORGANIZATION DEBTOR

1e. TYPE OF ORGANIZATION
Corporation

1f. JURISDICTION OF ORGANIZATION
Delaware

1g. ORGANIZATIONAL ID #, if any

 

o NONE

 

2. ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names

 

2a. ORGANIZATION’S NAME

OR

 

 

2b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

2c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

 

 

 

 

 

2d. SEE INSTRUCTIONS

ADD’L INFO RE ORGANIZATION DEBTOR

2e. TYPE OF ORGANIZATION

2f. JURISDICTION OF ORGANIZATION

2g. ORGANIZATIONAL ID #, if any

 

o NONE

 

3. SECURED PARTY’S NAME ( or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - insert only one secured party name (3a or 3b)

 

3a. ORGANIZATION’S NAME

 

CREDIT SUISSE, AS COLLATERAL AGENT

OR

 

 

3b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

3c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

ELEVEN MADISON AVENUE

NEW YORK

NY

10010

 

 

4. This FINANCING STATEMENT covers the following collateral:

ALL ASSETS.

 

 

5. ALTERNATIVE DESIGNATION [if applicable]: o  LESSEE/LESSOR o  CONSIGNEE/CONSIGNOR o  BAILEE/BAILOR o  SELLER/BUYER o  AG. LIEN o  NON-UCC FILING

 

6.  o   This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL ESTATE RECORDS. Attach Addendum [if applicable]

 

7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ADDITIONAL FEE]  [optional]

 

o  All Debtors o  Debtor 1  o  Debtor 2

 

8. OPTIONAL FILER REFERENCE DATA

F#197916

 5865-531 — DE - Secretary of State (SECOND LIEN)

A#301766

 

FILING OFFICE COPY — UCC FINANCING STATEMENT (FORM UCC1) (REV. 05/22/02)

 



 

UCC FINANCING STATEMENT

 

FOLLOW INSTRUCTIONS (front and back) CAREFULLY

 

 

 

A. NAME & PHONE OF CONTACT AT FILER [optional]

 

UCC Filings

800-828-0938

 

 

B. SEND ACKNOWLEDGMENT TO: (Name and Address)

 

National Corporate Research

 

41 State Street, Suite 600

 

Albany, NY 12207

 

 

 

 

 

THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

 

1. DEBTOR’S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b) - do not abbreviate or combine names

 

1a. ORGANIZATION’S NAME

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.

OR

 

 

1b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

1c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

10 WATER STREET

ENFLEID

CT

06082

 

 

 

 

 

 

1d. SEE INSTRUCTIONS

ADD’L INFO RE ORGANIZATION DEBTOR

1e. TYPE OF ORGANIZATION
Corporation

1f. JURISDICTION OF ORGANIZATION
Delaware

1g. ORGANIZATIONAL ID #, if any

 

o NONE

 

2. ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names

 

2a. ORGANIZATION’S NAME

OR

 

 

2b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

2c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

 

 

 

 

 

2d. SEE INSTRUCTIONS

ADD’L INFO RE ORGANIZATION DEBTOR

2e. TYPE OF ORGANIZATION

2f. JURISDICTION OF ORGANIZATION

2g. ORGANIZATIONAL ID #, if any

 

o NONE

 

3. SECURED PARTY’S NAME ( or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - insert only one secured party name (3a or 3b)

 

3a. ORGANIZATION’S NAME

 

CREDIT SUISSE, AS COLLATERAL AGENT

OR

 

 

3b. INDIVIDUAL’S LAST NAME

FIRST NAME

MIDDLE NAME

SUFFIX

 

 

 

 

 

3c. MAILING ADDRESS

CITY

STATE

POSTAL CODE

COUNTRY

ELEVEN MADISON AVENUE

NEW YORK

NY

10010

 

 

4. This FINANCING STATEMENT covers the following collateral:

ALL ASSETS.

 

 

5. ALTERNATIVE DESIGNATION [if applicable]: o  LESSEE/LESSOR o  CONSIGNEE/CONSIGNOR o  BAILEE/BAILOR o  SELLER/BUYER o  AG. LIEN o  NON-UCC FILING

 

6.  o   This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL ESTATE RECORDS. Attach Addendum [if applicable]

 

7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ADDITIONAL FEE]  [optional]

 

o  All Debtors o  Debtor 1  o  Debtor 2

 

8. OPTIONAL FILER REFERENCE DATA

F#197917

 5865-531 — DE - Secretary of State (SECOND LIEN)

A#301767

 

FILING OFFICE COPY — UCC FINANCING STATEMENT (FORM UCC1) (REV. 05/22/02)

 


 

EXHIBIT F-2

 

[FORM OF]

OPINION OF MURTHA CULLINA LLP

 



 

 

CITYPLACE I

185 ASYLUM STREET

HARTFORD, CONNECTICUT 06103-3469

ATTORNEYS AT LAW

 

TELEPHONE (860) 240-6000

FACSIMILE (860) 240-6150

www.murthalaw.com

 

June 15, 2007

 

Credit Suisse, As Administrative Agent,

Collateral Agent, Issuing Bank and Swingline Lender

under the Credit Agreement, as defined below

Eleven Madison Avenue

New York, New York 10010

 

The Lenders From Time to time party to the Credit Agreement

 

Ladies and Gentlemen:

 

We have acted as special counsel to Specialized Technology Resources, Inc., a Delaware corporation (the “Borrower”), in connection with the making of loans (the “Loans”) in the aggregate principal amount of up to $205,000,000 to the Borrower by the Lenders (the “Lenders”) referred to in the First Lien Credit Agreement dated as of June 15, 2007 (the “Credit Agreement”) by and among STR Holdings LLC, a Delaware limited liability company, STR Acquisition, Inc., a Delaware corporation (which substantially simultaneously with the execution of the Credit Agreement is to be merged with and into the Borrower, with the Borrower being the surviving entity), Credit Suisse, as administrative agent for the Lenders (the “Administrative Agent”), Credit Suisse, as collateral agent for the lenders (the “Collateral Agent”) and the Lenders. We have also acted as counsel to each of (i) Specialized Technology Resources (International), Inc., a Delaware corporation (“SII”), (ii) Shuster Laboratories, Inc., a Delaware corporation (“SLI”), (iii) Supply Chain Consulting Services Corp., a Delaware corporation (“SCCSC”) and (iv) STR Materials Science, Inc., a Delaware corporation (“STRMSI” and, together with SII, SLI and SCCSC, collectively, the “Delaware Guarantors”).

 

The Loans are being made pursuant to the documents listed on Exhibit A to this opinion, and entered into by the various parties thereto (the “Documents”). This opinion is being delivered to you pursuant to Section 4.02(a) of the Credit Agreement. As used in this opinion, all capitalized terms shall have the meanings set forth herein, or in Exhibit A hereto, or as ascribed to them in the Documents, unless the context otherwise requires.

 

In connection with this opinion, we have reviewed and relied upon originals or copies, certified or otherwise authenticated to our satisfaction, of the Certificates of Incorporation, Bylaws, and records of the corporate proceedings of the Borrower (including the Certificate of Incorporation and By-Laws which are to be become effective upon the merger of STR Acquisition, Inc. and the Borrower, with the Borrower being the surviving entity) and each of the

 

BOSTON       HARTFORD       NEW HAVEN       STAMFORD       WOBURN

 



 

Delaware Guarantors, certificates of public officials, executed copies of the Documents and, with respect to factual matters only, certificates of Barry A. Morris, Vice President, Chief Financial Officer, Treasurer and Secretary of the Borrower, Vice President, Chief Financial Officer, Treasurer and Secretary of SII, Vice President, Treasurer and Secretary of SLI, Vice President, Chief Financial Officer, Treasurer and Secretary of STRMSI, Vice President, Chief Financial Officer, and Assistant Secretary of Cal Safety Compliance Corporation (“CSCC”) (a California corporation which is a subsidiary of the Borrower), Vice President, Treasurer and Secretary of Specialized Technology Resources (Florida), Inc. (“STRFI”) (a Florida corporation which is a subsidiary of the Borrower), and a certificate of Thomas D. Vitro, Assistant Secretary of SCCSC (all of such certificates of Barry A. Morris and Thomas D. Vitro collectively herein called, the “Certificates”). As to the legal existence of the Borrower, SII, SLI, SCCSC and STRMSI, we have relied solely on certificates of the Secretary of State of the State of Delaware attached hereto as Exhibits B, C, D, E and F . As to the qualification of the Borrower to transact business in the State of Connecticut, we have relied solely on a certificate of the Secretary of the State of the State of Connecticut attached hereto as Exhibit G . As to the qualification of SLI to transact business in the Commonwealth of Massachusetts, we have relied solely on a certificate of the Secretary of the Commonwealth of Massachusetts attached hereto as Exhibit H . As to the qualification of SCCSC to transact business in the State of California, we have relied solely on a certificate of the Secretary of the State of California attached hereto as Exhibit I . As to various questions of fact material to our opinion, we have relied upon statements of fact (as opposed to legal conclusions) contained in the documents we have examined or made to us by Barry A. Morris who by reason of his positions would be expected to have knowledge of such facts. In addition, we have reviewed such provisions of law as we have deemed necessary in order to express the opinions hereinafter set forth.

 

With respect to matters stated herein to be “to our knowledge” or words of similar import, our opinions are limited to matters (i) within the present conscious awareness of the attorneys at this firm who have worked on this transaction and (ii) disclosed in the Certificates attached hereto as Exhibits J, K, L, M, N, O and P , respectively. We have no actual knowledge of any fact or circumstance which would lead us to believe that we are not justified in relying on such Certificates. We have not searched the dockets of any court or agency for litigation or proceedings against the Borrower or any of the Delaware Guarantors.

 

We have assumed that the documents to which the Delaware Guarantors are parties (collectively, the “Delaware Guarantor Documents”) will not be made unenforceable against any of the Delaware Guarantors due to lack of consideration (without investigation by us of the nature or extent of the consideration being received by any of the Delaware Guarantors).

 

We express no opinion as to the laws of any jurisdiction other than the laws of the State of Connecticut and the General Corporation Law of the State of Delaware.

 

2



 

For purposes of this opinion, we have assumed the following:

 

(i)             that each of the parties to the Documents other than the Borrower and the Delaware Guarantors (each party to any of the Documents other than the Borrower or the Delaware Guarantors herein individually called, an “Other Party” and all of the parties to the Documents other than the Borrower and the Delaware Guarantors herein collectively called, the “Other Parties”) have the power under their respective charter documents to enter into the transactions contemplated by the Documents, that such transactions are in compliance with all laws and regulations applicable to each of such Other Parties, and that those of the Documents to which any Other Party is a party have been duly authorized, executed and delivered by such Other Party or Other Parties, as the case may be, and constitute the valid and binding obligations of such Other Party or Other Parties, as the case may be, enforceable against such Other Party or Other Parties, as the case may be, in accordance with their respective terms;

 

(ii)            the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies, whether certified or not;

 

(iii)           the genuineness of all signatures on the Documents;

 

(iv)           the Borrower and each of the Delaware Guarantors have acquired good and marketable title to, and therefore own, their real and personal property, subject only to encumbrances which have been disclosed to, and accepted by, the Administrative Agent, the Collateral Agent and the Lenders;

 

(v)            the competency of each natural person executing the Documents or related documents or certificates;

 

(vi)           the accuracy and completeness of all representations and warranties of factual matters made by the Borrower and/or the Delaware Guarantors in the Documents, without any independent investigation on our part;

 

(vii)          the accuracy and completeness of all records made available to us by the Borrower and the Delaware Guarantors;

 

(viii)         the accuracy and completeness of all governmental records examined by us;

 

(ix)            that STR Acquisition, Inc. has merged with and into the Borrower, with the Borrower being the surviving entity; and

 

3



 

(x)             that the Certificate of Incorporation and By-Laws attached hereto as Exhibits Q and R , respectively, are the Certificate of Incorporation and By-Laws of the Borrower in effect immediately after the completion of the aforementioned merger of STR Acquisition, Inc. with and into the Borrower.

 

To the extent that our opinions herein relate to matters as to which governmental agencies have issued certificates, or as to which certificates or affidavits have been relied upon, such opinions speak as of the respective dates of such certificates or affidavits.

 

Based upon and subject to the foregoing, we are of the opinion that:

 

1.              The Borrower is a corporation legally existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on the business of product testing and manufacturing. SII is a corporation legally existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on the business of a holding company. SLI is a corporation legally existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on the business of product testing. SCCSC is a corporation legally existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on the business of consulting and inspection services. STRMSI is a corporation legally existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on the business permitted in its Certificate of Incorporation.

 

2.              The Borrower has all requisite corporate power and authority to enter into the Documents to which it is a party (the “Borrower Documents”) and to execute, deliver and perform its obligations under the terms of the Borrower Documents.

 

3.              The Borrower is qualified to transact business as a foreign corporation in the State of Connecticut.

 

4.              Each of the Delaware Guarantors has all requisite corporate power and authority to enter into the Delaware Guarantor Documents and to execute, deliver and perform its obligations under the terms of the Delaware Guarantor Documents.

 

5.              SLI is qualified to transact business as a foreign corporation, and is in good standing, in the Commonwealth of Massachusetts.

 

6.              SCCSC is qualified to transact business as a foreign corporation in the State of California.

 

4



 

7.              The execution and delivery of the Borrower Documents on behalf of the Borrower, the performance of the obligations undertaken by it therein, and the grant of security interests by it pursuant thereto, have been duly authorized by all necessary corporate action on the part of the Borrower.

 

8.              The execution and delivery of the Delaware Guarantor Documents on behalf of each of the Delaware Guarantors, the performance of the obligations undertaken by each of the Delaware Guarantors therein, and the grant of security interests by each of the Delaware Guarantors thereunder have been duly authorized by all necessary corporate action on the part of each of the Delaware Guarantors.

 

9.              The execution and delivery by the Borrower of, the performance by the Borrower of its obligations under, and the grant of security interests by the Borrower pursuant to the Borrower Documents do not (a) violate any provisions of the Certificate of Incorporation or Bylaws of the Borrower; (b) to our knowledge breach, or constitute a default under, any existing obligation of the Borrower under any indenture, mortgage, lease, license, franchise, agreement, judgment, decree, order, writ, injunction or other instrument to which the Borrower is a party or by which its property is bound; or (c) violate any provision of any statute, rule or regulation of general application applicable to the Borrower. Specifically excluded from this opinion, however, are any laws, rules or regulations with respect to subdivision, zoning or other land use and development matters.

 

10.            The execution and delivery by the Delaware Guarantors of, the performance by the Delaware Guarantors of their obligations under, and the grant of security interests by the Delaware Guarantors pursuant to, the Delaware Guarantor Documents do not (a) violate any provisions of the Certificates of Incorporation or Bylaws of the Delaware Guarantors; (b) to our knowledge, breach, or constitute a default under, any existing obligation of any of the Delaware Guarantors under any indenture, mortgage, lease, license, franchise, agreement, judgment, decree, order, writ, injunction or other instrument to which any of the Delaware Guarantors is a party or by which any property of any of the Delaware Guarantors is bound; or (c) violate any provision of any statute, rule or regulation of general application applicable to any of the Delaware Guarantors. Specifically excluded from this opinion, however, are any laws, rules or execution regulations with respect to subdivision, zoning or other land use and development matters.

 

11.            To our knowledge, except as set forth on Schedule 3.09 of the Credit Agreement, no judgments are outstanding against the Borrower or any of the Delaware Guarantors, and no litigation, contested claim or governmental proceeding is now pending or threatened by or against the Borrower or any of the Delaware Guarantors or affecting their business or property.

 

5



 

12.            No authorization, approval or other action by, and no notice to, consent of, order of or filing with, any Connecticut State governmental authority is required to be made or obtained by the Borrower in connection with the execution, delivery and performance by the Borrower of the Borrower Documents or the grant by the Borrower of the security interests under the Borrower Documents, other than (i) such reports to United States governmental authorities regarding international capital and foreign currency transactions as may be required pursuant to 31 C.F.R. Part 128, (ii) those that have been made or obtained and are in full force and effect or as to which the failure to be made or obtained or to be in full force and should not result individually or in the aggregate, in a material adverse effect on the Borrower and its Subsidiaries, taken as a whole, (iii) such registrations, filings and approvals under the laws of the State of Connecticut as may be necessary in connection with the exercise of remedies or sale of collateral or the granting of additional security interests or guarantees pursuant to the Documents, (iv) such registrations, filings or approvals that are required in order to perfect or record liens and/or security interests granted under the Documents and (v) such registrations, filings and approvals that may be required because of the legal or regulatory status of any Lender or because of any other facts specifically pertaining to any Lender.

 

13.            No authorization, approval or other action by, and no notice to, consent of, order of or filing with, any Connecticut State governmental authority is required to be made or obtained by any Delaware Guarantor in connection with the execution, delivery and performance by such Delaware Guarantor of the security interests under the Delaware Guarantor Documents, other than (i) such reports to United States governmental authorities regarding international capital and foreign currency transactions as may be required pursuant to 31 C.F.R. Part 128, (ii) those that have been made or obtained and are in full force and effect or as to which the failure to be made or obtained or to be in full force and effect should not result, individually or in the aggregate, in a material adverse effect on the Borrower and its Subsidiaries, taken as a whole, (iii) such registrations, filings and approvals under the laws of the State of Connecticut as may be necessary in connection with the exercise of remedies or sale of collateral or the granting of additional security interests or guarantees pursuant to the Documents, (iv) such registrations, filings or approvals that are required in order to perfect or record liens and/or security interests granted under the Documents and (iv) such registrations, filings and approvals that may be required because of the legal or regulatory status of any Lender or because of any other facts specifically pertaining to any Lender.

 

14.            The execution and delivery by CSCC of, the performance by CSCC of its obligations under, and the grant of security interests by CSCC pursuant to, the Documents to which it is a party do not, to our knowledge, breach or constitute a default under, any existing obligation of CSCC under any indenture, mortgage, lease, license, franchise agreement, judgment, decree, order, writ, injunction or other instrument to which CSCC is a party or by which its property is bound.

 

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15.            The execution and delivery by STRFI of, the performance by STRFI of its obligations under, and the grant of security interests by STRFI pursuant to, the Documents to which it is a party do not, to our knowledge, breach or constitute a default under, any existing obligation of STRFI under any indenture, mortgage, lease, license, franchise agreement, judgment, decree, order, writ, injunction or other instrument to which STRFI is a party or by which its property is bound.

 

The foregoing is subject to the following:

 

(a)            Our opinions are limited to only those laws, rules and regulations that we have, in the exercise of customary professional diligence, but without any special investigation, recognized as generally applicable to the transactions contemplated by the Documents or to business organizations of the same type as the Borrower and the Delaware Guarantors. In addition, we express no opinion as to any law, rule or regulation, the violation of which would not have a material effect on you, the Borrower or the Delaware Guarantors.

 

(b)            No opinion is expressed herein with respect to the enforceability of any of the Documents against any party thereto nor with respect to the creation, perfection or priority of any lien or security interest created by any of the Documents. We note that we have delivered a separate legal opinion dated the date hereof to the Administrative Agent and the Lenders addressing the enforceability of the Mortgage.

 

This opinion is rendered only as of the date hereof. We undertake no obligation to update or supplement this opinion to reflect any matters which may hereafter come to our attention or any amendments to the Documents or change in law or any other matter that may occur after the date of this opinion. This opinion is issued for the benefit of the Administrative Agent and the other Lenders and may be relied upon by the Administrative Agent and the Lenders and any of their successors or assigns and participants in the Loans in connection with the transactions contemplated by the Documents, but it may not be relied upon by any other person or for any other purpose whatsoever, without in each such other instance obtaining our prior written consent.

 

 

Very truly yours,

 

 

 

MURTHA CULLINA LLP

 

 

 

 

 

By:

/s/ Frank J. Saccomandi, III

 

 

Frank J. Saccomandi, III

 

 

A Partner of the Firm

 

7


 

CITYPLACE 1
185 ASYLUM STREET
HARTFORD, CONNECTICUT 06103-3469

ATTORNEYS AT LAW

TELEPHONE (860) 240-6000
FACSIMILE (860) 240-6150

www.murthalaw.com

 

June 15, 2007

 

Credit Suisse,

as Administrative Agent, Collateral Agent,

Issuing Bank and Swingline Lender

under the Credit Agreement referred to below

Eleven Madison Avenue

New York, New York 10010

 

The Lenders from time to time party to the Credit Agreement

 

Re:                                First Lien Credit Agreement dated as of June 15, 2007 (the “Credit Agreement”), among STR Acquisition, Inc., a Delaware corporation, which substantially simultaneously with the execution of the Credit Agreement shall be merged with and into Specialized Technology Resources, Inc. (the “Mortgagor”), STR Holdings LLC, a Delaware limited liability company, the lenders from time to time party thereto (the “Lenders”) and Credit Suisse, Administrative Agent for the Lenders, Collateral Agent for the Secured Parties, Swingline Lender and Issuing Bank.

 

Ladies and Gentlemen:

 

We have acted as special Connecticut counsel to the Mortgagor in connection with the making of the Loans by the Lenders pursuant to the Credit Agreement. The Mortgage, as defined below, is being granted by the Mortgagor as security for the Loans, which Loans shall not exceed $230,000,000, comprised of (a) a Term Loan in the aggregate principal amount not to exceed $185,000,000 to be advanced and fully funded on June 15, 2007, (b) Revolving Loans in an aggregate principal amount not to exceed $20,000,000, (c) Swingline Loans in an aggregate principal amount not to exceed $10,000,000 and Letters of Credit in an aggregate face amount not in excess of $15,000,000 (provided, however, that the overall limit of all such Revolving Loans, Swingline Loans and Letters of Credit outstanding at any time shall not exceed $20,000,000), and (d) Incremental Term Loans and increases in the Revolving Credit Commitment in an amount not to exceed the then available Incremental Revolving Facility Amount in a combined aggregate principal amount not to exceed $25,000,000 at any time.

 

BOSTON  HARTFORD  NEW HAVEN  STAMFORD  WOBURN

 



 

Capitalized terms used herein, but not otherwise defined herein, shall have the meanings ascribed to such terms in the Credit Agreement or the Mortgage. This opinion is delivered to you, at our client’s request, pursuant to Section 4.02(a)(ii) of the Credit Agreement.

 

In connection with this opinion, we have examined:

 

(a)           the Credit Agreement; and

 

(b)           that certain Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of June 15, 2007 (the “Mortgage”, and together with the Credit Agreement, the “Documents”), granted by Mortgagor to Credit Suisse (in such capacity, the “Mortgagee”), encumbering certain real property of Mortgagor located at 10 Water Street, Enfield, Connecticut 06082, which Mortgage is to be recorded in the Land Records of the Town of Enfield, Connecticut (the “Local Recording Office”).

 

In addition, we have made such investigation of law, as we have deemed necessary or advisable in connection with this opinion.

 

With respect to matters stated herein to be “to our knowledge” or words of similar import, we have limited our opinions to matters within the actual conscious awareness of attorneys in this firm who have rendered substantive attention to this transaction. We have not reviewed our files or made any other investigations with respect to matters stated herein to be “to our knowledge” or similarly qualified.

 

For purposes of this opinion we have assumed that:

 

(A)          each of the parties to the Documents is, and during the terms of such Documents will remain, in compliance with the provisions of Connecticut law governing the transaction of its business in Connecticut;

 

(B)           the Credit Agreement constitutes the valid and binding obligation of each party signatory thereto enforceable against such parties in accordance with its terms;

 

(C)           the Mortgagor owns, good and indefeasible fee simple title to, (or in the case of personal property, good and valid title to) the property it is purported to own as described in the Mortgage;

 

(D)          the Mortgagee will only seek foreclosure of the Mortgage with respect to all of the indebtedness secured thereby, notwithstanding any provision which may be contained in the Documents relating to the establishment of priority of the lien created thereby between the parties for whose benefit such Mortgage was granted; and

 

(E)           that STR Acquisition, Inc. has merged with and into the Mortgagor, with the Mortgagor being the surviving entity.

 

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We have also assumed: (a) the genuineness of all signatures; (b) the competency of each natural person executing the Documents, or related documents; and (c) that the terms and conditions of the Documents have not been amended, modified or supplemented, directly or indirectly, by any other agreement or understanding of the parties or by waiver of any of the material provisions of the Documents by any of the parties to such documents.

 

We have not verified any of the foregoing assumptions, but we have no knowledge of any facts which are inconsistent with those assumptions.

 

As to various questions of fact material to our opinion, we have relied upon statements of fact (as opposed to legal conclusions) contained in the documents we have examined and based on our knowledge, nothing has come to our attention that leads us to believe that we are not justified in so relying thereon.

 

Based upon, and subject to, the foregoing, and subject also to the qualifications, exceptions and limitations set forth below, we are of the opinion that:

 

1.             Except for filings which are necessary to publish notice of the existence of the Mortgage as an encumbrance on the real property described in the Mortgage, and/or to perfect the security interests granted under the Mortgage in fixtures located, or to be located, on the real property described in the Mortgage, no authorizations or approvals of, and no filings with, any governmental or regulatory authority or agency of the State of Connecticut are necessary for the execution, delivery or performance of the Mortgage by the Mortgagor.

 

2.             The Mortgage, which by its terms is to be governed in its entirety by the laws of the State of Connecticut, constitutes the legal, valid and binding obligation of the Mortgagor, enforceable against the Mortgagor in accordance with its terms.

 

3.             The execution and delivery by the Mortgagor of the Mortgage, and the consummation of the transaction contemplated thereby, do not conflict with, or violate, any Connecticut law, rule or regulation applicable to the Mortgagor.

 

4.             The choice of the Connecticut law to govern the Mortgage will be upheld and enforced by Connecticut state courts and federal courts sitting in Connecticut. We believe that a Connecticut state court or a federal court sitting in the Connecticut would give effect to the choice of law provisions set forth in the Credit Agreement stipulating that the validity, construction and enforceability of such Credit Agreement will be governed by the laws of the State of New York, unless such court were to determine that (x) the State of New York has no substantial relationship to the parties to the Credit Agreement or the transactions described therein, as applicable, or (y) the result obtained from applying the law of the State of New York would be contrary to the public policy of the State of Connecticut.

 

5.             The Mortgage is in proper form for recording, and upon due recordation of the Mortgage in the Local Recording Office, the Mortgage will create and constitute a valid, legal, binding and enforceable lien of record in favor of the Mortgagee, for the benefit of the Lenders, on all of the Mortgagor’s right, title and interest in the real property described in the

 

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Mortgage (the “Real Property”). No other filing or recording, or re-filing or re-recording, is necessary or advisable in order to publish notice of the Mortgagee’s interest in the Real Property or to preserve the lien created on the Mortgagor’s interest therein encumbered by the Mortgage.

 

6.             As provided in the Mortgage, the creation, perfection and enforcement of the security interest created by the Mortgage in fixtures of the Mortgagor located, or to be located, on the Real Property described in the Mortgage is governed by the laws of the State of Connecticut. The Mortgage constitutes a valid security agreement and fixture filing and creates a valid, legal, binding and enforceable security interest in favor of the Mortgagee, as secured party, and against the Mortgagor, as debtor, in that portion of the Mortgaged Property (as defined in the Mortgage) constituting fixtures attached to the Real Property described in the Mortgage and in which a security interest may be created under the provisions of Article 9 of the Uniform Commercial Code as in effect in the State of Connecticut as of the date hereof (the “UCC”). We note, however, that the definition of the term Mortgaged Property as contained in the Mortgage is sufficiently broad to encompass both personal property and fixtures attached to the Real Property. We further note that the Mortgagee’s security interest in the Mortgagor’s interest in such items of the Mortgaged Property constituting fixtures attached to the Real Property described in the Mortgage will not “attach”, as such term is used in the UCC, until the Mortgagor acquires rights therein or the right to transfer its interest therein. Upon the recording of the Mortgage in the Local Recording Office, the Mortgagee will have a perfected security interest in the Mortgagor’s interest in those items of the Mortgaged Property which constitute fixtures attached to the Real Property described in such Mortgage in which the Mortgagor now has rights or the right to transfer its interest and in which a security interest can be perfected by recording in the Local Recording Office under the UCC. Thereafter, at such time as the Mortgagor acquires rights in, or the right to transfer its interest in, additional items of such Mortgaged Property, the Mortgagee shall have a perfected security interest in the Mortgagor’s interest in that portion of such additional items of Mortgaged Property which constitute fixtures attached to the Real Property in which a security interest may be perfected by recording in the Local Recording Office under the UCC. Our opinions in this numbered paragraph 6 are qualified as follows:

 

I.              Insofar as security interests relate to proceeds, the continued perfection of such security interests is subject to the provisions of Section 9-315 of the UCC;

 

II.            We have assumed that the Lenders have “given value” as that term is used in the UCC; and

 

III.           No opinion is expressed with respect to the creation or perfection of a security interest in any of the Mortgaged Property other than fixtures as expressly set forth above.

 

7.             To the extent the substantive laws of the State of Connecticut (without regard to choice of law principles) were to apply, the Loans will not violate any applicable usury laws of the State of Connecticut or other applicable laws regulating the interest rate, fees and other charges that may be collected with respect to the Loans. By way of explanation, the provisions of Connecticut General Statutes § 37-4, et seq ., constitute the laws of the State of Connecticut

 

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relating to interest charges in excess of the lawful rate, commonly referred to as usury (“Connecticut’s Usury Statutes”). Connecticut’s Usury Statutes contain an exemption for loans made to foreign or domestic corporations, statutory trusts, limited liability companies and general or limited partnerships (among other entities) involved primarily in commercial, manufacturing, industrial or nonconsumer pursuits and provided further that the funds received by such entities are utilized in such entities’ business or investment activities and are not utilized for consumer purposes and provided further that the original indebtedness to be repaid is in excess of two hundred fifty thousand dollars. Connecticut’s Usury Statutes also contain an exemption for bona fide mortgages of real property for a sum in excess of five thousand dollars. Based upon the provisions of the Documents, the transaction evidenced by the Documents qualifies for the exemption(s) set forth above and Connecticut’s Usury Statutes would not be applicable to such transaction.

 

8.             To the extent that the sole activity of the Mortgagee, any Lender, or any other party to the Documents (except the Mortgagor) in the State of Connecticut is the recording of the Mortgage against the Real Property (as described above) or the enforcement of the Mortgage, such activity, in and of itself, would not constitute the transaction of business within the State of Connecticut within the purview of § 33-920 of the Connecticut General Statutes (which constitutes the laws of the State of Connecticut enumerating activities undertaken in the State of Connecticut by corporations which do not constitute the transaction of business in the State of Connecticut), and the Mortgagee or such other party would not be required under the laws of the State of Connecticut to qualify or register as a foreign entity in order to so accept the Mortgage or enforce the same. If it were later determined that such qualification, registration and/or filing were required, the validity of the Mortgage would not be affected thereby, and the Mortgagee could thereafter seek qualification as such foreign entity, but if the Mortgagee is not so qualified, it might be precluded from enforcing its rights (but could, in any case defend any action) in the courts of the State of Connecticut until such time as the Mortgagee is qualified to transact business in the State of Connecticut. We express no opinion as to whether the Mortgagee, any Lender or any other party to the Documents (other than the Mortgagor) has heretofore undertaken such other activities or transacted such business or is currently engaged in such other activities or transacting such business, as would require Mortgagee, any such Lender, or such other party, or any of them, to obtain a certificate of authority from the Secretary of the State of the State of Connecticut to transact business in the State of Connecticut.

 

9.             Subject to the procedural requirements set forth in Connecticut General Statutes §49-1 as described below and as discussed in the exceptions to this opinion, and subject to the provisions dealing with the obtaining of a deficiency judgment after the foreclosure of a mortgage set forth in Connecticut General Statutes §49-14 as discussed below, the foreclosure of the Mortgage will not restrict or impair the liabilities of the Mortgagor (provided, however, we express no opinion herein with respect to the Credit Agreement or any of the obligations or liabilities of any of the parties thereunder) with respect to the Loans or the Mortgagee’s or any Lender’s rights or remedies with respect to the foreclosure or enforcement of any other security interests or liens securing the Loans, and the laws of the State of Connecticut do not require a lienholder to elect to pursue its remedies either against mortgaged realty or

 

5



 

personalty if such lienholder holds security interests and liens on both real and personal property of a debtor. Pursuant to Connecticut General Statutes §49-1, once a foreclosure action on a mortgage is commenced, no further action on the mortgage debt, note or other obligations secured by such mortgage may be taken during the pendency of such foreclosure action against the person or persons who are liable for the payment thereof who are made parties to the foreclosure or against any person or persons upon whom service of process to constitute an action in personam could have been made within the State of Connecticut at the commencement of the foreclosure action, but the pendency of such a foreclosure action is not a bar to any further action upon the mortgage debt, note or obligation secured by such mortgage as to any person liable for the same upon whom service of process to constitute an action in personam could not have been made within the State of Connecticut at the commencement of such foreclosure action. Pursuant to Connecticut General Statutes §49-14, a foreclosing creditor has a statutory period of thirty (30) days after the redemption period has expired in a foreclosure action to file a motion for a deficiency judgment. If a motion for deficiency judgment is not filed within such aforesaid statutory period, the foreclosing creditor is not entitled to seek to recover any deficiency remaining after the foreclosure. If a motion seeking a deficiency judgment is timely filed, a hearing shall be held, a valuation for the mortgaged property shall be established and the deficiency between the valuation of the mortgaged property and the foreclosing creditor’s claim, if any, shall be established. In any further action on the debt, note or obligation which was secured by the foreclosed mortgage, the recovery is limited to the amount of the deficiency judgment.

 

10.           Under the laws of the State of Connecticut , no mortgage, documentary, stamp, intangible or similar tax is payable in connection with the execution, delivery or enforcement of the Documents or the recording of the Mortgage, other than nominal recording fees paid upon the recording of the Mortgage.

 

The opinions set forth above are subject to the following qualifications and limitations:

 

(a)           Except with respect to the $185,000,000 principal amount of the Term Loan advanced and fully funded at closing under the Credit Agreement, the $20,000,000 principal amount of Revolving Loans provided for under the Credit Agreement, (including within such amount up to $10,000,000 principal amount of Swingline Loans provided for under the Credit Agreement, and the Letters of Credit provided for under the Credit Agreement in an aggregate face amount not in excess of $15,000,000, with the overall limit of Revolving Loans, Swingline Loans and Letters of Credit being the aforesaid $20,000,000), we express no opinion as to whether the Mortgage adequately describes the obligations secured thereby or the effect on the enforceability of the Mortgage against third parties to the extent of such portions of the obligations as are deemed not to be adequately described. In particular, we note that to the extent the Mortgage is intended to secure the Mortgagor’s obligations with respect to certain Incremental Term Loans, any Incremental Revolving Facility Amount or any Hedging Agreement (each as defined in the Credit Agreement), the Mortgage is not and would not be effective under Connecticut law to create or preserve, or render enforceable, any lien with respect to any Incremental Term Loans, any Incremental Revolving Facility Amount or any such Hedging Agreement as it applies to the Mortgage or the Mortgagor’s undertaking(s) with respect thereto under any of the Documents, purported to be secured by the Mortgage.

 

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(b)           The enforceability of all rights, remedies and obligations is subject to procedural due process and to laws of general application relating to, and affecting the enforceability of, creditors’ rights and remedies generally, under applicable bankruptcy, insolvency, reorganization, arrangement, moratorium and fraudulent transfer or conveyance law and to state and federal forfeiture laws and similar laws related to illegal drugs, anti-money laundering, terrorist or similar activities.

 

(c)           The enforceability of the Mortgage is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

(d)           Certain provisions of the Mortgage may not be enforceable, but such unenforceability will not render the Mortgage invalid as a whole or preclude (i) subject to the statutory provision barring further action on the debt when foreclosure has commenced pursuant to Connecticut General Statutes § 49-1, and subject to Connecticut General Statutes §§ 49-14 and 49-28 affecting deficiency judgments, the judicial enforcement of the obligation of the Mortgagor to repay the principal balance of the Loans then outstanding, as provided therein (to the extent not deemed a penalty), and (ii) foreclosure of the Mortgage. We note that to the extent the Mortgage is in favor of the Mortgagee, while any promissory note or notes evidencing all or any portion of the indebtedness secured by the Mortgages are in favor of the Lender(s) pursuant to the Credit Agreement, evidence of the power and authority of the Mortgagee to act for and on behalf of the Lender(s) with respect to such promissory note(s) or an assignment of such promissory note(s) to the Mortgagee would be required to foreclose the Mortgage.

 

(e)           Subject to the provisions of subparagraph (d) above, no opinion is expressed as to the enforceability of (i) provisions related to self-help, (ii) provisions which purport to establish evidentiary standards, (iii) provisions related to waiver of remedies (or the delay or omission of enforcement thereof), disclaimers, releases of legal or equitable rights, discharge of defenses, or liquidated damages, (iv) provisions releasing, exculpating or exempting a party from, or requiring indemnification of a party for, liability for its own action or inaction to the extent the action or inaction involves negligence, recklessness, willful misconduct, unlawful conduct or conduct against public policy, or (v) any particular remedy where another remedy has been selected; provided, however, that such reservation in the aggregate will not affect the general legal, valid, binding and enforceable nature of the obligations of the Mortgagor under the Mortgage.

 

(f)            Provisions in the Mortgage which permit the Mortgagee to make determinations or to take actions may be subject to requirements that such determinations be made or actions be taken on a reasonable basis and in good faith.

 

(g)           No opinion is expressed as to the ownership by the Mortgagor of any real or personal property. No opinion is expressed as to the priority of any lien or security interest created in any property or as to any person’s rights in any collateral.

 

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(h)           Provisions of the Mortgage which purport to encumber after-acquired real property are unenforceable.

 

(i)            We express no opinion as to any compliance with, the effect of, or need for, any governmental approvals, licenses, permits or other authorizations required for the operation of any property owned by the Mortgagor or the conduct of the Mortgagor’s business, including but not limited to, any applicable health, safety, subdivision, zoning, land use or environmental law, rule or regulation.

 

(j)            We are qualified to practice law in the State of Connecticut. We express no opinion as to the laws of any jurisdiction other than the laws of the State of Connecticut.

 

(k)           The opinions herein expressed are limited to the matters expressly set forth in this opinion letter and no opinion is implied, or may be inferred, beyond the matters expressly so stated.

 

This opinion is rendered only as of the date hereof. We undertake no obligation to update or supplement this opinion to reflect any matters which may hereafter come to our attention or any amendments to the Documents, or change in law or any other matter that may occur after the date of this opinion. This opinion is issued for the benefit of the Institutions to whom this opinion is addressed (the “Institutions”) and may be relied upon by the Institutions, their respective counsel, and any of their successors or assigns in connection with the transactions contemplated by the Documents, but it may not be relied upon by any other person or for any other purpose whatsoever, without in each such other instance obtaining our prior written consent.

 

 

Very truly yours,

 

 

 

MURTHA CULLINA LLP

 

 

 

 

By:

/s/ Frank J. Saccomandi III

 

 

Frank J. Saccomandi III

 

 

A Partner of the Firm

 

8




Exhibit 10.9

 

EXECUTION VERSION

 

AMENDMENT No. 1 dated as of October 5, 2009 (this “ Amendment ”), to the First Lien Credit Agreement dated as of June 15, 2007 as amended, supplemented or otherwise modified (the Credit Agreement ”), among STR ACQUISITION INC., a Delaware corporation which substantially simultaneously with the execution thereof merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (the “ Borrower ”), STR HOLDINGS LLC, a Delaware limited liability company (“ Existing Holdings ”), the Lenders (as defined in the Credit Agreement), and CREDIT SUISSE, as administrative agent (in such capacity, the “ Administrative Agent ”) and as collateral agent (in such capacity the “Collateral Agent” ) for the Lenders.

 

WHEREAS the Borrower and Existing Holdings have informed the Administrative Agent that they intend to cause New Holdings (as defined below) to effect an initial public offering pursuant to which New Holdings’ common Equity Interests will be offered and sold.

 

WHEREAS the Borrower and the Lenders have agreed to permit (a) the formation of a Delaware limited liability company that will elect to be treated as a corporation for Federal income tax purposes, as a direct, wholly owned subsidiary of the Borrower (“ New Holdings ”) and a Delaware corporation, as a direct, wholly owned subsidiary of New Holdings (“ Merger Sub ”), (b) the merger of Merger Sub with and into the Borrower with the Borrower surviving and Existing Holdings receiving all of the Equity Interests in New Holdings, (c) the transfer from Existing Holdings to New Holdings of any and all Obligations of Existing Holdings under the Loan Documents as contemplated by, and in accordance with, Section 4 of this Amendment, (d) the liquidation of Existing Holdings, and (e) the conversion of New Holdings to a Delaware corporation pursuant to the filing of a certificate of conversion with the Secretary of State of Delaware (collectively, the “ IPO Restructuring Transactions ”).

 

WHEREAS the Borrower, the Administrative Agent and the Required Lenders have agreed, on the terms and subject to the conditions set forth herein, to amend the Credit Agreement in the manner set forth herein.

 

NOW, THEREFORE, Existing Holdings, the Borrower, the Required Lenders, and the Administrative Agent hereby agree as follows:

 

SECTION 1.  Defined Terms .   Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement.

 

SECTION 2.  Amendments . (a)   The definition of the term “Qualified Public Offering” set forth in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to “$50,000,000” therein with a reference to “$25,000,000”.

 

(b)  Section 1.01 of the Credit Agreement is amended to add definitions of the following terms in appropriate alphabetical order:

 



 

Agreement ” shall mean this Credit Agreement as modified, supplemented, amended, restated (including any amendment and restatement hereof), extended or renewed from time to time.

 

Amendment No. 1 ” shall mean Amendment No. 1 dated as of October 5, 2009, to this Agreement.

 

IPO Restructuring Transactions ” shall have the meaning ascribed thereto in Amendment No. 1.

 

(c)  Section 6.05 of the Credit Agreement is hereby amended, effective upon the Effective Date (as defined below), by deleting in its entirety existing clause (v) thereof and renumbering existing clause (u) as new clause (v), existing clause (v) currently reads as follows:

 

“(v) Holdings may merge, liquidate, reorganize or otherwise be restructured into a newly-formed Loan Party in a transaction the purpose of which is to re-organize Holdings as a corporation; provided that (1) such transaction (or series of transactions) does not result in a material increase in the Tax obligations payable in cash (on a consolidated basis) for Holdings, the Borrower, each Subsidiary of the Borrower and the holders of Equity Interests in Holdings and (2) immediately following such transaction, Holdings is in compliance with all requirements of the Guarantee and Collateral Agreement and has satisfied its obligations under Section 5.11 (including the execution of any further documents, financing statements, agreements and instruments, and the taking of all other actions, that may be reasonably requested by the Required Lenders, the Administrative Agent or the Collateral Agent).”

 

(d) A new Section 9.19 is hereby added to the Credit Agreement that reads in its entirety as follows:

 

“SECTION 9.19. Holdings . New Holdings (as defined in Amendment No. 1) shall be deemed to be a successor in interest to Existing Holdings (as defined in Amendment No. 1) and all references in this Agreement to “Holdings” (other than (a) in the preamble and (b) in the definitions of the terms “Acquisition”, “Equity Contribution”, “Fee Letter” and “Transactions”) shall be deemed to be references to New Holdings and Existing Holdings.  Notwithstanding anything to the contrary in this Agreement, the Borrower and Holdings shall be permitted to engage in any one or more of the IPO Restructuring Transactions, whether or not contemporaneous (although the Borrower and Holdings expect the IPO Restructuring Transactions, other than clauses (d) and (e) described in the definition thereof, will occur substantially contemporaneously).”

 

SECTION 3.  Waiver.  Effective as of the Effective Date (as defined below), the Lenders, the Administrative Agent and the Collateral Agent waive any non-compliance under the Credit Agreement that may arise solely to the extent necessary to give effect to the IPO Restructuring Transactions, other than compliance with the procedures and obligations set forth in Sections 5.06 and 5.11 of the Credit Agreement and Section 4 of this Amendment.

 

SECTION 4.  Release and Transfer of Obligations .  Upon written notification by the Borrower, Existing Holdings shall be released of any and all Obligations arising

 

2



 

under the Loan Documents; provided that on or prior to such time (i) New Holdings shall have executed and delivered to the Collateral Agent a counterpart of the First Lien Guarantee and Collateral Agreement and any and all such other documents as the Collateral Agent may reasonably request, (ii) New Holdings shall have pledged to the Collateral Agent 100% of the Equity Interests in the Borrower, (iii) Existing Holdings shall have assigned to New Holdings and New Holdings shall have assumed from Existing Holdings any and all Obligations of Existing Holdings arising under the Loan Documents pursuant to an assignment and assumption agreement or other instrument satisfactory to the Collateral Agent; and (iv) New Holdings, Existing Holdings, and the Borrower shall have executed any and all further documents, financing statements, agreements and instruments, and taken all further action (including filing Uniform Commercial Code and other financing statements, mortgages and deeds of trust) that may be required under applicable law, or that the Required Lenders, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by clause (i) through and including clause (iii) of this proviso.

 

SECTION 5.  Amendment Fee .    The Borrower agrees to pay on the Effective Date to the Administrative Agent, for the account of each Lender that executes and delivers a counterpart of this Amendment to the Administrative Agent (or its counsel) on or prior to October 5, 2009 at 12:00 p.m., New York City time (each such Lender a “ Consenting Lender ”), an amendment fee (collectively, the “ Amendment Fees ”) in an amount equal to 0.25% of the aggregate amount of Term Loans, Revolving Loans, L/C Exposure, Swingline Exposure and unused Revolving Credit Commitments and Term Loan Commitments of such Consenting Lender.

 

SECTION 6.  Conditions to Effectiveness; Counterparts; Amendments .   This Amendment shall become binding on the parties and irrevocable as of the date set forth above on the date on which (a) copies hereof that, when taken together, bear the signatures of Existing Holdings, the Borrower and the Required Lenders, shall have been received by the Administrative Agent, (b) the representations and warranties set forth in Article III of the Credit Agreement shall be true and correct in all material respects with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they are true and correct in all material respects as of such earlier date (c) no Default or Event of Default shall have occurred and be continuing, (d) the Administrative Agent and Lenders shall have received payment of the Amendment Fees, and (e) the Administrative Agent and Lenders shall have received all fees and other amounts due and payable pursuant to that certain fee letter dated as of September 29, 2009, relating to this Amendment, and payment of all out-of-pocket expenses, including the reasonable and documented fees, charges and disbursements of Cravath, Swaine & Moore LLP, counsel for the Administrative Agent and the Collateral Agent, to the extent invoiced and required to be paid or reimbursed to it by the Borrower under Section 9.05 of the Credit Agreement (the Effective Date ) .   This Amendment may not be amended nor may any provision hereof be waived except pursuant to a writing signed by Existing Holdings, the Borrower, the Administrative Agent and the Required Lenders.  This Amendment may be executed in any number of counterparts, each of which shall constitute an original but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page of this Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment.

 

3



 

SECTION 7.  Representations and Warranties .   To induce the other parties hereto to enter into this Amendment, each of Existing Holdings and the Borrower represents and warrants to each of the Lenders and the Administrative Agent that, after giving effect to this Amendment, (a) the representations and warranties set forth in Article III of the Credit Agreement are true and correct in all material respects on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date, in which case they are true and correct in all material respects as of such earlier date, and (b) no Default or Event of Default has occurred and is continuing.

 

SECTION 8.  Notices .   All notices hereunder shall be given in accordance with the provisions of Section 9.01 of the Credit Agreement.

 

SECTION 9.  Loan Document Pursuant to Credit Agreement .  This Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with all of the terms and provisions of the Credit Agreement, as amended hereby.  On and after the date hereof, any reference to the Credit Agreement contained in the Loan Documents shall mean the Credit Agreement as modified hereby.

 

SECTION 10.  Full Force and Effect; Limited Amendment .   Except as expressly set forth herein, this Amendment (a) shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Administrative Agent, Existing Holdings or the Borrower under the Credit Agreement or any other Loan Document and (b) shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect.  Nothing herein shall be deemed to entitle Existing Holdings or the Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances.

 

SECTION 11.   Headings .   The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

 

SECTION 12.  Applicable Law Waiver of Jury Trial .   (A) THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

(B) EACH PARTY HERETO HEREBY AGREES AS SET FORTH IN SECTION 9.11 OF THE FIRST LIEN CREDIT AGREEMENT AS IF SUCH SECTION WERE SET FORTH IN FULL HEREIN.

 

[Remainder of this page intentionally left blank]

 

4



 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized officers, all as of the date and year first above written.

 

 

 

STR HOLDINGS LLC

 

 

 

by

 

 

 

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title:

Executive Vice President and Chief Financial Officer

 

 

[Amendment No. 1 to First Lien Credit Agreement]

 



 

 

CREDIT SUISSE, CAYMAN ISLANDS BRANCH, individually and as Administrative Agent and Collateral Agent,

 

 

 

by 

 

 

 

/s/ Rianka Mohan

 

 

Name:

Rianka Mohan

 

 

Title:

Vice President

 

 

 

 

 

 

 

 

 

by 

 

 

 

/s/ Vipul Dhadda

 

 

Name:

Vipul Dhadda

 

 

Title:

Associate

 

 

[Amendment No. 1 to First Lien Credit Agreement]

 




Exhibit 10.10

 

EXECUTION COPY

 

 

FIRST LIEN GUARANTEE AND COLLATERAL AGREEMENT

 

dated as of

 

June 15, 2007

 

among

 

STR ACQUISITION, INC.,

 

STR HOLDINGS LLC,

 

the Subsidiaries of the Borrower
from time to time party hereto

 

and

 

CREDIT SUISSE,

as Collateral Agent

 

 



 

TABLE OF CONTENTS

 

 

 

Page

 

ARTICLE I

 

Definitions

 

SECTION 1.01.

Credit Agreement

1

SECTION 1.02.

Other Defined Terms

2

 

ARTICLE II

 

Guarantee

 

SECTION 2.01.

Guarantee

6

SECTION 2.02.

Guarantee of Payment

6

SECTION 2.03.

No Limitations, Etc

7

SECTION 2.04.

Reinstatement

8

SECTION 2.05.

Agreement To Pay; Subrogation

8

SECTION 2.06.

Information

8

 

 

 

ARTICLE III

 

 

 

Pledge of Securities

 

 

 

 

SECTION 3.01.

Pledge

9

SECTION 3.02.

Delivery of the Pledged Collateral

9

SECTION 3.03.

Representations, Warranties and Covenants

10

SECTION 3.04.

Certification of Limited Liability Company Interests and Limited Partnership Interests

11

SECTION 3.05.

Registration in Nominee Name; Denominations

11

SECTION 3.06.

Voting Rights; Dividends and Interest, Etc

12

 

 

 

ARTICLE IV

 

 

 

Security Interests in Personal Property

 

 

 

 

SECTION 4.01.

Security Interest

14

SECTION 4.02.

Representations and Warranties

15

SECTION 4.03.

Covenants

17

SECTION 4.04.

Other Actions

20

SECTION 4.05.

Covenants Regarding Patent, Trademark and Copyright Collateral

23

 



 

ARTICLE V

 

 

 

Remedies

 

 

 

SECTION 5.01.

Remedies Upon Default

25

SECTION 5.02.

Application of Proceeds

26

SECTION 5.03.

Grant of License to Use Intellectual Property

27

SECTION 5.04.

Securities Act, Etc

27

 

 

 

ARTICLE VI

 

 

 

Indemnity, Subrogation and Subordination

 

 

 

SECTION 6.01.

Indemnity and Subrogation

28

SECTION 6.02.

Contribution and Subrogation

29

SECTION 6.03.

Subordination

29

 

 

 

ARTICLE VII

 

Miscellaneous

 

SECTION 7.01.

Notices

29

SECTION 7.02.

Security Interest Absolute

30

SECTION 7.03.

Survival of Agreement

30

SECTION 7.04.

Binding Effect; Several Agreement

30

SECTION 7.05.

Successors and Assigns

30

SECTION 7.06.

Collateral Agent’s Fees and Expenses; Indemnification

31

SECTION 7.07.

Collateral Agent Appointed Attorney-in-Fact

31

SECTION 7.08.

Applicable Law

32

SECTION 7.09.

Waivers; Amendment

32

SECTION 7.10.

WAIVER OF JURY TRIAL

33

SECTION 7.11.

Severability

33

SECTION 7.12.

Counterparts

33

SECTION 7.13.

Headings

33

SECTION 7.14.

Jurisdiction; Consent to Service of Process

34

SECTION 7.15.

Termination or Release

34

SECTION 7.16.

Additional Subsidiaries

35

SECTION 7.17.

Right of Setoff

35

 

ii



 

Schedules

 

 

 

Schedule I

Subsidiary Guarantors

 

Schedule II

Equity Interests; Pledged Debt Securities

 

Schedule III

Intellectual Property

 

 

 

 

Exhibits

 

 

 

 

 

Exhibit A

Form of Supplement

 

Exhibit B

Form of Perfection Certificate

 

 

iii



 

FIRST LIEN GUARANTEE AND COLLATERAL AGREEMENT dated as of June 15, 2007 (this “Agreement” ) , among STR ACQUISITION, INC., a Delaware corporation, which substantially simultaneously with the execution hereof shall be merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation ( “STR” ) , with STR being the surviving entity (the “Borrower” ) , STR HOLDINGS LLC, a Delaware limited liability company ( “Holdings” ) , the Subsidiaries of the Borrower from time to time party hereto and CREDIT SUISSE ( “Credit Suisse” ), as collateral agent (in such capacity, the “Collateral Agent” ) .

 

PRELIMINARY STATEMENT

 

Reference is made to the First Lien Credit Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement” ) , among the Borrower, Holdings, the lenders from time to time party thereto (the “Lenders” )   and Credit Suisse,  as  administrative agent (in such capacity, the “Administrative Agent” ) and Collateral Agent.

 

The Lenders and the Issuing Bank (such term and each other capitalized term used but not defined in this preliminary statement having the meaning given or ascribed to it in Article I) have agreed to extend credit to the Borrower pursuant to, and upon the terms and conditions specified in, the Credit Agreement. The obligations of the Lenders and the Issuing Bank to extend credit to the Borrower are conditioned upon, among other things, the execution and delivery of this Agreement by the Borrower and each Guarantor. Each Guarantor is an affiliate of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement and is willing to execute and deliver this Agreement in order to induce the Lenders and the Issuing Bank to extend such credit. Accordingly, the parties hereto agree as follows:

 

ARTICLE I

 

Definitions

 

SECTION 1.01. Credit Agreement . (a) Capitalized terms used in this Agreement and not otherwise defined herein have the meanings set forth in the Credit Agreement. All capitalized terms defined in the New York UCC (as such term is defined herein) and not defined in this Agreement have the meanings specified therein. All references to the Uniform Commercial Code shall mean the New York UCC.

 

(b) The rules  of construction specified in Section 1.02  of the Credit Agreement also apply to this Agreement.

 



 

SECTION 1.02. Other Defined Terms . As used in this Agreement, the following terms have the meanings specified below:

 

“Accounts Receivable” shall mean all Accounts and all right, title and interest in any returned goods, together with all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired.

 

“Administrative Agent” shall have the meaning assigned to such term in the preliminary statement.

 

“Article 9 Collateral” shall have the meaning assigned to such term in Section 4.01.

 

“Assi gnmen t of Distributions” shall mean the assignment of distribution substantially in the form of Exhibit C.

 

“Borrower” shall have the meaning assigned to such term in the preamble.

 

“Collateral” shall mean the Article 9 Collateral and the Pledged Collateral.

 

“Collateral Agent” shall have the meaning assigned to such term in the preamble.

 

“Copyright License” shall mean any written agreement, now or hereafter in effect, granting any right to any third person under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third person, and all rights of such Grantor under any such agreement.

 

“Copyrights” shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office (or any successor office or any similar office in any other country), including those listed on Schedule III.

 

Ex cluded Assets” shall mean (a)   any lease, license, contract, property right or agreement to which any Grantor is a party or any of its rights or interests thereunder if and only for so long as the grant of a security interest hereunder shall constitute or result in a breach, termination or default under any such lease, license, contract, property right or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of any relevant jurisdiction or any other applicable law or principles of equity); provided,

 

2



 

however, that any portion of any such lease, license, contract, property right or agreement shall cease to constitute an Excluded Asset pursuant to this clause at the time and to the extent that the grant of security interest therein does not result in any of the consequences specified above, (b) motor vehicles the perfection of a security interest in which is excluded from the Uniform Commercial Code in the relevant jurisdiction, (c)   interests in real property, (d) any Equity Interest in an Excluded Entity and (e) any application to register Trademarks in the U.S. Patent and Trademark Office based upon Grantor’s “intent to use” such Trademark (but only if the grant of security interest to such intent-to-use Trademark violates 15 U.S.C. § 1060(a)) unless and until a “Statement of Use” or “Amendment to Allege Use” is filed in the U.S. Patent and Trademark Office with respect thereto, at which point the Collateral shall include, and the security interest granted hereunder shall attach to, such application.

 

Exc luded Entity” shall mean each of (i) STR-Registrar LLC, (ii) CTC Asia Ltd. and (iii) Specialized Technology Resources (India) Pvt Ltd. to the extent that the necessary governmental consents to make a valid and enforceable pledge of 66% of its issued and outstanding stock to the Collateral Agent have not been obtained.

 

“Federal Securities Laws” shall have the meaning assigned to such term in Section 5.04.

 

“General Intangibles” shall mean all choses in action and causes of action and all other intangible personal property of any Grantor of every kind and nature (other than Accounts) now owned or hereafter acquired by any Grantor, including all rights and interests in partnerships, limited partnerships, limited liability companies and other unincorporated entities, corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Hedging Agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts.

 

“Grantors” shall mean the Borrower and the Guarantors.

 

“Guarantors” shall mean Holdings and the Subsidiary Guarantors.

 

Ho ldings” shall have the meaning assigned to such term in the preamble.

 

“Intellectual Property” shall mean all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

 

3



 

“License” shall mean any Patent License, Trademark License, Copyright License or other license or sublicense agreement relating to Intellectual Property to which any Grantor is a party, including those listed on Schedule III.

 

“Loan Document Obligations” shall mean (a) the due and punctual payment of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations of the Borrower to any of the Secured Parties under the Credit Agreement and each of the other Loan Documents, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower under or pursuant to the Credit Agreement and each of the other Loan Documents, and (c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to this Agreement and each of the other Loan Documents.

 

“New York UCC” shall mean the Uniform Commercial Code as from time to time in effect in the State of New York.

 

“Obligations” shall mean (a) the Loan Document Obligations and (b) the due and punctual payment and performance of all obligations of each Loan Party under each Hedging Agreement that (i) is in effect on the Closing Date with a counterparty that is the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender as of the Closing Date or (ii) is entered into after the Closing Date with any counterparty that is the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender at the time such Hedging Agreement is entered into.

 

“Patent License” shall mean any written agreement, now or hereafter in effect, granting to any third person any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now or hereafter owned by any third person, is in existence, and all rights of any Grantor under any such agreement.

 

“Patents” shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office (or any successor or any similar offices in any other country),

 

4



 

including those listed on Schedule III, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

 

‘‘ Perf ection Certificate” shall mean a certificate substantially in the form of Exhibit B, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of the Borrower.

 

“Pledged Collateral” shall have the meaning assigned to such term in Section 3.01.

 

“Pledged Debt Securities” shall have the meaning assigned to such term in Section 3.01.

 

“Pledged Securities” shall mean any promissory notes, stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

 

“Pledged Stock” shall have the meaning assigned to such term in Section 3.01.

 

“Secured Parties” shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) any Issuing Bank, (e) each counterparty to any Hedging Agreement with a Loan Party that either (i) is in effect on the Closing Date if such counterparty is the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender as of the Closing Date or (ii) is entered into after the Closing Date if such counterparty is the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender at the time such Hedging Agreement is entered into, (f) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (g) the successors and assigns of each of the foregoing.

 

“Security Interest” shall have the meaning assigned to such term in Section 4.01.

 

“Subsidiary Guarantor” shall mean (a) the Subsidiaries identified on Schedule I hereto as Subsidiary Guarantors and (b) each other Subsidiary that becomes a party to this Agreement as a Subsidiary Guarantor after the Closing Date; provided, however, that in no event shall STR-Registrar LLC become a Subsidiary Guarantor.

 

‘‘Trad ema rk License” shall mean any written agreement, now or hereafter in effect, granting to any third person any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third person, and all rights of any Grantor under any such agreement.

 

5



 

Trademarks” shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office (or any successor office) or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule III, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.

 

“Unfun d ed Advances/Participations” shall mean (a) with respect to the Administrative Agent, the aggregate amount, if any (i) made available to the Borrower on the assumption that each Lender has made its portion of the applicable Borrowing available to the Administrative Agent as contemplated by Section 2.02(d) of the Credit Agreement and (ii) with respect to which a corresponding amount shall not in fact have been returned to the Administrative Agent by the Borrower or made available to the Administrative Agent by any such Lender, (b) with respect to the Swingline Lender, the aggregate amount, if any, of participations in respect of any outstanding Swingline Loan that shall not have been funded by the Revolving Facility Lenders in accordance with Section 2.22(e) of the Credit Agreement and (c) with respect to any Issuing Bank, the aggregate amount, if any, of participations in respect of any outstanding L/C Disbursement that shall not have been funded by the Revolving Facility Lenders in accordance with Sections 2.23(d) and 2.02(f) of the Credit Agreement.

 

ARTICLE II

 

Guarantee

 

SECTION 2.01. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Obligations. Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation for the ratable benefit of the Secured Parties. Each Guarantor waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of any Obligation, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.

 

SECTION 2.02. Guarantee of Payment. Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any security held for the payment of the Obligations or to

 

6



 

any balance of any Deposit Account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other person.

 

SECTION 2.03. Nature of Guarantee. (a)   If and to the extent required in order for the Obligations to be enforceable under applicable federal, state and other laws relating to the insolvency of debtors, the maximum liability of such Guarantor hereunder shall be limited to the greatest amount which can lawfully be guaranteed by such Guarantor under such laws, after giving effect to any rights of contribution, reimbursement and subrogation arising under Article VI. Each Guarantor acknowledges and agrees that, to the extent not prohibited by applicable law, (i) such Guarantor (as opposed to its creditors, representatives of creditors or bankruptcy trustee, including such Guarantor in its capacity as debtor in possession exercising any powers of a bankruptcy trustee) has no personal right under such laws to reduce, or request any judicial relief that has the effect of reducing, the amount of its liability under this Agreement, (ii) such Guarantor (as opposed to its creditors, representatives of creditors or bankruptcy trustee, including such Guarantor in its capacity as debtor in possession exercising any powers of a bankruptcy trustee) has no personal right to enforce the limitation set forth in this Section 2.03(a) or to reduce, or request judicial relief reducing, the amount of its liability under this Agreement, and (iii) the limitation set forth in this Section 2.03(a) may be enforced only to the extent required under such laws in order for the obligations of such Guarantor under this Agreement to be enforceable under such laws and only by or for the benefit of a creditor, representative of creditors or bankruptcy trustee of such Guarantor or other person entitled, under such laws, to enforce the provisions thereof.

 

(b) Except for termination of a Guarantor’s obligations hereunder as expressly provided in Section 7.15, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement, (iii) the release of, or any impairment of or failure to perfect any Lien on or security interest in, any security held by the Collateral Agent or any other Secured Party for the Obligations or any of them, (iv) any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). Subject to the terms of this Agreement, each Guarantor expressly authorizes the Collateral Agent to take and hold security for the payment and performance of the Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and

 

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manner of any sale thereof in its sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder.

 

(c) To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise any other right or remedy available to them against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Loan Party, as the case may be, or any security.

 

SECTION 2.04. Reinstatement. Each Guarantor agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Collateral Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower, any other Loan Party or otherwise.

 

SECTION 2.05. Agreement To Pay; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, if the Borrower or any other Loan Party shall fail to pay any Obligation when and as the same shall become due (after taking into account any applicable grace period), whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation. Upon payment by any Guarantor of any sums to the Collateral Agent as provided above, all rights of such Guarantor against the Borrower or any other Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article VI, provided that each Guarantor reserves any and all other rights of reimbursement, contribution or subrogation at any time available to it against any other Guarantor.

 

SECTION 2.06. Information . Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s and each other Loan Party’s financial condition and assess and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such

 

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Guarantor assumes and incurs hereunder, and agrees that neither the Collateral Agent nor any other Secured Party will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

 

ARTICLE III

 

Pledge of Securities

 

SECTION 3.01. Pledge. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest in, to and under (a)(i) the Equity Interests owned by such Grantor on the date hereof (including all such Equity Interests listed on Schedule II), (ii) any other Equity Interests obtained in the future by such Grantor and (iii) the certificates representing all such Equity Interests (all the foregoing collectively referred to herein as the “ Pledged Stock ”); provided, however, that the Pledged Stock shall not include (x) more than 66% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary or (y) an Excluded Asset, (b)(i) the debt securities held by such Grantor on the date hereof (including all such debt securities listed opposite the name of such Grantor on Schedule II), (ii) any debt securities in the future issued to such Grantor and (iii) the promissory notes and any other instruments evidencing such debt securities (all the foregoing collectively referred to herein as the “ Pledged Debt Securities ), (c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 3.01, (d) subject to Section 3.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect, of the securities referred to in clauses (a) and (b) above, (e) subject to Section 3.06, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c)   and (d) above, and (f) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the “ Pledged Collateral ”) ; provided, however, that notwithstanding any other provision in this agreement, this Section 3.01 shall not, at any time, constitute a grant of security interest in an Excluded Asset.

 

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

 

SECTION 3.02. Delivery of the Pledged Collateral. (a) Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all certificates, instruments or other documents representing or evidencing Pledged Securities.

 

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(b)   Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Debt Securities.

 

(c)    Upon delivery to the Collateral Agent, (i) any certificate, instrument or document representing or evidencing Pledged Securities shall be accompanied by undated stock powers duly executed in blank or other undated instruments of transfer satisfactory to the Collateral Agent and duly executed in blank and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the applicable securities, which schedule shall be attached hereto as Schedule II and made a part hereof; pr ovided that failure to attach any such schedule hereto shall not affect the validity of the pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

 

SECTION 3.03. Representations, Warranties and Covenants. The Grantors jointly and severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the Secured Parties, that:

 

(a)    Schedule II correctly sets forth in all material respects the percentage of the issued and outstanding shares of each class of the Equity Interests of the issuer thereof represented by such Pledged Stock and includes all Equity Interests, debt securities and promissory notes required to be pledged hereunder;

 

(b)   the Pledged Stock and Pledged Debt Securities have been duly and validly authorized and issued by the issuers thereof and (1) in the case of Pledged Stock, are fully paid and nonassessable and (ii) in the case of Pledged Debt Securities, are legal, valid and binding obligations of the issuers thereof;

 

(c)    except for the security interests granted hereunder (or otherwise permitted under the Credit Agreement), each Grantor (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Grantor, (ii) holds the same free and clear of all Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than transfers made in compliance with the Credit Agreement, and (iv) subject to Section 3.06, will cause any and all Pledged Collateral, whether for value paid by such Grantor or otherwise, to be forthwith deposited with the Collateral Agent and pledged or assigned hereunder;

 

(d)   except for restrictions and limitations imposed by the Loan Documents or securities laws generally, the Pledged Collateral is and will continue to be freely transferable and assignable, and none of the Pledged

 

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Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

 

(e)   each Grantor (i) has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than any Lien created or permitted by the Loan Documents), however arising, of all persons whomsoever;

 

(f)    no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect or those that, if not obtained, could not reasonably be expected to result in a Material Adverse Effect,);

 

(g)   by virtue of the execution and delivery by each Grantor of this Agreement, when any Pledged Securities are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a legal valid and perfected first priority lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations; and

 

(h) the pledge effected hereby is effective to vest in the Collateral Agent, for the ratable benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth herein and all action by any Grantor necessary or desirable to protect and perfect the Lien on the Pledged Collateral has been duly taken.

 

SECTION 3.04. Certi fication of Limited Liability Company Interests and Limited Partnership Interests. No interest of any Grantor in any limited liability company or limited partnership which is a Subsidiary and pledged hereunder is represented by a certificate. The Grantors shall not, without the consent of the Administrative Agent, agree to any amendment of the certificate of formation or limited liability company agreement (or other comparable constituent document) governing Pledged Stock which has the effect of turning previously uncertificated capital stock or membership interests into certificated capital stock or membership interests or which elects to treat any membership interest that is part of the Pledged Stock as a “security” under Section 8-103 of the New York UCC.

 

SECTION 3.05. Registration in Nominee Name; Denom inations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent. Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications

 

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received by it with respect to Pledged Securities in its capacity as the registered owner thereof. The Collateral Agent shall at any time during the occurrence and continuation of an Event of Default have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

 

SECTION 3.06. Voting Right; Dividends and Interest Etc. (a)   Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given the Grantors reasonable advance notice of its intent to exercise its rights under this Agreement (which notice shall be deemed to have been given immediately upon the occurrence of an Event of Default under paragraph (g) or (h) of Article VII of the Credit Agreement):

 

(i)       Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided, however, that such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Securities or the rights and remedies of any of the Collateral Agent or the other Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

 

(ii)     The Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to each Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (i) above.

 

(iii)    Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable law; provided, however, that any noncash dividends, interest, principal or other distributions that would constitute Pledged Stock or Pledged Debt Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but

 

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shall be held separate and apart therefrom, shall be held in trust for the ratable benefit of the Secured Parties and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement or instrument of assignment). This paragraph (iii) shall not apply to dividends between or among the Borrower, the Guarantors and any Subsidiaries only of property subject to a perfected security interest under this Agreement; provided that the Borrower notifies the Collateral Agent in writing, specifically referring to this Section 3.06 at the time of such dividend and takes any actions the Collateral Agent specifies to ensure the continuance of its perfected security interest in such property under this Agreement.

 

(b)   Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified (or shall be deemed to have notified pursuant to Section 3.06(a)) the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 3.06, then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.06 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 3.06 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement or instrument of assignment). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and each applicable Grantor has delivered to the Administrative Agent certificates to that effect, the Collateral Agent shall, promptly after all such Events of Default have been cured or waived, repay to each applicable Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.06 and that remain in such account.

 

(c)    Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified (or shall be deemed to have notified pursuant to Section 3.06(a)) the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 3.06, then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.06, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 3.06, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights.

 

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(d) Any notice given by the Collateral Agent to the Grantors exercising its rights under paragraph (a) of this Section 3.06 (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

 

ARTICLE IV

 

Security Interests in Personal Property

 

SECTION 4.01. Security Interest. (a) As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest (the “ Security Interest ”) , in all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “ Article 9 Collateral ”):

 

(i)            all Accounts;

 

(ii)           all Chattel Paper;

 

(iii)          all cash and Deposit Accounts;

 

(iv)          all Documents;

 

(v)           all Equipment;

 

(vi)          all General Intangibles;

 

(vii)         all Instruments;

 

(viii)        all Inventory;

 

(ix)          all Investment Property;

 

(x)            all Letter-of-Credit Rights;

 

(xi)          all Commercial Tort Claims;

 

(xii)         all books and records pertaining to the Article 9 Collateral; and

 

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(xiii) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any person with respect to any of the foregoing.

 

Notwithstanding any provision in this Agreement, this Section 4.01(a) shall not, at any time, constitute a grant of security interest in an Excluded Asset.

 

(b)   Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i) indicate the Article 9 Collateral as “all assets” of such Grantor or words of similar effect, and (ii) contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (B) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Article 9 Collateral relates. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

 

Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

 

The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party.

 

(c)   The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.

 

SECTION 4.02. Representations and Warranties. The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that:

 

(a) Each Grantor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent, for the ratable benefit of the Secured Parties, the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than (i) any consent or approval that has been obtained or (ii) those that, if not obtained, could not reasonably be expected to result in a Material Adverse Effect.

 

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(b)   The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein (including (x) the exact legal name of each Grantor and (y) the jurisdiction of organization of each Grantor) is correct and complete as of the Closing Date. Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations containing a description of the Article 9 Collateral have been prepared by the Collateral Agent based upon the information provided to the Administrative Agent and the Secured Parties in the Perfection Certificate for filing in each governmental, municipal or other office specified in Section 2 of the Perfection Certificate (or specified by notice from the Borrower to the Administrative Agent after the Closing Date in the case of filings, recordings or registrations required by Sections 5.06 or 5.11 of the Credit Agreement), which are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in the Article 9 Collateral consisting of United States Patents, Trademarks and Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. Each Grantor represents and warrants that a fully executed short form agreement in the form requested by the Collateral Agent and containing a description of all material Article 9 Collateral consisting of Intellectual Property with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights has been delivered to the Collateral Agent for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. §261, 15 U.S.C. §1060 or 17 U.S.C. §205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof).

 

(c)    The Security Interest constitutes (i) a legal and valid security interest in all Article 9 Collateral securing the payment and performance of the

 

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Obligations, (ii) upon completion of the filings described in Section 4.02(b), a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a security interest that shall be perfected in all Article 9 Collateral to the extent that a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable. The Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral, other than Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement that have priority as a matter of law.

 

(d) The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement. As of the Closing Date, no Grantor has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office, (iii) any notice under the Assignment of Claims Act, or (iv) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement and prior existing Liens no longer in effect. No Grantor holds any Commercial Tort Claims seeking damages in excess of $250,000 except as indicated on the Perfection Certificate.

 

SECTION 4.03. Covenants. (a) Each Grantor agrees promptly to notify the Collateral Agent in writing of any change in (i) its legal name, (ii) its identity or type of organization or corporate structure, (iii) its Federal Taxpayer Identification Number or organizational identification number or (iv) its jurisdiction of organization. Each Grantor agrees promptly to provide the Collateral Agent with certified organizational documents reflecting any of the changes described in the first sentence of this paragraph. Each Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Article 9 Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any material portion of the Article 9 Collateral owned or held by such Grantor is damaged or destroyed.

 

(b) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Article 9 Collateral owned by it as is

 

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consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any material part of the Article 9 Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any material Article 9 Collateral, provided that, unless an Event of Default has occurred and is continuing, the Collateral Agent shall be limited to one such requests in each calendar year.

 

(c)    Each Grantor shall, at its own expense, take any and all actions reasonably necessary to defend title to the Article 9 Collateral against all persons and to defend the Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement.

 

(d)   Each Grantor agrees, at its own expense, promptly to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, obtain, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and Taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing or continuation statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable to any Grantor under or in connection with any of the Article 9 Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper, in excess of $250,000 individually or $500,000 in the aggregate, then such Instrument or Tangible Chattel Paper shall be promptly pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent, except to the extent the costs of such actions are, in the Collateral Agent’s reasonable judgment, excessive in relation to the value of the security to be afforded thereby or to the extent prohibited by applicable law (or in the case of an amount payable by any Foreign Subsidiary, to the extent such actions would, in the Borrower’s good faith determination, result in adverse tax consequences).

 

Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule III or adding additional schedules hereto to identify specifically any asset or item of a Grantor that may, in the Collateral Agent’s reasonable judgment, constitute material Copyrights, Licenses, Patents or Trademarks; provided that any Grantor shall have the right, exercisable within 10 days after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any material inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use its commercially reasonable efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct in all material respects with respect to such Collateral

 

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within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Collateral.

 

(e)  The Collateral Agent and such persons as the Collateral Agent may designate shall have the right, at the applicable Grantor’s own cost and expense, to inspect the Article 9 Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Article 9 Collateral is located, to discuss the applicable Grantor’s affairs with the officers of such Grantor and its independent accountants and to verify the existence, validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, in the case of Accounts or other Article 9 Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party.

 

(f)  At its option, upon the occurrence and continuance of an Event of Default, the Collateral Agent may discharge past due Taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not expressly permitted pursuant to Section 5.03 or Section 6.02 of the Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any reasonable and documented payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to Taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

 

(g) If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other person to secure payment and performance of an Account, the value of which exceeds $250,000 individually or $500,000 in the aggregate, such Grantor shall promptly assign such security interest to the Collateral Agent for the ratable benefit of the Secured Parties. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other person granting the security interest.

 

(h) Each Grantor shall remain liable to observe and perform all the material conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance.

 

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(i) No Grantor shall make or permit to be made an assignment, pledge or hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9 Collateral or permit any notice to be filed under the Assignment of Claims Act, except, in each case, as expressly permitted by Section 6.02 of the Credit Agreement. No Grantor shall make or permit to be made any transfer of the Article 9 Collateral and each Grantor shall remain at all times in possession or otherwise in control of the Article 9 Collateral owned by it, except as permitted by the Credit Agreement.

 

(j) No Grantor will, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises, compoundings or settlements granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practice used in industries that are the same as or similar to those in which such Grantor is engaged.

 

(k) In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required under the Credit Agreement or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of any Grantor hereunder or any Default or Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable.  All sums disbursed by the Collateral Agent in connection with this paragraph, including attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby.

 

(1) Each Grantor shall maintain, in form and manner satisfactory to the Collateral Agent, records of its Chattel Paper and its books, records and documents evidencing or pertaining thereto.

 

SECTION 4.04. Other Actions. In order to further insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Security Interest in the Article 9 Collateral, each Grantor agrees, in each case at such Grantor’s own expense, to take the following actions with respect to the following Article 9 Collateral:

 

(a)  Instruments. If any Grantor shall at any time hold or acquire any Instruments having a value in excess of $250,000, such Grantor shall forthwith endorse, assign and deliver the same to the Collateral Agent, accompanied by such undated instruments of endorsement, transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably specify, except to the extent the costs of such actions are, in the Collateral Agent’s reasonable judgment, excessive in relation to the value of the security to be afforded thereby or to the extent prohibited by applicable law (or in the case of an amount payable

 

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by any Foreign Subsidiary, to the extent such actions would, in the Borrower’s good faith determination, result in adverse tax consequences).

 

(b)  Deposit Accounts.   For each Deposit Account that any Grantor at any time opens or maintains, other than Deposit Accounts (A) that are payroll accounts, withholdings tax accounts, petty cash accounts or flexible spending benefit accounts or trust, escrow or other fiduciary accounts or (B) which do not hold for any period of five consecutive days, an aggregate amount in excess of $1,000,000, such Grantor shall, upon the Collateral Agent’s request, either (i) cause the depositary bank to agree to comply at any time with instructions from the Collateral Agent to such depositary bank directing the disposition of funds from time to time credited to such Deposit Account, without further consent of such Grantor or any other person, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, or (ii) arrange for the Collateral Agent to become the customer of the depositary bank with respect to the Deposit Account, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw funds from such Deposit Account.  The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such instructions or withhold any withdrawal rights from any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any withdrawal, would occur; provided, however, upon the waiver by the applicable Required Lenders of such Event of Default, so long as no other Event of Default shall then exist or be continuing, the Collateral Agent shall revoke any such instruction. The provisions of this paragraph shall not apply to any Deposit Account for which any Grantor, the depositary bank and the Collateral Agent have entered into a cash collateral agreement specially negotiated among such Grantor, the depositary bank and the Collateral Agent for the specific purpose set forth therein.

 

(c)  Investment Property . If any securities, whether certificated or uncertificated, or other Investment Property having a value in excess of $50,000 in the aggregate now or hereafter acquired by any Grantor are held by such Grantor or its nominee through a Securities Intermediary or Commodity Intermediary, such Grantor shall promptly notify the Collateral Agent thereof and, at the Collateral Agent’s request and option, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause such Securities Intermediary or Commodity Intermediary, as the case may be, to agree to comply with Entitlement Orders from the Collateral Agent to such Securities Intermediary as to such securities or other Investment Property, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such Commodity Intermediary, in each case without further consent of any Grantor or such nominee, or (ii) in the case of Financial Assets (as governed by Article 8 of the New York UCC) or other Investment Property held through a Securities Intermediary, arrange for the Collateral Agent to become the Entitlement Holder with respect to such Investment Property, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such

 

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Investment Property. The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such Entitlement Orders or instructions or directions to any such issuer, Securities Intermediary or Commodity Intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur; provided, however, upon the waiver by the applicable Required Lenders of such Event of Default, so long as no other Event of Default shall then exist or be continuing, the Collateral Agent shall revoke any such instruction. The provisions of this paragraph shall not apply to any Financial Assets credited to a Securities Account for which the Collateral Agent is the Securities Intermediary.

 

(d)  Electronic Chattel Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any Electronic Chattel Paper or any “ transferable record ”, as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, shall take such action as the Collateral Agent may request to vest in the Collateral Agent control under New York UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Collateral Agent agrees with such Grantor that the Collateral Agent will arrange, pursuant to procedures satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent’s loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such Electronic Chattel Paper or transferable record.

 

(e)  Letter-of-credit Rights. If any Grantor is at any time a beneficiary under a letter of credit having a value in excess of $500,000 now or hereafter issued in favor of such Grantor (other than Letters of Credit and Letters of Credit Rights that do not constitute Supporting Obligations in respect of other Collateral), such Grantor shall promptly notify the Collateral Agent thereof and, at the request and option of the Collateral Agent, such Grantor shall, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of the letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds

 

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of any drawing under the letter of credit are to be paid to the applicable Grantor unless an Event of Default has occurred or is continuing.

 

(f) Commercial Tort Claims.   If any Grantor shall at any time hold or acquire a Commercial Tort Claim seeking damages in an amount reasonably estimated to exceed $250,000, the Grantor shall promptly notify the Collateral Agent thereof in a writing signed by such Grantor including a summary description of such claim and grant to the Collateral Agent, for the ratable benefit of the Secured Parties, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Collateral Agent.

 

SECTION 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Grantor agrees that it will not, and will not permit any of its licensees to, do any act, or omit to do any act, whereby any Patent that is material to the conduct of such Grantor’s business may become abandoned, invalidated or dedicated to the public, and agrees that it shall use commercially reasonable efforts to continue to mark any products covered by a material Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

 

(b)  Except as could not reasonably be expected to result in a Material Adverse Effect, each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) use commercially reasonable efforts to maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights.

 

(c)   Each Grantor (either itself or through its licensees or sublicensees) will, for each work covered by a Copyright material to the conduct of such Grantor’s business, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

 

(d)  Each Grantor shall notify the Collateral Agent promptly if it knows or has reason to know that any Patent, Trademark or Copyright material to the conduct of its business may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor’s ownership of any Patent, Trademark or Copyright, its right to register the same, or its right to keep and maintain the same.

 

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(e)  Except as could not reasonably be expected to result in a Material Adverse Effect, no Grantor shall, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly notifies the Collateral Agent, and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Security Interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

 

(f)   Except as could not reasonably be expected to result in a Material Adverse Effect, each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties.

 

(g)  In the event that any Grantor knows or has reason to believe that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor’s business has been or is about to be infringed, misappropriated or diluted by a third person, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Article 9 Collateral.

 

(h) Upon the occurrence and during the continuance of an Event of Default, each Grantor shall use its commercially reasonable efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License, and each other material License, to effect the assignment of all such Grantor’s right, title and interest thereunder to the Collateral Agent, for the ratable benefit of the Secured Parties, or its designee.

 

SECTION 4.06. Assignment of Distr ibutions.      The Borrower shall execute the Assignment of Distributions in the form attached hereto as Exhibit C in favor of the Collateral Agent with respect to its rights to any distributions of STR-Registrar LLC.

 

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ARTICLE V

 

Remedies

 

SECTION 5.01. Remedies Upon Default.    Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Grantor to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice (except any notice required by law) or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

 

The Collateral Agent shall give each applicable Grantor 10 days’ written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the

 

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Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by applicable law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by applicable law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, subject to Section 5.02 of this Agreement, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

 

SECTION 5.02. Application of Proceeds. The Collateral Agent shall apply the proceeds of any collection, sale, foreclosure or other realization upon any Collateral, including any Collateral consisting of cash, as follows;

 

FIRST, to the payment of all costs and expenses incurred by the Administrative Agent or the Collateral Agent (in their respective capacities as such hereunder or under any other Loan Document) in connection with such collection, sale, foreclosure or realization or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Administrative Agent and/or the

 

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Collateral Agent hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;

 

SECOND, to the payment in full of Unfunded Advances/Participations (the amounts so applied to be distributed between or among the Administrative Agent, the Swingline Lender and any Issuing Bank pro rata in accordance with the amounts of Unfunded Advances/Participations owed to them on the date of any such distribution);

 

THIRD, to the payment in full of all other Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution);

 

FOURTH, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

 

The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

 

SECTION 5.03. Grant of License to Use Intellectual Property.    For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors), to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent may be exercised, at the option of the Collateral Agent, only upon the occurrence and during the continuation of an Event of Default; provided, however, that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon each Grantor notwithstanding any subsequent cure of an Event of Default.

 

SECTION 5.04. Securities Act, Etc.     In view of the position of the Grantors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the U.S. Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the

 

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“Federal Securities Laws” ) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable “blue sky” or other state securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Collateral, limit the purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a limited number of potential purchasers (including a single potential purchaser) to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a limited number of purchasers (or a single purchaser) were approached. The provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

 

ARTICLE VI

 

Indemnity, Subrogation and Subordination

 

SECTION 6.01. Indemnity and Subrogation.    In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor under this Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part a claim of any Secured Party, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.

 

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SECTION 6.02.   Contribution and Subrogation.   Each Guarantor (a Con tributing Guarantor” ) agrees (subject to Section 6.03) that, in the event a payment shall be made by any other Guarantor hereunder in respect of any Obligation, or assets of any other Guarantor shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party, and such other Guarantor (the Claiming Guarantor ) shall not have been fully indemnified by the Borrower as provided in Section 6.01, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to (i) the amount of such payment or (ii) the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 7.16, the date of the supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 6.02 shall be subrogated to the rights of such Claiming Guarantor under Section 6.01 to the extent of such payment.

 

SECTION 6.03.   Subordination.   (a) Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 6.01 and 6.02 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 6.01 and 6.02 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of its obligations hereunder.

 

(b) The Borrower and each Guarantor hereby agree that all Indebtedness and other monetary obligations owed by it to any Subsidiary that is not a Loan Party (or, in the case of the Borrower, any Subsidiary) shall be fully subordinated to the indefeasible payment in full in cash of the Obligations, it being agreed that, for greater certainty, other than upon the occurrence and during the continuance of an Event of Default, the Borrower and each Guarantor shall be allowed to make payments with respect to Indebtedness permitted to be incurred pursuant to Section 6.01 of the Credit Agreement in accordance with the terms thereof.

 

ARTICLE VII

 

Mi scel laneous

 

SECTION 7.01.   Notices.     All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Guarantor shall be given to it in care of the Borrower as provided in Section 9.01 of the Credit Agreement.

 

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SECTION 7.02. Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument relating to the foregoing, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement.

 

SECTION 7.03. Survival of Agreement . All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and the Issuing Bank and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any Lender or Issuing Bank or on their behalf and notwithstanding that the Collateral Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under any Loan Document is outstanding and unpaid or the aggregate L/C Exposure does not equal zero and so long as the Commitments have not expired or terminated.

 

SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Loan Party and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Loan Party, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Loan Party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated or permitted by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

 

SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the

 

30



 

permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

 

SECTION 7.06. Collateral Agent’s Fees and Expenses; Indemnification. (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.05 of the Credit Agreement.

 

(b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other indemnitees against, and hold each indemnitee harmless from, any and all losses, claims, damages, liabilities, and related out of pocket expenses, including the fees, charges and disbursements of any counsel for any indemnitee, incurred by or asserted against any indemnitee arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any agreement or instrument contemplated hereby or any claim, litigation, investigation or proceeding relating to any of the foregoing or to the Collateral, regardless of whether any indemnitee is a party thereto or whether initiated by a third party or by a Loan Party or any Affiliate thereof; provided, however, that such indemnity shall not, as to any indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such indemnitee. To the extent permitted by applicable law, no Grantor shall assert, and each Grantor hereby waives any claim against any indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of proceeds thereof.

 

(c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.06 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 7.06 shall be payable on written demand therefor and shall bear interest, on and from the date of demand, at the rate specified in Section 2.06(a) of the Credit Agreement.

 

SECTION 7.07. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby appoints the Collateral Agent as the attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with

 

31



 

full power of substitution either in the Collateral Agent’s name or in the name of such Grantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof, (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral, (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral, (d) to send verifications of Accounts Receivable to any Account Debtor, (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral, (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral, (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent, and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement in accordance with its terms, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence, wilful misconduct or bad faith. Notwithstanding anything to the contrary in this Section 7.07, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for herein unless an Event of Default shall have occurred and be continuing.

 

SECTION 7.08.   App licable Law.    THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 7.09. Waivers; Amendment. (a) No failure or delay by the Collateral Agent, the Administrative Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver hereof or thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent, the Administrative Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 7.09, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  Without limiting the

 

32



 

generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Collateral Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.

 

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement.

 

SECTION 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

 

SECTION 7.11. Severability . In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 7.12. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 7.04. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

SECTION 7.13. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this

 

33



 

Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

 

SECTION 7.14. Jurisdiction; Consent to Service of Process.   (a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America, sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each party hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Collateral Agent, the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Grantor or its properties in the courts of any jurisdiction.

 

(b)  Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (a) of this Section 7.14. Each party hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(c)  Each party hereto hereby irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement or any other Loan Document will affect the right of the Collateral Agent to serve process in any other manner permitted by law.

 

SECTION 7.15. Termination or Release. (a) This Agreement, the guarantees made herein, the Security Interest, the pledge of the Pledged Collateral and all other security interests granted hereby shall terminate when all the Loan Document Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the aggregate L/C Exposure has been reduced to zero (or cash collateralized on terms reasonably acceptable to the Administrative Agent and the Issuing Bank) and the Issuing Banks have no further obligations to issue Letters of Credit under the Credit Agreement.

 

(b) A Subsidiary Guarantor shall automatically be released from its obligations hereunder and the Security Interests created hereunder in the Collateral of such Subsidiary Guarantor shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Subsidiary Guarantor ceases to be a Subsidiary.

 

34



 

(c) Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Credit Agreement to any person that is not the Borrower or a Guarantor, or, upon the effectiveness of any written consent to the release of the Security Interest granted hereby in any Collateral pursuant to Section 9.08 of the Credit Agreement, the Security Interest in such Collateral shall be automatically released.

 

(d) In connection with any termination or release pursuant to paragraph (a), (b) or (c) above, the Collateral Agent shall promptly execute and deliver to any Grantor, at such Grantor’s expense, all Uniform Commercial Code termination statements and similar documents that such Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 7.15 shall be without recourse to or representation or warranty by the Collateral Agent or any Secured Party. Without limiting the provisions of Section 7.06, the Borrower shall reimburse the Collateral Agent upon demand for all costs and out of pocket expenses, including the fees, charges and expenses of counsel, incurred by it in connection with any action contemplated by this Section 7.15.

 

SECTION 7.16. Additional Subsidiaries. Any Subsidiary that is required to become a party hereto pursuant to Section 5.11 of the Credit Agreement shall enter into this Agreement as a Subsidiary Guarantor and a Grantor upon becoming such a Subsidiary. Upon execution and delivery by the Collateral Agent and such Subsidiary of a supplement in the form of Exhibit A hereto, such Subsidiary shall become a Subsidiary Guarantor and a Grantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor and a Grantor herein The execution and delivery of any such instrument shall not require the consent of any other Loan Party hereunder. The rights and obligations of each Loan Party hereunder shall remain in full force and effect notwithstanding the addition of any new Loan Party as a party to this Agreement.

 

SECTION 7.17. Right of Setoff . If an Event of Default shall have occurred and is continuing, each Secured Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all Collateral (including any deposits (general or special, time or demand, provisional or final)) at any time held and other obligations at any time owing by such Secured Party to or for the credit or the account of any Grantor against any and all of the obligations of such Grantor now or hereafter existing under this Agreement and the other Loan Documents held by such Secured Party, irrespective of whether or not such Secured Party shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured.  The rights of each Secured Party under this Section 7.17 are in addition to other rights and remedies (including other rights of setoff) which such Secured Party may have.

 

[Remainder of page intentionally left blank]

 

35



 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

 

STR ACQUISITION, INC.,

 

 

 

 

 

by

 

 

 

 

/s/ Jason Metakis

 

 

 

Name:

Jason Metakis

 

 

 

Title:

Treasurer

 

 

 

 

 

STR HOLDINGS LLC,

 

 

 

 

 

 

by

 

 

 

 

/s/ Jason Metakis

 

 

 

Name:

Jason Metakis

 

 

 

Title:

Treasurer

 

 

 

 

 

SPECIALIZED TECHNOLOGY
RESOURCES, INC.,

 

 

 

 

by

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:

Barry A. Morris

 

 

 

Title:

Secretary

 

 

 

 

 

CAL SAFETY COMPLIANCE
CORPORATION,

 

 

 

 

 

 

by

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:

Barry A. Morris

 

 

 

Title:

Assistant Secretary

 

[First Lien Guarantee and Collateral Agreement]

 



 

 

SPECIALIZED TECHNOLOGY
RESOURCES (INTERNATIONAL), INC.,

 

 

 

 

 

 

by

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:

Barry A. Morris

 

 

 

Title:

Secretary

 

 

 

 

 

SHUSTER LABORATORIES, INC.,

 

 

 

 

by

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:

Barry A. Morris

 

 

 

Title:

Secretary

 

 

 

 

 

SUPPLY CHAIN CONSULTING
SERVICES CORPORATION,

 

 

 

 

 

 

by

 

 

 

 

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

SPECIALIZED TECHNOLOGY
RESOURCES (FLORIDA), INC.,

 

 

 

 

by

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:

Barry A. Morris

 

 

 

Title:

Secretary

 

 

 

 

 

 

STR MATERIALS SCIENCE, INC.,

 

 

 

 

 

 

by

 

 

 

 

/s/ Barry A. Morris

 

 

 

Name:

Barry A. Morris

 

 

 

Title :

Secretary

 

[First Lien Guarantee and Collateral Agreement]

 



 

 

SUPPLY CHAIN CONSULTING
SERVICES CORPORATION

 

 

 

 

 

 

by

 

 

 

 

/s/ Thomas D. Vitro

 

 

 

Name: Thomas D. Vitro

 

 

 

Title : Assistant Secretary

 

[First Lien Guarantee and Collateral Agreement]

 



 

 

CREDIT SUISSE, CAYMAN ISLANDS
BRANCH, as Collateral Agent,

 

 

 

 

 

 

by

 

 

 

 

/s/ Rianka Mohan

 

 

 

Name:

RIANKA MOHAN

 

 

 

Title :

VICE PRESIDENT

 

 

 

 

 

 

by

 

 

 

 

/s/ James Neira

 

 

 

Name:  JAMES NEIRA

 

 

 

Title :   ASSOCIATE

 

[First Lien Guarantee and Collateral Agreement]

 




Exhibit 10.11

 

SUPPLEMENT NO. 1 (this “ Supplement ”) dated as of November 5, 2009 to the First Lien Guarantee and Collateral Agreement dated as of June 15, 2007 (the “ Guarantee and Collateral Agreement ”), among SPECIALIZED TECHNOLOGY RESOURCES, INC. (successor by merger to STR Acquisition, Inc.), a Delaware corporation (the “ Borrower ”), STR HOLDINGS LLC, a Delaware limited liability company (“ Existing Holdings ”), each Subsidiary of the Borrower from time to time party thereto (each such Subsidiary individually a “ Subsidiary Guarantor ” and collectively, the “ Subsidiary Guarantors ”; the Subsidiary Guarantors, the Borrower and Holdings are referred to collectively herein as the “ Grantors ”) and CREDIT SUISSE (together with its affiliates, “ Credit Suisse ”), as collateral agent (in such capacity, the “ Collateral Agent ”) for the Secured Parties (as defined therein).

 

A.  Reference is made to the First Lien Credit Agreement dated as of June 15, 2007 as amended on October 5, 2009, (and amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrower, Existing Holdings, the lenders from time to time party thereto (the “ Lenders ”) and Credit Suisse, as administrative agent for the Lenders and as Collateral Agent.

 

B.  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement or the Guarantee and Collateral Agreement referred to therein, as applicable.

 

C.  The Grantors have entered into the Guarantee and Collateral Agreement in order to induce the Lenders to make Loans and the Issuing Banks to issue Letters of Credit.  The undersigned STR Holdings (New) LLC, a Delaware limited liability company (“ New LLC ” and, together with STR Holdings, Inc., a Delaware corporation, the corporate successor of New LLC by way of a conversion to be consummated on or around the date hereof, “ New Holdings ”) is executing this Supplement to confirm that it is becoming a Guarantor and a Grantor under the Guarantee and Collateral Agreement as successor in interest to Existing Holdings.

 

D.  Existing Holdings and New Holdings have executed and delivered to the Collateral Agent the Assignment and Assumption Agreement dated as of November 5, 2009 (the “ Assignment and Assumption Agreement ”), attached hereto as Exhibit A , pursuant to which Existing Holdings assigned to New Holdings and New Holdings assumed from Existing Holdings any and all Obligations of Existing Holdings arising under the Loan Documents.

 

Accordingly, the Collateral Agent and New Holdings agree as follows:

 

SECTION 1.  New Holdings as successor in interest to Existing Holdings is, and by its signature below confirms that it is and shall continue to be, a Grantor and Guarantor under the Guarantee and Collateral Agreement with the same force and effect

 



 

as if originally named therein as a Grantor and Guarantor and New Holdings hereby (a) agrees to all the terms and provisions of the Guarantee and Collateral Agreement applicable to it as a Grantor and Guarantor thereunder, (b) represents and warrants that the representations and warranties made by it as a Grantor and Guarantor thereunder are true and correct on and as of the date hereof, and (c) represents and warrants that attached hereto as Exhibit A is a true and complete copy of the Assignment and Assumption Agreement, currently in full force and effect, which continues to be legally valid, binding and enforceable against any and all parties thereto in accordance with its terms, and as of the date hereof, has not been altered, amended, supplemented or revised in any manner.  In furtherance of the foregoing, New Holdings, as security for the payment and performance in full of the Obligations (as defined in the Guarantee and Collateral Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of New Holdings’s right, title and interest in and to the Collateral (as defined in the Guarantee and Collateral Agreement) of New Holdings.  Each reference to a “Grantor” or “Guarantor” in the Guarantee and Collateral Agreement shall be deemed to include New Holdings.  The Guarantee and Collateral Agreement is hereby incorporated herein by reference.

 

SECTION 2.  New Holdings represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

 

SECTION 3.  This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of New Holdings and the Collateral Agent.  Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

 

SECTION 4.  New Holdings hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of (i) any and all Equity Interests and Pledged Debt Securities now owned by New Holdings and (ii) any and all Intellectual Property now owned by New Holdings and (b) set forth under its signature hereto, is the true and correct legal name of New Holdings and its jurisdiction of organization.

 

SECTION 5.  New Holdings shall be deemed to be a successor in interest to Existing Holdings and all references in the Guarantee and Collateral Agreement to “Holdings” shall be deemed to be references to New Holdings and Existing Holdings.

 

SECTION 6.  Except as expressly supplemented hereby, the Guarantee and Collateral Agreement shall remain in full force and effect.

 

A-2



 

SECTION 7.  THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 8.  In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 9.  All communications and notices hereunder shall (except as otherwise expressly permitted by the Guarantee and Collateral Agreement) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to New Holdings shall be given to it in care of the Borrower as provided in Section 9.01 of the Credit Agreement.

 

SECTION 10.  New Holdings agrees to reimburse the Collateral Agent for its out-of-pocket expenses in connection with this Supplement, including the fees, other charges and disbursements of counsel for the Collateral Agent.

 

A-3



 

IN WITNESS WHEREOF, New Holdings and the Collateral Agent have duly executed this Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.

 

 

 

STR HOLDINGS (NEW) LLC,

 

 

 

by

 

 

 

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Executive Vice President and Chief Financial Officer

 

 

Address:

 

 

Legal Name:

 

 

Jurisdiction of Formation:

 

 

 

 

 

CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Collateral Agent,

 

 

 

 

by

 

 

 

/s/ Rianka Mohan

 

 

Name: Rianka Mohan

 

 

Title: Vice President

 

 

 

 

by

 

 

 

/s/ Vipul Dhadda

 

 

Name: Vipul Dhadda

 

 

Title: Associate

 

A-4



 

Collateral of New Holdings

 

EQUITY INTERESTS

 

Issuer

 

Number of
Certificate

 

Registered
Owner

 

Number and
Class of
Equity Interest

 

Percentage
of Equity
Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PLEDGED DEBT SECURITIES

 

Issuer

 

Principal
Amount

 

Date of Note

 

Maturity Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTELLECTUAL PROPERTY

 




Exhibit 10.12

 

EXECUTION COPY

 

 

SECOND LIEN CREDIT AGREEMENT

 

dated as of

 

June 15, 2007

 

among

 

STR ACQUISITION, INC.,
(to be merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC.)

 

STR HOLDINGS LLC,

 

THE LENDERS PARTY HERETO,

 

CREDIT SUISSE,
as Administrative Agent and Collateral Agent

 


 

CREDIT SUISSE SECURITIES (USA) LLC

 

as Sole Bookrunner and Sole Lead Arranger

 

[CS&M Ref. No. 5865-531]

 



 

Table of Contents

 

 

 

Page

 

 

 

ARTICLE I

 

 

 

Definitions

SECTION 1.01.

Defined Terms

1

SECTION 1.02.

Terms Generally

22

SECTION 1.03.

Pro Forma Calculations

23

SECTION 1.04.

Classification of Loans and Borrowings

23

 

 

 

ARTICLE II

 

 

 

The Credits

 

SECTION 2.01.

Commitments

23

SECTION 2.02.

Loans

23

SECTION 2.03.

Borrowing Procedure

24

SECTION 2.04.

Evidence of Debt; Repayment of Loans

25

SECTION 2.05.

Fees

26

SECTION 2.06.

Interest on Loans

26

SECTION 2.07.

Default Interest

27

SECTION 2.08.

Alternate Rate of Interest

27

SECTION 2.09.

Termination and Reduction of Commitments

27

SECTION 2.10.

Conversion and Continuation of Borrowings

27

SECTION 2.11.

Optional Prepayment

29

SECTION 2.12.

Mandatory Prepayments

30

SECTION 2.13.

Reserve Requirements; Change in Circumstances

31

SECTION 2.14.

Change in Legality

32

SECTION 2.15.

Indemnity

33

SECTION 2.16.

Pro Rata Treatment

33

SECTION 2.17.

Sharing of Setoffs

34

SECTION 2.18.

Payments

34

SECTION 2.19.

Taxes

35

SECTION 2.20.

Assignment of Commitments Under Certain Circumstances; Duty to Mitigate

37

 

 

 

ARTICLE III

 

 

 

Representations and Warranties

 

 

SECTION 3.01.

Organization; Powers

38

SECTION 3.02.

Authorization

39

SECTION 3.03.

Enforceability

39

 



 

 

 

Page

 

 

 

SECTION 3.04.

Governmental Approvals

39

SECTION 3.05.

Financial Statements

39

SECTION 3.06.

No Material Adverse Change

40

SECTION 3.07.

Title to Properties; Possession Under Leases

40

SECTION 3.08.

Subsidiaries

41

SECTION 3.09.

Litigation; Compliance with Laws

41

SECTION 3.10.

Agreements

41

SECTION 3.11.

Federal Reserve Regulations

41

SECTION 3.12.

Investment Company Act

42

SECTION 3.13.

Use of Proceeds

42

SECTION 3.14.

Tax Returns

42

SECTION 3.15.

No Material Misstatements

42

SECTION 3.16.

Employee Benefit Plans

42

SECTION 3.17.

Environmental Matters

43

SECTION 3.18.

Insurance

43

SECTION 3.19.

Security Documents

44

SECTION 3.20.

Location of Real Property and Leased Premises

45

SECTION 3.21.

Labor Matters

45

SECTION 3.22.

Solvency

45

SECTION 3.23.

Transaction Documents

45

SECTION 3.24.

Sanctioned Persons

45

 

 

 

ARTICLE IV

 

 

 

Conditions of Lending

 

 

 

ARTICLE V

 

 

 

Affirmative Covenants

 

 

 

SECTION 5.01.

Existence; Compliance with Laws; Businesses and Properties

49

SECTION 5.02.

Insurance

49

SECTION 5.03.

Obligations and Taxes

51

SECTION 5.04.

Financial Statements, Reports, etc.

51

SECTION 5.05.

Litigation and Other Notices

53

SECTION 5.06.

Information Regarding Collateral

53

SECTION 5.07.

Maintaining Records; Access to Properties and Inspections; Maintenance of Ratings

54

SECTION 5.08.

Use of Proceeds

55

SECTION 5.09.

Employee Benefits

55

SECTION 5.10.

Compliance with Environmental Laws

55

SECTION 5.11.

Further Assurances

55

SECTION 5.12.

Interest Rate Protection

56

 



 

 

 

Page

 

 

 

SECTION 5.13.

Post-Closing Items

56

SECTION 5.14.

Funds Update

56

SECTION 5.15.

Purchase Price Adjustments

56

 

 

 

ARTICLE VI

 

 

 

Negative Covenants

 

 

 

SECTION 6.01.

Indebtedness

57

SECTION 6.02.

Liens

58

SECTION 6.03.

Sale/LeaseBack Transactions

59

SECTION 6.04.

Investments, Loans and Advances

60

SECTION 6.05.

Mergers, Consolidations, Sales of Assets and Acquisitions

62

SECTION 6.06.

Restricted Payments; Restrictive Agreements

62

SECTION 6.07.

Transactions with Affiliates

64

SECTION 6.08.

Business of Holdings, Borrower and Subsidiaries

64

SECTION 6.09.

Other Indebtedness and Agreements

64

SECTION 6.10.

Capital Expenditures

65

SECTION 6.11.

Maximum Total Leverage Ratio

65

SECTION 6.12.

Fiscal Year

66

SECTION 6.13.

Certain Equity Securities

66

 

 

 

ARTICLE VII

 

Events of Default

 

ARTICLE VIII

 

The Administrative Agent and the Collateral Agent

 

ARTICLE IX

 

Miscellaneous

 

SECTION 9.01.

Notices

73

SECTION 9.02.

Survival of Agreement

73

SECTION 9.03.

Binding Effect

74

SECTION 9.04.

Successors and Assigns

74

SECTION 9.05.

Expenses; Indemnity

77

SECTION 9.06.

Right of Setoff

79

SECTION 9.07.

Applicable Law

79

SECTION 9.08.

Waivers; Amendment

79

 



 

 

 

Page

 

 

 

SECTION 9.09.

Interest Rate Limitation

80

SECTION 9.10.

Entire Agreement

81

SECTION 9.11.

WAIVER OF JURY TRIAL

81

SECTION 9.12.

Severability

81

SECTION 9.13.

Counterparts

81

SECTION 9.14.

Headings

81

SECTION 9.15.

Jurisdiction; Consent to Service of Process

82

SECTION 9.16.

Confidentiality

82

SECTION 9.17.

USA PATRIOT Act Notice

83

SECTION 9.18.

Intercreditor Agreement

83

 



 

 

 

 

Page

 

 

 

 

SCHEDULES

 

 

 

 

 

 

 

Schedule 1.01(a)

-

Subsidiary Guarantors

 

Schedule 1.01(b)

-

Mortgaged Property

 

Schedule 2.01

-

Lenders and Commitments

 

Schedule 3.08

-

Subsidiaries

 

Schedule 3.09

-

Litigation

 

Schedule 3.17

-

Environmental Matters

 

Schedule 3.18

-

Insurance

 

Schedule 3.19(a)

-

UCC Filing Offices

 

Schedule 3.19(c)

-

Mortgage Filing Offices

 

Schedule 3.20(a)

-

Owned Real Property

 

Schedule 3.20(b)

-

Leased Real Property

 

Schedule 6.01

-

Existing Indebtedness

 

Schedule 6.02

-

Existing Liens

 

 

 

 

 

 

 

 

 

EXHIBITS

 

 

 

 

 

Exhibit A

-

Form of Administrative Questionnaire

 

Exhibit B

-

Form of Assignment and Acceptance

 

Exhibit C

-

Form of Borrowing Request

 

Exhibit D

-

Form of Guarantee and Collateral Agreement

 

Exhibit E

-

Form of Mortgage

 

Exhibit F-1

-

Form of Opinion of Weil, Gotshal & Manges LLP

 

Exhibit F-2

-

Form of Opinion of Murtha Cullina LLP

 

Exhibit G

-

Form of Interest Election Request

 

 



 

SECOND LIEN CREDIT AGREEMENT dated as of June 15, 2007, among STR ACQUISITION, INC., a Delaware corporation, which substantially simultaneously with the execution hereof shall be merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (the Borrower ) , STR HOLDINGS LLC, a Delaware limited liability company ( Holdings ), the Lenders (as defined in Article I), and CREDIT SUISSE, as administrative agent (in such capacity, the Administrative Agent ) and as collateral agent (in such capacity, the Collateral Agent ) for the Lenders.

 

The Borrower has requested the Lenders to make Loans (such term and each other capitalized term used but not defined in this introductory statement having the meaning given it in Article I) on the Closing Date, in an aggregate principal amount not in excess of $75,000,000. The proceeds of the Loans are to be used together with the proceeds of the First Lien Loans and cash to be contributed by Holdings solely (a) to pay consideration, fees and expenses related hereto and to the Acquisition and (b) to refinance the Existing Debt.

 

The Lenders are willing to extend such credit to the Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:

 

ARTICLE I

 

Definitions

 

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:

 

ABR , when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

 

Acqu isition shall mean the acquisition by Holdings of the Company and its subsidiaries pursuant to the Merger Agreement, pursuant to which on the Closing Date the Borrower will merge with and into the Company with the Company surviving as a wholly owned direct subsidiary of Holdings.

 

Adjusted LIBO Rate shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.

 

Administrative Agent Fees shall have the meaning assigned to such term in Section 2.05(a).

 



 

Administrative Questionnaire shall mean an Administrative Questionnaire in the form of Exhibit A, or such other form as may be supplied from time to time by the Administrative Agent.

 

Advisory Services and Monitoring Agreements shall mean (i) the Advisory Services and Monitoring Agreement dated as of the Closing Date, between the Borrower and Evergreen Capital Partners, LLC and (ii) the Monitoring Agreement dated as of the Closing Date, among the Borrower, DLJ Merchant Banking, Inc., Westwind STR Advisors, LLC and Dennis L Jilot.

 

Affili ate shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified; provided, however, that, (i) for purposes of Section 6.07, the term “Affiliate” shall also include any person that directly or indirectly owns 5% or more of any class of Equity Interests of the person specified or that is an officer or director of the person specified and (ii) Credit Suisse and its Affiliates (other than Permitted Investors, Parent and Parent’s subsidiaries) shall be deemed not to be Affiliates of Parent or any of its subsidiaries.

 

Alternate Base Rate shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, as the case may be.

 

Applic ab le Percentage shall mean, for any day (a) with respect to any Eurodollar Loan, 7.00% per annum, and (b) with respect to any ABR Loan, 6.00% per annum.

 

“Arranger shall mean Credit Suisse Securities (USA) LLC.

 

“Asset Sale shall mean the sale, transfer or other disposition (by way of merger, casualty, condemnation or otherwise) by the Borrower or any of the Subsidiaries to any person other than the Borrower or any Subsidiary Guarantor of (a) any Equity Interests of any of the Subsidiaries (other than directors’ qualifying shares) or (b) any other assets of the Borrower or any of the Subsidiaries (other than (i) inventory, damaged, obsolete or worn out assets, scrap and Permitted Investments, in each case disposed of in the ordinary course of business, (ii) dispositions between or among Foreign Subsidiaries and (iii) any sale, transfer or other disposition or series of related sales, transfers or other dispositions having a value not in excess of $500,000).

 

2



 

Assignment and Acceptance shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit B or such other form as shall be approved by the Administrative Agent.

 

Attributable Debt in respect of a Sale/Leaseback Transaction means, as of the time of determination, the present value (discounted at the interest rate borne by the Loans, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended); provided, however, that if such Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of “Capital Lease Obligations”.

 

Baseline EBITDA shall mean (i) for the fiscal year ended December 31, 2007, $42,000,000, (ii) for the fiscal year ended December 31, 2008, $45,000,000, (iii) for the fiscal year ended December 31, 2009, $50,000,000, (iv) for the fiscal year ended December 31, 2010, $55,000,000, (v) for the fiscal year ended December 31, 2011, $60,000,000, (vi) for the fiscal year ended December 31, 2012, $65,000,000, and (vii) for the fiscal year ended December 31, 2013, $70,000,000.

 

Board shall mean the Board of Governors of the Federal Reserve System of the United States of America.

 

Borrowing shall mean Loans of the same Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

 

Borrowing Request shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C or such other form as shall be approved by the Administrative Agent.

 

Business Day shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; provided, however , that when used in connection with a Eurodollar Loan, the term Business Day shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

 

Capital Expenditures shall mean, for any period, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and its consolidated Subsidiaries that are (or should be) set forth in a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP and (b) Capital Lease Obligations or Synthetic Lease Obligations incurred by the Borrower and its consolidated Subsidiaries during such period, but excluding in each case any such expenditure made to restore, replace or rebuild property to the condition of such property immediately prior to any damage, loss, destruction or condemnation of such property, to the extent such expenditure is made with insurance proceeds, condemnation awards or damage recovery proceeds relating to any such damage, loss, destruction or condemnation.

 

3



 

Capital Lease Obligations of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

 

Cash Interest shall have the meaning assigned to such term in Section 2.06.

 

A. Change in Control shall be deemed to have occurred if (a) prior to a Qualified Public Offering, the Permitted Investors shall fail to own, directly or indirectly, beneficially and of record, shares representing at least 51% of each of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings, (b) after a Qualified Public Offering, any “person” or “group” (within the meaning of Rule l3d-5 of the Securities Exchange Act of 1934 as in effect on the date hereof), other than the Permitted Investors, shall own, directly or indirectly, beneficially or of record, shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of Holdings, (c) a majority of the seats (other than vacant seats) on the board of directors of Holdings shall at any time be occupied by persons who were neither (i) nominated by the board of directors of Holdings nor (ii) appointed by directors so nominated, (d) any change in control (or similar event, however denominated) with respect to Holdings, the Borrower or any Subsidiary shall occur under and as defined in any indenture or agreement in respect of Material Indebtedness to which Holdings, the Borrower or any Subsidiary is a party, or (e) Holdings shall cease to directly own, beneficially and of record, 100% of the issued and outstanding Equity Interests of the Borrower.

 

Change in Law shall mean (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.13, by any lending office of such Lender or by such Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

 

Closing Date shall mean June 15, 2007.

 

Code shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

Collateral shall mean all the “Collateral” as defined in any Security Document and shall also include the Mortgaged Properties.

 

Commitment shall mean, with respect to any Lender, the commitment of such Lender to make Loans hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced

 

4


 

or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04.

 

Company shall mean Specialized Technology Resources, Inc., a Delaware corporation.

 

Confidential Information Memorandum shall mean the Confidential Information Memorandum of the Borrower dated May, 2007.

 

Consolidated EBITDA shall mean, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period and any commitment, agency, letter of credit or similar fees paid during such period with respect to Indebtedness permitted pursuant to Section 6.01 and other bank service fees, (ii) consolidated income tax expense for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) any non-cash charges (other than the write-down of current assets) for such period, (v) fees and expenses accrued during such period with respect to the Transactions and to the extent not consummated, any acquisition, disposition, equity issuance, investment or incurrence of Indebtedness that would have been permitted under this Agreement, (vi) charges in respect of management, monitoring, consulting and advising fees payable to the Sponsor pursuant to the Advisory Services and Monitoring Agreements as in effect as of the Closing Date in respect of such period, (vii) one-time costs, payments and expenses (including severance costs) incurred during such period in respect of the termination of employment of employees, officers and management of the Borrower or any Subsidiary outside the ordinary course of business, (viii) all cash payments received during such period on account of non-cash income deducted from Consolidated Net Income pursuant to clause (b)(ii) below in a previous period, (ix) consulting, legal, accounting, integration, brokerage and variable commission fees, costs and expenses incurred in connection with any Permitted Acquisition, (x) consulting fees incurred in connection with a one-time strategic review of the Borrower in an aggregate amount not to exceed $1,000,000, (xi) net after-tax extraordinary losses or charges, including any such losses or charges relating to relocation costs, one-time compensation charges and the Transactions, (xii) non-recurring or unusual cash charges for such period in an aggregate amount not to exceed $1,000,000 in any fiscal year, (xiii) non-cash compensation charges, (xiv) foreign currency transaction and translation losses, and (xv) any net after-tax gains or losses (less fees, expenses or charges related thereto) attributable to the early extinguishment of Indebtedness pursuant to the agreement governing such Indebtedness, and minus (b) without duplication (i) all cash payments made during such period on account of reserves, restructuring charges and other non-cash charges added to Consolidated Net Income pursuant to clause (a)(iv) above in a previous period, (ii) foreign currency transaction and translation gains, and (iii) to the extent included in determining such Consolidated Net Income, any unusual and extraordinary gains and all non-cash items of income for such period, all determined on a consolidated basis in accordance with GAAP. For purposes of determining the Total Leverage Ratio as of or for the periods ended on September 30, 2007 and December 31, 2007, Consolidated EBITDA will be

 

5



 

deemed to be equal to (i) for the fiscal quarter ended December 31, 2006, $12,013,000, and (ii) for the fiscal quarter ended March 31, 2007, $7,273,000.

 

Consolidated Interest Expense shall mean, for any period, the cash interest expense (including imputed interest expense in respect of Capital Lease Obligations and Synthetic Lease Obligations) of the Borrower and the Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. For purposes of the foregoing, interest expense shall be determined after giving effect to any net payments made or received by the Borrower or any Subsidiary with respect to interest rate Hedging Agreements.

 

Consolidated Net Income shall mean, for any period, the net income or loss of the Borrower and the Subsidiaries for such period determined on a consolidated basis in accordance with GAAP (adjusted to reflect any charge, tax or expense incurred or accrued by Holdings during such period as though such charge, tax or expense had been incurred by the Borrower, to the extent that the Borrower has made or would be entitled under the Loan Documents to make any payment to or for the account of Holdings in respect thereof); provided that there shall be excluded (a) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by the Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or governmental regulation applicable to such Subsidiary, (b) the income or loss of any person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary or the date that such person’s assets are acquired by the Borrower or any Subsidiary, (c) the income of any person in which any other person (other than the Borrower or a wholly owned Subsidiary or any director holding qualifying shares in accordance with applicable law) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or a wholly owned Subsidiary by such person during such period, and (d) any gains or losses attributable to sales of assets (including pursuant to a Sale/Leaseback Transaction) out of the ordinary course of business.

 

Control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms Controlling and Controlled shall have meanings correlative thereto.

 

Credit Facility shall mean the term loan facility provided for by this Agreement.

 

Cure Amount shall have the meaning assigned to such term in Article VII.

 

Cure Right shall have the meaning assigned to such term in Article VII.

 

Current Assets shall mean, at any time, the consolidated current assets (other than cash and Permitted Investments) of the Borrower and the Subsidiaries.

 

6



 

Current Liabilities shall mean, at any time, the consolidated current liabilities of the Borrower and the Subsidiaries at such time, but excluding, without duplication, (a) the current portion of any long-term Indebtedness and (b) outstanding Revolving Loans and Swingline Loans under the First Lien Credit Agreement (each as defined therein).

 

Default shall mean any event or condition that upon notice, lapse of time or both would constitute an Event of Default.

 

Discharge of First Lien Obligations shall have the meaning assigned to such term in the Intercreditor Agreement.

 

Disqualified Stock shall mean any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, or requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in each case at any time on or prior to the 91st day following the Maturity Date, or (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interest referred to in clause (a) above, in each case at any time prior to the 91st day following the Maturity Date.

 

dollars or $ shall mean lawful money of the United States of America.

 

Domestic Subsidiaries shall mean all Subsidiaries incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia.

 

Eligible Assignee shall mean any commercial bank, insurance company, investment or mutual fund or other entity (but not any natural person) that is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as amended) that extends credit or invests in bank loans as one of its businesses; provided that neither the Borrower nor any of its Affiliates shall be an Eligible Assignee.

 

EMU shall mean the economic and monetary union as contemplated in the Treaty on European Union.

 

En vironmental Laws shall mean all applicable Federal, state, local and foreign laws (including common law), treaties, regulations, rules, ordinances, codes, decrees, judgments, directives and orders (including consent orders), in each case, relating to pollution or protection of the environment, natural resources, human health and safety as related to exposure to Hazardous Materials, or the generation, use, treatment, storage, transport or handling of, or the arrangement for such activities with respect to, Hazardous Materials.

 

En vironmental Liability shall mean all liabilities, obligations, damages, losses, claims, actions, suits, judgments, orders, fines, penalties, fees, expenses and costs

 

7



 

(including administrative oversight costs, natural resource damages and remediation costs), whether contingent or otherwise, arising out of or relating to (a) requirements of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

Equity Contribution shall mean the contribution by DLJ Merchant Banking Partners IV, L.P., its affiliated funds, certain existing investors in the Company and certain other investors reasonably acceptable to the Arranger of not less than 30.0% of the pro forma consolidated capitalization of Holdings after giving effect to the Transactions on the Closing Date in cash to Holdings as cash common equity and/or preferred equity that does not provide for any cash dividends, redemption or other cash payment at any time prior to 91 days after repayment in full in cash of the Credit Facility.

 

Equity Interests shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any person, and any option, warrant or other right entitling the holder thereof to purchase or otherwise acquire any such equity interest.

 

ERISA shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

 

ERISA Affiliate shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

 

ERISA Event shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived), (b) prior to the effectiveness of the applicable provisions of the Pension Act, the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA) or, on and after the effectiveness of the applicable provisions of the Pension Act, any failure by any Plan to satisfy the minimum funding standard (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Plan, in each case whether or not waived, (c) the filing pursuant to, prior to the effectiveness of the applicable provisions of the Pension Act, Section 412(d) of the Code or Section 303(d) of ERISA or, on and after the effectiveness of the applicable provisions of the Pension Act, Section 412(c) of the Code or Section 302(c) of ERISA, of an application for a waiver of the minimum funding standard with respect to any Plan, (d) on and after the effectiveness of the applicable provisions of the Pension Act, a determination that any Plan is, or is expected to be, in “at-risk” status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code), (e) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the

 

8



 

Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan, (f) the receipt by the Borrower or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, (g) prior to the effectiveness of the applicable provisions of the Pension Act, the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, (h) the receipt by the Borrower or any of its ERISA Affiliates of any notice, or the receipt by any Multiemployer Plan from the Borrower or any of its ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA or, on and after the effectiveness of the applicable provisions of the Pension Act, in endangered or critical status, within the meaning of Section 305 of ERISA, (i) any Foreign Benefit Event or (j) any other event (other than the initial adoption or assumption of a Plan) or condition with respect to a Plan or Multiemployer Plan that could result in liability of the Borrower or any Subsidiary.

 

Eurodollar , when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

 

Event of Default shall have the meaning assigned to such term in Article VII.

 

Excess Cash Flow” shall mean, for any fiscal year of the Borrower (or, in the case of the fiscal year ended December 31, 2007 (except for purposes of determining changes in noncash working capital), the portion thereof commencing on the Closing Date and ending on December 31, 2007), the excess of (a) the sum, without duplication, of (i) Consolidated EBITDA for such fiscal year and (ii) reductions to noncash working capital of the Borrower and the Subsidiaries for such fiscal year (i.e., the decrease, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year) over (b) the sum, without duplication, of (i) the amount of any Taxes payable in cash by the Borrower and the Subsidiaries or, amounts payable pursuant to Sections 6.06(a)(iii)(y) or (iv) if applicable, with respect to such fiscal year, (ii) Consolidated Interest Expense for such fiscal year, (iii) Capital Expenditures made in cash in accordance with Section 6.10 during such fiscal year, except to the extent financed with the proceeds of Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or other proceeds that would not be included in Consolidated EBITDA, (iv) permanent repayments of Indebtedness (other than mandatory prepayments of Loans under Section 2.12) made in cash by the Borrower and the Subsidiaries during such fiscal year, but only to the extent that the Indebtedness so prepaid by its terms cannot be reborrowed or redrawn and such prepayments do not occur in connection with a refinancing of all or any portion of such Indebtedness and (v) additions to noncash working capital for such fiscal year ( i.e ., the increase, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year).

 

Excluded Taxes shall mean, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any

 

9



 

obligation of the Borrower hereunder, (a) income, franchise or other similar taxes imposed on (or measured by) its income by (i) the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located or (ii) by reason of a present or former connection between the recipient and the jurisdiction of the Borrower (other than such connection arising solely from such recipient having executed, delivered, or performed its obligations under, or enforced, this Agreement or any other Loan Documents), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above, (c) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 2.19(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.19(a), and (d) backup withholding taxes imposed on amounts payable to a recipient at the time such Lender becomes a party hereto (or designates a new lending office) or is attributable to such Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 2.19(e), except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such backup withholding tax pursuant to Section 2.19(a).

 

Existing Credit Agreement shall mean that certain Credit Agreement dated as of September 29, 2005 among the Company, Webster Bank, National Association, as Administrative Agent and L/C Issuer, Newstar Financial, Inc., as Syndication Agent, The Governor and Company of the Bank of Ireland and National City Bank, as Co-Documentation Agents and the Lenders party thereto, as amended.

 

Existing Debt shall mean the indebtedness of the Company under the Existing Credit Agreement.

 

Federal Funds Effective Rate shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

 

Fee Letter shall mean the Fee Letter dated April 21, 2007, among the Borrower, Holdings, the Arranger and the Administrative Agent.

 

Financial Officer of any person shall mean the chief financial officer, principal accounting officer, treasurer or controller of such person.

 

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First Lien Credit Agreement shall mean the First Lien Credit Agreement dated as of the date hereof, among the Borrower, Holdings, Credit Suisse, as administrative agent and as collateral agent, and the lenders from time to time party thereto.

 

First Lien Event of Default shall have the meaning assigned to such term in Article VII.

 

First Lien Guarantee and Collateral Agreement shall mean the First Lien Guarantee and Collateral Agreement dated as of the date hereof among the Borrower, Holdings, the Subsidiaries party thereto and Credit Suisse, as first lien collateral agent.

 

First Lien Loans shall mean the loans made under the First Lien Credit Agreement.

 

First Lien Loan Documents shall mean the First Lien Credit Agreement and all other instruments, agreements and other documents evidencing or governing the First Lien Loans or providing for any Guarantee or other right in respect thereof.

 

First Priority Liens shall have the meaning assigned to such term in the Intercreditor Agreement.

 

Foreign Benefit Event shall mean, with respect to any Foreign Pension Plan, (a) the existence of unfunded liabilities in excess of the amount permitted under any applicable law, or in excess of the amount that would be permitted absent a waiver from a Governmental Authority, (b) the failure to make the required contributions or payments, under any applicable law, on or before the due date for such contributions or payments, (c) the receipt of a notice by a Governmental Authority relating to the intention to terminate any such Foreign Pension Plan or to appoint a trustee or similar official to administer any such Foreign Pension Plan, or alleging the insolvency of any such Foreign Pension Plan or (d) the incurrence of any liability in excess of $5,000,000 by Holdings, the Borrower or any Subsidiary under applicable law on account of the complete or partial termination of such Foreign Pension Plan or the complete or partial withdrawal of any participating employer therein.

 

Foreign Lender shall mean any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

Foreign Pension Plan shall mean any benefit plan that covers employees of the Borrower or any Subsidiaries who are employed outside of the United States and that is subject to any statutory funding requirement permitting any Governmental Authority to accelerate the obligation of the Borrower or any Subsidiaries to fund all or a portion of the unfunded accrued benefit liabilities under such plan.

 

Foreign Subsidiary shall mean any Subsidiary that is not a Domestic Subsidiary.

 

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GAAP shall mean United States generally accepted accounting principles applied on a consistent basis.

 

Governmental Authority shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.

 

Granting Lender shall have the meaning assigned to such term in Section 9.04(i).

 

Guarantee of or by any person shall mean any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other person (the primary obligor ) in any manner, whether directly or indirectly, and including any obligation of such person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligation, (b) to purchase or lease properly, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment of such Indebtedness or other obligation or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation; provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.

 

Guarantee and Collateral Agreement shall mean the Second Lien Guarantee and Collateral Agreement, substantially in the form of Exhibit D, among the Borrower, Holdings, the Subsidiaries party thereto and the Collateral Agent for the benefit of the Secured Parties.

 

Guarantors shall mean Holdings and the Subsidiary Guarantors.

 

Hazar dous Materials shall mean (a) any petroleum products or byproducts and all other hydrocarbons, radon gas, asbestos, polychlorinated biphenyls, chlorofluorocarbons and all other ozone-depleting substances and (b) any chemical, material, substance or waste that is prohibited, limited or regulated by or pursuant to any Environmental Law.

 

Hedging Agreement shall mean any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

 

Inactive Subsidiary shall mean any Subsidiary that (a) does not conduct any business operations, (b) has assets with a book value not in excess of $250,000 and (c) does not have any Indebtedness outstanding.

 

Indebtedness of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or with respect to deposits or advances of any kind (excluding customer advances or deposits received in the ordinary course of business),

 

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(b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person upon which interest charges are customarily paid, (d) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all Capital Lease Obligations and Synthetic Lease Obligations of such person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such person, (i) all obligations of such person as an account party in respect of letters of credit and (j) all obligations of such person in respect of bankers’ acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner, to the extent such person is liable therefor as a result of such person’s ownership interest in, or other relationship with, such other person, except to the extent the terms of such Indebtedness expressly provide that such person is not liable therefor. Notwithstanding the foregoing, “Indebtedness” shall not include indemnification, adjustment of purchase price, earn out, contingent purchase obligations, hold back or other similar obligations, in each case, incurred or assumed in connection with an acquisition or disposition permitted hereunder of any business, assets or a Subsidiary, except to the extent not paid when due (unless the same are being contested in good faith). The amount of Indebtedness for which recourse is limited to either a specific amount or to identified assets shall be equal to the lesser of such specified amount or the fair market value of such asset, as the case may be.

 

Indemnified Taxes shall mean Taxes other than Excluded Taxes and Other Taxes.

 

Intercreditor Agreement shall mean that certain Intercreditor Agreement dated as of the date hereof, among the Borrower, the Subsidiaries party thereto, the Collateral Agent and First Lien Collateral Agent (as defined therein).

 

Interest Election shall have the meaning assigned to such term in Section 2.06.

 

Int e rest Election Request shall mean a notice of Interest Election in accordance with the terms of Section 2.06 and substantially in the form of Exhibit G.

 

Interest Payment Date shall mean (a)   with respect to any ABR Loan, the last Business Day of each March, June, September and December, commencing September 28, 2007 and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months’ duration been applicable to such Borrowing.

 

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Interest Period shall mean, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the Borrower may elect ( provided that for a Borrowing on the Closing Date, the Borrower may only elect a 1 month Interest Period); provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

 

Lenders shall mean (a) the persons listed on Schedule 2.01 (other than any such person that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any person that has become a party hereto pursuant to an Assignment and Acceptance.

 

LIBO Rate shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers’ Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the “LIBO Rate” shall be the interest rate per annum determined by the Administrative Agent to be the average of the rates per annum at which deposits in dollars are offered for such relevant Interest Period to major banks in the London interbank market in London, England by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such Interest Period.

 

Lien shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

Loan Documents shall mean this Agreement, the Security Documents and the promissory notes, if any, executed and delivered pursuant to Section 2.04(e).

 

Loan Parties shall mean the Borrower and the Guarantors.

 

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Loans shall mean the term loans made by the Lenders to the Borrower pursuant to Section 2.01.

 

Margin Stock shall have the meaning assigned to such term in Regulation U.

 

Material Adverse Effect shall mean (a) a materially adverse effect on the business, assets, liabilities, operations, financial condition or operating results of the Borrower and the Subsidiaries, taken as a whole or (b) a material impairment of the rights and remedies of or benefits available to the Lenders under any Loan Document.

 

Material Indebtedness shall mean Indebtedness (other than the Loans), or obligations in respect of one or more Hedging Agreements, of any one or more of Holdings, the Borrower or any Subsidiary in an aggregate principal amount exceeding $9,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of Holdings, the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Holdings, the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.

 

Material Subsidiary shall mean, at any time, any Subsidiary that at such time shall have assets in excess of $10,000,000 or shall have $10,000,000 in revenues in the most recently ended fiscal year.

 

Maturity Date shall mean December 15, 2014.

 

Merger Agreement shall mean the Agreement and Plan of Merger dated as of April 21, 2007, among the Borrower, the Company and Parent.

 

Moody’s shall mean Moody’s Investors Service, Inc., or any successor thereto.

 

Mortgage d Properties shall mean, initially, the owned real properties of the Loan Parties specified on Schedule 1.01(b), and shall include each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.11.

 

Mortgages shall mean the mortgages, deeds of trust, assignments of leases and rents, modifications and other security documents delivered pursuant to clause (i) of paragraph (j) of Article IV or pursuant to Section 5.11, each substantially in the form of Exhibit E.

 

Multie mp loyer Plan shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

 

Net Cash Proceeds shall mean (a) with respect to any Asset Sale, the cash proceeds (including cash proceeds subsequently received (as and when received) in respect of noncash consideration initially received), net of (i) selling expenses (including reasonable broker’s fees or commissions, legal fees, transfer and similar taxes and the Borrower’s good faith estimate of income taxes paid or payable in connection with such

 

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sale), (ii) amounts provided as a reserve, in accordance with GAAP, against any liabilities under any indemnification obligations or purchase price adjustment associated with such Asset Sale ( provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money that is secured by the asset sold in such Asset Sale and that is required to be repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such asset); provided, however, that, if (x) the Borrower shall deliver a certificate of a Financial Officer to the Administrative Agent at the time of receipt thereof setting forth the Borrower’s intent to reinvest such proceeds in productive assets of a kind then used or usable in the business of the Borrower and its Subsidiaries within 365 days of receipt of such proceeds and (y) no Default or Event of Default shall have occurred and shall be continuing at the time of such certificate or at the proposed time of the application of such proceeds, such proceeds shall not constitute Net Cash Proceeds except to the extent not so used at the end of such 365-day period, at which time such proceeds shall be deemed to be Net Cash Proceeds; and (b) with respect to any issuance or incurrence of Indebtedness or any Specified Equity Issuance, the cash proceeds thereof, net of all taxes and customary fees, commissions, costs and other expenses incurred in connection therewith.

 

Obligations shall mean all obligations defined as “Obligations” in the Guarantee and Collateral Agreement and the other Security Documents.

 

Other Taxes shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

 

Parent shall mean STR Holdings, Inc. and its successors and assigns.

 

PBGC shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.

 

Pension Act shall mean the Pension Protection Act of 2006, as amended from time to time.

 

Perfection Certificate shall mean the Perfection Certificate substantially in the form of Exhibit B to the Guarantee and Collateral Agreement.

 

Pe rmitted Acquisition shall have the meaning assigned to such term in Section 6.04(g).

 

Pe rmitte d Investments shall mean:

 

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

 

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(b) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, any participating member state of the EMU (or by any agency thereof to the extent such obligations are backed by the full faith and credit of such participating member state of the EMU), in each case with a rating equal to or higher than Baa3 by Moody’s and BBB- by S&P (or the equivalent rating and rating agency applicable for such member state) and maturing within one year from the date of acquisition thereof;

 

(c)  investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;

 

(d) investments in certificates of deposit, banker’s acceptances, time deposits and eurodollar time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof or any foreign commercial bank organized under the laws of a participating member state of the EMU that has a combined capital and surplus and undivided profits of not less than $500,000,000 in the case of U.S. banks (or the dollar equivalent as of the date of determination in the case of non-U.S. banks);

 

(e) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria of clause (d) above;

 

(f) investments in “money market funds” within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (e) above;

 

(g) investments in so-called “auction rate” securities rated AAA or higher by S&P or Aaa or higher by Moody’s and which have a reset date not more than 90 days from the date of acquisition thereof; and

 

(h) other short-term investments utilized by Foreign Subsidiaries in accordance with normal investment practices for cash management in investments of a type analogous to the foregoing and denominated in dollars or foreign currencies.

 

Permitted Investors shall mean DLJ Merchant Banking Partners IV, L.P. and its affiliated funds.

 

person shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership, Governmental Authority or other entity.

 

 “ PIK Interest shall have the meaning assigned to such term in Section 2.06.

 

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Plan shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

Pledged Collateral shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

 

Prime Rate shall mean the rate of interest per annum determined from time to time by Credit Suisse as its prime rate in effect at its principal office in New York City and notified to the Borrower.

 

Qualified Capital Stock of any person shall mean any Equity Interest of such person that is not Disqualified Stock.

 

Qualified Public Offering shall mean the initial underwritten public offering of common Equity Interests of Holdings or the Borrower pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended, that results in at least $50,000,000 of Net Cash Proceeds to Holdings.

 

Register shall have the meaning assigned to such term in Section 9.04(d).

 

Regulation T shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

Regulation U shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

Regulation X shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

Related Fund shall mean, with respect to any Lender that is a fund or commingled investment vehicle that invests in bank loans, any other fund that invests in bank loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

 

Related Parties shall mean, with respect to any specified person, such person’s Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such person and such person’s Affiliates.

 

Release shall mean any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment or within or upon any building, structure, facility or fixture.

 

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Required Lenders shall mean, at any time, Lenders having Loans and Commitments representing more than 50% of the sum of all Loans outstanding and Commitments at such time.

 

Required Prepayment Percentage shall mean in the case of any Excess Cash Flow, 50% or, if on the date of the applicable prepayment (and after giving effect thereto, in whole or in part), the Total Leverage Ratio is less than 5.25 to 1.00 but greater than or equal to 4.50 to 1.00, 25%, or, if on the date of the applicable prepayment, the Total Leverage Ratio is less than 4.50 to 1.00, 0%.

 

Responsible Officer of any person shall mean any executive officer or Financial Officer of such person and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Agreement.

 

Restricted Indebtedness shall mean Indebtedness of Holdings, the Borrower or any Subsidiary, the payment, prepayment, repurchase or defeasance of which is restricted under Section 6.09(b).

 

Restricted Payment shall mean any dividend or other distribution (whether in cash, securities or other property (other than Qualified Capital Stock)) with respect to any Equity Interests in Holdings, the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property (other than Qualified Capital Stock)), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in Holdings, the Borrower or any Subsidiary. For greater certainty, the payment of fees pursuant to the Advisory Services and Monitoring Agreements shall not constitute a Restricted Payment under Section 6.06(a).

 

Sale/Leaseback Transaction means an arrangement, directly or indirectly, with any person relating to property, real or personal or mixed, used or useful in the business of the Borrower or any Subsidiary, whether now owned or acquired after the Closing Date, whereby the Borrower or any Subsidiary sells or transfers such property to a person and thereafter rents or leases such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred.

 

Secured Parties shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

 

Security Documents shall mean the Mortgages, the Guarantee and Collateral Agreement, the Intercreditor Agreement and each of the security agreements, mortgages and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.11.

 

Significant Asset Sale shall mean the sale, transfer, lease or other disposition by Holdings or any Subsidiary to any person other than the Borrower or a Subsidiary Guarantor of all or substantially all of the assets of, or a majority of the Equity Interests in, a person, or a division or line of business or other business unit of a person.

 

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S&P shall mean Standard & Poor’s Ratings Service, or any successor thereto.

 

Spanish Subs idized Loans shall mean government-subsidized loans in advance made as part of an official program of the Ministry of Economic Development of Spain (the Spanish Ministry ), representing funds pledged to STR España as incentive for economic development in the country of Spain and/or the region of Asturias, Spain, the interest and principal of which are relieved by the Spanish Ministry upon completion of STR España’s approved development program (capital investment, job creation, employee training, etc.).

 

SPC shall have the meaning assigned to such term in Section 9.04(i).

 

Specified Equity Issuance shall mean any public issuance or sale by Holdings, the Borrower or any of their respective subsidiaries of any Equity Interests of Holdings, the Borrower or any such subsidiary, as applicable, other than public offerings with respect to Holding’s, the Borrower’s or any of their respective subsidiaries’ Equity Interests registered on Form S-4 or Form S-8.

 

Statutory Reserves shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate or other fronting office making or holding a Loan) is subject for Eurocurrency Liabilities (as defined in Regulation D of the Board). Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities (as defined in Regulation D of the Board) and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

STR Espa ñ a shall mean Specialized Technology Resources España S.A., a stock corporation formed under the laws of Spain and wholly owned by the Borrower.

 

subsidiary shall mean, with respect to any person (herein referred to as the paren t ), any corporation, partnership, limited liability company, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, Controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

 

Subsidiary shall mean any subsidiary of the Borrower.

 

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Subsidiary Guarantor shall mean each Subsidiary listed on Schedule 1.01(a), and each other Subsidiary that is or becomes a party to the Guarantee and Collateral Agreement.

 

Synthetic Lease shall mean, as to any person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income tax purposes, other than any such lease under which such person is the lessor.

 

Synthetic Lease Obligations shall mean, as to any person, an amount equal to the capitalized amount of the remaining lease payments under any Synthetic Lease that would appear on a balance sheet of such person in accordance with GAAP if such obligations were accounted for as Capital Lease Obligations.

 

Synthetic Purchase Agreement shall mean any swap, derivative or other agreement or combination of agreements pursuant to which Holdings, the Borrower or any Subsidiary is or may become obligated to make (a) any payment in connection with a purchase by any third party from a person other than Holdings, the Borrower or any Subsidiary of any Equity Interest or Restricted Indebtedness or (b) any payment (other than on account of a permitted purchase by it of any Equity Interest or Restricted Indebtedness) the amount of which is determined by reference to the price or value at any time of any Equity Interest or Restricted Indebtedness; provided that no phantom stock or similar plan providing for payments only to current or former directors, officers or employees of Holdings, the Borrower or the Subsidiaries (or to their heirs or estates) shall be deemed to be a Synthetic Purchase Agreement.

 

Taxes shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

 

‘‘ Total Debt shall mean, at any time, the total Indebtedness of the Borrower and the Subsidiaries at such time (excluding Indebtedness of the type described in clause (i) of the definition of such term, except to the extent of any unreimbursed drawings thereunder).

 

Total Leverage Ratio shall mean, on any date, the ratio of Total Debt (net of unrestricted cash and cash equivalents of the Borrower and the Subsidiaries (in each case in the amount determined by GAAP)) on such date to Consolidated EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date. In any period of four consecutive fiscal quarters in which a Permitted Acquisition or Significant Asset Sale occurs, the Total Leverage Ratio shall be determined on a pro forma basis in accordance with Section 1.03.

 

Transactions shall mean, collectively, (a) the execution, delivery and performance by Parent, the Company and the Borrower of the Merger Agreement and the consummation of the transactions contemplated thereby, (b) the execution, delivery and performance by Holdings, the Borrower and the Subsidiaries party thereto of the First

 

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Lien Loan Documents and the incurrence of the First Lien Loans, (c) the execution, delivery and performance by the Loan Parties of the Loan Documents to which they are a party and the making of the Borrowings hereunder, (d) the repayment of all amounts due or outstanding under or in respect of, and the termination of, the Existing Credit Agreement and (e) the payment of related fees and expenses.

 

Type , when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term Rate shall mean the Adjusted LIBO Rate and the Alternate Base Rate.

 

USA PATRIOT Act shall mean The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)).

 

wholly owned Subsidiary of any person shall mean a subsidiary of such person of which securities (except for directors’ qualifying shares) or other ownership interests representing 100% of the Equity Interests are, at the time any determination is being made, owned, Controlled or held by such person or one or more wholly owned Subsidiaries of such person or by such person and one or more wholly owned Subsidiaries of such person.

 

Withdrawal Liability shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

 

SECTION 1.02. Terms Generally . The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”; and the words “asset” and “property” shall be construed as having the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time and (b) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article VI or any related definition to eliminate the effect of any change in GAAP occurring after the date of this Agreement on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VI or any related definition for such purpose), then the Borrower’s compliance with such covenant shall be determined on the basis of GAAP in effect immediately

 

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before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders.

 

SECTION 1.03. Pro Forma Calculations. With respect to any period of four consecutive fiscal quarters during which any Permitted Acquisition or Significant Asset Sale occurs (and for purposes of determining whether an acquisition is a Permitted Acquisition under Section 6.04(g) or would result in a Default or an Event of Default), the Total Leverage Ratio shall be calculated with respect to such period on a pro forma basis after giving effect to such Permitted Acquisition or Significant Asset Sale (including, without duplication, (a) all pro forma adjustments permitted or required by Article 11 of Regulation S-X under the Securities Act of 1933, as amended and (b) pro forma adjustments for cost savings (net of continuing associated expenses) to the extent such cost savings are factually supportable, are expected to have a continuing impact and have been realized or are reasonably expected to be realized within 12 months following such Permitted Acquisition; provided that all such adjustments shall be set forth in a reasonably detailed certificate of a Financial Officer of the Borrower), using, for purposes of making such calculations, the historical financial statements of the Borrower and the Subsidiaries which shall be reformulated as if such Permitted Acquisition or Significant Asset Sale, and any other Permitted Acquisitions and Significant Asset Sales that have been consummated during the period, had been consummated on the first day of such period.

 

SECTION 1.04. Classjfication of Loans and Borrowings . For purposes of this Agreement, Loans may be classified and referred to by Type ( e.g., a “Eurodollar Loan”). Borrowings also may be classified and referred to by Type ( e.g., a “Eurodollar Borrowing”).

 

ARTICLE II

 

The Credits

 

SECTION 2.01. Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, to make a Loan to the Borrower on the Closing Date in a principal amount not to exceed its Commitment. Amounts paid or prepaid in respect of Loans may not be reborrowed.

 

SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). The Loans comprising any Borrowing shall be in an aggregate principal amount that is an integral multiple of $100,000 and not less than $500,000.

 

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(b)   Subject to Sections 2.08 and 2.14, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than five Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.

 

(c)   Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 1:00 p.m., New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account designated by the Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders.

 

(d)   Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower to but excluding the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement.

 

SECTION 2.03. Borrowing Procedure. In order to request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 (noon), New York City time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before a proposed Borrowing.  Each such telephonic Borrowing Request shall be irrevocable, and shall be

 

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confirmed promptly by hand delivery or fax to the Administrative Agent of a written Borrowing Request and shall specify the following information: (i) whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall be a Business Day); (iii) the number and location of the account to which funds are to be disbursed; (iv) the amount of such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; provided, however, that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.02. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. The Administrative Agent shall promptly advise the applicable Lenders of any notice given pursuant to this Section 2.03 (and the contents thereof), and of each Lender’s portion of the requested Borrowing.

 

SECTION 2.04. Evidence of Debt ; Repayment of Loans.   (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the principal amount of each Loan of such Lender on the Maturity Date.

 

(b)   Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

 

(c)   The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type thereof and, if applicable, the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower or any Guarantor and each Lender’s share thereof.

 

(d)   The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms.

 

(e)   Any Lender may request that Loans made by it hereunder be evidenced by a promissory note. In such event, the Borrower shall execute and deliver to such Lender a promissory note payable to such Lender and its registered assigns and in a form and substance reasonably acceptable to the Administrative Agent and the Borrower. Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive such a promissory note, the interests represented by such note shall at all times (including after any assignment of all or part of such interests pursuant to

 

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Section 9.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns.

 

SECTION 2.05. Fees. (a) The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees set forth in the Fee Letter at the times and in the amounts specified therein (the “Administrative Agent Fees ) .

 

(b)   All fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders. Once paid, none of the fees shall be refundable under any circumstances.

 

SECTION 2.06.  Interest on Loans.   (a) Upon the terms and subject to the conditions of this Agreement, the Lenders grant the Borrower, for any Interest Period commencing prior to the fifth anniversary of the Closing Date, an option to pay interest on the Loans (i) entirely in cash ( Cash Interest ) or (ii) entirely by increasing the outstanding principal amount of the Loans by the amount of interest accrued during such Interest Period ( “PIK Interest” ) . The Borrower must elect (the Int e rest Election ) the form of payment of interest with respect to each Interest Period by delivering an Interest Election Request to the Administrative Agent no later than five Business Days prior to the start of such Interest Period. The Administrative Agent shall promptly deliver a corresponding notice to each Lender. In the absence of such an Interest Election for any Interest Period, interest on the Loans shall be payable as Cash Interest.

 

(b)   Subject to the provisions of Section 2.07, Cash Interest on Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate is determined by reference to the Prime Rate and over a year of 360 days at all other times and calculated from and including the date of such Borrowing to but excluding the date of repayment thereof) at a rate per annum equal to the Alternate Base Rate plus the Applicable Percentage in effect from time to time.

 

(c)   Subject to the provisions of Section 2.07, Cash Interest on Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage in effect from time to time.

 

(d)   Notwithstanding anything to the contrary in this Section 2.06, PIK Interest on the Loans shall bear interest at the rate otherwise applicable to such Loan pursuant to Section 2.06(c) or (d), as applicable, plus 1.50% per annum.

 

(e)   Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

 

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SECTION 2.07. Default Interest . If the Borrower shall default in the payment of any principal of or interest on any Loan or any other amount due hereunder, by acceleration or otherwise, or under any other Loan Document, then, until such defaulted amount shall have been paid in full, to the extent permitted by law, all overdue amounts outstanding under this Agreement and the other Loan Documents shall bear interest (after as well as before judgment), payable on demand, (a) in the case of principal, at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus 2.00% per annum and (b) in all other cases, at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when determined by reference to the Prime Rate and over a year of 360 days at all other times) equal to the rate that would be applicable to an ABR Loan plus 2.00% per annum.

 

SECTION 2.08. Alternate Rate of Interest . In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that the rates at which such dollar deposits are being offered will not adequately and fairly reflect the cost to any Lender of making or maintaining its Eurodollar Loan during such Interest Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or fax notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent under this Section 2.08 shall be conclusive absent manifest error

 

SECTION 2.09. Termination and Reduction of Commitments. (a) The Commitments shall automatically terminate upon the making of the Loans on the Closing Date. Notwithstanding the foregoing, all the Commitments shall automatically terminate at 5:00 p.m., New York City time, on June 30, 2007, or such earlier date on which the Merger Agreement terminates, if the Borrowing of the Loans shall not have occurred by such time.

 

(b)   Upon at least three Business Days’ prior irrevocable written or fax notice to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Commitments; provided, however , that each partial reduction of the Commitments shall be in an integral multiple of $1,000,000 and in a minimum amount of $1,000,000.

 

(c)   Each reduction in the Commitments hereunder shall be made ratably among the Lenders in accordance with their respective applicable Commitments.

 

SECTION 2.10. Conversion and Cont inuation of Borrowings. The Borrower shall have the right at any time upon prior irrevocable notice to the Administrative Agent (a) not later than 12:00 (noon), New York City time, one Business Day prior to

 

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conversion, to convert any Eurodollar Borrowing into an ABR Borrowing, (b) not later than 12:00 (noon), New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Borrowing or to continue any Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest Period, and (c) not later than 12:00 (noon), New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Borrowing to another permissible Interest Period, subject in each case to the following:

 

(i)   until the Administrative Agent shall have notified the Borrower that the primary syndication of the Commitments has been completed (which notice shall be given as promptly as practicable and, in any event, within 30 days after the Closing Date), no LIBOR Borrowing may have an Interest Period in excess of one month;

 

(ii)   each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing;

 

(iii)   if less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting Borrowing shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal amount and maximum number of Borrowings of the relevant Type;

 

(iv)   each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on any Eurodollar Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion;

 

(v)   if any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15;

 

(vi)   any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing;

 

(vii)   any portion of a Eurodollar Borrowing that cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing;

 

(viii)   no Interest Period may be selected for any Eurodollar Borrowing that would end later than the Maturity Date; and

 

(ix)   upon notice to the Borrower from the Administrative Agent given at the request of the Required Lenders, after the occurrence and during the

 

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continuance of a Default or Event of Default, no outstanding Loan may be converted into, or continued as, a Eurodollar Loan.

 

Each notice pursuant to this Section 2.10 shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the Borrower requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month’s duration. The Administrative Agent shall advise the Lenders of any notice given pursuant to this Section 2.10 and of each Lender’s portion of any converted or continued Borrowing. If the Borrower shall not have given notice in accordance with this Section 2.10 to continue any Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued into an ABR Borrowing.

 

SECTION 2.11 . Optional Prepayment.  (a) Subject to payment of any applicable premium as set forth in paragraph (b) below, the Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, upon at least three Business Days’ prior written or fax notice (or telephone notice promptly confirmed by written or fax notice) in the case of Eurodollar Loans, or written or fax notice (or telephone notice promptly confirmed by written or fax notice) at least one Business Day prior to the date of prepayment in the case of ABR Loans, to the Administrative Agent before 12:00 (noon), New York City time; provided, however , that each partial prepayment shall be in an amount that is an integral multiple of $100,000 and not less than $1,000,000.

 

(b)   Each prepayment of Loans made pursuant to Section 2.11(a) shall be made together with a prepayment premium in an amount equal to (i) if such prepayment is made prior to the first anniversary of the Closing Date, 2.00%, and (ii) if such prepayment is made on or after the first anniversary of the Closing Date but prior to the second anniversary of the Closing Date, 1.00%, in each case of the aggregate principal amount of Loans being prepaid.

 

(c)   Each notice of prepayment shall specify the prepayment date, the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable (unless such notice is expressly conditioned upon a refinancing of the Credit Facility, in which case such notice may be rescinded if such refinancing shall not be consummated or shall otherwise be delayed) and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments under this Section 2.11 shall be subject to paragraph (b) above (if applicable) and to Section 2.15 but otherwise without premium or penalty. All prepayments under this Section 2.11 shall be

 

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accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.

 

SECTION 2.12. Mandatory Prepayments .   (a) Subject to paragraph (f) of this Section 2.12, not later than the third Business Day following the receipt of Net Cash Proceeds in respect of any Asset Sale, the Borrower shall apply 100% of the Net Cash Proceeds received with respect thereto to prepay outstanding Loans.

 

(b)   Subject to paragraph (f) of this Section 2.12, in the event and on each occasion that an Specified Equity Issuance occurs, the Borrower shall, substantially simultaneously with (and in any event not later than the third Business Day next following) the occurrence of such Specified Equity Issuance, apply 50% of the Net Cash Proceeds therefrom to prepay outstanding Loans.

 

(c)   Subject to paragraph (f) of this Section 2.12, no later than the later of (i) 120 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending on December 31, 2007, and (ii) the 10th day subsequent to the date on which the financial statements with respect to such period are delivered pursuant to Section 5.04(a), the Borrower shall prepay outstanding Loans in an aggregate principal amount equal to the Required Prepayment Percentage of Excess Cash Flow for the fiscal year then ended.

 

(d)   Subject to paragraph (f) of this Section 2.12, in the event that any Loan Party or any subsidiary of a Loan Party shall receive Net Cash Proceeds from the issuance or incurrence of Indebtedness for money borrowed of any Loan Party or any subsidiary of a Loan Party (other than any cash proceeds from the issuance or renewal of Indebtedness permitted pursuant to Section 6.01), the Borrower shall, substantially simultaneously with (and in any event not later than the third Business Day next following) the receipt of such Net Cash Proceeds by such Loan Party or such subsidiary, apply an amount equal to 100% of such Net Cash Proceeds to prepay outstanding Loans.

 

(e)   Notwithstanding the foregoing, any Lender may elect, by written notice to the Administrative Agent at the time and in the manner specified by the Administrative Agent, to decline all (but not less than all) of its pro rata share of such mandatory prepayment of its Loans pursuant to this Section 2.12 (such declined amounts, the Declined Proceeds ) . Any Declined Proceeds shall be offered to the Lenders not so declining such prepayment (with such Lenders having the right to decline any prepayment with Declined Proceeds at the time and in the manner specified by the Administrative Agent). To the extent such Lenders elect to decline their pro rata shares of such Declined Proceeds, such remaining Declined Proceeds may be retained by the Borrower.

 

(f)   Notwithstanding anything to the contrary in this Section 2.12, until the Discharge of First Lien Obligations shall have occurred, no mandatory prepayments of outstanding Loans that would otherwise be required under this Section 2.12 shall be required to be made, except with respect to the portion (if any) of the proceeds of the event giving rise to such mandatory prepayment as shall have been rejected by the

 

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lenders under the First Lien Credit Agreement (and which is not required to be applied to reduce outstanding Revolving Facility Loans and Swingline Loans thereunder and as defined therein or to fund a cash collateral account with the administrative agent under the First Lien Credit Agreement in an amount up to the aggregate L/C Exposure (as defined in the First Lien Credit Agreement) at such time), in each case in accordance with and as required by Section 2.13 of the First Lien Credit Agreement. If at the time of any prepayment pursuant to this Section 2.12 there shall be outstanding Borrowings of different Types or Eurodollar Borrowings with different Interest Periods, and if some but not all Lenders shall have accepted such mandatory prepayment, then the aggregate amount of such mandatory prepayment shall be allocated ratably to each outstanding Borrowing of the accepting Lenders. If no Lenders exercise the right to waive a given mandatory prepayment of the Loans pursuant to Section 2.12(e), then, with respect to such mandatory prepayment, the amount of such mandatory prepayment shall be applied first to Loans that are ABR Loans to the full extent thereof before application to Loans that are Eurodollar Loans in a manner that minimizes the amount of any payments required to be made by the Borrower pursuant to Section 2.15.

 

(g)   The Borrower shall deliver to the Administrative Agent, at the time of each prepayment required under this Section 2.12, (i) a certificate signed by a Financial Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment and (ii) to the extent practicable, at least three days prior written notice of such prepayment. Each notice of prepayment shall specify the prepayment date, the Type of each Loan being prepaid and the principal amount of each Loan (or portion thereof) to be prepaid. All prepayments of Borrowings under this Section 2.12 shall be subject to Section 2.15, but shall otherwise be without premium or penalty, and shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.

 

SECTION 2.13. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by any Lender (except any such reserve requirement which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then the Borrower will pay to such Lender upon demand such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

 

(b)   If any Lender shall have determined that any Change in Law regarding capital adequacy has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made pursuant hereto to a level below that which such Lender or such Lender’s holding company could have achieved but for such

 

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Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

 

(c)   A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as applicable, as specified in paragraph (a) or (b) above shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate delivered by it within 10 Business Days after its receipt of the same.

 

(d)   Failure or delay on the part of any Lender to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be under any obligation to compensate any Lender under paragraph (a) or (b) above with respect to increased costs or reductions with respect to any period prior to the date that is 120 days prior to such request if such Lender knew or could reasonably have been expected to know of the circumstances giving rise to such increased costs or reductions and of the fact that such circumstances would result in a claim for increased compensation by reason of such increased costs or reductions; provided further that the foregoing limitation shall not apply to any increased costs or reductions arising out of the retroactive application of any Change in Law within such 120-day period. The protection of this Section 2.13 shall be available to each Lender regardless of any possible contention of the invalidity or inapplicability of the Change in Law that shall have occurred or been imposed.

 

SECTION 2.14. Change in Legality. (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent:

 

(i)   such Lender may declare that Eurodollar Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods) and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Loans, whereupon any request for a Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing for an additional Interest Period) shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan as such for an additional Interest Period or to convert a Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration shall be subsequently withdrawn; and

 

(ii)   such Lender may require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall

 

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be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below.

 

In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.

 

(b)   For purposes of this Section 2.14, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period then applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.

 

SECTION 2.15. Indemnity . The Borrower shall indemnify each Lender against any loss or expense that such Lender may sustain or incur as a consequence of (a) any event, other than a default by such Lender in the performance of its obligations hereunder, which results in (i) such Lender receiving or being deemed to receive any amount on account of the principal of any Eurodollar Loan prior to the end of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period with respect to any Eurodollar Loan, in each case other than on the last day of the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar Loan to be made pursuant to a conversion or continuation under Section 2.10) not being made after notice of such Loan shall have been given by the Borrower hereunder (any of the events referred to in this clause (a) being called a Breakage Event” ) or (b) any default in the making of any payment or prepayment required to be made hereunder. In the case of any Breakage Event, such loss shall include an amount equal to the excess, as reasonably determined by such Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that is the subject of such Breakage Event for the period from the date of such Breakage Event to the last day of the Interest Period in effect (or that would have been in effect) for such Loan over (ii) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such Breakage Event for such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.15 shall be delivered to the Borrower and shall be conclusive absent manifest error.

 

SECTION 2.16. Pro Rata Treatment. Except as required under Section 2.12(e) or 2.14, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each reduction of the Commitments and each conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans). Each Lender agrees that in computing such Lender’s portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender’s percentage of such Borrowing to the next higher or lower whole dollar amount.

 

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SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker’s lien, setoff or counterclaim against the Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans as a result of which the unpaid principal portion of its Loans shall be proportionately less than the unpaid principal portion of the Loans of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Loans of such other Lender, so that the aggregate unpaid principal amount of the Loans and participations in Loans held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Loans then outstanding as the principal amount of its Loans prior to such exercise of banker’s lien, setoff or counterclaim or other event was to the principal amount of all Loans outstanding prior to such exercise of banker’s lien setoff or counterclaim or other event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.17 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. The Borrower and Holdings expressly consent to the foregoing arrangements and agree that any Lender holding a participation in a Loan deemed to have been so purchased may exercise any and all rights of banker’s lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower and Holdings to such Lender by reason thereof as fully as if such Lender had made a Loan directly to the Borrower in the amount of such participation.

 

SECTION 2.18. Payments. (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any fees or other amounts) hereunder and under any other Loan Document not later than 12:00 (noon), New York City time, on the date when due in immediately available dollars, without setoff, defense or counterclaim. Each such payment shall be made to the Administrative Agent at its offices at Eleven Madison Avenue, New York, NY 10010. The Administrative Agent shall promptly distribute to each Lender any payments received by the Administrative Agent on behalf of such Lender

 

(b)   Except as otherwise expressly provided herein, whenever any payment (including principal of or interest on any Borrowing or any fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, if applicable.

 

(c)   Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the

 

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Lenders the amount due. In such event, if the Borrower does not in fact make such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender, and to pay interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error).

 

SECTION 2.19. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower or any other Loan Party hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that, if the Borrower or any other Loan Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.19) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Loan Party shall make such deductions and (iii) the Borrower or such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

 

(b)   The Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c)   The Borrower shall indemnify the Administrative Agent and each Lender, within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower or any other Loan Party hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.19) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto (other than penalties, interest or other expenses payable by reason of the deliberate action or inaction of the Administrative Agent or such Lender, as the case may be), whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or by the Administrative Agent on behalf of itself or a Lender, shall be conclusive absent manifest error.

 

(d)   As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or any other Loan Party to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

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(e)   Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement or any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to withholding or information reporting requirements. Without limiting the generality of the foregoing, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent), two of whichever of the following is applicable:

 

(i)     duly completed original signed copies of Internal Revenue Service (“ IRS ”) Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

 

(ii)    duly completed original signed copies of IRS Form W-8ECI,

 

(iii)   in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” within the meaning of Section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (y) duly completed original signed copies of IRS Form W-BEN, or

 

(iv)  any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit Borrower to determine the withholding or deduction required to be made.

 

(f)   Any Lender that is a “United States person”, as defined in Section 7701(a)(30) of the Code, shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent) duly completed original signed copies of IRS Form W-9, or any successor form, in order to comply with U.S. backup withholding requirements.

 

(g)   If the Administrative Agent or any Lender receives a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower

 

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or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.19, it shall promptly notify the Borrower of such refund and shall, within 30 days after receipt of such refund, pay to the Borrower an amount equal to such refund, net of all out-of-pocket expenses of the Administrative Agent or such Lender, as the case may be; provided, however, that the Borrower, upon the request of the Administrative Agent or such Lender, as applicable, agrees to repay the amount paid over to the Borrower to the Administrative Agent or such Lender, as applicable, in the event of the Administrative Agent or such Lender is required to repay such refund. This paragraph shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other person.

 

SECTION 2.20. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate. (a) In the event (i) any Lender delivers a certificate requesting compensation pursuant to Section 2.13, (ii) any Lender delivers a notice described in Section 2.14, (iii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority on account of any Lender pursuant to Section 2.19 or (iv) any Lender refuses to consent to any amendment, waiver or other modification of any Loan Document requested by the Borrower that requires the consent of a greater percentage of the Lenders than the Required Lenders and such amendment, waiver or other modification is consented to by the Required Lenders, the Borrower may, at its sole expense and effort (including with respect to the processing and recordation fee referred to in Section 9.04(b)), upon notice to such Lender and the Administrative Agent, require such Lender to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all of its interests, rights and obligations under this Agreement to an Eligible Assignee that shall assume such assigned obligations and, with respect to clause (iv) above, shall consent to such requested amendment, waiver or other modification of any Loan Document (which Eligible Assignee may be another Lender, if a Lender accepts such assignment); provided that (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (y) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld or delayed, and (z) the Borrower or such Eligible Assignee shall have paid to the affected Lender in immediately available funds an amount equal to the sum of the principal of and interest accrued to the date of such payment on the outstanding Loans of such Lender, plus all fees and other amounts accrued for the account of such Lender hereunder with respect thereto (including any amounts under Sections 2.13 and 2.15 and, in the case of clause (iv) above, if such assignment occurs prior to the first anniversary of the Closing Date, the prepayment fee that would be payable pursuant to Section 2.11(b) if the Loans of such Lender subject to such assignment had been prepaid by the Borrower pursuant to Section 2.11, such amount to be payable by the Borrower); provided further that, if prior to any such transfer and assignment the circumstances or event that resulted in such Lender’s claim for compensation under Section 2.13, notice under Section 2.14 or the amounts paid pursuant to Section 2.19, as the case may be, cease to cause such Lender to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital, or cease to have the consequences specified in Section 2.14, or cease to result in amounts being payable under Section 2.19, as the case may be (including as a

 

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result of any action taken by such Lender pursuant to paragraph (b) below), or if such Lender shall waive its right to claim further compensation under Section 2.13 in respect of such circumstances or event or shall withdraw its notice under Section 2.14 or shall waive its right to further payments under Section 2.19 in respect of such circumstances or event or shall consent to the proposed amendment, waiver, consent or other modification, as the case may be, then such Lender shall not thereafter be required to make any such transfer and assignment hereunder. Each Lender hereby grants to the Administrative Agent an irrevocable power of attorney (which power is coupled with an interest) to execute and deliver, on behalf of such Lender as assignor, any Assignment and Acceptance necessary to effectuate any assignment of such Lender’s interests hereunder in the circumstances contemplated by this Section 2.20(a).

 

(b)   If (i) any Lender shall request compensation under Section 2.13, (ii) any Lender delivers a notice described in Section 2.14 or (iii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority on account of any Lender, pursuant to Section 2.19, then such Lender shall use reasonable efforts (which shall not require such Lender to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be significant) (x) to file any certificate or document reasonably requested in writing by the Borrower or (y) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.13 or enable it to withdraw its notice pursuant to Section 2.14 or would reduce amounts payable pursuant to Section 2.19, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such filing or assignment, delegation and transfer.

 

ARTICLE III

 

Representations and Warranties

 

Each of Holdings and the Borrower represents and warrants to the Administrative Agent, the Collateral Agent and each of the Lenders that:

 

SECTION 3.01. Organization; Powers. Holdings, the Borrower and each of the Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and, to the extent such concept is applicable in such jurisdiction, is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Borrower, to borrow hereunder.

 

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SECTION 3.02. Authorization. The Transactions (a) have been duly authorized by all requisite corporate and, if required, stockholder action and (b) will not (i) violate (A) any provision of law, statute, rule or regulation in a manner that could reasonably be expected to result in a Material Adverse Effect, or of the certificate or articles of incorporation or other constitutive documents or by-laws of Holdings, the Borrower or any Subsidiary, (B) any order of any Governmental Authority in a manner that could reasonably be expected to result in a Material Adverse Effect, or (C) any provision of any indenture, agreement or other instrument to which Holdings, the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound in a manner that could reasonably be expected to result in a Material Adverse Effect, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument in a manner that could reasonably be expected to result in a Material Adverse Effect, or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by Holdings, the Borrower or any Subsidiary (other than any Lien created hereunder or under the Security Documents or any First Priority Lien).

 

SECTION 3.03. Enforceability.   This Agreement has been duly executed and delivered by Holdings and the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against such Loan Party in accordance with its terms.

 

SECTION 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for (a) the filing of Uniform Commercial Code financing statements and filings with the United States Patent and Trademark Office and the United States Copyright Office, (b) recordation of the Mortgages, (c) such as have been made or obtained and are in full force and effect and (d) those that, if not obtained or made, could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

 

SECTION 3.05. Financial Statements. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheets and related statements of income, stockholder’s equity and cash flows: (i) as of and for the fiscal years ended December 31, 2004, 2005 and 2006, audited by and accompanied by the opinion of UHY LLP, independent public accountants, (ii) as of and for the fiscal quarter and the portion of the fiscal year ended March 31, 2007, certified by a Financial Officer, and (iii) as of and for each fiscal month ended after March 31, 2007 and at least 30 days before the Closing Date, certified by a Financial Officer. Such financial statements present fairly the financial condition and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods. Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the dates thereof. Such financial statements were prepared in accordance with GAAP applied on a consistent basis, subject, in the case of

 

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unaudited financial statements, to year-end audit adjustments, the absence of footnotes and an exception for the calculation of taxes and tax accruals.

 

(b)   The Borrower has heretofore delivered to the Lenders its unaudited pro forma consolidated balance sheet and related pro forma statements of income, as of March 31, 2007, prepared giving effect to the Transactions as if they had occurred, with respect to such balance sheet, on such date and, with respect to such other financial statements, on the first day of the 12-month period ending on such date. Such pro forma financial statements have been prepared in good faith by the Borrower, based on the assumptions used to prepare the pro forma financial information contained in the Confidential Information Memorandum (which assumptions are believed by the Borrower on the date hereof and on the Closing Date to be reasonable), are based on the best information available to the Borrower as of the date of delivery thereof, accurately reflect all adjustments required to be made to give effect to the Transactions and present fairly on a pro forma basis the estimated consolidated financial position of the Borrower and its consolidated Subsidiaries as of such date and for such period, assuming that the Transactions had actually occurred at such date or at the beginning of such period, as the case may be.

 

SECTION 3.06. No Material Adverse Change. No event, change or condition has occurred that has had, or could reasonably be expected to have a material adverse effect on the business, assets, liabilities, operations, financial condition or operating results of Holdings, the Borrower and the Subsidiaries, taken as a whole, since December 31, 2006.

 

SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of Holdings, the Borrower and the Subsidiaries has good and marketable title to, or valid leasehold interests in, all its material properties and assets (including all Mortgaged Property), except for minor defects in title that do not interfere in any material respect with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. All such material properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.02.

 

(b)   Except to the extent that failure to do so could not reasonably be expected to result in a Material Adverse Effect, (i) each of Holdings, the Borrower and the Subsidiaries has complied with all obligations under all leases to which it is a party and all such leases are in full force and effect and (ii) each of Holdings, the Borrower and the Subsidiaries enjoys peaceful and undisturbed possession under all such leases.

 

(c)   As of the Closing Date, neither Holdings nor the Borrower has received any notice of, nor has any knowledge of, any pending or contemplated condemnation proceeding affecting the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation.

 

(d)   As of the Closing Date, none of Holdings, the Borrower or any of the Subsidiaries is obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein.

 

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SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Closing Date a list of all Subsidiaries and the percentage ownership interest of Holdings or the Borrower therein. The shares of capital stock or other ownership interests so indicated on Schedule 3.08 are fully paid and non-assessable and are owned by Holdings or the Borrower, directly or indirectly, free and clear of all Liens (other than Liens created under the Security Documents or any First Priority Lien).

 

SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth on Schedule 3.09, there are no actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of Holdings or the Borrower, threatened against or affecting Holdings or the Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve any Loan Document or the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

 

(b)   Since the date of this Agreement, there has been no change in the status of the matters disclosed on Schedule 3.09 that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

 

(c)   None of Holdings, the Borrower or any of the Subsidiaries or any of their respective material properties or assets is in violation of, nor will the continued operation of their material properties and assets as currently conducted violate, any law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting the Mortgaged Property, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect.

 

(d)   Certificates of occupancy and permits are in effect for each Mortgaged Property as currently constructed, and true and complete copies of such certificates of occupancy have been delivered to the Collateral Agent as mortgagee with respect to each Mortgaged Property.

 

SECTION 3.10. Agreements. (a) None of Holdings, the Borrower or any of the Subsidiaries is a party to any agreement or instrument or subject to any corporate restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect.

 

(b)   None of Holdings, the Borrower or any of the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect.

 

SECTION 3.11. Federal Reserve Regulations. (a) None of Holdings, the Borrower or any of the Subsidiaries is engaged principally, or as one of its important

 

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activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.

 

(b)   No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation T, U or X.

 

SECTION 3.12. Investment Company Act . None of Holdings, the Borrower or any Subsidiary is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

 

SECTION 3.13. Use of Proceeds . The Borrower will use the proceeds of the Loans only for the purposes specified in the introductory statement to this Agreement.

 

SECTION 3.14. Tax Returns . Each of Holdings, the Borrower and the Subsidiaries has filed or caused to be filed all Federal, and all material state, local and foreign tax returns or materials required to have been filed by it and has paid or caused to be paid all material taxes due and payable by it and all assessments received by it, except taxes that are being contested in good faith by appropriate proceedings and for which Holdings, the Borrower or such Subsidiary, as applicable, shall have set aside on its books adequate reserves.

 

SECTION 3.15. No Material Misstatements . None of (a) the Confidential Information Memorandum or (b) any other information, report, financial statement, exhibit or schedule furnished by or on behalf of Holdings or the Borrower to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, each of Holdings and the Borrower represents only that it acted in good faith and utilized reasonable assumptions (based upon accounting principles consistent with the historical audited financial statements of the Borrower) and due care in the preparation of such information, report, financial statement, exhibit or schedule.

 

SECTION 3.16. Employee Benefit Plans . (a) Each of the Borrower and its ERISA Affiliates is in compliance with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder, except as could not reasonably be expected to have a Material Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur that, alone or when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect. The fair market value of all the assets under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) was not, as of the last annual valuation date applicable thereto, less than 80% of the present value of all benefit

 

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liabilities under such Plan, and the fair market value of all assets of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) was not, as of the last annual valuation dates applicable thereto, less than 80% of the present value of all benefit liabilities of such underfunded Plans.

 

(b)   Each Foreign Pension Plan is in compliance in all material respects with all requirements of law applicable thereto and the respective requirements of the governing documents for such plan, except as, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. With respect to each Foreign Pension Plan, none of Holdings, its Affiliates or any of their respective directors, officers, employees or agents has engaged in a transaction that could subject Holdings, the Borrower or any Subsidiary, directly or indirectly, to a tax or civil penalty that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. With respect to each Foreign Pension Plan, reserves have been established in the financial statements furnished to Lenders in respect of any unfunded liabilities in accordance with applicable law and prudent business practice or, where required, in accordance with ordinary accounting practices in the jurisdiction in which such Foreign Pension Plan is maintained, except as could not reasonably be expected to have a Material Adverse Effect. The aggregate unfunded liabilities with respect to such Foreign Pension Plans could not reasonably be expected to result in a Material Adverse Effect; the fair market value of the assets of all such Foreign Pension Plans (based on those assumptions used to fund each such Foreign Pension Plan) was not, as of the last annual valuation date applicable thereto, less than 80% of the present value of all the aggregate accumulated benefit liabilities of such Foreign Pension Plans.

 

SECTION 3.17. Environmental Matters.  (a) Except as set forth in Schedule 3.17 and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, none of Holdings, the Borrower or any of the Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

 

(b)   Since the date of this Agreement, there has been no change in the status of any matters disclosed on Schedule 3.17 or any new matters that, individually or in the aggregate, have resulted in, or materially increased the likelihood of, a Material Adverse Effect.

 

SECTION 3.18 . Insurance. Schedule 3.18 sets forth a true, complete and correct description of all insurance maintained by the Borrower or by the Borrower for its Subsidiaries as of the date hereof and the Closing Date. As of each such date, such insurance is in full force and effect and all premiums have been duly paid. The Borrower and its Subsidiaries have insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice for each applicable jurisdiction.

 

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SECTION 3.19. Security Documents.    (a) The Guarantee and Collateral Agreement, upon execution and delivery thereof by the parties thereto, will create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Guarantee and Collateral Agreement) and the proceeds thereof and (i) when the Pledged Collateral (as defined in the Guarantee and Collateral Agreement) is delivered to the collateral agent under the First Lien Guarantee and Collateral Agreement (who will hold such Pledged Collateral as bailee for perfection for the Collateral Agent), the Lien  created under Guarantee and Collateral Agreement shall constitute a fully perfected first priority (subject to the Intercreditor Agreement) Lien on, and security interest in, all right, title and interest of the Loan Parties in such Pledged Collateral, in each case prior and superior in right to any other person other than, pursuant to the terms of the Intercreditor Agreement, the First Lien Secured Parties (as defined in the Intercreditor Agreement), and (ii) when financing statements in appropriate form are filed in the offices specified on Schedule 3.19(a), the Lien created under the Guarantee and Collateral Agreement will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral (other than Intellectual Property, as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other person, other than with respect to Liens expressly permitted by Section 6.02.

 

(b)   Upon the recordation of the Guarantee and Collateral Agreement (or a short-form security agreement in form and substance reasonably satisfactory to the Borrower and the Collateral Agent) with the United States Patent and Trademark Office and the United States Copyright Office, together with the financing statements in appropriate form filed in the offices specified on Schedule 3.19(a), Lien created under the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Guarantee and Collateral Agreement) in which a security interest may be perfected by filing in the United States and its territories and possessions, in each case prior and superior in right to any other person other than, pursuant to the terms of the Intercreditor Agreement, the First Lien Secured Parties (as defined in the Intercreditor Agreement) (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks and patents, trademark and patent applications and registered copyrights acquired by the Loan Parties after the date hereof).

 

(c)   The Mortgages are effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the Loan Parties’ right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.19(c), the Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Property and the proceeds thereof, in each case prior and superior in right to any other person, other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.02.

 

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SECTION 3.20.  Location of Real Property and Leased Premises.   (a) Schedule 3.20(a) lists completely and correctly as of the Closing Date all real property owned by the Borrower and the Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries own in fee all the real property set forth on Schedule 3.20(a).

 

(b)     Schedule 3.20(b) lists completely and correctly as of the Closing Date all real property leased by the Borrower and the Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries have valid leases in all the real property set forth on Schedule 3.20(b).

 

SECTION 3.21. Labor Matters.    As of the date hereof and the Closing Date, there are no strikes, lockouts or slowdowns against Holdings, the Borrower or any Subsidiary pending or, to the knowledge of Holdings or the Borrower, threatened that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Except to the extent that the same could not reasonably be expected to result in a Material Adverse Effect, the hours worked by and payments made to employees of Holdings, the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters.

 

SECTION 3.22. Solvency. Immediately after the consummation of the Transactions to occur on the Closing Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of each Loan, (a) the fair value of the assets of the Loan Parties, taken as a whole, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Loan Parties, taken as a whole, will be greater than the amount that will be required to pay the probable liability of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Loan Parties, taken as a whole, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Loan Parties, taken as a whole, will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Closing Date.

 

SECTION 3.23. Transaction Documents. Holdings and the Borrower have delivered to the Administrative Agent a complete and correct copy of the Merger Agreement (including all schedules, exhibits, amendments, supplements and modifications thereto). Neither Holdings, the Borrower nor any Loan Party or, to the knowledge of Holdings or the Borrower, any other person party thereto is in default in the performance or compliance with any material provisions thereof.

 

SECTION 3.24. Sanctioned Persons. None of Holdings, the Borrower or any Subsidiary nor, to the knowledge of the Borrower, any director, officer, agent, employee or Affiliate of Holdings, the Borrower or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury

 

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Department (“ OFAC ”); and the Borrower will not directly or indirectly use the proceeds of the Loans or otherwise make available such proceeds to any person, for the purpose of financing the activities of any person, currently subject to any U.S. sanctions administered by OFAC.

 

ARTICLE IV

 

Condi tions of Lending

 

The obligations of the Lenders to make Loans hereunder on the Closing Date are subject to the satisfaction of the following conditions:

 

(a)  The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03.

 

(b)  (i) The representations and warranties set forth in Sections 3.01, 3.02, 3.03, 3.11, 3.12, 3.19 (subject to paragraph (j) below) and 3.24 shall be true and correct in all material respects on the Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date and (ii) the condition relating to the accuracy of the representations and warranties of the Company in the Merger Agreement as are material to the interests of the Lenders shall have been satisfied.

 

(c)  At the time of and immediately after the making of such Loans, no Default or Event of Default shall have occurred and be continuing.

 

(d)  The Administrative Agent shall have received, on behalf of itself and the Lenders, a written opinion of (i) Weil, Gotshal & Manges LLP, counsel for Holdings and the Borrower, substantially to the effect set forth in Exhibit F-1 and (ii) Murtha Cullina LLP, substantially to the effect set forth in Exhibit F-2, in each case (A) dated the Closing Date, (B) addressed to the Administrative Agent and the Lenders, and (C) covering such other matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request, and Holdings and the Borrower hereby request such counsel to deliver such opinions.

 

(e)  The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation (or other similar formation document), including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State (or equivalent) of the state of its organization, and a certificate of legal existence and, if available in such jurisdiction, certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws (or equivalent) of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions (or equivalent) duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to

 

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which such person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of legal existence or good standing (or equivalent) or state certified copies of such documents furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; and (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above.

 

(f)  The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Responsible Officer of the Borrower, confirming compliance with the conditions precedent set forth in paragraph (b) of this Article IV as of the Closing Date.

 

(g)  The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced prior to the Closing Date, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder or under any other Loan Document.

 

(h)  The Security Documents shall have been duly executed by each Loan Party that is to be a party thereto and shall be in full force and effect on the Closing Date. The Collateral Agent on behalf of the Secured Parties shall have been granted a security interest in the Collateral of the type and priority described in each Security Document.

 

(i)  The Collateral Agent shall have received a Perfection Certificate with respect to the Loan Parties dated the Closing Date and duly executed by a Responsible Officer of Holdings and the Borrower, and shall have received the results of a search of the Uniform Commercial Code filings (or equivalent filings) made with respect to the Loan Parties in the states (or other jurisdictions) of formation of such persons, in which the chief executive office of each such person is located and in the other jurisdictions in which such persons maintain property, in each case as indicated on such Perfection Certificate, together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence satisfactory to the Collateral Agent that the Liens indicated in any such financing statement (or similar document) would be permitted under Section 6.02 or have been or will be contemporaneously released or terminated.

 

(j)  Except as otherwise specifically contemplated hereunder or by the Security Documents, (i) each of the Security Documents, in form and substance satisfactory to the Lenders, relating to each of the Mortgaged Properties shall have been duly executed by the parties thereto and delivered to the Collateral Agent and shall be in full force and effect, (ii) each of such Mortgaged Properties shall not be subject to any Lien other than those permitted under Section 6.02 or Liens which shall be paid from the proceeds of the First Credit Event and for which the Borrower has received a commitment from the holder thereof to release the same upon payoff from the proceeds of the First Credit Event and (iii) each of such Security Documents shall be in proper form for filing and

 

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recording in the recording office as specified on Schedule 3.19(c); provided that to the extent a perfected security interest in any assets of a type that cannot be perfected by the filing of a UCC financing statement or the delivery of stock certificates is not able to be provided on the Closing Date after the Borrower’s use of commercially reasonable efforts to do so, the providing of a perfected security interest in such assets shall not constitute a condition precedent to the Borrowing on the Closing Date but such requirement to create a perfected security interest in such assets shall be satisfied after the Closing Date pursuant to Section 5.13.

 

(k)  The Administrative Agent shall have received a copy of, or a certificate as to coverage under, the insurance policies required by Section 5.02 and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a customary lender’s loss payable endorsement and to name the Collateral Agent as additional insured, in form and substance satisfactory to the Administrative Agent.

 

(l)  The Acquisition and the other Transactions shall be consummated substantially simultaneously with the initial funding of Loans on the Closing Date in accordance with applicable law and on the terms in this Agreement and in the Merger Agreement (without any amendment, modification or waiver thereof that is materially adverse to the Lenders (as reasonably determined by the Administrative Agent) without the prior written consent of the Administrative Agent). The Administrative Agent shall have received copies of the Merger Agreement and all certificates, opinions and other documents delivered thereunder, certified by a Financial Officer as being complete and correct.

 

(m)  The Equity Contribution shall have been made and the Administrative Agent shall be satisfied with the capitalization and structure of Holdings and the Borrower.

 

(n)  All principal, premium, if any, interest, fees and other amounts due or outstanding under the Existing Debt shall have been, or substantially simultaneously with the initial funding of Loans on the Closing Date shall be, paid in full, the commitments thereunder terminated and all guarantees and security in support thereof discharged and released, and the Administrative Agent shall have received reasonably satisfactory evidence thereof. Immediately after giving effect to the Transactions and the other transactions contemplated hereby, Holdings, the Borrower and the Subsidiaries shall have outstanding no Indebtedness or preferred stock other than (a) Indebtedness outstanding under this Agreement, (b) the First Lien Loans, (c) Indebtedness set forth on Schedule 6.01 and (d) other Indebtedness in an outstanding principal amount not to exceed $100,000 in the aggregate.

 

(o)  The Administrative Agent shall have received a certificate from the chief financial  officer  of Holdings  certifying  that  Holdings  and  its  subsidiaries,  on  a consolidated basis after giving effect to the Transactions to occur on the Closing Date, are solvent.

 

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(p)  The Lenders shall have received, to the extent reasonably requested, at least five Business Days prior to the Closing Date, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act.

 

(q)  The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Responsible Officer of the Company, certifying that not less than $10,000,000 in aggregate cash liquidity is in bank accounts in jurisdictions appropriate for carrying out the Company’s operational objectives (which, for greater certainty, shall not include financing in whole or in part any Permitted Acquisition), including planned Capital Expenditures, during the period from the Closing Date to the first anniversary of the Closing Date.

 

The Borrowing of the Loans on the Closing Date shall be deemed to constitute a representation and warranty by the Borrower and Holdings on such date as to the matters specified in paragraphs (b) of this Article IV.

 

ARTICLE V

 

Affirmative Covenants

 

Each of Holdings and the Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all fees and all other expenses or amounts payable under any Loan Document shall have been paid in full, unless the Required Lenders shall otherwise consent in writing, each of Holdings and the Borrower will, and will cause each of the Subsidiaries to:

 

SECTION 5.01. Existence; Compliance with Laws; Businesses and Properties.   (a)  Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05.

 

(b)   Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; maintain and operate such business in substantially the manner in which it is presently conducted and operated; comply in all material respects with all applicable laws, rules, regulations and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted; and at all times maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times.

 

SECTION 5.02. Insurance. (a)  Keep its  insurable properties adequately insured at all times by financially sound and reputable insurers; maintain such other insurance, to

 

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such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations or jurisdictions, including, where applicable, public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it; and maintain such other insurance as may be required by applicable law.

 

(b)   Cause all such policies covering any Collateral to be endorsed or otherwise amended to include a customary lender’s loss payable endorsement, in form and substance satisfactory to the Administrative Agent and the Collateral Agent, which endorsement (subject to the Intercreditor Agreement) shall provide that, from and after the Closing Date, if the insurance carrier shall have received written notice from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to the Borrower or the Loan Parties under such policies directly to the Collateral Agent; cause all such policies to provide that neither the Borrower, the Administrative Agent, the Collateral Agent nor any other party shall be a coinsurer thereunder and to contain a “Replacement Cost Endorsement”, without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably require from time to time to protect their interests; deliver evidence reasonably satisfactory to the Collateral Agent of all such policies; cause each such policy to provide that it shall not be canceled or not renewed (i) by reason of nonpayment of premium upon not less than 10 days’ prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent (giving the Administrative Agent and the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason upon not less than 30 days’ prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent; deliver evidence reasonably satisfactory to the Administrative Agent and the Collateral Agent, prior to the cancellation or nonrenewal of any such policy of insurance, of renewal of a policy previously delivered to the Administrative Agent and the Collateral Agent, together with evidence reasonably satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium therefor.

 

(c)   If at any time the area in which the Premises (as defined in the Mortgages) are located is designated (i) a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time reasonably require, and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time, or (ii) a “Zone 1” area, obtain earthquake insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time reasonably require.

 

(d)   With respect to any Mortgaged Property, carry and maintain comprehensive general liability insurance including the “broad form CGL endorsement” or its equivalent and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any

 

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and all causes of loss, in no event for a combined single limit of less than $10,000,000 naming the Collateral Agent as an additional insured (subject to the Intercreditor Agreement), on forms satisfactory to the Collateral Agent.

 

(e)   Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.02 is taken out by any Loan Party; and promptly deliver evidence reasonably satisfactory to the Administrative Agent and the Collateral Agent of such policy or policies.

 

SECTION 5.03. Obligations and Taxes.    Pay its Indebtedness and other material obligations promptly and in accordance with their terms and pay and discharge all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP

 

SECTION 5.04. Financial Statements, Reports, etc.    In the case of the Borrower, furnish to the Administrative Agent, which shall furnish to each Lender:

 

(a)   within 120 days after the end of each fiscal year, its consolidated balance sheet and related statements of income, stockholders’ equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal year and the results of its operations and the operations of such Subsidiaries during such year, together with comparative figures for the immediately preceding fiscal year, all audited by UHY LLP or other independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which opinion shall be without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

 

(b)   within 45 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheet and related statements of income, stockholders’ equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal quarter and the results of its operations and the operations of such Subsidiaries during such fiscal quarter and the then elapsed portion of the fiscal year, and comparative figures for the same periods in the immediately preceding fiscal year, all certified by one of its Financial Officers as fairly presenting the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

 

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(c)   concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of the accounting firm (in the case of paragraph (a)) or Financial Officer (in the case of paragraph (b)) opining on or certifying such statements (which certificate, when furnished by an accounting firm, may be limited to accounting matters and disclaim responsibility for legal interpretations) (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.10 and 6.11 and, in the case of a certificate delivered with the financial statements required by paragraph (a) above, setting forth the Borrower’s calculation of Excess Cash Flow;

 

(d)   within 90 days after the beginning of each fiscal year of the Borrower, a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flows as of the end of and for such fiscal year and setting forth the assumptions used for purposes of preparing such budget) and, promptly when available, any significant revisions of such budget;

 

(e)   promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Holdings, the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed to its shareholders, as the case may be;

 

(f)   promptly after the receipt thereof by Holdings or the Borrower or any of their respective subsidiaries, a copy of any “management letter” received by any such person from its certified public accountants and the management’s response thereto;

 

(g)   promptly after the request by any Lender, all documentation and other information that such Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act;

 

(h)   promptly after the request by the Administrative Agent or any Lender, on and after the effectiveness of the applicable provisions of the Pension Act, copies of (i) any documents described in Section 101(k)(l) of ERISA that the Borrower or any of its ERISA Affiliates may request with respect to any Multiemployer Plan and (ii) any notices described in Section 101(1)(1) of ERISA that the Borrower or any of its ERISA Affiliates may request with respect to any Multiemployer Plan; provided that if the Borrower or any of its ERISA Affiliates has not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, the Borrower or the applicable ERISA Affiliate shall promptly make a request for such documents or notices from such administrator or sponsor and shall provide copies of such documents and notices promptly after receipt thereof; and

 

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(i)   promptly, from time to time, such other information regarding the operations, business affairs and financial condition of Holdings, the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.

 

Documents required to be delivered pursuant to Section 5.04(e) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i)   on which the Borrower posts such documents, or provides a link thereto at http://www.strlab.com/www/strlab/; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or sponsored by the Administrative Agent); provided that: (x) the Borrower shall deliver paper copies of such documents to the Administrative Agent if it so requests or to any Lender that so requests the Borrower to deliver such paper copies and (y) the Borrower shall notify the Administrative Agent and each Lender of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents.

 

SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative Agent and each Lender prompt written notice of the following:

 

(a)   any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto;

 

(b)   the filing or commencement of, or any written threat or written notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against the Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect;

 

(c)   the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

 

(d)   any development that has resulted in, or could reasonably be expected to result in a Material Adverse Effect; and

 

(e)   any change in the Borrower’s corporate rating by S&P, in the Borrower’s corporate family rating by Moody’s or in the ratings of the Credit Facility by S&P or Moody’s, or any notice from either such agency indicating its intent to effect such a change or to place the Borrower or the Credit Facility on a “CreditWatch” or “WatchList” or any similar list, in each case with negative implications, or its cessation of, or its intent to cease, rating the Borrower or the Credit Facility.

 

SECTION 5.06. Information Regarding Collateral. (a) Furnish to the Administrative Agent prompt written notice of any change (i) in any Loan Party’s corporate name, (ii) in the jurisdiction of organization or formation of any Loan Party, (iii) in any Loan Party’s identity or corporate structure or (iv) in any Loan Party’s Federal

 

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Taxpayer Identification Number. Holdings and the Borrower agree not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are reasonably required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. Holdings and the Borrower also agree promptly to notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed.

 

(b)   In the case of the Borrower, each year, at the time of delivery of the annual financial statements with respect to the preceding fiscal year pursuant to Section 5.04(a), deliver to the Administrative Agent a certificate of a Financial Officer (i) setting forth the information required pursuant to Section 2 of the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Closing Date or the date of the most recent certificate delivered pursuant to this Section 5.06 and (ii) to the extent applicable, certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings recordings or registrations, including all refilings, recordings and registrations, containing a description of the Article 9 Collateral (as defined in the Guarantee and Collateral Agreement) have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) of this Section 5.06(b) to the extent necessary to protect and perfect the security interest for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). Each certificate delivered pursuant to this Section 5.06(b)(ii) shall identify in the format of Section 13 of the Perfection Certificate all Intellectual Property of any Loan Party in existence on the date thereof and not then listed on the Perfection Certificate or previously so identified to the Collateral Agent.

 

SECTION 5.07. Maintaining Records; Access to Properties and Inspections; Maintenance of Ratings. (a) Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law are made of all dealings and transactions in relation to its business and activities. Each Loan Party will, and will cause each of its subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender to visit and inspect the financial records and the properties of such person at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances and condition of such person with the officers thereof and independent accountants therefor; provided that as long as no Default or Event of Default shall have occurred and shall be continuing, no more than one such site inspection may be conducted in any calendar year (which shall be conducted by representatives designated by the Administrative Agent).

 

(b)   In the case of Holdings and the Borrower, use commercially reasonable efforts to cause the Credit Facility to be continuously rated by S&P and Moody’s, and in the case of the Borrower, use commercially reasonable efforts to maintain a corporate rating from S&P and a corporate family rating from Moody’s, in each case in respect of the Borrower.

 

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SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans only for the purposes specified in the introductory statement to this Agreement.

 

SECTION 5.09. Employee Benefits. (a) With respect to any Plan or Foreign Pension Plan sponsored or maintained by Borrower or any Subsidiary, comply in all material respects with the applicable provisions of ERISA and the Code and the laws applicable to any Foreign Pension Plan and (b) furnish to the Administrative Agent as soon as possible after, and in any event within ten days after any responsible officer of Holdings, the Borrower or any ERISA Affiliate knows or has reason to know that, any ERISA Event has occurred that, alone or together with any other ERISA Event could reasonably be expected to result in a Material Adverse Effect, a statement of a Financial Officer of Holdings or the Borrower setting forth details as to such ERISA Event and the action, if any, that Holdings or the Borrower proposes to take with respect thereto.

 

SECTION 5.10. Compliance with Environmental Laws. Comply, and use commercially reasonable efforts to cause all lessees and other persons occupying its properties to comply, in all respects with all Environmental Laws applicable to its operations and properties; obtain and renew all environmental permits necessary for its operations and properties; and conduct any remedial action in accordance with Environmental Laws, except where the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; provided, however, that none of Holdings, the Borrower or any Subsidiary shall be required to undertake any remedial action required by Environmental Laws to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP.

 

SECTION 5.11. Further Assurances. Execute any and all further documents, financing statements, agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements, mortgages and deeds of trust) that may be required under applicable law, or that the Required Lenders, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority (subject to the Intercreditor Agreement) of the security interests created or intended to be created by the Security Documents. The Borrower will cause any subsequently acquired or organized Domestic Subsidiary to become a Loan Party by executing the Guarantee and Collateral Agreement and each applicable Security Document in favor of the Collateral Agent. In addition, from time to time, the Borrower will, at its cost and expense, promptly secure the Obligations by pledging or creating, or causing to be pledged or created, perfected security interests with respect to such of its assets and properties as the Administrative Agent or the Required Lenders shall designate (it being understood that it is the intent of the parties that the Obligations shall be secured by substantially all the assets of the Borrower and its Domestic Subsidiaries (including real and other properties acquired subsequent to the Closing Date)). Such security interests and Liens will be created under the Security Documents and other security agreements, mortgages, deeds of trust, leasehold mortgages, assignments of leases and rents, modifications and other

 

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instruments and documents in form and substance satisfactory to the Collateral Agent, and the Borrower shall deliver or cause to be delivered to the Lenders all such instruments and documents (including lien searches, surveys, abstracts, appraisals, legal opinions and a policy or policies of title insurance issued by a nationally recognized title insurance company, together with such endorsements, coinsurance and reinsurance as may be requested by the Collateral Agent and the Lenders, insuring the Mortgages as valid first liens, free of Liens other than those permitted under Section 6.02) as the Collateral Agent shall reasonably request to evidence compliance with this Section. The Borrower agrees to provide such evidence as the Collateral Agent shall reasonably request as to the perfection and priority status of each such security interest and Lien. In furtherance of the foregoing, the Borrower will give prompt notice to the Administrative Agent of the acquisition by it or any of the Subsidiaries of any real property (or any interest in real property) having a value in excess of $1,000,000.

 

SECTION 5.12. Interest Rate Protection. No later than the 90th day after the Closing Date, the Borrower shall enter into, and for a minimum of three years thereafter maintain, Hedging Agreements acceptable to the Administrative Agent that result in at least 50% of the aggregate principal amount of its funded long-term Indebtedness being effectively subject to a fixed or maximum interest rate acceptable to the Administrative Agent.

 

SECTION 5.13. Post-Closing Items. Holdings and the Borrower shall, and shall cause each of the Subsidiaries to, take all necessary actions to satisfy the requirements set forth on Schedule 5.13 within the period specified on such schedule (or such longer period as may be consented to by the Administrative Agent).

 

SECTION 5.14. Funds Update. The Borrower shall, with respect to each of the first four fiscal quarters ending after the Closing Date, provide the Administrative Agent with reasonably detailed information about the uses of the $10,000,000 described in paragraph (q) of Article IV, all of which such uses to be consistent with those contemplated by paragraph (q) of Article IV.

 

SECTION 5.15. Purchase Price Adjustments. Holdings and the Borrower shall, take all actions reasonably necessary to ensure that all purchase price adjustments related to the Transactions payable by the sellers shall be paid to the Borrower.

 

ARTICLE VI

 

Negative Covenants

 

Each of Holdings and the Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all fees and all other expenses or amounts payable under any Loan Document have been paid in full, unless the Required Lenders shall otherwise consent in writing, neither Holdings nor the Borrower will, nor will they cause or permit any of the Subsidiaries to:

 

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SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any Indebtedness, except:

 

(a)   Indebtedness existing on the date hereof and set forth in Schedule 6.01 and any extensions, renewals or replacements of such Indebtedness to the extent the principal amount of such Indebtedness is not increased, neither the final maturity nor the weighted average life to maturity of such Indebtedness is decreased, such Indebtedness, if subordinated to the Obligations, remains so subordinated on terms no less favorable to the Lenders, and the original obligors in respect of such Indebtedness remain the only obligors thereon;

 

(b)   Indebtedness created hereunder and under the other Loan Documents;

 

(c)   intercompany Indebtedness of the Borrower and the Subsidiaries to the extent permitted by Section 6.04(c);

 

(d)   Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this Section 6.01(d), when combined with the aggregate principal amount of all Capital Lease Obligations and Synthetic Lease Obligations incurred pursuant to Section 6.01(e), shall not exceed $10,000,000 at any time outstanding;

 

(e)   Capital Lease Obligations and Synthetic Lease Obligations in an aggregate principal amount, when combined with the aggregate principal amount of all Indebtedness incurred pursuant to Section 6.01(d), not in excess of $10,000,000 at any time outstanding;

 

(f)   Attributable Debt in respect of Sale/Leaseback Transactions; provided, however, that the aggregate principal amount of all Indebtedness then outstanding and incurred pursuant to this clause (f) does not exceed (i) $6,000,000 in respect of property owned by the Borrower or any Subsidiary on the Closing Date or (ii) $6,000,000 in respect of any property acquired by the Borrower or any Subsidiary after the Closing Date;

 

(g)   Indebtedness under performance bonds or with respect to workers’ compensation claims, in each case incurred in the ordinary course of business;

 

(h)   Indebtedness incurred by Foreign Subsidiaries in an aggregate principal amount not exceeding $12,000,000 at any time outstanding;

 

(i)   Indebtedness under the First Lien Credit Agreement and any refinancings thereof in an aggregate principal amount at any time outstanding not

 

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to exceed the Cap Amount as permitted under and as defined in the Intercreditor Agreement;

 

(j)   Indebtedness under the Spanish Subsidized Loans in an aggregate principal amount not exceeding $5,000,000 at any time outstanding; and

 

(k)   other unsecured Indebtedness of the Borrower or the Subsidiaries in an aggregate principal amount not exceeding $6,000,000 at any time outstanding.

 

SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including Equity Interests or other securities of any person, including the Borrower or any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except:

 

(a)   Liens on property or assets of the Borrower and its Subsidiaries existing on the date hereof and set forth in Schedule 6.02; provided that such Liens shall secure only those obligations which they secure on the date hereof and extensions, renewals and replacements thereof permitted hereunder;

 

(b)   any Lien created under the Loan Documents;

 

(c)   any First Priority Liens;

 

(d)   any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or assets of any person that becomes a Subsidiary after the date hereof prior to the time such person becomes a Subsidiary, as the case may be; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such person becoming a Subsidiary, (ii) such Lien does not apply to any other property or assets of Holdings, the Borrower or any Subsidiary and (iii) such Lien secures only those obligations which it secures on the date of such acquisition or the date such person becomes a Subsidiary, as the case may be;

 

(e)   Liens for taxes not yet due or which are being contested in compliance with Section 5.03 or are immaterial in amount;

 

(f)   carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business and securing obligations that are not due and payable or which are being contested in compliance with Section 5.03;

 

(g)   pledges and deposits made in the ordinary course of business in compliance with workmen’s compensation, unemployment insurance and other social security laws or regulations;

 

(h)   deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory

 

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obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

 

(i)   zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;

 

(j)   purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary; provided that (i) such security interests secure Indebtedness permitted by Section 6.01, (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 90 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 100% of the lesser of the cost or the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) and (iv) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary;

 

(k)   Liens arising out of judgments or awards in respect of which Holdings, the Borrower or any of the Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such appeal or proceedings; provided that the aggregate amount of all such judgments or awards (and any cash and the fair market value of any property subject to such Liens) does not exceed $6,000,000 at any time outstanding;

 

(l)   any Lien securing Indebtedness incurred by the Borrower or any Subsidiary pursuant to Section 6.01(f); provided that any such Liens attach only to the property that is the subject of, and proceeds thereof in connection with, the applicable Sale/Leaseback Transaction and shall not attach to any other property of the Borrower or any Subsidiary theretofore existing or (except for any such proceeds) which arises after the date thereof;

 

(m)   Liens on assets of Foreign Subsidiaries; provided that (i) such Liens do not extend to, or encumber, assets that constitute Collateral or the Equity Interests of the Borrower or any of the Subsidiaries, and (ii) such Liens extending to the assets of any Foreign Subsidiary secure only Indebtedness incurred by such Foreign Subsidiary pursuant to Section 6.01(h); and

 

(n)   other Liens that do not, individually or in the aggregate, secure obligations (or encumber property with a fair market value) in excess of $3,000,000 at any one time.

 

SECTION 6.03. Sale/LeaseBack Transactions.    Enter into any Sale/Leaseback Transaction unless (a) the sale or transfer of such property is permitted by Section 6.05

 

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and (b) any Capital Lease Obligations, Synthetic Lease Obligations or Liens arising in connection therewith are permitted by Sections 6.01 and 6.02, as the case may be.

 

SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire any Equity Interests, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other person, except:

 

(a) (i)   investments by Holdings, the Borrower and the Subsidiaries existing on the date hereof in the Equity Interests of the Borrower and the Subsidiaries, (ii) additional investments by Holdings, the Borrower and the Subsidiaries in the Equity Interests of the Borrower and the Subsidiaries and (iii) investments in STR India Pvt. Ltd. in an amount not to exceed $5,000,000 in the aggregate; provided that (A) any such Equity Interests held by a Loan Party other than Equity Interests in Excluded Assets (as defined in the Guarantee and Collateral Agreement) shall be pledged pursuant to the Guarantee and Collateral Agreement (subject to the limitations applicable to voting stock of a Foreign Subsidiary referred to therein) and (B) the aggregate amount of investments made after the Closing Date (other than pursuant to clause (iii) above) by Loan Parties in, and loans and advances made after the Closing Date by Loan Parties to, Subsidiaries that are not Loan Parties (determined without regard to any write-downs or write-offs of such investments, loans and advances) shall not exceed $12,000,000 at any time outstanding;

 

(b) Permitted Investments;

 

(c) loans or advances made by the Borrower to any Subsidiary and made by any Subsidiary to Holdings, the Borrower or any other Subsidiary; provided that (i) any such loans and advances made by a Loan Party to Subsidiaries that are not Loan Parties shall be evidenced by a promissory note pledged to the Collateral Agent for the ratable benefit of the Secured Parties pursuant to the Guarantee and Collateral Agreement and (ii) the amount of such loans and advances made by Loan Parties to Subsidiaries that are not Loan Parties shall be subject to the limitation set forth in clause (a) above;

 

(d) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

 

(e) the Borrower and the Subsidiaries may make loans and advances in the ordinary course of business to their respective employees so long as the aggregate principal amount thereof at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $2,000,000;

 

(f) the Borrower and the Subsidiaries may enter into Hedging Agreements that (i) are required by Section 5.12 or (ii) are not speculative in nature and are

 

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related to income derived from foreign operations of the Borrower or any Subsidiary or otherwise related to purchases from foreign suppliers;

 

(g) the Borrower or any Subsidiary may acquire all or substantially all the assets of a person or line of business of such person, or not less than 85% of the Equity Interests (other than directors’ qualifying shares) of a person (referred to herein as the “Acquired Entity” ); provided that (i) such acquisition was not preceded by an unsolicited tender offer for such Equity Interests by, or proxy contest initiated by, Holdings, the Borrower or any Subsidiary; (ii) the Acquired Entity shall be in a similar or reasonably related or incidental line of business to those of the Borrower and the Subsidiaries as conducted during the current and most recently concluded calendar year; and (iii) at the time of such transaction (A) both before and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; (B) the Borrower would be in compliance with the covenant set forth in Sections 6.11 as of the most recently completed period of four consecutive fiscal quarters ending prior to such transaction for which the financial statements and certificates required by Section 5.04(a) or 5.04(b), as the case may be, and 5.04(c) have been delivered, after giving pro forma effect to such transaction and to any other event occurring after such period as to which pro forma recalculation is appropriate (including any other transaction described in this Section 6.04(g) occurring after such period) as if such transaction had occurred as of the first day of such period; (C) the total consideration paid in connection with such acquisition and an y other acquisitions pursuant to this Section 6.04(g) (including any Indebtedness of the Acquired Entity that is assumed by the Borrower or any Subsidiary following such acquisition and any payments following such acquisition pursuant to earn-out provisions or similar obligations) shall not in the aggregate exceed $50,000,000 and (D) the Borrower shall have delivered a certificate of a Financial Officer, certifying as to the foregoing and containing reasonably detailed calculations in support thereof, in form and substance satisfactory to the Administrative Agent; (iv) the Borrower shall comply, and shall cause the Acquired Entity to comply, with the applicable provisions of Section 5.11 and the Security Documents; and (v) if the Acquired Entity would not constitute a wholly owned Subsidiary of the Borrower and would be required to become a Subsidiary Guarantor hereunder, each holder of an Equity Interest therein (other than the Borrower or any wholly owned Subsidiary) shall have executed and delivered to the Collateral Agent a consent and waiver in form and substance reasonably satisfactory to the Collateral Agent permitting such Acquired Entity to become a Subsidiary Guarantor hereunder and a party to the Security Documents (any acquisition of an Acquired Entity meeting all the criteria of this Section 6.04(g) being referred to herein as a “Permitted Acquisition” ); and

 

(h) in addition to investments permitted by paragraphs (a) through (g) above, additional investments, loans and advances by the Borrower and the Subsidiaries so long as the aggregate amount invested, loaned or advanced pursuant to this paragraph (h) (determined without regard to any write-downs or

 

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write-offs of such investments, loans and advances) does not exceed $6,000,000 in the aggregate.

 

SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions.    (a) Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all the assets (whether now owned or hereafter acquired) of the Borrower or less than all the Equity Interests of any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person, except that (i) the Borrower and any Subsidiary may purchase and sell inventory in the ordinary course of business and (ii) if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing (u) any wholly owned Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (v) Holdings may merge, liquidate, reorganize or otherwise be restructured into a newly-formed Loan Party in a transaction the purpose of which is to re-organize Holdings as a corporation; provided that (1) such transaction (or series of transactions) does not result in a material increase in the Tax obligations payable in cash (on a consolidated basis) for Holdings, the Borrower, each Subsidiary of the Borrower and the holders of Equity Interests in Holdings and (2) immediately following such transaction, Holdings is in compliance with all requirements of the Guarantee and Collateral Agreement and has satisfied its obligations under Section 5.11 (including the execution of any further documents, financing statements, agreements and instruments, and the taking of all other actions, that may be reasonably requested by the Required Lenders, the Administrative Agent or the Collateral Agent), (w) any wholly owned Subsidiary may merge into or consolidate with any other wholly owned Subsidiary in a transaction in which the surviving entity is a wholly owned Subsidiary and no person other than the Borrower or a wholly owned Subsidiary receives any consideration ( provided that if any party to any such transaction is a Loan Party, the surviving entity of such transaction shall be a Loan Party), (x) the Borrower and the Subsidiaries may make Permitted Acquisitions and (y) any Inactive Subsidiary of the Borrower may be dissolved or liquidated.

 

(b)  Make any Asset Sale otherwise permitted under paragraph (a) above unless (i) such Asset Sale is for consideration at least 75% of which is cash, (ii) such consideration is at least equal to the fair market value of the assets being sold, transferred, leased or disposed of and (iii) the fair market value of all assets sold, transferred, leased or disposed of pursuant to this paragraph (b) shall not exceed (x) $10,000,000 in any fiscal year or (y) $50,000,000 in the aggregate.

 

SECTION 6.06. Restricted Payments; Restrictive Agreements. (a) Declare or make, or agree to declare or make, directly or indirectly, any Restricted Payment (including pursuant to any Synthetic Purchase Agreement), or incur any obligation (contingent or otherwise) to do so; provided, however, that (i) any Subsidiary may declare and pay dividends or make other distributions ratably to its equity holders, (ii) so long as no Event of Default or Default shall have occurred and be continuing or would result therefrom, the Borrower may, or the Borrower may make distributions to Holdings

 

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so that Holdings may, repurchase its Equity Interests owned by employees of Holdings, the Borrower or the Subsidiaries or make payments to employees of Holdings, the Borrower or the Subsidiaries upon termination of employment in connection with the exercise of stock options, stock appreciation rights or similar equity incentives or equity based incentives pursuant to management incentive plans or in connection with the death or disability of such employees in an aggregate amount not to exceed $2,000,000 in any fiscal year, (iii) the Borrower may make Restricted Payments to Holdings (x) in an amount not to exceed $500,000 in any fiscal year, to the extent necessary to pay general corporate and overhead expenses incurred by Holdings in the ordinary course of business and (y) if Borrower is a member of a consolidated, combined or unitary group of which Borrower is not the common parent, in an amount necessary to pay the Tax liabilities of the common parent (the Common Parent ) of the consolidated, combined or unitary group of which Borrower is not the common parent directly attributable to (or arising as a result of) the operations of the Borrower and the Subsidiaries; provided, however, that (A) the amount of such dividends shall not exceed the amount that the Borrower and the Subsidiaries would be required to pay in respect of Federal, state and local taxes were the Borrower and the Subsidiaries to pay such taxes as members of a consolidated, combined or unitary group of which Borrower is the common parent and (B) all Restricted Payments made to Holdings pursuant to this clause (iii) are used by Holdings to make Restricted Payments as specified in clause (iv) within 20 days of the receipt thereof and (iv) if Borrower is a member of a consolidated, combined or unitary group of which Borrower is not the common parent, then Holdings may make Restricted Payments to the Common Parent (x) in an amount not to exceed $500,000 in any fiscal year, to the extent necessary to pay general corporate and overhead expenses incurred by the Common Parent in the ordinary course of business and (y) in an amount necessary to pay the Tax liabilities of the Common Parent directly attributable to (or arising as a result of) the operations of the Borrower and the Subsidiaries; provided, however, that (A) the amount of such dividends shall not exceed the amount that the Borrower and the Subsidiaries would be required to pay in respect of Federal, state and local taxes were the Borrower and the Subsidiaries to pay such taxes as members of a consolidated, combined or unitary group of which Borrower is the common parent and (B) all Restricted Payments made to the Common Parent pursuant to this clause (iv) are used by the Common Parent for the purposes specified herein within 20 days of the receipt thereof.

 

(b)   Enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (i) the ability of Holdings, the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets to secure the Obligations, or (ii) the ability of any Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (A) the foregoing shall not apply to restrictions and conditions imposed by law or by any Loan Document or any First Lien Loan Document, (B) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (C) the foregoing shall not apply to restrictions and conditions imposed on any Foreign Subsidiary by the terms of any

 

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Indebtedness of such Foreign Subsidiary permitted to be incurred hereunder, (D) clause (i) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (E) clause (i) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.

 

SECTION 6.07. Tran sactions with Affiliates. Except for transactions between or among Loan Parties and transactions pursuant to the Advisory Services and Monitoring Agreements as in effect as of the Closing Date, sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except that the Borrower or any Subsidiary may engage in any of the foregoing transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties.

 

SECTION 6.08. Business of Holdings, Borrower and Subsidiaries. (a) With respect to Holdings, engage in any business activities or have any assets or liabilities other than its ownership of the Equity Interests of the Borrower and liabilities incidental thereto, including its liabilities as a Guarantor pursuant to the Guarantee and Collateral Agreement and its Guarantees of obligations under the First Lien Loan Documents.

 

(b)   With respect to the Borrower and its Subsidiaries, engage at any time in any business or business activity other than the business currently conducted by it and business activities reasonably incidental thereto.

 

SECTION 6.09. Other Indeb tedness and Agreements. (a) Permit (i) any waiver, supplement, modification, amendment, termination or release of any indenture, instrument or agreement pursuant to which the First Lien Loan or any subordinated Material Indebtedness of Holdings, the Borrower or any of the Subsidiaries is outstanding if the effect of such waiver, supplement, modification, amendment, termination or release would materially increase the obligations of the obligor or confer additional material rights on the holder of such Indebtedness in a manner adverse to Holdings, the Borrower, any of the Subsidiaries or the Lenders; provided that the First Lien Loan Documents may be amended in accordance with the Intercreditor Agreement, or (ii) any waiver, supplement, modification or amendment of its certificate of incorporation, by-laws, operating, management or partnership agreement or other organizational documents to the extent any such waiver, supplement modification or amendment would be adverse to the Lenders in any material respect.

 

(b)  (i)  Make any distribution, whether in cash, property, securities or a combination thereof, other than regular scheduled payments of principal and interest as and when due (to the extent not prohibited by applicable subordination provisions), in respect of, or pay, or commit to pay, or directly or indirectly (including pursuant to any Synthetic Purchase Agreement) redeem, repurchase, retire or otherwise acquire for consideration, or set apart any sum for the aforesaid purposes any Indebtedness (other than the Loans and the First Lien Loans), or (ii) pay in cash any amount in respect of any

 

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Indebtedness or preferred Equity Interests that may at the obligor’s option be paid in kind or in other securities (other than the payment of PIK Interest on the Loans in accordance with Section 2.06).

 

SECTION 6.10. Capital Expenditures. (a) Permit the aggregate amount of Capital Expenditures made by the Borrower and the Subsidiaries in any period set forth below to exceed the amount set forth below for such period:

 

Period

 

Amount

 

Closing Date - December 31, 2007

 

$

15,000,000

 

January 1, 2008 - December 31, 2008

 

$

10,000,000

 

January 1, 2009 - December 31, 2009

 

$

12,000,000

 

January 1, 2010 - December 31, 2010

 

$

14,000,000

 

January 1, 2011 - December 31, 2011

 

$

15,000,000

 

January 1, 2012 - December 31, 2012

 

$

16,000,000

 

January 1, 2013 - December 31, 2013

 

$

17,000,000

 

January 1, 2014 - Maturity Date

 

$

18,000,000

 

 

If, in any fiscal year, the Consolidated EBITDA exceeds the Baseline EBITDA for such fiscal year, the amount of permitted Capital Expenditures set forth above in respect of such fiscal year shall be increased (but not decreased) by 40% of the excess of (i) the Consolidated EBITDA for such fiscal year over (ii) the Baseline EBITDA for such fiscal year.

 

Any unused amount of Capital Expenditures permitted to be made during each fiscal year may be carried forward to, and made, at any time during the next succeeding two fiscal years; provided that , for purposes of this sentence, Capital Expenditures made in any fiscal year shall be deemed to use the amount permitted to be made during such fiscal year set forth above before using the amount carried forward to such fiscal year.

 

(b)   Notwithstanding subsection (a) above, the Borrower and its Subsidiaries may make Capital Expenditures with the Net Cash Proceeds of (A) Specified Equity Issuances by Holdings, the Borrower or any of their respective subsidiaries permitted hereunder or (B) any Asset Sale, or any sale of used, worn out or surplus equipment, in each case to the extent such Net Cash Proceeds are not required to be applied to prepay loans, or cash collateralize, letters of credit, under the First Lien Credit Agreement or to prepay Loans hereunder.

 

SECTION 6.11. Maximum Total Leverage Ratio. Permit the Total Leverage Ratio at any time during a period set forth below to be greater than the ratio set forth opposite such period below:

 

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Period

 

Ratio

 

September 30, 2007

 

8.00 to 1.00

 

December 31, 2007

 

8.00 to 1.00

 

March 31, 2008

 

8.00 to 1.00

 

June 30, 2008

 

8.00 to 1.00

 

September 30, 2008

 

7.75 to 1.00

 

December 31, 2008

 

7.25 to 1.00

 

March 31, 2009

 

6.50 to 1.00

 

June 30, 2009

 

6.50 to 1.00

 

September 30, 2009

 

6.50 to 1.00

 

December 31, 2009

 

6.50 to 1.00

 

March 31, 2010

 

6.25 to 1.00

 

June 30, 2010

 

6.25 to 1.00

 

September 30, 2010

 

6.25 to 1.00

 

December 31, 2010

 

6.25 to 1.00

 

March 31, 2011

 

5.25 to 1.00

 

June 30, 2011

 

5.25 to 1.00

 

September 30, 2011

 

5.25 to 1.00

 

December 31, 2011

 

5.25 to 1.00

 

March 31, 2012

 

5.25 to 1.00

 

 

SECTION 6.12. Fiscal Year.   With respect to Holdings and the Borrower, change their fiscal year-end to a date other than December 31.

 

SECTION 6.13. Certain Equity Securities.    Issue any Equity Interest that is not Qualified Capital Stock.

 

ARTICLE VII

 

Events of Default

 

In case of the happening of any of the following events ( “Events of Default” ):

 

(a)  any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished;

 

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(b)  default shall be made in the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;

 

(c)  default shall be made in the payment of any interest on any Loan or any fee or any other amount (other than an amount referred to in (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days;

 

(d)  default shall be made in the due observance or performance by Holdings, the Borrower or any Subsidiary of any covenant, condition or agreement contained in Section 5.01(a), 5.05(a), 5.05(d) or 5.08 or in Article VI;

 

(e)  default shall be made in the due observance or performance by Holdings, the Borrower or any Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or the Required Lenders to the Borrower;

 

(f) (i) Holdings, the Borrower or any Subsidiary shall fail to pay any principal, interest or other amount due in respect of any Material Indebtedness, when and as the same shall become due and payable after giving effect to any grace periods applicable thereto or (ii) any other event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity or that results in the termination or permits any counterparty to terminate any Hedging Agreement the obligations under which constitute Material Indebtedness; provided that this clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness or to mandatory prepayments of First Lien Loans required pursuant to Section 2.13 of the First Lien Credit Agreement; provided further that an Event of Default under and as defined in the First Lien Credit Agreement (other than the Events of Default described in paragraphs (b) or (c) of Article VII of the First Lien Credit Agreement to which this proviso shall not apply) (a “ First Lien Event of Default ”) shall not in and of itself constitute an Event of Default under this paragraph until the earlier to occur of (x) a period of 60 days has elapsed following notice of such First Lien Event of Default from the administrative agent or any lender under the First Lien Credit Agreement to the Borrower, or from the Borrower to such administrative agent or any such lender, and (y) the acceleration of the maturity of any of the loans or the termination of any of the commitments under the First Lien Credit Agreement in connection with such First Lien Event of Default or the exercise of any remedies

 

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by the lenders or the administrative agent under the First Lien Credit Agreement in connection with such First Lien Event of Default;

 

(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Holdings, the Borrower or any Material Subsidiary (or any group of Subsidiaries that, when taken together, would constitute a Material Subsidiary), or of a substantial part of the property or assets of Holdings, the Borrower or a Material Subsidiary (or any group of Subsidiaries that, when taken together, would constitute a Material Subsidiary), under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Material Subsidiary (or any group of Subsidiaries that, when taken together, would constitute a Material Subsidiary) or for a substantial part of the property or assets of Holdings, the Borrower or a Material Subsidiary (or any group of Subsidiaries that, when taken together, would constitute a Material Subsidiary) or (iii) the winding-up or liquidation of Holdings, the Borrower or any Material Subsidiary (or any group of Subsidiaries that, when taken together, would constitute a Material Subsidiary); and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

 

(h) Holdings, the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Subsidiary or for a substantial part of the property or assets of Holdings, the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing;

 

(i) one or more judgments shall be rendered against Holdings, the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of Holdings, the Borrower or any Subsidiary to enforce any such judgment and such judgment either (i) is for the payment of money in an aggregate amount in excess of $6,000,000 or (ii) is for injunctive relief and could reasonably be expected to result in a Material Adverse Effect;

 

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(j) an ERISA Event shall have occurred that, when taken together with all other such ERISA Events, could reasonably be expected to result in actual liability to Holdings, the Borrower or any Subsidiary (or any combination thereof), including directly or indirectly through their ERISA Affiliates, in an aggregate amount exceeding $6,000,000;

 

(k) any Guarantee under the Guarantee and Collateral Agreement for any reason shall cease to be in full force and effect (other than in accordance with its terms), or any Guarantor shall deny in writing that it has any further liability under the Guarantee and Collateral Agreement (other than as a result of the discharge of such Guarantor in accordance with the terms of the Loan Documents);

 

(l) any security interest purported to be created by any Security Document shall cease to be, or shall be asserted by the Borrower or any other Loan Party not to be, a valid, perfected, first priority (subject to the Intercreditor Agreement) (except as otherwise expressly provided in this Agreement or such Security Document) security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the First Lien Collateral Agent (as defined in the Intercreditor Agreement) to maintain possession of certificates representing securities pledged under the Guarantee and Collateral Agreement and except to the extent that such loss is covered by a lender’s title insurance policy and the related insurer promptly after such loss shall have acknowledged in writing that such loss is covered by such title insurance policy;

 

(m) the Intercreditor Agreement shall, in whole or in part, cease to be effective or cease to be legally valid, binding and enforceable against any party thereto (or against any person on whose behalf any such party makes any covenants or agreements therein), or otherwise not be effective to create the rights and obligations purported to be created thereunder unless the same results directly from the action or inaction of the Collateral Agent; or

 

(n) there shall have occurred a Change in Control;

 

then, and in every such event (other than an event with respect to Holdings or the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event

 

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with respect to Holdings or the Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.

 

Notwithstanding anything to the contrary contained in the foregoing provisions of this Article VII, in the event that the Borrower fails to comply with Section 6.11, until the expiration of the 10th day subsequent to the date the certificate calculating such compliance is required to be delivered pursuant to Section 5.04(c), the Borrower shall have the right to issue common equity for cash or otherwise receive cash contributions to the capital of the Borrower (collectively, the “ Cure Rig ht ”), and upon receipt by the Borrower of such cash (the “ Cure Amount ”) pursuant to the exercise of the Borrower of such Cure Right the applicable covenants shall be recalculated giving effect to the following pro forma adjustments:

 

(i)  Consolidated EBITDA for the immediately preceding fiscal quarter shall be increased, solely for the purpose of measuring compliance with Section 6.11 for such fiscal quarter and each period thereafter in which the Consolidated EBITDA for such fiscal quarter is contained, and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; and

 

(ii)  if, after giving effect to the foregoing recalculations, the Borrower shall then be in compliance with Section 6.11 as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, then the applicable breach or default of the covenants set forth in Section 6.11 that had occurred shall be deemed cured for all purposes of this Agreement as fully as if such breach or default had never occurred.

 

Notwithstanding anything herein to the contrary, (A) in each four quarter period there shall be a period of at least two fiscal quarters in which the Cure Right is not exercised, (B) in each eight quarter period there shall be a period of at least four fiscal quarters in which the Cure Right is not exercised, (C) the amount of any Cure Amount shall be no greater than the amount required to cause the Borrower to be in compliance with Section 6.11 and (D) all Cure Amounts shall be disregarded for all other purposes under this Agreement, including any baskets in Article VI and the definitions of Applicable Margin and Required Prepayment Percentage.

 

ARTICLE VIII

 

The Adm inistrative Agent and the Collateral Agent

 

Each of the Lenders hereby irrevocably appoints the Administrative Agent and the Collateral Agent (for purposes of this Article VIII, the Administrative Agent and the

 

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Collateral Agent are referred to collectively as the “Agents” ) its agent and authorizes the Agents to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents. The Lenders acknowledge and agree that the Administrative Agent shall also act, subject to and in accordance with the terms of the Intercreditor Agreement as the administrative agent and collateral agent for the lenders under the First Lien Credit Agreement.

 

The bank serving as the Administrative Agent and/or the Collateral Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Holdings, the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

 

Neither Agent shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) neither Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) neither Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is instructed in writing to exercise by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.08), and (c) except as expressly set forth in the Loan Documents, neither Agent shall have any duty to disclose, nor shall it be liable for the failure to disclose, any information relating to Holdings, the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent and/or Collateral Agent or any of its Affiliates in any capacity. Neither Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.08) or in the absence of its own gross negligence or willful misconduct. Neither Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by Holdings, the Borrower or a Lender, and neither Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to such Agent.

 

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Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper person. Each Agent may also rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by it. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Credit Facility as well as activities as Agent.

 

Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, with the consent of the Borrower (not to be unreasonably withheld or delayed), unless a default of payment or bankruptcy is continuing, in which case no such consent shall be required, to appoint a successor, which shall be a bank with an office in the United States or an Affiliate of such bank with an office in the United States. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation (including, for greater certainty, due to the failure of the Borrower to consent to such appointment), then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After an Agent’s resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while acting as Agent.

 

Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other

 

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Loan Document any related agreement or any document furnished hereunder or thereunder.

 

ARTICLE IX

 

Miscellaneous

 

SECTION 9.01. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or nationally recognized overnight courier service, mailed by certified or registered mail or sent by fax, as follows:

 

(a)   if to the Borrower or Holdings, to it at 10 Water Street, Enfield, CT 06082-4899, Attention of Chief Financial Officer (Fax No. (860) 749-9158); with a copy to STR Holdings LLC, c/o DLJ Merchant Banking, Attention of Dan Gerwitz (Fax No. (860) 749-9158);

 

(b)   if to the Administrative Agent, to Credit Suisse, Eleven Madison Avenue, New York, NY 10010, Attention of Matthew Carter RDU-2 (Fax No. (212) 743-1842); and

 

(c)   if to a Lender, to it at its address (or fax number) set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto.

 

All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or nationally recognized overnight courier service or sent by fax or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. As agreed to among Holdings, the Borrower, the Administrative Agent and the applicable Lenders from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable person provided from time to time by such person so long as a copy of such notice or other communication is also sent by one of the other methods set forth above; provided, however, that notices given by the Borrower to the Administrative Agent pursuant to Article II may not be delivered by email unless otherwise agreed to by the Administrative Agent on a case by case basis.

 

SECTION 9.02. Survival of Agreement.   All covenants, agreements, representations and warranties made by the Borrower or Holdings herein and in the certificates or other instruments prepared or delivered in connection with, or pursuant to, this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of, or any accrued interest on, any Loan or any fee or any other amount payable under this Agreement or any other Loan Document is

 

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outstanding and unpaid and so long as the Commitments have not been terminated. The provisions of Sections 2.13, 2.15, 2.19 and 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent or any Lender.

 

SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower, Holdings and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto.

 

SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower, Holdings, the Administrative Agent, the Collateral Agent or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

 

(b)   Each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it), with notice to the Borrower delivered from time to time and the prior written consent of the Administrative Agent (not to be unreasonably withheld or delayed); provided, however, that (i) the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall be in an integral multiple of, and not less than, $1,000,000 (or, if less, the entire remaining amount of such Lender’s Commitment or Loans of the relevant Class), (ii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent (or, if previously agreed with the Administrative Agent, manually), and shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent), and (iii) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and all applicable tax forms. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to any fees accrued for its account and not yet paid).

 

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(c)   By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i)   such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Commitment, and the outstanding balances of its Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance; (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or the financial condition of the Borrower or any Subsidiary or the performance or observance by the Borrower or any Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is an Eligible Assignee and is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 3.05(a) or delivered pursuant to Section 5.04 the Intercreditor Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee agrees to be bound by the terms of the Intercreditor Agreement; (vii) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent and the Collateral Agent, respectively, by the terms hereof, together with such powers as are reasonably incidental thereto; and (viii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

 

(d)   The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register” ). The entries in the Register shall be conclusive and the Borrower the Administrative Agent, the Collateral Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Collateral Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

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(e)   Upon its receipt of, and consent to, a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already he a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above, if applicable, and the written consent of the Administrative Agent and, if required, the Borrower to such assignment and any applicable tax forms, the Administrative Agent shall promptly (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e).

 

(f)   Each Lender may without the consent of the Borrower or the Administrative Agent sell participations to one or more banks or other persons in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other persons shall be entitled to the benefit of the cost protection provisions contained in Sections 2.13, 2.15 and 2.19 to the same extent as if they were Lenders (but, with respect to any particular participant, to no greater extent than the Lender that sold the participation to such participant), (iv) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable to such participating bank or person hereunder or the amount of principal of or the rate at which interest is payable on the Loans in which such participating bank or person has an interest, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans in which such participating bank or person has an interest, increasing or extending the Commitments in which such participating bank or person has an interest or releasing all or substantially all of the value of the Guarantees (other than in connection with the sale of such Guarantor in a transaction permitted by Section 6.05) or all or substantially all of the Collateral) and (v) such Lender, acting solely for this purpose as an agent of the Borrower, shall maintain a register for the recordation of the names and addresses of the participating bank or other person and the Commitments of and principal amounts of and interest on the Loans owing and paid to, such participating banks pursuant to the terms hereof from time to time and the amounts received by such Lender from the Borrower and whether such amounts constitute principal interest fees or other amounts and each participating bank’s share thereof.

 

(g)   Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to

 

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customary exceptions) to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.16.

 

(h)   Any Lender may at any time assign all or any portion of its rights under this Agreement to secure extensions of credit to such Lender or in support of obligations owed by such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.

 

(i)   Notwithstanding anything to the contrary contained herein, any Lender (a “ Granting Lender ”) may grant to a special purpose funding vehicle (an “ SPC ”) , identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 9.04, any SPC may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC.

 

(j)   Neither Holdings nor the Borrower shall assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent and each Lender, and any attempted assignment without such consent shall be null and void.

 

SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent and the Collateral Agent in connection with the syndication of the Credit Facility and the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or

 

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thereof (whether or not the transactions hereby or thereby contemplated shall be consummated) or incurred by the Administrative Agent, the Collateral Agent or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made hereunder, including the reasonable and documented fees, charges and disbursements of Cravath, Swaine & Moore LLP, counsel for the Administrative Agent and the Collateral Agent, and, in connection with any such enforcement or protection, the fees, charges and disbursements of any other counsel for the Administrative Agent, the Collateral Agent or any Lender.

 

(b)   The Borrower agrees to indemnify the Administrative Agent, the Collateral Agent, each Lender and each Related Party of any of the foregoing persons, their successors and assigns and members of each of the foregoing (each such person being called an “ Indemnitee ”) against, and to hold each Indemnitee harmless from, any and all reasonable and documented losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby (including the syndication of the Credit Facility), (ii) the use of the proceeds of the Loans, or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (and regardless of whether such matter is initiated by a third party or by the Borrower, any other Loan Party or any of their respective Affiliates); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee or (y) result from the release of Hazardous Materials or a violation of Environmental Laws that first occurs at a particular owned real property after such property has been transferred to any Indemnitees or its successor or assigns by foreclosure, deed-in-lieu of foreclosure or similar transfer except to the extent caused by, or attributable to the actions of or failure to act by, the Borrower or any of its Subsidiaries.

 

(c)   To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent or the Collateral Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent or the Collateral Agent, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or the Collateral Agent in its capacity as such. For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its share of the sum of the outstanding Loans and unused Commitments at the time.

 

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(d)  To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof.

 

(e)  The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent or any Lender. All amounts due under this Section 9.05 shall be payable on written demand therefor.

 

SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, except to the extent prohibited by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower or Holdings against any of and all the obligations of the Borrower or Holdings now or hereafter existing under this Agreement and other Loan Documents held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 9.06 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

 

SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the Administrative Agent, the Collateral Agent or any Lender in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Collateral Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.   No notice or demand on the

 

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Borrower or Holdings in any case shall entitle the Borrower or Holdings to any other or further notice or demand in similar or other circumstances.

 

(b)  Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower, Holdings and the Required Lenders; provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan, without the prior written consent of each Lender directly adversely affected thereby, (ii) increase or extend the Commitment or decrease or extend the date for payment of any fees of any Lender without the prior written consent of such Lender, (iii) amend or modify the pro rata requirements of Section 2.16, the provisions of Section 9.04(j) or the provisions of this Section or release all or substantially all of the value of the Guarantees (other than in connection with the sale of such Guarantor in a transaction permitted by Section 6.05) or all or substantially all of the Collateral (except as provided in the Intercreditor Agreement), without the prior written consent of each Lender, (iv) change the provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of one Class differently from the rights of Lenders holding Loans of any other Class without the prior written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each adversely affected Class, (v) modify the protections afforded to an SPC pursuant to the provisions of Section 9.04(i) without the written consent of such SPC or (vi) reduce the percentage contained in the definition of the term “Required Lenders” without the prior written consent of each Lender (it being understood that with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Commitments on the date hereof); provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Collateral Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent or the Collateral Agent.

 

SECTION 9.09. In terest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges” ), shall exceed the maximum lawful rate (the “Maximum Rate” ) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan or participation hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or participation but were not payable as a result of the operation of this Section 9.09 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or participations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

 

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SECTION 9.10. Entire Agreement. This Agreement, the Fee Letter and the other Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Any other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any person (other than the parties hereto and thereto, their respective successors and assigns permitted hereunder and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Collateral Agent and the Lenders) any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.

 

SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARIS1NG OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

 

SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 9.13. Counterparts . This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 9.03. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

SECTION 9.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this

 

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Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

 

SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party hereto may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any other party hereto or their respective properties in the courts of any jurisdiction.

 

(b)  Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(c)  Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

 

SECTION 9.16. Confidentiality. Each of the Administrative Agent, the Collateral Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ officers, directors, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) upon notice to the Borrower (to the extent practicable and permitted under applicable laws or regulations), to the extent requested by any regulatory authority or quasi-regulatory authority (such as the National Association of Insurance Commissioners), (c) upon notice to the Borrower (to the extent practicable and permitted under applicable laws or regulations), to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) in connection with the exercise of any remedies hereunder or under the other Loan Documents or any suit, action or proceeding relating to the enforcement of its rights hereunder or thereunder, (e) subject to an agreement containing provisions substantially the same as those of this

 

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Section 9.16, to (i) any actual or prospective assignee of or participant in any of its rights or obligations under this Agreement and the other Loan Documents or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower or any Subsidiary or any of their respective obligations, (f) with the consent of the Borrower or (g) to the extent such Information becomes publicly available other than as a result of a breach of this Section 9.16. For the purposes of this Section, “Information” shall mean all information received from the Borrower or Holdings and related to the Borrower or Holdings or their business, other than any such information that was available to the Administrative Agent, the Collateral Agent or any Lender on a nonconfidential basis prior to its disclosure by the Borrower or Holdings. Any person required to maintain the confidentiality of Information as provided in this Section 9.16 shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person would accord its own confidential information.

 

SECTION 9.17. USA PATRIOT Act Notice. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies Holdings and the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies Holdings and the Borrower, which information includes the name and address of Holdings and the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify Holdings and the Borrower in accordance with the USA PATRIOT Act.

 

SECTION 9.18. Intercreditor Agreement. Reference is made to the Intercreditor Agreement. Each Lender hereunder (a) acknowledges that it has received a copy of the Intercreditor Agreement, (b) consents to the subordination of Liens provided for in the Intercreditor Agreement, (c) agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor Agreement and (d) authorizes and instructs the Collateral Agent to enter into the Intercreditor Agreement as Collateral Agent and on behalf of such Lender. The foregoing provisions are intended as an inducement to the lenders under the First Lien Credit Agreement to permit the incurrence of Indebtedness under this Agreement and to extend credit to the Borrower and such lenders are intended third party beneficiaries of such provisions.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

 

STR ACQUISITION, INC.,

 

 

 

 

by

 

 

 

 

 

/s/ Jason Metakis

 

 

Name: Jason Metakis

 

 

T itle: Treasurer

 

 

 

STR HOLDINGS LLC,

 

 

 

 

by

 

 

 

 

 

/s/ Jason Metakis

 

 

Name: Jason Metakis

 

 

Title: Treasurer

 



 

 

CREDIT SUISSE, CAYMAN ISLANDS
BRANCH, individually and as
Administrative Agent and Collateral Agent,

 

 

 

 

by

 

 

 

 

/s/ Shanka Mohan

 

 

Name: Shanka Mohan

 

 

Title: Vice President

 

 

 

 

 

by

 

 

 

 

/s/ James Neira

 

 

Name: James Neira

 

 

Title: Associate

 


 

SCHEDULE 1.01(a)

Subsidiary Guarantors

 

Cal Safety Compliance Corporation

Specialized Technology Resources (International), Inc.

Shuster Laboratories, Inc.

Supply Chain Consulting Services Corporation

Specialized Technology Resources (Florida), Inc

STR Materials Science, Inc.

 

2



 

SCHEDULE 1.01(b)

 

Mortgaged Property

 

Property located at 10 Water Street, Enfield, CT 06082, described as follows:

 

That certain piece or parcel of land on the south side of Hazard Avenue (Route 190) in the Town of Enfield, County of Hartford and State of Connecticut, shown as “Parcel A” on Sheet 1 of 2 on a map or plan entitled: “Prepared for Springborn Laboratories, Inc. Hazard Avenue & Abbe Road, Enfield, Conn. . . Scale: 1 in. = 100 ft. Date: June 30, 1987. . . Rev. 2-24-88. . . Alford Associates, Inc. Civil Engineers, Windsor, Connecticut,” which map or plan is on file with the Enfield Town Clerk in Volume 220, Page 3033, and more particularly bounded and described as follows:

 

Beginning at a point on the south side of Hazard Avenue, which point is the northwest corner of the herein described premises and the northeast corner of land now or formerly of Raymond F. and Suzanne Aquilio, as shown on said map; running thence along the arc of a curve to the right having a radius of 933.00 feet and a delta angle of 9° 34' 03" a distance of 155.79 feet to a CHD marker; running thence N 83° 19' 04" E a distance of 414.00 feet to a CHD monument; running thence N 82° 58' 24" E a distance of 143.64 feet to a point, the last three courses running along the south side of Hazard Avenue; running thence S 09° 53' 12" E a distance of 435.66 feet along land now or formerly of National Railroad Passenger Corporation as shown on said map; running thence S 89° 20' 43" W a distance of 143.38 feet to a point; S 64° 08' 57" W a distance of 9.72 feet to a point; S 00° 09' 17" W a distance of 14.24 feet to a point; S 89° 08' 16" W a distance of 51.12 feet to a point; S 86° 57' 00" W a distance of 105.15 feet to a point; N 89° 55' 46" W a distance of 384.08 feet to a point; S 79° 44' 15" W a distance of 139.61 feet to a set iron pin; N 69° 59' 38" W a distance of 129.11 feet to a set iron pin, the last eight (8) courses being along the Scantic River as shown on said map; running thence N 24° 34' 57" E a distance of 401.37 feet along land now or formerly of Thomas E. and Diane S. Eastwood, James C. and Nancy A. Miczak and Raymond F. and Suzanne Aquilia, in part by each, to the point or place of beginning.

 

TOGETHER WITH an easement from the State of Connecticut to Springborn Testing & Research, Inc. dated December 31, 1997 and recorded in Volume 1156, Page 123 of the Enfield Land Records.

 

3



 

Schedule 2.01
Lenders and Commitments

 

Second Lien Term Loan Facility Lender

 

Second Lien Term Loan
Commitment on Closing Date

 

Credit Suisse

 

$

75,000,000

 

TOTAL COMMITMENT

 

$

75,000,000

 

 



 

SCHEDULE 3.08

Subsidiaries

 

STR Acquisition, Inc. — 100% owned by STR Holdings LLC

 

Specialized Technology Resources, Inc. (“STR”) (to be the survivor of merger with STR Acquisition, Inc.; thereafter to be 100% owned by STR Holdings LLC.

 

(a)

(Unless otherwise noted, STR owns 100% of the equity securities of each subsidiary)

 

 

1.

Specialized Technology Resources (Singapore) Pte Ltd (100% of voting stock owned by STR; small portion of non-voting stock owned by STR-HK)

 

 

2.

Specialised Technology Resources (UK) Limited (“STR-UK”)

 

 

3.

Cal Safety Compliance Corporation (“CSCC”)

 

 

4.

Cal Safety Compliance Corporation de CV (Gregory Gardner owns one share of the 50 outstanding shares; remaining shares owned by CSCC)

 

 

5.

Specialized Technology Resources Laboratuar Hizmetleri Anonim Sirketi (99% owned by Company, .25% owned by each of STR-UK, STR-HK, STRAG and CSCC).

 

 

6.

STR Laboratuar Hizmetleri ve Gozetim Ltd. (dormant)

 

 

7.

STR-Registrar LLC (51% owned by STR; 49% owned by Science, Technology and Registration Holdings, Inc. (formerly Quality Paradigms))

 

 

8.

Specialized Technology Resources (International), Inc. (“STR-I”)

 

 

9.

Specialized Technology Resources (Taiwan) Ltd. (owned by STR-I)

 

 

10.

Specialized Technology Resources (Hong Kong) Ltd. (“STR-HK”) (Dennis Jilot owns one share of the 120,002 outstanding shares and remaining shares owned by STR-I)

 

 

11.

Specialized Technology Resources (Shanghai) Ltd. (owned by STR-HK)

 

 

12.

STR Testing & Inspection AG (“STR AG”) (owned by STR-I)

 

 

13.

Specialized Technology Resources España S.A.

 

 

14.

Shuster Laboratories, Inc.

 

 

15.

Supply Chain Consulting Services Corporation (dormant)

 

 

16.

Specialized Technology Resources (India) Pvt Ltd. (Samir Rastogi owns 1 share of the 5,000 outstanding shares; remaining shares owned by STR)

 

 

17.

Specialized Technology Resources (Florida), Inc.

 

 

18.

Specialised Technology Resources Lanka (Private) Limited (50% owned by STR; 50% owned by STR-I)

 

 

19.

STR Materials Science, Inc. (dormant)

 

 

20.

Tex Analysis Laboratory Private Limited (owned by STR-HK)

 

 

21.

STR Vietnam Co. Ltd. (owned by STR-HK)

 

5



 

(b)

Joint Ventures

 

STR France S.A.S. (STR-UK owns a 50% interest)

 

CTC Asia Ltd. (STR owns 50%)

 

6



 

SCHEDULE 3.09

 

Litigation

 

1.             Specialized Technology Resources, Inc. (“STR”) is aware of certain inquiries in India with respect to the former operations of Cal Safety Compliance Corporation (“CSCC”) in India by the Enforcement Directorate concerning the manner in which it was conducting business in India and its authority to do so. These inquiries are ongoing and during the course of them a current employee of STR in India was questioned but no further steps have been taken.

 

2.             The local manager of CSCC in India has received a complaint dated August 19, 2005, filed in the Court of the Judicial Magistrate at Gurgaon, alleging certain improprieties on a website maintained by CSCC with respect to the display of the map of India and the Indian national flag. This matter is ongoing.

 

3.             On April 17, 2006, a proceeding was initiated against Specialized Technology Resources Espana S.A. by the family of a worker injured at its plant in Spain. The proceeding is criminal in nature at this time, but as is custom in Spain, it is expected that civil claims will arise relating to this claim. Specialized Technology Resources España S.A. has local counsel and has referred the matter to its insurer.

 

7



 

SCHEDULE 3.17

 

Environmental Matters

 

None.

 

8



 

Schedule 3.18

 

Insurance

 

Type of Insurance

 

Policy Number

 

Carrier

 

 

 

 

 

Domestic Commercial General Liability

 

10CESOA9276

 

The Hartford (Twin City Fire)

 

 

 

 

 

Commercial Umbrella Liability

 

AUC591925100

 

American Guarantee & Liability (Zurich)

 

 

 

 

 

D & O/EPL

 

626-00-58

 

AIG — Illinois National Ins. Co.

 

 

 

 

 

Forefront Portfolio Crime & Fiduciary Liability

 

8185-3181

 

Federal Insurance Company (Chubb)

 

 

 

 

 

Forefront Portfolio Kidnap/Ransom & Extortion

 

6804-1625

 

Federal Insurance Company (Chubb)

 

 

 

 

 

Errors & Omissions (Professional Liability)

 

1155784

 

Lexington Insurance

 

 

 

 

 

Foreign General Liability

 

GBO2901067

 

St. Paul Travelers

 

 

 

 

 

Global Marine/War Cargo

 

M-20159, WC-20159

 

Falvey Cargo

 

 

 

 

 

Flood Policies

 

2043437800
1011190076
2044479400
2044479500

 

American Bankers Ins. Co. of Florida

 

 

 

 

 

War Risk Coverage

 

8034573

 

AIG Life Ins. Co.

 

 

 

 

 

Adjustable Premium Term Life Insurance Policy (John F. Gual)

 

11305750

 

Massachusetts Mutual Life Insurance Company

 

 

 

 

 

Adjustable Premium Term Life Insurance Policy (Dennis Jilot)

 

1116S207

 

Massachusetts Mutual Life Insurance Company

 

 

 

 

 

Worldwide Property

 

GPAD3601751-A

 

ACE American Insurance Company

 

 

 

 

 

Workers Compensation

 

WCJZ91445093027

 

WAUSAU, Member of Liberty Mutual Group

 

 

 

 

 

Commercial Automobile

 

ASJZ91445093017

 

WAUSAU, Member of Liberty Mutual Group

 

9



 

Schedule 3.19(a)


UCC Filing Offices

 

Grantor

 

Filing Office(s)

 

 

 

STR Holdings LLC

 

Delaware Secretary of State

 

 

 

STR Acquisition, Inc.

 

Delaware Secretary of State

 

 

 

Specialized Technology Resources, Inc.

 

Delaware Secretary of State

 

Enfield, Connecticut Town Clerk

 

Somers, Connecticut Town Clerk

 

 

 

Cal Safety Compliance Corporation

 

California Secretary of State

 

Los Angeles County Registrar-Recorder/County Clerk

 

Hudson County, NJ

 

 

 

Specialized Technology Resources (International), Inc.

 

Delaware Secretary of State

 

 

 

Shuster Laboratories, Inc.

 

Delaware Secretary of State

 

Norfolk County (MA) Registry of Deeds

 

 

 

Supply Chain Consulting Services Corporation

 

Delaware Secretary of State

 

Los Angeles County Registrar-Recorder/County Clerk

 

 

 

Specialized Technology Resources (Florida), Inc.

 

FloridaUCC, Inc.

 

St. Johns County Circuit Court

 

 

 

STR Materials Science, Inc.

 

Delaware Secretary of State

 


 

Schedule 3.19(c)

 

Mortgage Filing Offices

 

Mortgage on the property owned by Specialized Technology Resources, Inc. located at 10 Water Street, Enfield, Connecticut to be filed in the Land Records of the Town of Enfield, Connecticut maintained by the Town Clerk of Enfield, Connecticut.

 



 

Schedule 3.20(a)

 

Owned Real Property

 

Address

 

Owned

 

Entity

 

 

 

 

 

10 Water Street
Enfield, CT 06082

 

Owned

 

Specialized Technology Resources, Inc.

 



 

Schedule 3.20(b)

 

Leased Real Property

 

Address

 

Leased

 

Entity

 

 

 

 

 

24 Scitico Road
Somers, CT

 

Leased

 

Specialized Technology Resources, Inc.

 

 

 

 

 

66 Hudson Street, 1 st  
Floor, Hoboken, NJ

 

Leased

 

Cal Safety Compliance Corporation

 

 

 

 

 

1122 West Washington Boulevard, Los Angeles, CA

 

Leased

 

Cal Safety Compliance Corporation

 

 

 

 

 

Units 425-427, 4 th  Floor,
Hankow Center, 5-155
Hankow Road, Tsim Sha
Tsui, Kowloon, HK

 

Leased

 

Cal Safety Compliance Corporation

 

 

 

 

 

House #162, 3 rd  Floor,
Road #1 (East), D.O.S.H.,
Baridhara, Gulshan,
Bangladesh 12121

 

Leased

 

Cal Safety Compliance Corporation

 

 

 

 

 

JL Barito II No. 33
Kebayoran Baru, Jakarta,
Indonesia 12130

 

Leased

 

Cal Safety Compliance Corporation

 

 

 

 

 

85 John Road, Canton,
MA 02021

 

Leased

 

Shuster Laboratories, Inc.

 

 

 

 

 

30 Iroquois Street, Saint
Augustine, FL 32085

 

Leased

 

Specialized Technology Resources (Florida), Inc.

 



 

Schedule 6.01

 

Existing Indebtedness

 

1.

Letter of Support dated February 2, 2006 to Lee Seng Chan & Co. (the auditors of Specialized Technology Resources (Singapore) Pte. Ltd.).

 

 

2.

Master Equipment Lease with Key Equipment Finance, dated September 16, 2005.

 

 

3.

Reimbursement Agreement dated January 14, 2007 between Specialized Technology Resources, Inc. and Webster Bank relating to Letter of Credit number 10304 dated January 9, 2007 for $821,684 in favor of Macro Engineering & Technology, Inc.

 

 

4.

Assignment of Certificate of Deposit dated June 14, 2007 made by Specialized Technology Resources, Inc. in favor of Webster Bank relating to the Assignment of an $862,768 Certificate of Deposit as collateral for Specialized Technology Resources, Inc.’s obligations under the Reimbursement Agreement set forth in item 3 above.

 



 

Schedule 6.02

 

Existing Liens

 

UCC Liens

 

Grantor

 

Secured Party

 

Jurisdiction

 

Date and File
Number

 

 

 

 

 

 

 

STR Holdings LLC

 

None

 

Delaware Secretary of State

 

 

 

 

 

 

 

 

 

STR Acquisition, Inc.

 

None

 

Delaware Secretary of State

 

 

 

 

 

 

 

 

 

Specialized Technology Resources, Inc.

 

ISO Capital, LLC

 

Delaware Secretary of State

 

12/11/02

2309129 9

 

 

 

 

 

 

 

 

 

Key Equipment Finance, Inc.

 

Delaware Secretary of State

 

9/21/05
5292107 1

 

 

 

 

 

 

 

 

 

None

 

Enfield, Connecticut Town Clerk

 

 

 

 

 

 

 

 

 

 

 

None

 

Somers, Connecticut Town Clerk

 

 

 

 

 

 

 

 

 

Cal Safety Compliance Corporation

 

None

 

Los Angeles County Registrar- Recorder/County Clerk

 

 

 

 

 

 

 

 

 

 

 

None

 

Hudson County (NJ) Register

 

 

 

 

 

 

 

 

 

Specialized Technology Resources (International), Inc.

 

None

 

 

 

 

 



 

Shuster Laboratories, Inc.

 

Key Equipment Finance, Inc.

 

Delaware Secretary of State

 

9/21/05

5292107 1

 

 

 

 

 

 

 

 

 

None

 

Norfolk County (MA) Registry of Deeds

 

 

 

 

 

 

 

 

 

STR Acquisition Sub, Inc. (now known as Shuster Laboratories, Inc.)

 

None

 

Delaware Secretary of State

 

 

 

 

 

 

 

 

 

 

 

None

 

Norfolk County (MA) Registry of Deeds

 

 

 

 

 

 

 

 

 

Supply Chain Consulting Services Corporation

 

None

 

Los Angeles County Registrar- Recorder/County Clerk

 

 

 

 

 

 

 

 

 

Specialized Technology Resources (Florida), Inc.

 

None

 

St. Johns County Circuit Court

 

 

 

 

 

 

 

 

 

Conplex, Inc., (now known as Specialized Technology Resources (Florida), Inc.)

 

Toyota Motor Credit Corporation

 

Florida Secured Transaction Registry

 

7/1/04

200407315878

 

 

 

 

 

 

 

 

 

None

 

St. Johns County Circuit Court

 

 

 

 

 

 

 

 

 

STR Materials Science, Inc.

 

None

 

Delaware Secretary of State

 

 

 

Permitted Encumbrances

 

1.                                        Taxes to the Town of Enfield not yet due and payable.

 

2.                                        Fire Taxes to the City of Enfield; which payments are current and not yet due and payable.

 

3.                                        The following matters as shown on the map filed in Map Volume 220, Page 3033 in the Office of the Enfield Town Clerk:

 

a.                                        Sanitary sewer easement and rights to construct and maintain drainage structures; and

 

b.                                       Notes shown thereon.

 



 

4.

Pole line easement in favor of the Connecticut Light and Power Company dated August 6, 1956 and recorded in Volume 151, Page 241 of the Enfield Land Records.

 

 

5.

Pole line easement in favor of the Connecticut Light and Power Company dated July 21, 1938 and recorded in Volume 84, Page 240 of the Enfield Land Records.

 

 

6.

Easement in favor of Hazardville Water Company recorded in Volume 107, Page 2 of the Enfield Land Records.

 

 

7.

Easement in favor of the Town of Enfield described in deed from DeBell & Richardson, Inc. dated July 10, 1984 and recorded in Volume 386, Page 443 of the Enfield Land Records.

 

 

8.

Permanent Right of Way Easement in favor of the State of Connecticut dated July 29, 1996 and recorded in Volume 1156, Page 131 of the Enfield Land Records. See also maps filed in Map Volume 220, Page 3037 and Map Volume 239, Pages 3968 and 3969 in the Office of the Enfield Town Clerk.

 

 

9.

Rights of others in and to any water courses on, touching or flowing through the premises.

 

 

10.

Possible public easement of use and enjoyment of the beach or shore area above the low water mark of the Scantic River.

 

 

11.

Terms and conditions of Easement from the State of Connecticut to Springborn Testing & Research, Inc. dated December 31, 1997 and recorded in Volume 1156, Page 123 of the Enfield Land Records (affects appurtenant rights only).

 

 

12.

Matters on a survey entitled “Improvement Location Survey Prepared For Specialized Technology Resources 504 Hazard Avenue a.k.a 10 Water Street Enfield, Conn.” Prepared by Alford Associates, Inc. Scale 1 In.= 30 Ft. Date: Feb. 20, 1996 Rev. 8-13-01 Updated Survey, Change Title Block:

 

 

a.

25’ side yard set back lines;

 

b.

concrete supports for oil tanks (oil tanks removed);

 

c.

encroaching drainage on the easterly property line;

 

d.

lean to shed encroaches 3.4” on the easterly property line;

 

e.

conc. retaining wall on the southerly property line;

 

f.

property line follows face of building on the southerly property line;

 

g.

dam on the southerly property line;

 

h.

Scantic River along southerly property line;

 

i.

Brook;

 

j.

Outlet pipes which encroach on the northerly property line;

 

k.

Existing culvert on the northerly property line;

 

1.

40’ set back line;

 

m.

water lines;

 

n.

gas lines; and

 

o.

Water Street (abandoned).

 

p.

Notes on said map.

 



 

1 3.

Sanitary Sewer Easement is shown per Water Street Sanitary Sewer Plan and Easement reserved to the Town of Enfield per Council Action Feb.10, 1975.

 

 

14.

Parcel may be subject to rights to construct and maintain drainage structure and rip rap acquired from Gordon Brothers by Connecticut D.O.T. per plan number 266, Sheet 2 of 2, April 30, 1930.

 

 

15.

Possible rights of others for ingress and egress over abandoned portion of Water Street.

 

 

16.

Possible rights of others as defined in the Council Minutes dated February 10, 1975 for the abandonment of Water Street.

 

 

1 7.

Assignment of Certificate of Deposit dated June 14, 2007 made by Specialized Technology Resources, Inc. in favor of Webster Bank relating to the Assignment of an $862,768 Certificate of Deposit as collateral for Specialized Technology Resources, Inc.’s obligations under the Reimbursement Agreement set forth in item 3 of Schedule 6.01 above.

 


 

EXHIBIT A

 

[FORM OF]

 

ADMINISTRATIVE QUESTIONNAIRE

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.

 

Agent Information

Agent Closing Contact

Credit Suisse

Fay Rollins

Eleven Madison Avenue

Tel: 212-325-9041

New York, NY 10010

Fax: 212-743-1422

 

E-Mail: fay.rollins@credit-suisse.com

 

Agent Wire Instructions

Bank of New York

ABA 021000018

Account Name: CSFB Agency Cayman Account

Account Number: 8900492627

 

It is very important that all of the requested information be completed accurately and that this questionnaire be returned promptly. If your institution is sub-allocating its allocation, please fill out an administrative questionnaire for each legal entity.

 

Legal Name of Lender to appear in Documentation:

 

 

Signature Block Information:

 

 

 

·

Signing Credit Agreement

o Yes

o No

 

 

 

 

 

 

·

Coming in via Assignment

o Yes

o No

 

Type of Lender:

 

 

(Bank, Asset Manager, Broker/Dealer, CLO/CDO; Finance Company, Hedge Fund, Insurance, Mutual Fund, Pension Fund, Other Regulated Investment Fund, Special Purpose Vehicle, Other-please specify)

 

Lender Parent:

 

 

Lender Domestic Address

 

Lender Eurodollar Address

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Contacts/Notification Methods: Borrowings, Paydowns, Interest, Fees, etc.

 

 

Primary Credit Contact

 

Secondary Credit Contact

 

 

 

 

Name:

 

 

 

 

 

 

 

Company:

 

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Telephone:

 

 

 

 

 

 

 

Facsimile:

 

 

 

 

 

 

 

E-Mail Address:

 

 

 

 

 

 

 

 

Primary Operations Contact

 

Secondary Operations Contact

 

 

 

 

Name:

 

 

 

 

 

 

 

Company:

 

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

Address:

 

 

 

 

Lender’s Domestic Wire Instructions

 

Bank Name:

 

 

 

ABA/Routing No.:

 

 

 

Account Name:

 

 

 

Account No.:

 

 

 

FFC Account Name:

 

 

 

FFC Account No.:

 

 

 

Attention:

 

 

 

Reference:

 

 

2



 

Tax Documents

 

NON-U.S. LENDER INSTITUTIONS :

 

I.  Corporations :

If your institution is incorporated outside of the United States for U.S. federal income tax purposes, and is the beneficial owner of the interest and other income it receives, you must complete one of the following three tax forms, as applicable to your institution: a.) Form W-8BEN (Certificate of Foreign Status of Beneficial Owner), b.) Form W-8ECI (Income Effectively Connected to a U.S. Trade or Business), or c.) Form W-8EXP (Certificate of Foreign Government or Governmental Agency).

 

A U.S. taxpayer identification number is required for any institution submitting Form W-8ECI. It is also required on Form W-8BEN for certain institutions claiming the benefits of a tax treaty with the U.S. Please refer to the instructions when completing the form applicable to your institution. In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms. An original tax form must be submitted.

 

II.  Flow-Through Entities :

If your institution is organized outside the U.S., and is classified for U.S. federal income tax purposes as either a Partnership, Trust, Qualified or Non-Qualified Intermediary, or other non-U.S. flow-through entity, an original Form W-8IMY (Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding) must be completed by the intermediary together with a withholding statement. Flow-through entities other than Qualified Intermediaries are required to include tax forms for each of the underlying beneficial owners.

 

Please refer to the instructions when completing this form. In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms. Original tax form(s) must be submitted.

 

U.S. LENDER INSTITUTIONS :

 

If your institution is incorporated or organized within the United States, you must complete and return Form W-9 (Request for Taxpayer Identification Number and Certification). Please be advised that we request that you submit an original Form W-9.

 

Pursuant to the language contained in the tax section of the Credit Agreement, the applicable tax form for your institution must be completed and returned prior to the first payment of income. Failure to provide the proper tax form when requested may subject your institution to U.S. tax withholding.

 

3



 

EXHIBIT B

 

[FORM OF]

 

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the Second Lien Credit Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among Specialized Technology Resources, Inc. (successor by merger to STR Acquisition, Inc.), a Delaware corporation (the Borrower ), STR Holdings LLC, a Delaware limited liability company ( Holdings ), the lenders from time to time party thereto (the Lenders ) and Credit Suisse, as administrative agent (in such capacity, the Administrative Agent ) and as collateral agent for the Lenders. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Credit Agreement.

 

1.     The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below (but not prior to the registration of the information contained herein in the Register pursuant to Section 9.04(e) of the Credit Agreement), the interests set forth below (the Assigned Interest ) in the Assignor’s rights and obligations under the Credit Agreement and the other Loan Documents, including, without limitation, the amounts and percentages set forth below of (i) the Commitments of the Assignor on the Effective Date and (ii) the Loans owing to the Assignor which are outstanding on the Effective Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 9.04(c) of the Credit Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement; provided that the obligations of the Assignor under Section 9.16 of the Credit Agreement shall survive the execution of this Assignment and Acceptance and the assignment of interests effected hereby.

 

2.     This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is organized under the laws of a jurisdiction outside the United States, any forms referred to in Section 2.19(e) of the Credit Agreement, duly completed and executed by such Assignee, (ii) if the Assignee is not already a Lender under the Credit Agreement, a completed Administrative Questionnaire and (iii) if required by Section 9.04(b) of the Credit Agreement, a processing and recordation fee of $3,500.

 

3.     This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York.

 



 

Date of Assignment:

 

Legal Name of Assignor ( Assignor ):

 

Legal Name of Assignee ( Assignee ):

 

Effective Date of Assignment ( Effective Date ):

 

Facility/Commitment

 

Principal Amount
Assigned(1)

 

Percentage Assigned of
Commitment(1) (set forth, to at least
8 decimals, as a percentage of the
Facility and the aggregate
Commitments of all Lenders
thereunder)

 

Loans/Commitments

 

$

 

%

 

 

[Remainder of page intentionally left blank]

 


(1)  Amount of Commitments and/or Loans assigned is governed by Section 9.04(b) of the Credit Agreement.

 

2



 

The terms set forth above are hereby agreed to:

 

Accepted:

 

 

 

                                  , as Assignor,

 

[CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent](2),

 

 

 

by:

 

 

 

 

 

 

 

 

 

 

Name:

 

by:

 

 

Title:

 

 

 

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

 

 

                                  , as Assignee,

 

by:

 

 

 

 

 

 

 

 

 

 

Name:

by:

 

 

 

Title:

 

 

 

 

 

Name:

 

 

 

Title:

 

 

 


(2)  To the extent required under the Credit Agreement.

 

3


 

EXHIBIT C

 

[FORM OF]

 

BORROWING REQUEST

 

Credit Suisse, as Administrative Agent

Eleven Madison Avenue

New York, New York 10010

 

ATTN: Agency Group

 

[DATE](l)

 

Ladies and Gentlemen:

 

The undersigned, STR ACQUISITION, INC., a Delaware corporation (the Borrower ”), refers to the Second Lien Credit Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ”), among the Borrower, STR Holdings LLC, a Delaware limited liability company (“ Holdings ”), the lenders from time to time party thereto (the Lenders ”) and Credit Suisse, as administrative agent (in such capacity, the Administrative Agent ”) and as collateral agent for the Lenders. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

 

The Borrower hereby gives you notice pursuant to Section 2.03 of the Credit Agreement that it requests a Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Borrowing is requested to be made:

 

(A)

Type of Borrowing:(2)

 

 

 

 

(B)

Date of Borrowing:(3)

 

 

 

 

(C)

Account Number and Location:

 

 

 

 

(D)

Principal Amount of Borrowing:

 

 

 

 

(E)

Interest Period:(4)

 

 


(1)           Must be notified irrevocably by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon (New York City time), three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 noon (New York City time), one Business Day before a proposed Borrowing, in each case to be promptly confirmed by hand delivery or fax.

 

(2)  Specify whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing.

 

(3)  Date of Borrowing must be a Business Day.

 

(4)  If such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto.

 



 

The Borrower hereby represents and warrants to the Administrative Agent and the Lenders that, on the date of this Borrowing Request and on the date of the related Borrowing, the conditions to lending specified in Article IV of the Credit Agreement have been satisfied.

 

 

STR ACQUISITION, INC.

 

 

 

by

 

 

 

 

 

 

Name:

 

 

Title:

 

2


 

EXHIBIT D

 

[FORM OF]

 

SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT

 



 

EXECUTION COPY

 

 

SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT

 

dated as of

 

June 15, 2007

 

among

 

STR ACQUISITION, INC.,

 

STR HOLDINGS LLC,

 

the Subsidiaries of the Borrower
from time to time party hereto

 

and

 

CREDIT SUISSE,
as Collateral Agent

 

THIS IS THE SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT REFERRED TO IN (A) THE INTERCREDITOR AGREEMENT OF EVEN DATE HEREWITH AMONG STR ACQUISITION, INC., STR HOLDINGS LLC, THE SUBSIDIARIES OF THE BORROWER FROM TIME TO TIME PARTY THERETO AND CREDIT SUISSE, AS FIRST LIEN COLLATERAL AGENT AND AS SECOND LIEN COLLATERAL AGENT AND (B) THE OTHER SECURITY DOCUMENTS REFERRED TO IN THE CREDIT AGREEMENTS REFERRED TO HEREIN.

 

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

 

 

 

Definitions

 

 

 

SECTION 1.01. Credit Agreement

 

2

SECTION 1.02. Other Defined Terms

 

2

 

 

 

ARTICLE II

 

 

 

Guarantee

 

 

 

SECTION 2.01. Guarantee

 

6

SECTION 2.02. Guarantee of Payment

 

7

SECTION 2.03. No Limitations, Etc.

 

7

SECTION 2.04. Reinstatement

 

8

SECTION 2.05. Agreement To Pay; Subrogation

 

8

SECTION 2.06. Information

 

9

 

 

 

ARTICLE III

 

 

 

Pledge of Securities

 

 

 

SECTION 3.01. Pledge

 

9

SECTION 3.02. Delivery of the Pledged Collateral

 

10

SECTION 3.03. Representations, Warranties and Covenants

 

10

SECTION 3.04. Certification of Limited Liability Company Interests and Limited Partnership Interests

 

12

SECTION 3.05. Registration in Nominee Name; Denominations

 

12

SECTION 3.06. Voting Rights; Dividends and Interest, Etc.

 

12

 

 

 

ARTICLE IV

 

 

 

Security Interests in Personal Property

 

 

 

SECTION 4.01. Security Interest

 

15

SECTION 4.02. Representations and Warranties

 

16

SECTION 4.03. Covenants

 

18

SECTION 4.04. Other Actions

 

21

SECTION 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral

 

24

 



 

ARTICLE V

 

 

 

Remedies

 

 

 

SECTION 5.01. Remedies Upon Default

 

26

SECTION 5.02. Application of Proceeds

 

27

SECTION 5.03. Grant of License to Use Intellectual Property

 

28

SECTION 5.04. Securities Act, Etc.

 

28

 

 

 

ARTICLE VI

 

 

 

Indemnity, Subrogation and Subordination

 

 

 

SECTION 6.01. Indemnity and Subrogation

 

29

SECTION 6.02. Contribution and Subrogation

 

30

SECTION 6.03. Subordination

 

30

 

 

 

ARTICLE VII

 

 

 

Miscellaneous

 

 

 

SECTION 7.01. Notices

 

30

SECTION 7.02. Security Interest Absolute

 

31

SECTION 7.03. Survival of Agreement

 

31

SECTION 7.04. Binding Effect; Several Agreement

 

31

SECTION 7.05. Successors and Assigns

 

32

SECTION 7.06. Collateral Agent’s Fees and Expenses; Indemnification

 

32

SECTION 7.07. Collateral Agent Appointed Attorney-in-Fact

 

32

SECTION 7.08. Applicable Law

 

33

SECTION 7.09. Waivers; Amendment

 

33

SECTION 7.10. WAIVER OF JURY TRIAL

 

34

SECTION 7.11. Severability

 

34

SECTION 7.12. Counterparts

 

34

SECTION 7.13. Headings

 

35

SECTION 7.14. Jurisdiction; Consent to Service of Process

 

35

SECTION 7.15. Termination or Release

 

35

SECTION 7.16. Additional Subsidiaries

 

36

SECTION 7.17. Right of Setoff

 

36

 

ii



 

Schedules

 

 

 

Schedule I

Subsidiary Guarantors

Schedule II

Equity Interests; Pledged Debt Securities

Schedule III

Intellectual Property

 

 

Exhibits

 

 

 

Exhibit A

Form of Supplement

Exhibit B

Form of Perfection Certificate

 

iii



 

SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT dated as of June 15, 2007 (this “Agreement” ), among STR ACQUISITION, INC., a Delaware corporation, which substantially simultaneously with the execution hereof shall be merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation ( “STR” ), with STR being the surviving entity (the “Borrower” ), STR HOLDINGS LLC, a Delaware limited liability company ( “Holdings” ), the Subsidiaries of the Borrower from time to time party hereto and CREDIT SUISSE ( “Credit Suisse” ), as collateral agent (in such capacity, the “Collateral Agent” ).

 

PRELIMINARY STATEMENT

 

Reference is made to (a) the Second Lien Credit Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement” ) , among the Borrower, Holdings, the lenders from time to time party thereto (the “Lenders” ) and Credit Suisse, as administrative agent (in such capacity, the “Administrative Agent” ) and Collateral Agent, (b) the First Lien Credit Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the “First Lien Credit Agreement” ), among the Borrower, Holdings, the Lenders and Credit Suisse, as administrative agent, (c) the First Lien Guarantee and Collateral Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the “First Lien Guarantee and Collateral Agreement” ) among the Borrower, Holdings, the Subsidiaries of the Borrower from time to time party thereto and Credit Suisse, as first lien collateral agent (in such capacity, the “First Lien Collateral Agent” ), and (d) the Intercreditor Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the “Intercreditor Agreement” ), among Borrower, Holdings, the Subsidiaries of the Borrower from time to time party thereto and Credit Suisse, in its capacities as the Collateral Agent and as the First Lien Collateral.

 

The Lenders have agreed to extend credit to the Borrower pursuant to, and upon the terms and conditions specified in, the Credit Agreement. The obligations of the Lenders to extend credit to the Borrower are conditioned upon, among other things, the execution and delivery of this Agreement by the Borrower and each Guarantor (such term and each other capitalized term used but not defined in this preliminary statement having the meaning given or ascribed to it in Article I). Each Guarantor is an affiliate of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement and is willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows:

 



 

ARTICLE I

Definitions

 

SECTION 1.01. Credit Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined herein have the meanings set forth in the Credit Agreement. All capitalized terms defined in the New York UCC (as such term is defined herein) and not defined in this Agreement have the meanings specified therein. All references to the Uniform Commercial Code shall mean the New York UCC.

 

(b) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to this Agreement.

 

SECTION 1.02. Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

 

“Accounts Receivable” shall mean all Accounts and all right, title and interest in any returned goods, together with all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired.

 

“Administrative Agent” shall have the meaning assigned to such term in the preliminary statement.

 

“Article 9 Collateral” shall have the meaning assigned to such term in Section 4.01.

 

“Assignment of Distributions” shall mean the assignment of distribution substantially in the form of Exhibit C.

 

“Borrower” shall have the meaning assigned to such term in the preamble.

 

“Collateral” shall mean the Article 9 Collateral and the Pledged Collateral.

 

“Collateral Agent” shall have the meaning assigned to such term in the preamble.

 

“Copyright License” shall mean any written agreement, now or hereafter in effect, granting any right to any third person under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third person, and all rights of such Grantor under any such agreement.

 

“Copyrights” shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or

 

2



 

otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office (or any successor office or any similar office in any other country), including those listed on Schedule III.

 

“Discharge of First Lien Obligations” shall have the meaning assigned to such term in the Intercreditor Agreement.

 

“Excluded Assets” shall mean (a) any lease, license, contract, property right or agreement to which any Grantor is a party or any of its rights or interests thereunder if and only for so long as the grant of a security interest hereunder shall constitute or result in a breach, termination or default under any such lease, license, contract, property right or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of any relevant jurisdiction or any other applicable law or principles of equity); provided, however, that any portion of any such lease, license, contract, property right or agreement shall cease to constitute an Excluded Asset pursuant to this clause at the time and to the extent that the grant of security interest therein does not result in any of the consequences specified above, (b) motor vehicles the perfection of a security interest in which is excluded from the Uniform Commercial Code in the relevant jurisdiction, (c) interests in real property, (d) any Equity Interest in an Excluded Entity and (e) any application to register Trademarks in the U.S. Patent and Trademark Office based upon Grantor’s “intent to use” such Trademark (but only if the grant of security interest to such intent-to-use Trademark violates 15 U.S.C. § 1060(a)) unless and until a “Statement of Use” or “Amendment to Allege Use” is filed in the U.S. Patent and Trademark Office with respect thereto, at which point the Collateral shall include, and the security interest granted hereunder shall attach to, such application.

 

“Excluded Entity” shall mean each of (i) STR-Registrar LLC, (ii) CTC Asia Ltd. and (iii) Specialized Technology Resources (India) Pvt Ltd. to the extent that the necessary governmental consents to make a valid and enforceable pledge of 66% of its issued and outstanding stock to the Collateral Agent have not been obtained.

 

“Federal Securities Laws” shall have the meaning assigned to such term in Section 5.04.

 

“First Lien Collateral Agent” shall have the meaning assigned to such term in the preliminary statement.

 

“First Lien Credit Agreement” shall have the meaning assigned to such term in the preliminary statement.

 

“First Lien Guarantee and Collateral Agreement” shall have the meaning assigned to such term in the preliminary statement.

 

3



 

“First Lien Loan Documents” shall have the meaning assigned to the term “Loan Documents” in the First Lien Credit Agreement.

 

“First Lien Obligations” shall have the meaning assigned to such term in the Intercreditor Agreement.

 

“First Priority Liens” shall have the meaning assigned to such term in the Intercreditor Agreement.

 

“General Intangibles” shall mean all choses in action and causes of action and all other intangible personal property of any Grantor of every kind and nature (other than Accounts) now owned or hereafter acquired by any Grantor, including all rights and interests in partnerships, limited partnerships, limited liability companies and other unincorporated entities, corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Hedging Agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts.

 

“Grantors” shall mean the Borrower and the Guarantors.

 

“Guarantors” shall mean Holdings and the Subsidiary Guarantors.

 

“Holdings” shall have the meaning assigned to such term in the preamble.

 

“Intellectual Property” shall mean all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

 

“License” shall mean any Patent License, Trademark License, Copyright License or other license or sublicense agreement relating to Intellectual Property to which any Grantor is a party, including those listed on Schedule III.

 

“New York UCC” shall mean the Uniform Commercial Code as from time to time in effect in the State of New York.

 

“Obligations” shall mean (a) the due and punctual payment of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations of the Borrower to any of the Secured Parties under the

 

4



 

Credit Agreement and each of the other Loan Documents, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower under or pursuant to the Credit Agreement and each of the other Loan Documents, and (c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to this Agreement and each of the other Loan Documents.

 

“Patent License” shall mean any written agreement, now or hereafter in effect, granting to any third person any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now or hereafter owned by any third person, is in existence, and all rights of any Grantor under any such agreement.

 

“Patents” shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office (or any successor or any similar offices in any other country), including those listed on Schedule III, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

 

“Perfection Certificate” shall mean a certificate substantially in the form of Exhibit B, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of the Borrower.

 

“Pledged Collateral” shall have the meaning assigned to such term in Section 3.01.

 

“Pledged Debt Securities” shall have the meaning assigned to such term in Section 3.01.

 

“Pledged Securities” shall mean any promissory notes, stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

 

“Pledged Stock” shall have the meaning assigned to such term in Section 3.01.

 

“Secured Parties” shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) the beneficiaries of each indemnification obligation

 

5


 

undertaken by any Loan Party under any Loan Document and (e) the successors and assigns of each of the foregoing.

 

“Security Interest” shall have the meaning assigned to such term in Section 4.01.

 

“Subsidiary Guarantor” shall mean (a) the Subsidiaries identified on Schedule I hereto as Subsidiary Guarantors and (b) each other Subsidiary that becomes a party to this Agreement as a Subsidiary Guarantor after the Closing Date; provided, however, that in no event shall STR-Registrar LLC become a Subsidiary Guarantor.

 

“Trademark License” shall mean any written agreement, now or hereafter in effect, granting to any third person any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third person, and all rights of any Grantor under any such agreement.

 

“Trademarks” shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office (or any successor office) or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule III, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.

 

“Unfunded Advances” shall mean the aggregate amount, if any (i) made available to the Borrower on the assumption that each Lender has made its portion of the applicable Borrowing available to the Administrative Agent as contemplated by Section 2.02(d) of the Credit Agreement and (ii) with respect to which a corresponding amount shall not in fact have been returned to the Administrative Agent by the Borrower or made available to the Administrative Agent by any such Lender.

 

ARTICLE II

Guarantee

 

SECTION 2.01. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Obligations. Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation for the ratable

 

6



 

benefit of the Secured Parties. Each Guarantor waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of any Obligation, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.

 

SECTION 2.02. Guarantee of Payment. Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any security held for the payment of the Obligations or to any balance of any Deposit Account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other person.

 

SECTION 2.03. Nature of Guarantee. (a) If and to the extent required in order for the Obligations to be enforceable under applicable federal, state and other laws relating to the insolvency of debtors, the maximum liability of such Guarantor hereunder shall be limited to the greatest amount which can lawfully be guaranteed by such Guarantor under such laws, after giving effect to any rights of contribution, reimbursement and subrogation arising under Article VI. Each Guarantor acknowledges and agrees that, to the extent not prohibited by applicable law, (i) such Guarantor (as opposed to its creditors, representatives of creditors or bankruptcy trustee, including such Guarantor in its capacity as debtor in possession exercising any powers of a bankruptcy trustee) has no personal right under such laws to reduce, or request any judicial relief that has the effect of reducing, the amount of its liability under this Agreement, (ii) such Guarantor (as opposed to its creditors, representatives of creditors or bankruptcy trustee, including such Guarantor in its capacity as debtor in possession exercising any powers of a bankruptcy trustee) has no personal right to enforce the limitation set forth in this Section 2.03(a) or to reduce, or request judicial relief reducing, the amount of its liability under this Agreement, and (iii) the limitation set forth in this Section 2.03(a) may be enforced only to the extent required under such laws in order for the obligations of such Guarantor under this Agreement to be enforceable under such laws and only by or for the benefit of a creditor, representative of creditors or bankruptcy trustee of such Guarantor or other person entitled, under such laws, to enforce the provisions thereof.

 

(b) Except for termination of a Guarantor’s obligations hereunder as expressly provided in Section 7.15, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement, (iii) the release of, or any impairment of or failure to perfect any Lien on or security interest in, any security held by the Collateral Agent or any other Secured Party for the Obligations or any of them,

 

7



 

(iv) any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). Subject to the terms of this Agreement, each Guarantor expressly authorizes the Collateral Agent to take and hold security for the payment and performance of the Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in its sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder.

 

(c) To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise any other right or remedy available to them against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Loan Party, as the case may be, or any security.

 

SECTION 2.04. Reinstatement. Each Guarantor agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Collateral Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower, any other Loan Party or otherwise.

 

SECTION 2.05. Agreement To Pay; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, if the Borrower or any other Loan Party shall fail to pay any Obligation when and as the same shall become due (after taking into account any applicable grace period), whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation. Upon payment by any Guarantor of any sums to the Collateral Agent as provided above, all rights of such Guarantor against the Borrower or any other Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement,

 

8



 

indemnity or otherwise shall in all respects be subject to Article VI, provided that each Guarantor reserves any and all other rights of reimbursement, contribution or subrogation at any time available to it against any other Guarantor.

 

SECTION 2.06. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s and each other Loan Party’s financial condition and assets and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that neither the Collateral Agent nor any other Secured Party will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

 

ARTICLE III

Pledge of Securities

 

SECTION 3.01. Pledge. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest in, to and under (a)(i) the Equity Interests owned by such Grantor on the date hereof (including all such Equity Interests listed on Schedule II), (ii) any other Equity Interests obtained in the future by such Grantor and (iii) the certificates representing all such Equity Interests (all the foregoing collectively referred to herein as the “Pledged Stock” ); provided, however, that the Pledged Stock shall not include (x) more than 66% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary or (y) an Excluded Asset, (b)(i) the debt securities held by such Grantor on the date hereof (including all such debt securities listed opposite the name of such Grantor on Schedule II), (ii) any debt securities in the future issued to such Grantor and (iii) the promissory notes and any other instruments evidencing such debt securities (all the foregoing collectively referred to herein as the “Pledged Debt Securities” ), (c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 3.01, (d) subject to Section 3.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a) and (b) above, (e) subject to Section 3.06, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above, and (f) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the “Pledged Collateral” ); provided, however, that notwithstanding any other provision in this agreement, this Section 3.01 shall not, at any time, constitute a grant of security interest in an Excluded Asset.

 

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the

 

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Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

 

SECTION 3.02. Delivery of the Pledged Collateral. (a) Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent) any and all certificates, instruments or other documents representing or evidencing Pledged Securities.

 

(b) Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent) any and all Pledged Debt Securities.

 

(c) Upon delivery to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent), (i) any certificate, instrument or document representing or evidencing Pledged Securities shall be accompanied by undated stock powers duly executed in blank or other undated instruments of transfer satisfactory to the Collateral Agent and duly executed in blank and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the applicable securities, which schedule shall be attached hereto as Schedule II and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of the pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

 

(d) In accordance with the terms of the Intercreditor Agreement, all Pledged Collateral delivered to the First Lien Collateral Agent shall be held by the First Lien Collateral Agent, until the transfer of possession of such Pledged Collateral to the Collateral Agent following the Discharge of First Lien Obligations, as gratuitous bailee for the Secured Parties solely for the purpose of perfecting the security interest therein granted under this Agreement.

 

SECTION 3.03. Representations, Warranties and Covenants. The Grantors jointly and severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the Secured Parties, that:

 

(a) Schedule II correctly sets forth in all material respects the percentage of the issued and outstanding shares of each class of the Equity Interests of the issuer thereof represented by such Pledged Stock and includes all Equity Interests, debt securities and promissory notes required to be pledged hereunder;

 

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(b) the Pledged Stock and Pledged Debt Securities have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable and (ii) in the case of Pledged Debt Securities, are legal, valid and binding obligations of the issuers thereof;

 

(c) except for the security interests granted hereunder (or otherwise permitted under the Credit Agreement), each Grantor (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Grantor, (ii) holds the same free and clear of all Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than transfers made in compliance with the Credit Agreement, and (iv) subject to Section 3.06 and the terms of the Intercreditor Agreement, will cause any and all Pledged Collateral, whether for value paid by such Grantor or otherwise, to be forthwith deposited with the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent) and pledged or assigned hereunder;

 

(d) except for restrictions and limitations imposed by the Loan Documents or securities laws generally, the Pledged Collateral is and will continue to be freely transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

 

(e) each Grantor (i) has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than any Lien created or permitted by the Loan Documents), however arising, of all persons whomsoever;

 

(f) no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect or those that, if not obtained, could not reasonably be expected to result in a Material Adverse Effect, );

 

(g) by virtue of the execution and delivery by each Grantor of this Agreement, when any Pledged Securities are delivered to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent) in accordance with this Agreement, the Collateral Agent will obtain a legal, valid and perfected first priority (subject to the Intercreditor Agreement) lien upon and security interest in

 

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such Pledged Securities as security for the payment and performance of the Obligations; and

 

(h) the pledge effected hereby is effective to vest in the Collateral Agent, for the ratable benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth herein and all action by any Grantor necessary or desirable to protect and perfect the Lien on the Pledged Collateral has been duly taken.

 

SECTION 3.04. Certification of Limited Liability Company Interests and Limited Partnership Interests. No interest of any Grantor in any limited liability company or limited partnership which is a Subsidiary and pledged hereunder is represented by a certificate. The Grantors shall not, without the consent of the Administrative Agent, agree to any amendment of the certificate of formation or limited liability company agreement (or other comparable constituent document) governing Pledged Stock which has the effect of turning previously uncertificated capital stock or membership interests into certificated capital stock or membership interests or which elects to treat any membership interest that is part of the Pledged Stock as a “security” under Section 8-103 of the New York UCC.

 

SECTION 3.05. Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, at any time after the Discharge of First Lien Obligations, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent. Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities in its capacity as the registered owner thereof. The Collateral Agent shall at any time after the Discharge of First Lien Obligations and during the occurrence and continuation of an Event of Default have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

 

SECTION 3.06. Voting Rights; Dividends and Interest, Etc. (a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given the Grantors reasonable advance notice of its intent to exercise its rights under this Agreement (which notice shall be deemed to have been given immediately upon the occurrence of an Event of Default under paragraph (g) or (h) of Article VII of the Credit Agreement):

 

(i)           Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided, however, that such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Securities or the rights and remedies of any of the

 

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Collateral Agent or the other Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

 

(ii)            The Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to each Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (i) above.

 

(iii)           Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable law; provided, however, that any noncash dividends, interest, principal or other distributions that would constitute Pledged Stock or Pledged Debt Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the ratable benefit of the Secured Parties and shall be forthwith delivered to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent) in the same form as so received (with any necessary endorsement or instrument of assignment). This paragraph (iii) shall not apply to dividends between or among the Borrower, the Guarantors and any Subsidiaries only of property subject to a perfected security interest under this Agreement; provided that the Borrower notifies the Collateral Agent in writing, specifically referring to this Section 3.06 at the time of such dividend and takes any actions the Collateral Agent specifies to ensure the continuance of its perfected security interest in such property under this Agreement.

 

(b) Upon the occurrence and during the continuance of an Event of Default and in any case subject to the terms of the Intercreditor Agreement, after the Collateral Agent shall have notified (or shall be deemed to have notified pursuant to Section 3.06(a)) the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 3.06, then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.06

 

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shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 3.06 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and, subject to the rights of the First Lien Collateral Agent and the obligations of the Grantors under the First Lien Loan Documents and the Intercreditor Agreement, shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement or instrument of assignment). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and each applicable Grantor has delivered to the Administrative Agent certificates to that effect, the Collateral Agent shall, promptly after all such Events of Default have been cured or waived, repay to each applicable Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.06 and that remain in such account.

 

(c) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified (or shall be deemed to have notified pursuant to Section 3.06(a)) the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 3.06, then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.06, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 3.06, shall cease, and all such rights shall thereupon become, subject to the rights of the First Lien Collateral Agent and the obligations of the Grantors under the First Lien Loan Documents and the Intercreditor Agreement, vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, subject to the terms of the Intercreditor Agreement, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights.

 

(d) Any notice given by the Collateral Agent to the Grantors exercising its rights under paragraph (a) of this Section 3.06 (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

 

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ARTICLE IV

 

Security Interests in Personal Property

 

SECTION 4.01. Security Interest. (a) As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest (the Security Interest ), in all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the Article 9 Collateral ):

 

(i)      all Accounts;

 

(ii)     all Chattel Paper;

 

(iii)    all cash and Deposit Accounts;

 

(iv)    all Documents;

 

(v)     all Equipment;

 

(vi)    all General Intangibles;

 

(vii)   all Instruments;

 

(viii)  all Inventory;

 

(ix)    all Investment Property;

 

(x)     all Letter-of-Credit Rights;

 

(xi)    all Commercial Tort Claims;

 

(xii)   all books and records pertaining to the Article 9 Collateral; and

 

(xiii)  to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any person with respect to any of the foregoing.

 

Notwithstanding any provision in this Agreement, this Section 4.01(a) shall not, at any time, constitute a grant of security interest in an Excluded Asset.

 

(b) Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i) indicate the Article 9 Collateral as “all assets” of

 

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such Grantor or words of similar effect, and (ii) contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (B) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Article 9 Collateral relates. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

 

Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

 

The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party.

 

(c) The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.

 

SECTION 4.02. Representations and Warranties. The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that:

 

(a) Each Grantor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent, for the ratable benefit of the Secured Parties, the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than (i) any consent or approval that has been obtained or (ii) those that, if not obtained, could not reasonably be expected to result in a Material Adverse Effect.

 

(b) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein (including (x) the exact legal name of each Grantor and (y) the jurisdiction of organization of each Grantor) is correct and complete as of the Closing Date. Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations containing a description of the Article 9 Collateral have been prepared by the Collateral Agent based upon the information provided to the Administrative Agent and the Secured Parties in the Perfection Certificate for filing in each governmental, municipal or other office specified in Section 2 of the Perfection Certificate (or specified by notice from the Borrower to the

 

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Administrative Agent after the Closing Date in the case of filings, recordings or registrations required by Sections 5.06 or 5.11 of the Credit Agreement), which are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in the Article 9 Collateral consisting of United States Patents, Trademarks and Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. Each Grantor represents and warrants that a fully executed short form agreement in the form requested by the Collateral Agent and containing a description of all material Article 9 Collateral consisting of Intellectual Property with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights has been delivered to the Collateral Agent for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. §261, 15 U.S.C. §1060 or 17 U.S.C. §205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof).

 

(c) The Security Interest constitutes (i) a legal and valid security interest in all Article 9 Collateral securing the payment and performance of the Obligations, (ii) upon completion of the filings described in Section 4.02(b), a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a security interest that shall be perfected in all Article 9 Collateral to the extent that a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable. The Security Interest is and shall be prior to any other Lien on any of

 

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the Article 9 Collateral, other than Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement that have priority as a matter of law.

 

(d) The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement. As of the Closing Date, no Grantor has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office, (iii) any notice under the Assignment of Claims Act, or (iv) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement and prior existing Liens no longer in effect. No Grantor holds any Commercial Tort Claims seeking damages in excess of $250,000 except as indicated on the Perfection Certificate.

 

SECTION 4.03. Covenants. (a) Each Grantor agrees promptly to notify the Collateral Agent in writing of any change in (i) its legal name, (ii) its identity or type of organization or corporate structure, (iii) its Federal Taxpayer Identification Number or organizational identification number or (iv) its jurisdiction of organization. Each Grantor agrees promptly to provide the Collateral Agent with certified organizational documents reflecting any of the changes described in the first sentence of this paragraph. Each Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority (subject to the Intercreditor Agreement) security interest in all the Article 9 Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any material portion of the Article 9 Collateral owned or held by such Grantor is damaged or destroyed.

 

(b) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Article 9 Collateral owned by it as is consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any material part of the Article 9 Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any material Article 9 Collateral, provided that, unless an Event of Default has occurred and is continuing, the Collateral Agent shall be limited to one such requests in each calendar year.

 

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(c) Each Grantor shall, at its own expense, take any and all actions reasonably necessary to defend title to the Article 9 Collateral against all persons and to defend the Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement.

 

(d) Each Grantor agrees, at its own expense, promptly to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, obtain, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and Taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing or continuation statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable to any Grantor under or in connection with any of the Article 9 Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper, in excess of $250,000 individually or $500,000 in the aggregate, then such Instrument or Tangible Chattel Paper shall be promptly pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent, except to the extent the costs of such actions are, in the Collateral Agent’s reasonable judgment, excessive in relation to the value of the security to be afforded thereby or to the extent prohibited by applicable law (or in the case of an amount payable by any Foreign Subsidiary, to the extent such actions would, in the Borrower’s good faith determination, result in adverse tax consequences); provided that prior to the Discharge of First Lien Obligations, such delivery shall be made to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent.

 

Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule III or adding additional schedules hereto to identify specifically any asset or item of a Grantor that may, in the Collateral Agent’s reasonable judgment, constitute material Copyrights, Licenses, Patents or Trademarks; provided that any Grantor shall have the right, exercisable within 10 days after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any material inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use its commercially reasonable efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct in all material respects with respect to such Collateral within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Collateral.

 

(e) Subject to the terms of the Intercreditor Agreement, the Collateral Agent and such persons as the Collateral Agent may designate shall have the right, at the applicable Grantor’s own cost and expense, to inspect the Article 9 Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Article 9 Collateral is located, to discuss the applicable Grantor’s affairs with the officers of such Grantor and its independent accountants and to verify the

 

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existence, validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, in the case of Accounts or other Article 9 Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party.

 

(f) At its option, upon the occurrence and continuance of an Event of Default, the Collateral Agent may discharge past due Taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not expressly permitted pursuant to Section 5.03 or Section 6.02 of the Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any reasonable and documented payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to Taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

 

(g) If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other person to secure payment and performance of an Account, the value of which exceeds $250,000 individually or $500,000 in the aggregate, such Grantor shall promptly assign such security interest to the Collateral Agent for the ratable benefit of the Secured Parties. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other person granting the security interest.

 

(h) Each Grantor shall remain liable to observe and perform all the material conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance.

 

(i) No Grantor shall make or permit to be made an assignment, pledge or hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9 Collateral or permit any notice to be filed under the Assignment of Claims Act, except, in each case, as expressly permitted by Section 6.02 of the Credit Agreement. No Grantor shall make or permit to be made any transfer of the Article 9 Collateral and each Grantor shall remain at all times in possession or otherwise in control of the Article 9 Collateral owned by it, except as permitted by the Credit Agreement.

 

(j) No Grantor will, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any Accounts included in the Article 9

 

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Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises, compoundings or settlements granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practice used in industries that are the same as or similar to those in which such Grantor is engaged.

 

(k) In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required under the Credit Agreement or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of any Grantor hereunder or any Default or Event of Default and subject to the Intercreditor Agreement, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this paragraph, including attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby.

 

(l) Each Grantor shall maintain, in form and manner satisfactory to the Collateral Agent, records of its Chattel Paper and its books, records and documents evidencing or pertaining thereto.

 

SECTION 4.04. Other Actions. In order to further insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Security Interest in the Article 9 Collateral, each Grantor agrees, in each case at such Grantor’s own expense, to take the following actions with respect to the following Article 9 Collateral:

 

(a) Instruments. If any Grantor shall at any time hold or acquire any Instruments having a value in excess of $250,000, such Grantor shall forthwith endorse, assign and deliver the same to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent as a gratuitous bailee of the Collateral Agent), accompanied by such undated instruments of endorsement, transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably specify, except to the extent the costs of such actions are, in the Collateral Agent’s reasonable judgment, excessive in relation to the value of the security to be afforded thereby or to the extent prohibited by applicable law (or in the case of an amount payable by any Foreign Subsidiary, to the extent such actions would, in the Borrower’s good faith determination, result in adverse tax consequences).

 

(b) Deposit Accounts. For each Deposit Account that any Grantor at any time opens or maintains, other than Deposit Accounts (A) that are payroll accounts, withholdings tax accounts, petty cash accounts or flexible spending benefit accounts or trust, escrow or other fiduciary accounts or (B) which do not hold for any period of five consecutive days, an aggregate amount in excess of

 

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$1,000,000, such Grantor shall, upon the Collateral Agent’s request, either (i) cause the depositary bank to agree to comply at any time with instructions from the Collateral Agent (or, prior to the Discharge of First Lien Obligations, the First Lien Collateral Agent) to such depositary bank directing the disposition of funds from time to time credited to such Deposit Account, without further consent of such Grantor or any other person, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, or (ii) arrange for the Collateral Agent (or, prior to the Discharge of First Lien Obligations, the First Lien Collateral Agent) to become the customer of the depositary bank with respect to the Deposit Account, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw funds from such Deposit Account. The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such instructions or withhold any withdrawal rights from any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any withdrawal, would occur; provided, however, upon the waiver by the applicable Required Lenders of such Event of Default, so long as no other Event of Default shall then exist or be continuing, the Collateral Agent shall revoke any such instruction. The provisions of this paragraph shall not apply to any Deposit Account for which any Grantor, the depositary bank and the Collateral Agent have entered into a cash collateral agreement specially negotiated among such Grantor, the depositary bank and the Collateral Agent for the specific purpose set forth therein.

 

(c) Investment Property. If any securities, whether certificated or uncertificated, or other Investment Property having a value in excess of $50,000 in the aggregate now or hereafter acquired by any Grantor are held by such Grantor or its nominee through a Securities Intermediary or Commodity Intermediary, such Grantor shall promptly notify the Collateral Agent thereof and, at the Collateral Agent’s request and option, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause such Securities Intermediary or Commodity Intermediary, as the case may be, to agree to comply with Entitlement Orders from the Collateral Agent (or, prior to the Discharge of First Lien Obligations, the First Lien Collateral Agent) to such Securities Intermediary as to such securities or other Investment Property, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such Commodity Intermediary, in each case without further consent of any Grantor or such nominee, or (ii) in the case of Financial Assets (as governed by Article 8 of the New York UCC) or other Investment Property held through a Securities Intermediary, arrange for the Collateral Agent (or, prior to the Discharge of First Lien Obligations, the First Lien Collateral Agent) to become the Entitlement Holder with respect to such Investment Property, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such Investment Property. The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such Entitlement Orders or instructions or directions to any such issuer, Securities Intermediary or Commodity Intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing

 

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rights by any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur; provided, however, upon the waiver by the applicable Required Lenders of such Event of Default, so long as no other Event of Default shall then exist or be continuing, the Collateral Agent shall revoke any such instruction. The provisions of this paragraph shall not apply to any Financial Assets credited to a Securities Account for which the Collateral Agent is the Securities Intermediary.

 

(d) Electronic Chattel Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any Electronic Chattel Paper or any transferable record ”, as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, shall take such action as the Collateral Agent may request to vest in the Collateral Agent (or, prior to the Discharge of First Lien Obligations, the First Lien Collateral Agent) control under New York UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Collateral Agent agrees with such Grantor that the Collateral Agent will arrange, pursuant to procedures satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent’s loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such Electronic Chattel Paper or transferable record.

 

(e) Letter-of-Credit Rights. If any Grantor is at any time a beneficiary under a letter of credit having a value in excess of $500,000 now or hereafter issued in favor of such Grantor (other than Letters of Credit and Letters of Credit Rights that do not constitute Supporting Obligations in respect of other Collateral), such Grantor shall promptly notify the Collateral Agent thereof and, at the request and option of the Collateral Agent, and subject to the rights of the First Lien Collateral Agent and the Obligations of the Grantors under the First Lien Loan Documents and the Intercreditor Agreement, such Grantor shall, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of the letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be paid to the applicable Grantor unless an Event of Default has occurred or is continuing.

 

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(f) Commercial Tort Claims. If any Grantor shall at any time hold or acquire a Commercial Tort Claim seeking damages in an amount reasonably estimated to exceed $250,000, the Grantor shall promptly notify the Collateral Agent thereof in a writing signed by such Grantor including a summary description of such claim and grant to the Collateral Agent, for the ratable benefit of the Secured Parties, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Collateral Agent.

 

SECTION 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Grantor agrees that it will not, and will not permit any of its licensees to, do any act, or omit to do any act, whereby any Patent that is material to the conduct of such Grantor’s business may become abandoned, invalidated or dedicated to the public, and agrees that it shall use commercially reasonable efforts to continue to mark any products covered by a material Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

 

(b) Except as could not reasonably be expected to result in a Material Adverse Effect, each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) use commercially reasonable efforts to maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights.

 

(c) Each Grantor (either itself or through its licensees or sublicensees) will, for each work covered by a Copyright material to the conduct of such Grantor’s business, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

 

(d) Each Grantor shall notify the Collateral Agent promptly if it knows or has reason to know that any Patent, Trademark or Copyright material to the conduct of its business may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor’s ownership of any Patent, Trademark or Copyright, its right to register the same, or its right to keep and maintain the same.

 

(e) Except as could not reasonably be expected to result in a Material Adverse Effect, no Grantor shall, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office,

 

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United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly notifies the Collateral Agent, and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Security Interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

 

(f) Except as could not reasonably be expected to result in a Material Adverse Effect, each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties.

 

(g) In the event that any Grantor knows or has reason to believe that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor’s business has been or is about to be infringed, misappropriated or diluted by a third person, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Article 9 Collateral.

 

(h) Upon the occurrence and during the continuance of an Event of Default, each Grantor shall use its commercially reasonable efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License, and each other material License, to effect the assignment of all such Grantor’s right, title and interest thereunder to the Collateral Agent, for the ratable benefit of the Secured Parties, or its designee.

 

SECTION 4.06. Assignment of Distributions. The Borrower shall execute the Assignment of Distributions in the form attached hereto as Exhibit C in favor of the Collateral Agent with respect to its rights to any distributions of STR-Registrar LLC.

 

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ARTICLE V

 

Remedies

 

SECTION 5.01. Remedies Upon Default.   Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Grantor to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice (except any notice required by law) or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

 

The Collateral Agent shall give each applicable Grantor 10 days’ written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the

 

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Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by applicable law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by applicable law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, subject to Section 5.02 of this Agreement, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

 

Any remedies provided in this Section 5.01 shall be subject to the Intercreditor Agreement.

 

SECTION 5.02. Application of Proceeds.   Subject to the Intercreditor Agreement, the Collateral Agent shall apply the proceeds of any collection, sale, foreclosure or other realization upon any Collateral, including any Collateral consisting of cash, as follows:

 

FIRST, to the payment of all costs and expenses incurred by the Administrative Agent or the Collateral Agent (in their respective capacities as such hereunder or under any other Loan Document) in connection with such

 

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collection, sale, foreclosure or realization or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Administrative Agent and/or the Collateral Agent hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;

 

SECOND, to the payment in full of Unfunded Advances (the amounts so applied to be distributed between or among the Secured Parties pro rata in accordance with the amounts of Unfunded Advances owed to them on the date of any such distribution);

 

THIRD, to the payment in full of all other Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution);

 

FOURTH, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

 

The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

 

SECTION 5.03. Grant of License to Use Intellectual Property.   For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors), to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent may be exercised, at the option of the Collateral Agent, only upon the occurrence and during the continuation of an Event of Default; provided, however, that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon each Grantor notwithstanding any subsequent cure of an Event of Default.

 

SECTION 5.04. Securities Act, Etc.   In view of the position of the Grantors in relation to the Pledged Collateral, or because of other current or future

 

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circumstances, a question may arise under the U.S. Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the Federal Securities Laws ”) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable “blue sky” or other state securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Collateral, limit the purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion (subject to the Intercreditor Agreement) (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a limited number of potential purchasers (including a single potential purchaser) to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Collateral Agent, in its sole and absolute discretion (subject to the terms of the Intercreditor Agreement), may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a limited number of purchasers (or a single purchaser) were approached. Th e provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

 

ARTICLE VI

 

Indemnity, Subrogation and Subordination

 

SECTION 6.01. Indemnity and Subrogation.   In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor under this Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part a claim of any

 

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Secured Party, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.

 

SECTION 6.02. Contribution and Subrogation.   Each Guarantor (a Contributing Guarantor ”) agrees (subject to Section 6.03) that, in the event a payment shall be made by any other Guarantor hereunder in respect of any Obligation, or assets of any other Guarantor shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party, and such other Guarantor (the Claiming Guarantor ”) shall not have been fully indemnified by the Borrower as provided in Section 6.01, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to (i) the amount of such payment or (ii) the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 7.16, the date of the supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 6.02 shall be subrogated to the rights of such Claiming Guarantor under Section 6.01 to the extent of such payment.

 

SECTION 6.03. Subordination.   (a) Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 6.01 and 6.02 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 6.01 and 6.02 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of its obligations hereunder.

 

(b) The Borrower and each Guarantor hereby agree that all Indebtedness and other monetary obligations owed by it to any Subsidiary that is not a Loan Party (or, in the case of the Borrower, any Subsidiary) shall be fully subordinated to the indefeasible payment in full in cash of the Obligations, it being agreed that, for greater certainty, other than upon the occurrence and during the continuance of an Event of Default, the Borrower and each Guarantor shall be allowed to make payments with respect to Indebtedness permitted to be incurred pursuant to Section 6.01 of the Credit Agreement in accordance with the terms thereof.

 

ARTICLE VII

 

Miscellaneous

 

SECTION 7.01. Notices.   All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any

 

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Subsidiary Guarantor shall be given to it in care of the Borrower as provided in Section 9.01 of the Credit Agreement.

 

SECTION 7.02. Security Interest Absolute.   All rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument relating to the foregoing, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement.

 

SECTION 7.03. Survival of Agreement.   All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any Lender or on their behalf and notwithstanding that the Collateral Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under any Loan Document is outstanding and unpaid or the aggregate L/C Exposure does not equal zero and so long as the Commitments have not expired or terminated.

 

SECTION 7.04. Binding Effect; Several Agreement.   This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Loan Party and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Loan Party, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Loan Party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated or permitted by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

 

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SECTION 7.05. Successors and Assigns.   Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

 

SECTION 7.06. Collateral Agent’s Fees and Expenses; Indemnification.   (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.05 of the Credit Agreement.

 

(b)   Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other indemnitees against, and hold each indemnitee harmless from, any and all losses, claims, damages, liabilities, and related out of pocket expenses, including the fees, charges and disbursements of any counsel for any indemnitee, incurred by or asserted against any indemnitee arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any agreement or instrument contemplated hereby or any claim, litigation, investigation or proceeding relating to any of the foregoing or to the Collateral, regardless of whether any indemnitee is a party thereto or whether initiated by a third party or by a Loan Party or any Affiliate thereof; provided, however, that such indemnity shall not, as to any indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such indemnitee. To the extent permitted by applicable law, no Grantor shall assert, and each Grantor hereby waives any claim against any indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of proceeds thereof.

 

(c)   Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.06 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 7.06 shall be payable on written demand therefor and shall bear interest, on and from the date of demand, at the rate specified in Section 2.06(a) of the Credit Agreement.

 

SECTION 7.07. Collateral Agent Appointed Attorney-in-Fact.   Subject to the terms of the Intercreditor Agreement, each Grantor hereby appoints the Collateral Agent as the attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof,

 

32



 

which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, subject to the terms of the Intercreditor Agreement, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent’s name or in the name of such Grantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof, (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral, (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral, (d) to send verifications of Accounts Receivable to any Account Debtor, (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral, (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral, (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent, and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement in accordance with its terms, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence, wilful misconduct or bad faith. Notwithstanding anything to the contrary in this Section 7.07, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for herein unless an Event of Default shall have occurred and be continuing.

 

SECTION 7.08. Applicable Law.   THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 7.09. Waivers; Amendment.   (a) No failure or delay by the Collateral Agent, the Administrative Agent or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver hereof or thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent, the Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any

 

33



 

event be effective unless the same shall be permitted by paragraph (b) of this Section 7.09, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Collateral Agent or any Lender may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.

 

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement.

 

SECTION 7.10. WAIVER OF JURY TRIAL.   EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

 

SECTION 7.11. Severability.   In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 7.12. Counterparts.   This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 7.04. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

34



 

SECTION 7.13. Headings.   Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

 

SECTION 7.14. Jurisdiction; Consent to Service of Process.   (a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America, sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each party hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Collateral Agent, the Administrative Agent, or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Grantor or its properties in the courts of any jurisdiction.

 

(b)   Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (a) of this Section 7.14. Each party hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(c)   Each party hereto hereby irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement or any other Loan Document will affect the right of the Collateral Agent to serve process in any other manner permitted by law.

 

SECTION 7.15. Termination or Release.   (a) This Agreement, the guarantees made herein, the Security Interest, the pledge of the Pledged Collateral and all other security interests granted hereby shall terminate when all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement.

 

(b) A Subsidiary Guarantor shall automatically be released from its obligations hereunder and the Security Interests created hereunder in the Collateral of such Subsidiary Guarantor shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Subsidiary Guarantor ceases to be a Subsidiary.

 

35


 

(c)   Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Credit Agreement to any person that is not the Borrower or a Guarantor, or, upon the effectiveness of any written consent to the release of the Security Interest granted hereby in any Collateral pursuant to Section 9.08 of the Credit Agreement, the Security Interest in such Collateral shall be automatically released.

 

(d)   In connection with any termination or release pursuant to paragraph (a), (b) or (c) above, the Collateral Agent shall promptly execute and deliver to any Grantor, at such Grantor’s expense, all Uniform Commercial Code termination statements and similar documents that such Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 7.15 shall be without recourse to or representation or warranty by the Collateral Agent or any Secured Party. Without limiting the provisions of Section 7.06, the Borrower shall reimburse the Collateral Agent upon demand for all costs and out of pocket expenses, including the fees, charges and expenses of counsel, incurred by it in connection with any action contemplated by this Section 7.15.

 

SECTION 7.16. Additional Subsidiaries.   Any Subsidiary that is required to become a party hereto pursuant to Section 5.11 of the Credit Agreement shall enter into this Agreement as a Subsidiary Guarantor and a Grantor upon becoming such a Subsidiary. Upon execution and delivery by the Collateral Agent and such Subsidiary of a supplement in the form of Exhibit A hereto, such Subsidiary shall become a Subsidiary Guarantor and a Grantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor and a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any other Loan Party hereunder. The rights and obligations of each Loan Party hereunder shall remain in full force and effect notwithstanding the addition of any new Loan Party as a party to this Agreement.

 

SECTION 7.17. Right of Setoff.   If an Event of Default shall have occurred and is continuing, each Secured Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all Collateral (including any deposits (general or special, time or demand, provisional or final)) at any time held and other obligations at any time owing by such Secured Party to or for the credit or the account of any Grantor against any and all of the obligations of such Grantor now or hereafter existing under this Agreement and the other Loan Documents held by such Secured Party, irrespective of whether or not such Secured Party shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Secured Party under this Section 7.17 are in addition to other rights and remedies (including other rights of setoff) which such Secured Party may have.

 

SECTION 7.18. Intercreditor Agreement Governs.   NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE LIEN AND SECURITY INTEREST GRANTED TO THE COLLATERAL AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, PURSUANT TO THIS AGREEMENT AND THE EXERCISE OF ANY RIGHT OR REMEDY BY THE COLLATERAL AGENT AND THE OTHER SECURED PARTIES HEREUNDER ARE SUBJECT TO

 

36



 

THE PROVISIONS OF THE INTERCREDITOR AGREEMENT. IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THE INTERCREDITOR AGREEMENT AND THIS AGREEMENT, THE PROVISIONS OF THE INTERCREDITOR AGREEMENT SHALL CONTROL.

 

SECTION 7.19. Obligations of Grantors.   To the extent that the obligations of any Grantor hereunder shall conflict, or shall be inconsistent, with the obligations of such Grantor under the First Lien Guarantee and Collateral Agreement, the provisions of the First Lien Guarantee and Collateral Agreement shall control.

 

SECTION 7.20. Delivery of Collateral.   Notwithstanding anything herein to the contrary, prior to the Discharge of First Lien Obligations, to the extent any Grantor is required hereunder to deliver Collateral to the Collateral Agent for purposes of possession and control and is unable to do so as a result of having previously delivered such Collateral to the First Lien Collateral Agent in accordance with the terms of the First Lien Guarantee and Collateral Agreement, such Grantor’s obligations hereunder with respect to such delivery shall be deemed satisfied by the delivery to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent.

 

[Remainder of page intentionally left blank]

 

37



 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

 

STR ACQUISITION, INC.,

 

 

 

by

 

 

 

/s/ Jason Metakis

 

 

Name:

Jason Metakis

 

 

Title:

Treasurer

 

 

 

 

 

STR HOLDINGS LLC,

 

 

 

 

 

by

 

 

 

/s/ Jason Metakis

 

 

Name:

Jason Metakis

 

 

Title:

Treasurer

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.,

 

 

 

 

 

by

 

 

 

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

CAL SAFETY COMPLIANCE CORPORATION,

 

 

 

 

 

by

 

 

 

 

 

 

 

Name:

 

 

 

Title:

 

 

[Second Lien Guarantee and Collateral Agreement]

 



 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

 

STR ACQUISITION, INC.,

 

 

 

by

 

 

 

 

 

 

Name:

 

 

Title:

 

 

 

 

STR HOLDINGS LLC,

 

 

 

 

by

 

 

 

 

 

 

Name:

 

 

Title:

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.,

 

 

 

 

by

 

 

 

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title:

Secretary

 

 

 

 

 

CAL SAFETY COMPLIANCE CORPORATION,

 

 

 

 

 

by

 

 

 

 

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title:

Assistant Secretary

 

[Second Lien Guarantee and Collateral Agreement]

 



 

 

SPECIALIZED TECHNOLOGY RESOURCES (INTERNATIONAL), INC.,

 

 

 

by

 

 

 

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title:

Secretary

 

 

 

 

 

SHUSTER LABORATORIES, INC.,

 

 

 

by

 

 

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title:

Secretary

 

 

 

 

 

SUPPLY CHAIN CONSULTING SERVICES CORPORATION,

 

 

 

 

 

by

 

 

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES (FLORIDA), INC.,

 

 

 

 

 

by

 

 

 

 

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title:

Secretary

 

 

 

 

 

STR MATERIALS SCIENCE, INC.,

 

 

 

 

 

by

 

 

 

 

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title:

Secretary

 

[Second Lien Guarantee and Collateral Agreement]

 



 

 

SUPPLY CHAIN CONSULTING SERVICES CORPORATION

 

 

 

 

by

 

 

 

/s/ Thomas D. Vitro

 

 

Name:

Thomas D. Vitro

 

 

Title:

Assistant Secretary

 

[Second Lien Guarantee and Collateral Agreement]

 



 

 

CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Collateral Agent,

 

 

 

 

by

 

 

 

/s/ Rianka Mohan

 

 

Name:

RIANKA MOHAN

 

 

Title:

VICE PRESIDENT

 

 

 

 

 

by

 

 

 

 

/s/ James Neira

 

 

Name:

JAMES NEIRA

 

 

Title:

ASSOCIATE

 

[Second Lien Guarantee and Collateral Agreement]

 


 

EXHIBIT E

 

[FORM OF]

 

SECOND LIEN MORTGAGE

 



 

 

SECOND LIEN OPEN-END MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FINANCING STATEMENT

 

From

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.

 

To

 

CREDIT SUISSE

 


 

Dated: June 15, 2007
Premises: Enfield, Connecticut
Hartford County

 


 

 

1



 

THIS SECOND LIEN OPEN-END MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FINANCING STATEMENT dated as of June 15, 2007 (this “Mortgage”), by SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation, having an office at 10 Water Street, Enfield, CT 06082-4899 (the “Mortgagor”), to CREDIT SUISSE, having an office at Eleven Madison Avenue, New York, New York 10010 (the “Mortgagee”) as Collateral Agent for the Secured Parties (as such terms are defined below).

 

WITNESSETH THAT:

 

Reference is made to (i) the Second Lien Credit Agreement dated as of even date hereof (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among STR Acquisition, Inc., a Delaware corporation (“Acquisition”), which substantially simultaneously with the execution hereof shall be merged with and into Specialized Technology Resources, Inc., a Delaware corporation (“STR”), with STR being the surviving entity (the “Borrower”), STR Holdings LLC, a Delaware limited liability company (“Holdings”), the lenders from time to time party thereto (the “Lenders”) and Credit Suisse, as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders and collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties, (ii) the Second Lien Guarantee and Collateral Agreement dated as of even date hereof (as amended, supplemented or otherwise modified from time to time, the “Guarantee and Collateral Agreement”) among Acquisition, Holdings, the subsidiaries of Acquisition from time to time party thereto and Credit Suisse and (iii) the Intercreditor Agreement dated as of even date hereof (as amended, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”) among Acquisition, Holdings, the subsidiaries of Acquisition from time to time party thereto and Credit Suisse as first lien collateral agent and as second lien collateral agent. Capitalized terms used but not defined herein have the meanings given to them in the Credit Agreement and the Guarantee and Collateral Agreement.

 

In the Credit Agreement, (i) the Lenders have agreed to make term loans (the “Loans”) pursuant to, upon the terms, and subject to the conditions specified in, the Credit Agreement. Amounts paid in respect of the Loans may not be reborrowed. The Credit Agreement provides that the principal amount of the Loans outstanding and secured hereby shall not exceed $75,000,000 to be advanced and fully funded on the date hereof.

 

Mortgagor will be the Borrower subsequent to the merger referenced above and will derive substantial benefit from the making of the Loans by the Lenders. In order to induce the Lenders to make the Loans, the Mortgagor has agreed to grant this Mortgage to secure, among other things, the due and punctual payment and performance of all of the obligations of the Borrower under the Credit Agreement.

 

The obligations of the Lenders to make the Loans are conditioned upon, among other things, the execution and delivery by the Mortgagor of this Mortgage in the form hereof to secure the Obligations. As used in this Mortgage, the term “Obligations” shall mean (a) the Loan Document Obligations and (b) the due and punctual payment and performance of all

 

2



 

obligations of each Loan Party under each Hedging Agreement that (i) is in effect on the Closing Date with a counterparty that is the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender as of the Closing Date or (ii) is entered into after the Closing Date with any counterparty that is the Administrative Agent or a Lender or an Affiliate of the Administrative Agent or a Lender at the time such Hedging Agreement is entered into.

 

As used in this Mortgage, the term “Secured Parties” shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) each counterparty to any Hedging Agreement with a Loan Party that either (i) is in effect on the Closing Date if such counterparty is the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender as of the Closing Date or (ii) is entered into after the Closing Date if such counterparty is the Administrative Agent, a Lender or an Affiliate of the Administrative Agent or a Lender at the time such Hedging Agreement is entered into, (e) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (f) the successors and assigns of each of the foregoing.

 

Pursuant to the requirements of the Credit Agreement, the Mortgagor is granting this Mortgage to create a lien on and a security interest in the Mortgaged Property (as hereinafter defined) to secure the performance and payment by the Mortgagor of the Obligations. The Credit Agreement also requires the granting by other Loan Parties of mortgages, deeds of trust and/or deeds to secure debt (the “Other Mortgages”) that create liens on and security interests in certain real and personal property other than the Mortgaged Property to secure the performance of the Obligations.

 

Granting Clauses

 

NOW, THEREFORE, IN CONSIDERATION OF the foregoing and in order to secure the due and punctual payment and performance of the Obligations for the benefit of the Secured Parties, Mortgagor hereby grants, conveys, mortgages, assigns and pledges to the Mortgagee, a mortgage lien on and a security interest in, all the following described property (the “Mortgaged Property”) whether now owned or held or hereafter acquired:

 

(1)     the land more particularly described on Exhibit A hereto (the “Land”), together with all rights appurtenant thereto, including the easements over certain other adjoining land granted by any easement agreements, covenant or restrictive agreements and all air rights, mineral rights, water rights, oil and gas rights and development rights, if any, relating thereto, and also together with all of the other easements, rights, privileges, interests, hereditaments and appurtenances thereunto belonging or in any way appertaining and all of the estate, right, title, interest, claim or demand whatsoever of Mortgagor therein and in the streets and ways adjacent thereto, either in law or in equity, in possession or expectancy, now or hereafter acquired (the “Premises”);

 

(2)     all buildings, improvements, structures, paving, parking areas, walkways and landscaping now or hereafter erected or located upon the Land, and all fixtures of every kind and type affixed to the Premises or attached to or forming part of any

 

3



 

structures, buildings or improvements and replacements thereof now or hereafter erected or located upon the Land (the “Improvements”);

 

(3)     all apparatus, movable appliances, building materials, equipment, fittings, furnishings, furniture, machinery and other articles of tangible personal property of every kind and nature, and replacements thereof, now or at any time hereafter placed upon or used in any way in connection with the use, enjoyment, occupancy or operation of the Improvements or the Premises, including all of Mortgagor’s books and records relating thereto and including all pumps, tanks, goods, machinery, tools, equipment, lifts (including fire sprinklers and alarm systems, fire prevention or control systems, cleaning rigs, air conditioning, heating, boilers, refrigerating, electronic monitoring, water, loading, unloading, lighting, power, sanitation, waste removal, entertainment, communications, computers, recreational, window or structural, maintenance, truck or car repair and all other equipment of every kind), restaurant, bar and all other indoor or outdoor furniture (including tables, chairs, booths, serving stands, planters, desks, sofas, racks, shelves, lockers and cabinets), bar equipment, glasses, cutlery, uniforms, linens, memorabilia and other decorative items, furnishings, appliances, supplies, inventory, rugs, carpets and other floor coverings, draperies, drapery rods and brackets, awnings, venetian blinds, partitions, chandeliers and other lighting fixtures, freezers, refrigerators, walk-in coolers, signs (indoor and outdoor), computer systems, cash registers and inventory control systems, and all other apparatus, equipment, furniture, furnishings, and articles used in connection with the use or operation of the Improvements or the Premises, it being understood that the enumeration of any specific articles of property shall in no way result in or be held to exclude any items of property not specifically mentioned (the property referred to in this subparagraph (3), the “Personal Property”);

 

(4)     all general intangibles owned by Mortgagor and relating to design, development, operation, management and use of the Premises or the Improvements, all certificates of occupancy, zoning variances, building, use or other permits, approvals, authorizations and consents obtained from and all materials prepared for filing or filed with any governmental agency in connection with the development, use, operation or management of the Premises and Improvements, all construction, service, engineering, consulting, leasing, architectural and other similar contracts concerning the design, construction, management, operation, occupancy and/or use of the Premises and Improvements, all architectural drawings, plans, specifications, soil tests, feasibility studies, appraisals, environmental studies, engineering reports and similar materials relating to any portion of or all of the Premises and Improvements, and all payment and performance bonds or warranties or guarantees relating to the Premises or the Improvements, all to the extent assignable (the “Permits, Plans and Warranties”);

 

(5)     all now or hereafter existing leases or licenses (under which Mortgagor is landlord or licensor) and subleases (under which Mortgagor is sublandlord), concession, management, mineral or other agreements of a similar kind that permit the use or occupancy of the Premises or the Improvements for any purpose in return for any payment, or the extraction or taking of any gas, oil, water or other minerals

 

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from the Premises in return for payment of any fee, rent or royalty (collectively, “Leases”), and all agreements or contracts for the sale or other disposition of all or any part of the Premises or the Improvements, now or hereafter entered into by Mortgagor, together with all charges, fees, income, issues, profits, receipts, rents, revenues or royalties payable thereunder (“Rents”);

 

(6)     all real estate tax refunds and all proceeds of the conversion, voluntary or involuntary, of any of the Mortgaged Property into cash or liquidated claims (“Proceeds”), including Proceeds of insurance maintained by the Mortgagor and condemnation awards, any awards that may become due by reason of the taking by eminent domain or any transfer in lieu thereof of the whole or any part of the Premises or Improvements or any rights appurtenant thereto, and any awards for change of grade of streets, together with any and all moneys now or hereafter on deposit for the payment of real estate taxes, assessments or common area charges levied against the Mortgaged Property, unearned premiums on policies of fire and other insurance maintained by the Mortgagor covering any interest in the Mortgaged Property or required by the Credit Agreement; and

 

(7)     all extensions, improvements, betterments, renewals, substitutes and replacements of and all additions and appurtenances to, the Land, the Premises, the Improvements, the Personal Property, the Permits, Plans and Warranties and the Leases, hereinafter acquired by or released to the Mortgagor or constructed, assembled or placed by the Mortgagor on the Land, the Premises or the Improvements, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, deed of trust, conveyance, assignment or other act by the Mortgagor, all of which shall become subject to the lien of this Mortgage as fully and completely, and with the same effect, as though now owned by the Mortgagor and specifically described herein.

 

TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its successors and assigns, for the ratable benefit of the Secured Parties, forever, subject only to the applicable permitted Liens set forth in Section 6.02 of the Credit Agreement and to satisfaction and release as provided in Section 3.04 of this Mortgage.

 

ARTICLE I

 

Representations, Warranties and Covenants of Mortgagor

 

Mortgagor agrees, covenants, represents and/or warrants as follows:

 

SECTION 1.01. Title, Mortgage Lien.  (a) Mortgagor has good and marketable fee simple title to the Mortgaged Property, subject only to the applicable permitted Liens set forth in Section 6.02 of the Credit Agreement.

 

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(b)   The execution and delivery of this Mortgage is within Mortgagor’s corporate powers and has been duly authorized by all necessary corporate and, if required, stockholder action. This Mortgage has been duly executed and delivered by Mortgagor and constitutes a legal, valid and binding obligation of Mortgagor, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

(c)   The execution, delivery and recordation of this Mortgage (i) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except filings necessary to perfect the lien of this Mortgage, (ii) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of Mortgagor or any order of any Governmental Authority, (iii) will not violate or result in a default under any indenture, agreement or other instrument binding upon Mortgagor or its assets, or give rise to a right thereunder to require any payment to be made by Mortgagor, and (iv) will not result in the creation or imposition of any Lien on any asset of Mortgagor, except the lien of this Mortgage.

 

(d)   This Mortgage and the Uniform Commercial Code Financing Statements described in Section 1.09 of this Mortgage, when duly recorded in the public records identified in the Perfection Certificate will create a valid, perfected and enforceable lien upon and security interest in all of the Mortgaged Property.

 

(e)   Mortgagor will forever warrant and defend its title to the Mortgaged Property, the rights of Mortgagee therein under this Mortgage and the validity and priority of the lien of this Mortgage thereon against the claims of all persons and parties except those having rights under the applicable permitted Liens set forth in Section 6.02 of the Credit Agreement to the extent of those rights.

 

SECT ION 1.02. Credit Agreement.  This Mortgage is given pursuant to the Credit Agreement. Mortgagor expressly covenants and agrees to pay when due, and to timely perform, and to cause the other Loan Parties to pay when due, and to timely perform, the Obligations in accordance with the terms of the Loan Documents.

 

SECTION 1.03. Payment of Taxes, and Other Obligations.  (a) Mortgagor will pay and discharge from time to time prior to the time when the same shall become delinquent, and before any interest or penalty accrues thereon or attaches thereto, all Taxes and other obligations with respect to the Mortgaged Property or any part thereof or upon the Rents from the Mortgaged Property or arising in respect of the occupancy, use or possession thereof in accordance with, and to the extent required by, the Credit Agreement.

 

(b)   In the event of the passage of any state, Federal, municipal or other governmental law, order, rule or regulation subseque nt to the date hereof (i) deducting from the value of real property for the purpose of taxation any lien or encumbrance thereon or in any manner changing or modifying the laws now in force governing the taxation of this Mortgage or debts secured by mortgages or deeds of trust (other than laws governing income, franchise

 

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and similar taxes generally) or the manner of collecting taxes thereon and (ii) imposing a tax to be paid by Mortgagee, either directly or indirectly, on this Mortgage or any of the Loan Documents, or requiring an amount of taxes to be withheld or deducted therefrom, Mortgagor will promptly (i) notify Mortgagee of such event, (ii) enter into such further instruments as Mortgagee may determine are reasonably necessary or desirable to obligate Mortgagor to make any additional payments necessary to put the Lenders and Secured Parties in the same financial position they would have been if such law, order, rule or regulation had not been passed and (iii) make such additional payments to Mortgagee for the benefit of the Lenders and Secured Parties.

 

SECTION 1.04. Maintenance of Mortgaged Property.  Mortgagor will maintain the Improvements and the Personal Property in the manner required by the Credit Agreement.

 

SECTION 1.05. Insurance.  Mortgagor will keep or cause to be kept the Improvements and Personal Property insured against such risks, and in the manner, described in Section 4.03(k) of the Guarantee and Collateral Agreement and shall purchase such additional insurance as may be required from time to time pursuant to Section 5.02 of the Credit Agreement. Federal Emergency Management Agency Standard Flood Hazard Determination Forms will be purchased by Mortgagor for each Mortgaged Property on which Improvements are located. If any portion of Improvements constituting part of the Mortgaged Property is located in an area identified as a special flood hazard area by Federal Emergency Management Agency or other applicable agency, Mortgagor will purchase flood insurance in an amount satisfactory to Mortgagee, but in no event less than the maximum limit of coverage available under the National Flood Insurance Act of 1968, as amended.

 

SECTION 1.06. Casualty Condemnation/Eminent Domain.  Mortgagor shall give Mortgagee prompt written notice of any casualty or other damage to the Mortgaged Property or any proceeding for the taking of the Mortgaged Property or any portion thereof or interest therein under power of eminent domain or by condemnation or any similar proceeding in accordance with, and to the extent required by, the Credit Agreement. Any Net Cash Proceeds received by or on behalf of the Mortgagor in respect of any such casualty, damage or taking shall constitute trust funds held by the Mortgagor for the benefit of the Secured Parties to be applied to repair, restore or replace the Mortgaged Property or, if an Asset Sale shall occur with respect to any such Net Cash Proceeds, to be applied in accordance with Section 2.12 of the Credit Agreement.

 

SECTION 1.07. Assignment of Leases and Rents.  (a) Mortgagor hereby irrevocably and absolutely grants, transfers and assigns all of its right title and interest in all Leases, together with any and all extensions and renewals thereof for purposes of securing and discharging the performance by Mortgagor of the Obligations. Mortgagor has not assigned or executed any assignment of, and will not assign or execute any assignment of, any Leases or the Rents payable thereunder to anyone other than Mortgagee.

 

(b)   All Leases shall be subordinate to the lien of this Mortgage. Mortgagor will not enter into, modify or amend any Lease if such Lease, as entered into, modified or amended, will not be subordinate to the lien of this Mortgage.

 

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(c)   Subject to Section 1.07(d), Mortgagor has assigned and transferred to Mortgagee all of Mortgagor’s right, title and interest in and to the Rents now or hereafter arising from each Lease heretofore or hereafter made or agreed to by Mortgagor, it being intended that this assignment establish, subject to Section 1.07(d), an absolute transfer and assignment of all Rents and all Leases to Mortgagee and not merely to grant a security interest therein. Subject to Section 1.07(d), Mortgagee may in Mortgagor’s name and stead (with or without first taking possession of any of the Mortgaged Property personally or by receiver as provided herein) operate the Mortgaged Property and rent, lease or let all or any portion of any of the Mortgaged Property to any party or parties at such rental and upon such terms as Mortgagee shall, in its sole discretion, determine, and may collect and have the benefit of all of said Rents arising from or accruing at any time thereafter or that may thereafter become due under any Lease.

 

(d)   So long as an Event of Default shall not have occurred and be continuing, Mortgagee will not exercise any of its rights under Section 1.07(c), and Mortgagor shall receive and collect the Rents accruing under any Lease; but after the happening and during the continuance of any Event of Default, Mortgagee may, at its option, receive and collect all Rents and enter upon the Premises and Improvements through its officers, agents, employees or attorneys for such purpose and for the operation and maintenance thereof. Mortgagor hereby irrevocably authorizes and directs each tenant, if any, and each successor, if any, to the interest of any tenant under any Lease, respectively, to rely upon any notice of a claimed Event of Default sent by Mortgagee to any such tenant or any of such tenant’s successors in interest, and thereafter to pay Rents to Mortgagee without any obligation or right to inquire as to whether an Event of Default actually exists and even if some notice to the contrary is received from the Mortgagor, who shall have no right or claim against any such tenant or successor in interest for any such Rents so paid to Mortgagee. Each tenant or any of such tenant’s successors in interest from whom Mortgagee or any officer, agent, attorney or employee of Mortgagee shall have collected any Rents, shall be authorized to pay Rents to Mortgagor only after such tenant or any of their successors in interest shall have received written notice from Mortgagee that the Event of Default is no longer continuing, unless and until a further notice of an Event of Default is given by Mortgagee to such tenant or any of its successors in interest.

 

(e)   Mortgagee will not become a mortgagee in possession so long as it does not enter or take actual possession of the Mortgaged Property. In addition, Mortgagee shall not be responsible or liable for performing any of the obligations of the landlord under any Lease, for any waste by any tenant, or others, for any dangerous or defective conditions of any of the Mortgaged Property, for negligence in the management, upkeep, repair or control of any of the Mortgaged Property or any other act or omission by any other person.

 

(f)    Mortgagor shall furnish to Mortgagee, within 30 days after a request by Mortgagee to do so, a written statement containing the names of all tenants, subtenants and concessionaires of the Premises or Improvements, the terms of any Lease, the space occupied and the rentals and/or other amounts payable thereunder.

 

SECTION 1.08. Restrictions on Transfers and Encumbrances.  Mortgagor shall not directly or indirectly sell, convey, alienate, assign, lease, sublease, license, mortgage, pledge,

 

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encumber or otherwise transfer, create, consent to or suffer the creation of any lien, charge or other form of encumbrance upon any interest in or any part of the Mortgaged Property, or be divested of its title to the Mortgaged Property or any interest therein in any manner or way, whether voluntarily or involuntarily (other than resulting from a condemnation), or engage in any common, cooperative, joint, time-sharing or other congregate ownership of all or part thereof, except in each case in accordance with and to the extent permitted by the Credit Agreement; provided , that Mortgagor may, in the ordinary course of business and in accordance with reasonable commercial standards, enter into easement or covenant agreements that relate to and/or benefit the operation of the Mortgaged Property and that do not materially and adversely affect the value, use or operation of the Mortgaged Property. If any of the foregoing transfers or encumbrances results in an Asset Sale, any Net Cash Proceeds received by or on behalf of the Mortgagor in respect thereof shall constitute trust funds to be held by the Mortgagor for the benefit of the Secured Parties and applied in accordance with Section 2.12 of the Credit Agreement.

 

SECTION 1.09. Security Agreement.  This Mortgage is both a mortgage of real property and a grant of a security interest in personal property, and shall constitute and serve as a “Security Agreement” within the meaning of the uniform commercial code as adopted in the state wherein the Premises are located (“UCC”). Mortgagor has hereby granted unto Mortgagee a security interest in and to all the Mortgaged Property described in this Mortgage that is not real property, and simultaneously with the recording of this Mortgage, Mortgagor has filed or will file UCC financing statements, and will file continuation statements prior to the lapse thereof, at the appropriate offices in the jurisdiction of formation of the Mortgagor to perfect the security interest granted by this Mortgage in all the Mortgaged Property that is not real property. Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to execute any document and to file the same in the appropriate offices (to the extent it may lawfully do so), and to perform each and every act and thing reasonably requisite and necessary to be done to perfect the security interest contemplated by the preceding sentence. Mortgagee shall have all rights with respect to the part of the Mortgaged Property that is the subject of a security interest afforded by the UCC in addition to, but not in limitation of, the other rights afforded Mortgagee hereunder and under the Guarantee and Collateral Agreement.

 

SECTION 1.10. Filing and Recording.  Mortgagor will cause this Mortgage, the UCC financing statements referred to in Section 1.09, any other security instrument creating a security interest in or evidencing the lien hereof upon the Mortgaged Property and each UCC continuation statement and instrument of further assurance to be filed, registered or recorded and, if necessary, refiled, rerecorded and reregistered, in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to perfect the lien hereof upon, and the security interest of Mortgagee in, the Mortgaged Property until this Mortgage is terminated and released in full in accordance with Section 3.04 hereof. Mortgagor will pay all filing, registration and recording fees, all Federal, state, county and municipal recording, documentary or intangible taxes and other taxes, duties, imposts, assessments and charges, and all reasonable expenses incidental to or arising out of or in connection with the execution, delivery and recording of this Mortgage, UCC continuation statements any mortgage supplemental hereto, any security instrument with

 

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respect to the Personal Property, Permits, Plans and Warranties and Proceeds or any instrument of further assurance.

 

SECTION 1.11. Further Assurances. Upon demand by Mortgagee, Mortgagor will, at the cost of Mortgagor and without expense to Mortgagee, do, execute, acknowledge and deliver all such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers and assurances as Mortgagee shall from time to time reasonably require for the better assuring, conveying, assigning, transferring and confirming unto Mortgagee the property and rights hereby conveyed or assigned or intended now or hereafter so to be, or which Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage, or for filing, registering or recording this Mortgage, and on demand, Mortgagor will also execute and deliver and hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to execute and file to the extent it may lawfully do so, one or more financing statements, chattel mortgages or comparable security instruments reasonably requested by Mortgagee to evidence more effectively the lien hereof upon the Personal Property and to perform each and every act and thing requisite and necessary to be done to accomplish the same.

 

SECTION 1.12. Additions to Mortgaged Property. All right, title and interest of Mortgagor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property hereafter acquired by or released to Mortgagor or constructed, assembled or placed by Mortgagor upon the Premises or the Improvements, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case without any further mortgage, conveyance, assignment or other act by Mortgagor, shall become subject to the lien and security interest of this Mortgage as fully and completely and with the same effect as though now owned by Mortgagor and specifically described in the grant of the Mortgaged Property above, but at any and all times Mortgagor will execute and deliver to Mortgagee any and all such further assurances, mortgages, conveyances or assignments thereof as Mortgagee may reasonably require for the purpose of expressly and specifically subjecting the same to the lien and security interest of this Mortgage.

 

SECTION 1.13. No Claims Against Mortgagee. Nothing contained in this Mortgage shall constitute any consent or request by Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof, nor as giving Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Mortgagee in respect thereof.

 

SECTION 1.14. F ixture Filing. (a) Certain portions of the Mortgaged Property are or will become “fixtures” (as that term is defined in the UCC) on the Land, and this Mortgage, upon being filed for record in the real estate records of the county wherein such fixtures are situated, shall operate also as a financing statement filed as a fixture filing in

 

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accordance with the applicable provisions of said UCC upon such portions of the Mortgaged Property that are or become fixtures.

 

(b)   The real property to which the fixtures relate is described in Exhibit A attached hereto. The record owner of the real property described in Exhibit A attached hereto is Mortgagor. The name, type of organization and jurisdiction of organization of the debtor for purposes of this financing statement are the name, type of organization and jurisdiction of organization of the Mortgagor set forth in the first paragraph of this Mortgage, and the name of the secured party for purposes of this financing statement is the name of the Mortgagee set forth in the first paragraph of this Mortgage. The mailing address of the Mortgagor/debtor is the address of the Mortgagor set forth in the first paragraph of this Mortgage. The mailing address of the Mortgagee/secured party from which information concerning the security interest hereunder may be obtained is the address of the Mortgagee set forth in the first paragraph of this Mortgage. Mortgagor’s organizational identification number is 2576119.

 

ARTICLE II

Defaults and Remedies

 

SECTION 2.01. E vents of Default. Any Event of Default under the Credit Agreement (as such term is defined therein) shall constitute an Event of Default under this Mortgage.

 

SECTION 2.02. Demand for Payment. If an Event of Default shall occur and be continuing, then, upon written demand of Mortgagee, Mortgagor will pay to Mortgagee all amounts due hereunder and under the Credit Agreement and the Guarantee and Collateral Agreement and such further amount as shall be sufficient to cover the costs and expenses of collection, including attorneys’ fees, disbursements and expenses incurred by Mortgagee, and Mortgagee shall be entitled and empowered to institute an action or proceedings at law or in equity for the collection of the sums so due and unpaid, to prosecute any such action or proceedings to judgment or final decree, to enforce any such judgment or final decree against Mortgagor and to collect, in any manner provided by law, all moneys adjudged or decreed to be payable.

 

SECTION 2.03. Rights To Take Possession, Operate and Apply Revenues. (a) If an Event of Default shall occur and be continuing, Mortgagor s hall, upon demand of Mortgagee, forthwith surrender to Mortgagee actual possession of the Mortgaged Property and, if and to the extent not prohibited by applicable law, Mortgagee itself, or by such officers or agents as it may appoint, may then enter and take possession of all the Mortgaged Property without the appointment of a receiver or an application therefor, exclude Mortgagor and its agents and employees wholly therefrom, and have access to the books, papers and accounts of Mortgagor.

 

(b)   If Mortgagor shall for any reason fail to surrender or deliver the Mortgaged Property or any part thereof after such demand by Mortgagee, M ortgagee may to the extent not prohibited by applicable law, obtain a judgment or decree conferring upon Mortgagee the

 

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right to immediate possession or requiring Mortgagor to deliver immediate possession of the Mortgaged Property to Mortgagee, to the entry of which judgment or decree Mortgagor hereby specifically consents. Mortgagor will pay to Mortgagee, upon demand, all reasonable expenses of obtaining such judgment or decree, including reasonable compensation to Mortgagee’s attorneys and agents with interest thereon at the rate per annum applicable to overdue amounts under the Credit Agreement as provided in Section 2.07 of the Credit Agreement (the “Interest Rate”); and all such expenses and compensation shall, until paid, be secured by this Mortgage.

 

(c)   Upon every such entry or taking of possession, Mortgagee may, to the extent not prohibited by applicable law, hold, store, use, operate, manage and control the Mortgaged Property, conduct the business thereof and, from time to time, (i) make all necessary and proper maintenance, repairs, renewals, replacements, additions, betterments and improvements thereto and thereon, (ii) purchase or otherwise acquire additional fixtures, personalty and other property, (iii) insure or keep the Mortgaged Property insured, (iv) manage and operate the Mortgaged Property and exercise all the rights and powers of Mortgagor to the same extent as Mortgagor could in its own name or otherwise with respect to the same, or (v) enter into any and all agreements with respect to the exercise by others of any of the powers herein granted Mortgagee, all as may from time to time be directed or determined by Mortgagee to be in its best interest and Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in any and all capacities, to perform any of the foregoing acts. Mortgagee may collect and receive all the Rents, issues, profits and revenues from the Mortgaged Property, including those past due as well as those accruing thereafter, and, after deducting (i) all expenses of taking, holding, managing and operating the Mortgaged Property (including compensation for the services of all persons employed for such purposes), (ii) the costs of all such maintenance, repairs, renewals, replacements, additions, betterments, improvements, purchases and acquisitions, (iii) the costs of insurance, (iv) such taxes, assessments and other similar charges as Mortgagee may at its option pay, (v) other proper charges upon the Mortgaged Property or any part thereof and (vi) the compensation, expenses and disbursements of the attorneys and agents of Mortgagee, Mortgagee shall apply the remainder of the moneys and proceeds so received first to the payment of the Mortgagee for the satisfaction of the Obligations, and second, if there is any surplus, to Mortgagor, subject to the entitlement of others thereto under applicable law.

 

(d)   Whenever, before any sale of the Mortgaged Property under Section 2.06, all Obligations that are then due shall have been paid and all Events of Default fully cured, Mortgagee will surrender possession of the Mortgaged Property back to Mortgagor, its successors or assigns. The same right of taking possession shall, however, arise again if any subsequent Event of Default shall occur and be continuing.

 

SECTION 2.04. Right To Cure Mortgagor’s Failure to Perform. Should Mortgagor fail in the payment, performance or observance of any term, covenant or condition required by this Mortgage or the Credit Agreement (with respect to the Mortgaged Property), Mortgagee may pay, perform or observe the same, and all payments made or costs or expenses incurred by Mortgagee in connection therewith shall be secured hereby and shall be, without demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at

 

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the Interest Rate. Mortgagee shall be the judge using reasonable discretion of the necessity for any such actions and of the amounts to be paid. Mortgagee is hereby empowered to enter and to authorize others to enter upon the Premises or the Improvements or any part thereof for the purpose of performing or observing any such defaulted term, covenant or condition without having any obligation to so perform or observe and without thereby becoming liable to Mortgagor, to any person in possession holding under Mortgagor or to any other person.

 

SECTION 2.05. Right to a Receiver. If an Event of Default shall occur and be continuing, Mortgagee, upon application to a court of competent jurisdiction , shall be entitled as a matter of right to the appointment of a receiver to take possession of and to operate the Mortgaged Property and to collect and apply the Rents. The receiver shall have all of the rights and powers permitted under the laws of the state wherein the Mortgaged Property is located. Mortgagor shall pay to Mortgagee upon demand all reasonable expenses, including receiver’s fees, reasonable attorney’s fees and disbursements, costs and agent’s compensation incurred pursuant to the provisions of this Section 2.05; and all such expenses shall be secured by this Mortgage and shall be, without demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at the Interest Rate.

 

SECTION 2.06. Foreclosure and Sale. (a) If an Event of Default shall occur and be continuing, Mortgagee may elect to sell the Mortgaged Property or any part of the Mortgaged Property by exercise of the power of foreclosure or of sale granted to Mortgagee by applicable law or this Mortgage. In such case, Mortgagee may commence a civil action to foreclose this Mortgage, or it may proceed and sell the Mortgaged Property to satisfy any Obligation. Mortgagee or an officer appointed by a judgment of foreclosure to sell the Mortgaged Property, may sell all or such parts of the Mortgaged Property as may be chosen by Mortgagee at the time and place of sale fixed by it in a notice of sale, either as a whole or in separate lots, parcels or items as Mortgagee shall deem expedient, and in such order as it may determine, at public auction to the highest bidder. Mortgagee or an officer appointed by a judgment of foreclosure to sell the Mortgaged Property may postpone any foreclosure or other sale of all or any portion of the Mortgaged Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement or subsequently noticed sale. Without further notice, Mortgagee or an officer appointed to sell the Mortgaged Property may make such sale at the time fixed by the last postponement, or may, in its discretion, give a new notice of sale. Any person, including Mortgagor or Mortgagee or any designee or affiliate thereof, may purchase at such sale.

 

(b)   The Mortgaged Property may be sold subject to unpaid taxes and the applicable permitted Liens set forth in Section 6.02 of the Credit Agreement, and, after deducting all costs, fees and expenses of Mortgagee (including costs of evidence of title in connection with the sale) , Mortgagee or an officer that makes any sale shall apply the proceeds of sale in the manner set forth in Section 2.08.

 

(c)   Any foreclosure or other sale of less than the whole of the Mortgaged Property or any defective or irregular sale made hereunder shall not exhaust the power of foreclosure or of sale provided for herein; and subsequent sales may be made hereunder until the Obligations have been satisfied, or the entirety of the Mortgaged Property has been sold.

 

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(d)   If an Event of Default shall occur and be continuing, Mortgagee may instead of, or in addition to, exercising the rights described in Section 2.06(a) above and either with or without entry or taking possession as herein permitted, proceed by a suit or suits in law or in equity or by any other appropriate proceeding or remedy (i) to specifically enforce payment of some or all of the Obligations, or the performance of any term, covenant, condition or agreement of this Mortgage or any other Loan Document or any other right, or (ii) to pursue any other remedy available to Mortgagee, all as Mortgagee shall determine most effectual for such purposes.

 

SECTION 2.07. Other Remedies. (a) In case an Event of Default shall occur and be continuing, Mortgagee may also exercise, to the extent not prohibited by law, any or all of the remedies available to a secured party under the UCC.

 

(b)   In connection with a sale of the Mortgaged Property or any Personal Property and the application of the proceeds of sale as provided in Section 2.08, Mortgagee shall be entitled to enforce payment of and to receive up to the principal amount of the Obligations, plus all other charges, payments and costs due under this Mortgage, and to recover a deficiency judgment for any portion of the aggregate principal amount of the Obligations remaining unpaid, with interest.

 

SECTION 2.08. Appli cation of Sale Proceeds and Rents. Subject to the Intercreditor Agreement, after any foreclosure sale of all or any of the Mortgaged Property, Mortgagee shall receive and apply the proceeds of the sale together with any Rents that may have been collected and any other sums that then may be held by Mortgagee under this Mortgage as follows:

 

FIRST, to the payment of all costs and expenses incurred by the Mortgagee, the Administrative Agent or the Collateral Agent (in their respective capacities as such hereunder or under any other Loan Document) in connection with such collection, sale, foreclosure or realization or otherwise in connection with this Mortgage, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Mortgagee, the Administrative Agent and/or the Collateral Agent hereunder or under any other Loan Document on behalf of Mortgagor or any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;

 

SECOND, to the payment in full of Unfunded Advances (the amounts so applied to be distributed between or among the Secured Parties pro rata in accordance with the amounts of Unfunded Advances owed to them on the date of any such distribution);

 

THIRD, to the payment in full of all other Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution);

 

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FOURTH, to the Mortgagor, its successors or assigns, or as a court of competent jurisdiction may otherwise direct.

 

The Mortgagee shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Mortgage. Upon any sale of the Mortgaged Property by the Mortgagee (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Mortgagee or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Mortgaged Property so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Mortgagee or such officer or be answerable in any way for the misapplication thereof.

 

SECTION 2.09. Mortgagor as Tenant Holding Over. If Mortgagor remains in possession of any of the Mortgaged Property after any foreclosure sale by Mortgagee, at Mortgagee’s election Mortgagor shall be deemed a tenant holding over and shall forthwith surrender possession to the purchaser or purchasers at such sale or be summarily dispossessed or evicted according to provisions of law applicable to tenants holding over.

 

SECTION  2.10. Waiver of Appraisement, Valuation, Stay, Extension and Redemption Laws. Mortgagor waives, to the extent not prohibited by law, (i) the benefit of all laws now existing or that hereafter may be enacted (x) providing for any appraisement or valuation of any portion of the Mortgaged Property and/or (y) in any way extending the time for the enforcement or the collection of amounts due under any of the Obligations or creating or extending a period of redemption from any sale made in collecting said debt or any other amounts due Mortgagee, (ii) any right to at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any homestead exemption, stay, statute of limitations, extension or redemption, or sale of the Mortgaged Property as separate tracts, units or estates or as a single parcel in the event of foreclosure or notice of deficiency, and (iii) all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of or each of the Obligations and marshaling in the event of foreclosure of this Mortgage.

 

SECTION 2 .11. Discontinuance of Proceedings. In case Mortgagee shall proceed to enforce any right, power or remedy under this Mortgage by foreclosure, entry or otherwise, and such proceedings shall be discontinued or abandoned for any reason, or shall be determined adversely to Mortgagee, then and in every such case Mortgagor and Mortgagee shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of Mortgagee shall continue as if no such proceeding had been taken.

 

SECTION 2.12.  Suits To Protect the Mortgaged Property. Mortgagee shall have power (a) to institute and maintain suits and proceedings to prevent any impairment of the Mortgaged Property by any acts that may be unlawful or in violation of this Mortgage, (b) to preserve or protect its interest in the Mortgaged Property and in the Rents arising therefrom and (c) to restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of or compliance with such enactment, rule or order would impair the security or be prejudicial to the interest of Mortgagee hereunder.

 

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SECTION 2.13. Filing Proofs of Claim. In case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting Mortgagor, Mortgagee shall, to the extent permitted by law, be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of Mortgagee allowed in such proceedings for the Obligations secured by this Mortgage at the date of the institution of such proceedings and for any interest accrued, late charges and additional interest or other amounts due or that may become due and payable hereunder after such date.

 

SECTION 2.14. Possession by Mortgagee. Notwithstanding the appointment of any receiver, liquidator or trustee of Mortgagor, any of its property or the Mortgaged Property, Mortgagee shall be entitled, to the extent not prohibited by law, to remain in possession and control of all parts of the Mortgaged Property now or hereafter granted under this Mortgage to Mortgagee in accordance with the terms hereof and applicable law.

 

SECTION 2.15. Waiver. (a) No delay or failure by Mortgagee to exercise any right, power or remedy accruing upon any breach or Event of Default shall exhaust or impair any such right, power or remedy or be construed to be a waiver of any such breach or Event of Default or acquiescence therein; and every right, power and remedy given by this Mortgage to Mortgagee may be exercised from time to time and as often as may be deemed expedient by Mortgagee. No consent or waiver by Mortgagee to or of any breach or Event of Default by Mortgagor in the performance of the Obligations shall be deemed or construed to be a consent or waiver to or of any other breach or Event of Default in the performance of the same or of any other Obligations by Mortgagor hereunder. No failure on the part of Mortgagee to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall constitute a waiver by Mortgagee of its rights hereunder or impair any rights, powers or remedies consequent on any future Event of Default by Mortgagor.

 

(b)   Even if Mortgagee (i) grants some forbearance or an extension of time for the payment of any sums secured hereby, (ii) takes other or additional security for the payment of any sums secured hereby, (iii) waives or does not exercise some right granted herein or under the Loan Documents, (iv) releases a part of the Mortgaged Property from this Mortgage, (v) agrees to change some of the terms, covenants, conditions or agreements of any of the Loan Documents, (vi) consents to the filing of a map, plat or replat affecting the Premises, (vii) consents to the granting of an easement or other right affecting the Premises or (viii) makes or consents to an agreement subordinating Mortgagee’s lien on the Mortgaged Property hereunder; no such act or omission shall preclude Mortgagee from exercising any other right, power or privilege herein granted or intended to be granted in the event of any breach or Event of Default then made or of any subsequent default; nor, except as otherwise expressly provided in an instrument executed by Mortgagee, shall this Mortgage be altered thereby. In the event of the sale or transfer by operation of law or otherwise of all or part of the Mortgaged Property, Mortgagee is hereby authorized and empowered to deal with any vendee or transferee with reference to the Mortgaged Property secured hereby, or with reference to any of the terms, covenants, conditions or agreements hereof, as fully and to the same extent as it might deal with the original parties hereto and without in any way releasing or discharging any liabilities, obligations or undertakings.

 

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SECTION 2.16. Waiver of Trial by Jury. To the fullest extent permitted by applicable law, Mortgagor and Mortgagee each hereby irrevocably a nd unconditionally waive trial by jury in any action, claim, suit or proceeding relating to this Mortgage and for any counterclaim brought therein. Mortgagor hereby waives all rights to interpose any counterclaim in any suit brought by Mortgagee hereunder and all rights to have any such suit consolidated with any separate suit, action or proceeding.

 

SECTION 2.17. Remedies Cumulative. No right, power or remedy conferred upon or reserved to Mortgagee by this Mortgage is intended to be exclusive of any other right, power or remedy, and each and every such right, power and remedy shall be cumulative and concurrent and in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity or by statute.

 

ARTICLE III

Miscellaneous

 

SECTION 3.01. Partial Invalidity. In the event any one or more of the provisions contained in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such validity, illegality or unenforceability shall, at the option of Mortgagee, not affect any other provision of this Mortgage, and this Mortgage shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein or therein.

 

SEC TION 3.02. Notices. All notices and communications hereunder shall be in writing and given to Mortgagor in accordance with the terms of the Credit Agreement at the address set forth on the first page of this Mortgage and to the Mortgagee as provided in the Credit Agreement.

 

SECTION 3.03. Successors and Assigns. All of the grants, covenants, terms, provisions and conditions herein shall run with the Premises and the Improvements and shall apply to, bind and inure to, the benefit of the permitted successors and assigns of Mortgagor and the successors and assigns of Mortgagee.

 

SECTIO N 3.04. Satisfaction and Cancelation. (a) The conveyance to Mortgagee of the Mortgaged Property as security created and consummated by this Mortgage shall terminate and be null and void when all the Obligations have been indefeasibly paid in full in accordance with the terms of the Loan Documents and the Lenders have no further commitment to lend under the Credit Agreement.

 

(b)    Mortgagor shall automatically be released from its obligations hereunder upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Mortgagor ceases to be a Subsidiary.

 

(c)   Upon any sale or other transfer by Mortgagor of any Collateral that is permitted under the Credit Agreement to any person that is not the Borrower or a Mortgagor, or, upon the effectiveness of any written consent to the release of the Security Interest granted hereby

 

17



 

in any Collateral pursuant to Section 9.08 of the Credit Agreement, the Security Interest in such Collateral shall be automatically released.

 

(d)   In connection with any termination or release pursuant to paragraph (a), (b) or (c) above, the Mortgagee shall promptly execute and deliver to Mortgagor at such Mortgagor’s expense, all Uniform Commercial Code termination statements and similar documents that such Mortgagor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section shall be without recourse to or representation or warranty by the Mortgagee or any Secured Party. Without limiting the provisions of Section 7.06 of the Guarantee and Collateral Agreement, the Borrower shall reimburse the Mortgagee upon demand for all costs and out of pocket expenses, including the fees, charges and expenses of counsel, incurred by it in connection with any action contemplated by this Section.

 

SECTION 3.05. Definitions. As used in this Mortgage, the singular shall include the plural as the context requires and the following words and phrases shall have the following meanings: (a) “including” shall mean “including but not limited to”; (b) “provisions” shall mean “provisions, terms, covenants and/or conditions”; (c) “lien” shall mean “lien, charge, encumbrance, security interest, mortgage or deed of trust”; (d) “obligation” shall mean “obligation, duty, covenant and/or condition”; and (e) “any of the Mortgaged Property” shall mean “the Mortgaged Property or any part thereof or interest therein”. Any act that Mortgagee is permitted to perform hereunder may be performed at any time and from time to time by Mortgagee or any person or entity designated by Mortgagee. Any act that is prohibited to Mortgagor hereunder is also prohibited to all lessees of any of the Mortgaged Property. Each appointment of Mortgagee as attorney-in-fact for Mortgagor under the Mortgage is irrevocable, with power of substitution and coupled with an interest. Subject to the applicable provisions hereof, Mortgagee has the right to refuse to grant its consent, approval or acceptance or to indicate its satisfaction, in its sole discretion, whenever such consent, approval, acceptance or satisfaction is required hereunder.

 

SECTION  3.06. Multisite Real Estate Transaction. Mortgagor acknowledges that this Mortgage is one of a number of Other Mortgages and Security Documents that secure the Obligations. Mortgagor agrees that the lien of this Mortgage shall be absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Mortgagee, and without limiting the generality of the foregoing, the lien hereof shall not be impaired by any acceptance by the Mortgagee of any security for or guarantees of any of the Obligations hereby secured, or by any failure, neglect or omission on the part of Mortgagee to realize upon or protect any Obligation or indebtedness hereby secured or any collateral security therefor including the Other Mortgages and other Security Documents. The lien hereof shall not in any manner be impaired or affected by any release (except as to the property released), sale, pledge, surrender, compromise, settlement, renewal, extension, indulgence, alteration, changing, modification or disposition of any of the Obligations secured or of any of the collateral security therefor, including the Other Mortgages and other Security Documents or of any guarantee thereof, and Mortgagee may at its discretion foreclose, exercise any power of sale, or exercise any other remedy available to it under any or all of the Other Mortgages and other Security Documents without first exercising or enforcing any of its rights and remedies hereunder. Such exercise of

 

18



 

Mortgagee’s rights and remedies under any or all of the Other Mortgages and other Security Documents shall not in any manner impair the indebtedness hereby secured or the lien of this Mortgage and any exercise of the rights or remedies of Mortgagee hereunder shall not impair the lien of any of the Other Mortgages and other Security Documents or any of Mortgagee’s rights and remedies thereunder. Mortgagor specifically consents and agrees that Mortgagee may exercise its rights and remedies hereunder and under the Other Mortgages and other Security Documents separately or concurrently and in any order that it may deem appropriate and waives any rights of subrogation.

 

SECTION 3.07. No Oral Modification. This Mortgage may not be changed or terminated orally. Any agreement made by Mortgagor and Mortgagee after the date of this Mortgage relating to this Mortgage shall be superior to the rights of the holder of any intervening or subordinate Mortgage, lien or encumbrance.

 

ARTICLE IV

Particular Provisions

 

This Mortgage is subject to the following provisions relating to the particular laws of the state wherein the Premises are located:

 

SECTION 4.01. Applicable Law; Certain Particular Provisions. This Mortgage shall be governed by and construed in accordance with the internal law of the state where the Mortgaged Property is located, except that Mortgagor expressly acknowledges that by their terms, the Credit Agreement and other Loan Documents (aside from those Other Mortgages to be recorded outside New York) shall be governed by the internal law of the State of New York, without regard to principles of conflict of law. Mortgagor and Mortgagee agree to submit to jurisdiction and the laying of venue for any suit on this Mortgage in the state where the Mortgaged Property is located.

 

SECTION 4.02. Open-End Mortgage. This Mortgage is an “Open-End Mortgage” within the meaning of Connecticut General Statutes §49-2(c), and the holder hereof shall have all of the rights, powers and protections to which the holder of any such Open-End Mortgage is entitled under Connecticut law. The full amount of the Loans is $75,000,000 to be advanced and fully funded on the date hereof. The maximum term (“Maturity Date”) of the Loans is December 15, 2014.

 

SECTION 4.03. Prejudgment Remedy Waiver. The Mortgagor represents, warrants and acknowledges that the transaction of which this Mortgage is a part is a commercial transaction and not a consumer transaction. Monies now or in the future to be advanced to or on behalf of Mortgagor are not and will not be used for personal, family or household purposes. MORTGAGOR ACKNOWLEDGES THAT IT HAS THE RIGHT UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, SUBJECT TO CERTAIN LIMITATIONS, TO NOTICE OF AND HEARING ON THE RIGHT OF THE MORTGAGEE TO OBTAIN A PREJUDGEMENT REMEDY, SUCH AS ATTACHMENT, GARNISHEMENT OR REPLEVIN, UPON COMMENCING ANY LITIGATION

 

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AGAINST MORTGAGOR. NOTWITHSTANDING SUCH RIGHT, MORTGAGOR HEREBY WAIVES ALL RIGHTS TO NOTICE, JUDICIAL HEARING OR PRIOR COURT ORDER TO WHICH IT MIGHT OTHERWISE HAVE THE RIGHT UNDER SAID STATUTE OR UNDER ANY OTHER STATE OR FEDERAL STATUTE OR CONSTITUTION IN CONNECTION WITH THE OBTAINING BY MORTGAGEE OF ANY PREJUDGMENT REMEDY IN CONNECTION WITH THIS MORTGAGE. MORTGAGOR FURTHER CONSENTS TO THE ISSUANCE OF ANY PREJUDGEMENT REMEDIES WITHOUT A BOND. NOTWITHSTANDING THE FOREGOING WAIVER, NOTHING HEREIN SHALL BE DEEMED TO WAIVE ANY RIGHTS WHICH MORTGAGOR MAY HAVE WITH RESPECT TO ANY PROCEEDINGS WHICH MAY BE PERMITTED BY LAW FOLLOWING THE GRANTING OF SUCH PREJUDGMENT REMEDY.

 

SECTION 4.04. Loans Subject to Variable Interest Rate. The Loans secured by this Mortgage are variable interest rate loans as more particularly described in the Credit Agreement, but changes in the interest rate will not affect the maximum term of such Loans or the maturity date of such Loans as set forth in Section 4.02, above.

 

SECTION 4.05. Statutory Condition. This Mortgage is made and given upon THE STATUTORY CONDITION. If the Obligations have been indefeasibly paid in full in accordance with the terms of the Loan Documents, if all of the covenants and agreements of the Mortgagor under this Mortgage, the Credit Agreement and the Loan Documents shall be fully and faithfully paid, performed, observed and complied with, in accordance with their terms and if the Lenders have no further commitment to lend under the Credit Agreement, then this Mortgage shall be absolutely void; otherwise the same shall remain in full force and effect.

 

SECTION 4.06. Intercreditor Agreement. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE LIEN AND SECURITY INTEREST GRANTED TO THE COLLATERAL AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, PURSUANT TO THIS MORTGAGE AND THE EXERCISE OF ANY RIGHT OR REMEDY BY THE COLLATERAL AGENT AND THE OTHER SECURED PARTIES HEREUNDER ARE SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR AGREEMENT. IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THE INTERCREDITOR AGREEMENT AND THIS MORTGAGE, THE PROVISIONS OF THE INTERCREDITOR AGREEMENT SHALL CONTROL.

 

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IN WITNESS WHEREOF, this Mortgage has been duly executed and delivered to Mortgagee by Mortgagor on the date of the acknowledgment attached hereto.

 

WITNESSES:

SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation,

 

 

/s/ Kris Villarreal

 

by:

Printed Name: Kris Villarreal

/s/ Barry A. Morris

 

Name:

 

Title:

/s/ Kristin Blazewicz

 

 

Printed Name: Kristin Blazewicz

 

 

21



 

STATE OF NEW YORK

)

 

 

 

) ss

June 15, 2007

COUNTY OF NEW YORK

)

 

 

On this the 15 day of June, 2007, before me, Ercy Castro , the undersigned officer, personally appeared Barry A. Morris , who acknowledged himself/herself to be the                                          of SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation, and that he/she, as such                              , being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself/herself as such                                                  .

 

In Witness Whereof I hereunto set my hand.

 

 

/s/ Ercy Castro

 

Name: Ercy Castro

 

Notary Public

 

My Commission Expires : 10/23/2010.

 

 

 

 

 

ERCY CASTRO
Notary Public, State of New York
No. 01CA6155025
Qualified in Kings County
Commission Expires Oct. 23, 2010

 

22



 

Exhibit A
to Mortgage

 

Description of the Land

 

That certain piece or parcel of land on the south side of Hazard Avenue (Route 190) in the Town of Enfield, County of Hartford and State of Connecticut, shown as “Parcel A” on Sheet 1 of 2 on a map or plan entitled: “Prepared for Springborn Laboratories, Inc. Hazard Avenue & Abbe Road, Enfield, Conn. . . Scale: 1 in. = 100 ft. Date: June 30, 1987. . . Rev. 2-24-88. . . Alford Associates, Inc. Civil Engineers, Windsor, Connecticut,” which map or plan is on file with the Enfield Town Clerk in Map Volume 220, Page 3033, and more particularly bounded and described as follows:

 

Beginning at a point on the south side of Hazard Avenue, which point is the northwest corner of the herein described premises and the northeast corner of land now or formerly of Raymond F. and Suzanne Aquilio, as shown on said map; running thence along the arc of a curve to the right having a radius of 933.00 feet and a delta angle of 9° 34 ' 03 " a distance of 155.79 feet to a CHD marker; running thence N 83° 19 ' 04 " E a distance of 414.00 feet to a CHD monument; running thence N 82° 58 ' 24 " E a distance of 143.64 feet to a point, the last three (3) courses running along the south side of Hazard Avenue; running thence S 09° 53 ' 12 " E a distance of 435.66 feet along land now or formerly of National Railroad Passenger Corporation as shown on said map; running thence S 89° 20 ' 43 " W a distance of 143.38 feet to a point; S 64° 08 ' 57 " W a distance of 9.72 feet to a point; S 00° 09 ' 17 " W a distance of 14.24 feet to a point; S 89° 08 ' 16 " W a distance of 51.12 feet to a point; S 86° 57 ' 00 " W a distance of 105.15 feet to a point; N 89° 55 ' 46 " W a distance of 384.08 feet to a point; S 79° 44 ' 15 " W a distance of 139.61 feet to a set iron pin; N 69° 59 ' 38 " W a distance of 129.11 feet to a set iron pin, the last eight (8) courses being along the Scantic River as shown on said map; running thence N 24° 34 ' 57 " E a distance of 401.37 feet along land now or formerly of Thomas E. and Diane S. Eastwood, James C. and Nancy A. Miczak and Raymond F. and Suzanne Aquilio, in part by each, to the point or place of beginning.

 

TOGETHER WITH an easement from the State of Connecticut to Springborn Testing & Research, Inc. dated December 31, 1997 and recorded in Volume 1156, Page 123 of the Enfield Land Records.

 


 

EXHIBIT F-1

 

[FORM OF]

 

OPINION OF WEIL, GOTSHAL & MANGES LLP



 

 

 

WEIL, GOTSHAL & MANGES LLP

 

 

 

 

767 FIFTH AVENUE

 

AUSTIN

 

 

NEW YORK, NY 10153

 

BOSTON

 

 

(212) 310-8000

 

BRUSSELS

 

 

FAX: (212) 310-8007

 

BUDAPEST

 

 

 

 

DALLAS

 

 

 

 

FRANKFURT

 

 

 

 

HOUSTON

 

 

 

 

LONDON

 

 

 

 

MIAMI

 

 

 

 

MUNICH

 

 

 

 

PARIS

 

 

 

 

PRAGUE

 

 

 

 

PROVIDENCE

WRITER’S DIRECT LINE

 

 

 

SHANGHAI

 

 

 

 

SILICON VALLEY

 

 

 

 

SINGAPORE

 

 

June 15, 2007

 

WARSAW

 

 

 

 

WASHINGTON, D.C.

 

Credit Suisse,

as Administrative Agent and
the Lenders party to the
Second Lien Credit Agreement

 

Ladies and Gentlemen:

 

We have acted as counsel to STR Acquisition, Inc., a Delaware corporation (the “ Borrower ”), STR Holdings LLC, a Delaware limited liability company (“ Holdings ”), Specialized Technology Resources, Inc., a Delaware corporation (“ STR ”), Cal Safety Compliance Corporation, a California corporation (“ CSCC ”), Specialized Technology Resources (International), Inc., a Delaware corporation (“ STR International ”), Shuster Laboratories, Inc., a Delaware corporation (“ Shuster ”), Supply Chain Consulting Corporation, a Delaware corporation (“ Supply Chain ”), Specialized Technology Resources (Florida), Inc., a Florida corporation (“ STR Florida ”) and STR Materials Science, Inc., a Delaware corporation (“ Materials ”, and together with the Borrower, Holdings, STR, CSCC, STR International, Shuster, Supply Chain, and STR Florida, the “ Loan Parties ”), in connection with the execution and delivery of, and the consummation of the transactions contemplated by, the Second Lien Credit Agreement dated as of June 15, 2007 (the “ Credit Agreement ”) among the Borrower, Holdings, the Lenders party thereto, and Credit Suisse, as administrative agent for the Lenders (in such capacity, the “ Administrative Agent ”) and as collateral agent for the Lenders (in such capacity, the “ Collateral Agent ”). This opinion is being delivered pursuant to Section 4.02(a) of the Credit Agreement. Capitalized terms defined in the Credit Agreement and used (but not otherwise defined) herein are used herein as so defined.

 

In so acting, we have examined originals or copies (certified or otherwise identified to our satisfaction) of the following:

 

(a)           the Credit Agreement;

 



 

(b)           the Second Lien Guarantee and Collateral Agreement, dated as of the date hereof (the “ Collateral Agreement ”), among the Loan Parties and the Collateral Agent;

 

(c)           the Second Lien Assignment of Distributions among STR, STR-Registrar LLC and the Collateral Agent;

 

(d)           the Second Lien Patent Security Agreement, dated as of the date hereof, among the Loan Parties and the Collateral Agent;

 

(e)           the Second Lien Trademark Security Agreement, dated as of the date hereof, among Holdings, the Borrower and the Collateral Agent;

 

(f)            the Intercreditor Agreement dated as of the date hereof among Holdings, the Borrower, the Collateral Agent and Credit Suisse, as the First Lien Collateral Agent (as defined therein);

 

(g)           the UCC-1 Financing Statements attached as Exhibit A hereto (the “ Financing Statements ”); and

 

(h)           such corporate and limited liability company records, agreements, documents and other instruments, and such certificates or comparable documents of public officials and of officers and representatives of each of the Loan Parties, and have made such inquiries of such officers and representatives, as we have deemed relevant and necessary as a basis for the opinions hereinafter set forth. The documents set forth in clauses (a) through (f) above shall be referred to as the “ Loan Documents .”

 

In such examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. As to all questions of fact material to these opinions that have not been independently established, we have relied upon certificates or comparable documents of officers and representatives of the Loan Parties and upon the representations and warranties of the Loan Parties contained in the Loan Documents. As used herein, “to our knowledge” and “of which we are aware” mean the conscious awareness of facts or other information by any lawyer in our firm actively involved in the transactions contemplated by the Loan Documents.

 

Based on the foregoing, and subject to the qualifications stated herein, we are of the opinion that:

 

1.     The Borrower is a corporation validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and

 

2



 

authority to own, lease and operate its properties and to carry on its business as now being conducted. Holdings is a limited liability company validly existing and in good standing under the laws of the State of Delaware and has all requisite limited liability company power and authority to own, lease and operate its properties and to carry on its business as now being conducted. CSCC is a corporation validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. STR Florida is a corporation validly existing and in good standing under the laws of the State of Florida and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted.

 

2.     Each of the Borrower, Holdings, CSCC and STR Florida has all requisite corporate or limited liability company power and authority to execute and deliver each of the Loan Documents to which it is a party and to perform its obligations thereunder. The execution, delivery and performance of, and the grant of security interests pursuant to, the Loan Documents by each of the Borrower, Holdings, CSCC and STR Florida have been duly authorized by all necessary corporate action on the part of the Borrower, CSCC and STR Florida and all necessary limited liability company action on the part of Holdings. Each Loan Document has been duly and validly executed and delivered by each of the Loan Parties party thereto. Assuming the due authorization, execution and delivery thereof by the other parties thereto, each Loan Document constitutes the legal, valid and binding obligation of each Loan Party party thereto, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except that (A) rights to indemnification and contribution thereunder may be limited by federal or state securities laws or public policy relating thereto, (B) no opinion is expressed with respect to Section 9.06 of the Credit Agreement, and (C) certain remedial provisions of the Loan Documents are or may be unenforceable in whole or in part under the laws of the State of New York, but the inclusion of such provisions does not affect the validity of the Loan Documents, and the Loan Documents contains adequate provisions for the practical realization of the rights and benefits afforded thereby. No opinion is expressed in this paragraph as to the attachment, perfection or priority of any liens granted pursuant to the Loan Documents.

 

3.     The execution and delivery by each Loan Party of the Loan Documents to which it is a party, the performance by each Loan Party of its obligations thereunder and the grant of security interests by each Loan Party pursuant to the Loan Documents will not conflict with, constitute a default under or violate (i) any of the terms, conditions or provisions of the Certificate of Incorporation or by-laws of the

 

3



 

Borrower, CSCC or STR Florida or the Certificate of Formation or operating agreement of Holdings, (ii) any of the terms, conditions or provisions of any material document, agreement or other instrument to which the Borrower or Holdings is a party of which we are aware (iii) in the case of STR Florida, Florida corporate law, in the case of CSCC, California corporate law, in the case of Holdings, Delaware limited liability company law, in the case of the Borrower, Delaware corporate law, (iv) federal law or regulation (other than federal and state securities or blue sky laws, as to which we express no opinion in this paragraph) or (v) any judgment, writ, injunction, decree, order or ruling of any court or governmental authority binding on the Borrower or Holdings of which we are aware.

 

4.     No consent, approval, waiver, license or authorization or other action by or filing with any New York, California corporate, Florida corporate, Delaware corporate or federal governmental authority is required in connection with the execution and delivery by any Loan Party of the Loan Documents to which it is a party, the consummation by such Loan Party of the transactions contemplated thereby, the performance by such Loan Party of its obligations thereunder or the grant by such Loan Party of the security interests under the Loan Documents, except for (i) filings in connection with perfecting security interests, and federal and state securities or blue sky laws, as to which we express no opinion in this paragraph, (ii) those already obtained and (iii) those which could not reasonably be expected to have a material adverse effect on the business, assets or financial condition of the Borrower, Holdings and each of their subsidiaries taken as a whole.

 

5.     Except as set forth in Schedule 3.09 to the Credit Agreement, to our knowledge, there is no litigation, proceeding or governmental investigation pending or overtly threatened against the Borrower or Holdings that relates to any of the transactions contemplated by the Loan Documents or which could reasonably be expected to have a material adverse effect on the business, assets or financial condition of the Borrower, Holdings and each of their subsidiaries taken as a whole or on the ability of the Borrower to perform it obligations under the Loan Documents.

 

6.     No Loan Party is an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

 

7.     Assuming that the Borrower complies with the provisions of the Credit Agreement relating to the use of proceeds of the Loans, the execution and delivery of the Credit Agreement by the Borrower and the making of the Loans under the Credit Agreement will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve Board.

 

8.     (a)The execution and delivery of the Collateral Agreement by each Loan Party creates a valid security interest in favor of the Collateral Agent in the Article

 

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9 Collateral (as defined in the Collateral Agreement), as security for the Obligations (as defined in the Collateral Agreement). Assuming the filing of the Financing Statements (i) with respect to CSCC, with the Secretary of State of the State of California, (ii) with respect to STR Florida, with the Secretary of State of the State of Florida and (iii) with respect to the Borrower, Holdings, STR, STR International, Shuster, Supply Chain and Materials (collectively, the “ Delaware Parties ”), with the Secretary of State of the State of Delaware, such security interest is perfected, to the extent a security interest in the Article 9 Collateral may be perfected by the filing of a financing statement under the Uniform Commercial Code in effect (x) with respect to CSCC, in the State of California (the “ CA UCC ”), (y) with respect to STR Florida, in the State of Florida (the “ FL UCC ”) or (z) with respect to the Delaware Parties, in the State of Delaware (the “ DE UCC ”).

 

(b)           The execution and delivery of the Collateral Agreement by each Loan Party creates a valid lien on and security interest in the Pledged Stock and Pledged Debt Securities (each as defined in the Collateral Agreement), in favor of the Collateral Agent as security for the Obligations (as defined in the Collateral Agreement). Assuming (i) delivery in the State of New York to the Collateral Agent (the “ Pledgee ”) of all certificates and instruments that represent the Pledged Stock and Pledged Debt Securities, together with stock powers or note powers, as the case may be, properly executed in blank with respect thereto, and (ii) that the Pledgee was without notice of any adverse claim (as such phrase is defined in Section 8-105 of the Uniform Commercial Code in effect in the State of New York (the “ NY UCC ” and, together with the CA UCC, the FL UCC and the DE UCC, the “ UCC ”)) with respect to the Pledged Stock and Pledged Debt Securities, such security interest is perfected and is free of any adverse claim.

 

(c)           The execution and delivery by each Loan Party of the Collateral Agreement creates in favor of the Collateral Agent a valid security interest in each Deposit Account described therein. Upon the execution and delivery of the Webster DACA by STR, the Collateral Agent and Webster Bank, the security interest granted to the Collateral Agent in each Deposit Account described in the Webster DACA will be perfected.

 

The opinions in subparagraph (a) and, with respect to subclauses A and B below, subparagraphs (b) and (c) are subject to the following exceptions:

 

A.            that with respect to rights in the Collateral of any Loan Party (as defined in the Collateral Agreement), we express no opinion, and have assumed that such Loan Party has rights in the Collateral;

 

B.            that with respect to any Collateral as to which the perfection of a lien or security interest is governed by the laws of any jurisdiction other than the State of California, the State of Florida, the State of Delaware or the State of New York, we express no opinion;

 

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C.            that with respect to any Collateral which is or may become fixtures (as defined in Section 9-102(a)(41) of the UCC) or a commercial tort claim (as defined in Section 9-102(a)(13) of the UCC), we express no opinion; and

 

D.            that with respect to transactions excluded from Article 9 of the UCC by Section 9-109 thereof, we express no opinion.

 

The opinion set forth in subparagraph (b) is also subject to the following exceptions:

 

E.             that with respect to (i) federal tax liens accorded priority under law and (ii) liens created under Title IV of the Employee Retirement Income Security Act of 1974 which are properly filed after the date hereof, we express no opinion as to the relative priority of such liens and the security interests created by the Collateral Agreement or as to whether such liens may be adverse claims; and

 

F.             that with respect to any claim (including for taxes) in favor of any state or any of its respective agencies, authorities, municipalities or political subdivisions which claim is given lien status and/or priority under any law of such state, we express no opinion as to the relative priority of such liens and the security interests created by the Collateral Agreement or as to whether such liens may be adverse claims.

 

In addition, the opinions in subparagraphs (a) and (b) are subject to (i) the limitations on perfection of security interests in proceeds resulting from the operation of Section 9-315 of the UCC; (ii) the limitations with respect to buyers in the ordinary course of business imposed by Sections 9-318 and 9-320 of the UCC; (iii) the limitations with respect to documents, instruments and securities imposed by Sections 8-302, 9-312 and 9-331 of the UCC; (iv) the provisions of Section 9-203 of the UCC relating to the time of attachment; and (v) Section 552 of Title 11 of the United States Code (the Bankruptcy Code ”) with respect to any Collateral acquired by any Loan Party subsequent to the commencement of a case against or by such Loan Party under the Bankruptcy Code.

 

We further assume that all filings will be timely made and duly filed as necessary (i) in the event of a change in the name, identity or corporate structure of any Loan Party, (ii) in the event of a change in the location of any Loan Party and (iii) to continue to maintain the effectiveness of the original filings.

 

The opinions expressed herein are limited to the laws of the State of New York, the corporate and limited liability company laws of the State of Delaware, the corporate laws of the State of California, the corporate laws of the State of Florida, Article 9 of the UCC and the federal laws of the United States, and we express no opinion as to the effect on the matters covered by this letter of the laws of any other jurisdiction.

 

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The opinions expressed herein are rendered solely for your benefit in connection with the transactions described herein. Those opinions may not be used or relied upon by any other person, nor may this letter or any copies hereof be furnished to a third party, filed with a governmental agency, quoted, cited or otherwise referred to without our prior written consent, other than to bank regulatory authorities or permitted assigns of any Lender.

 

 

Very truly yours,

 

 

 

 

 

/s/ Weil, Gotshal & Manges LLP

 

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EXHIBIT F-2

 

[FORM OF]

OPINION OF MURTHA CULLINA LLP



 

 

CITYPLACE 1
185 ASYLUM STREET
HARTFORD, CONNECTICUT 06103-3469

ATTORNEYS AT LAW

 

TELEPHONE (860) 240-6000
FACSIMILE (860) 240-6150
www.murthalaw.com

 

June 15, 2007

 

Credit Suisse, As Administrative Agent and

Collateral Agent, under the Credit Agreement, as defined below

Eleven Madison Avenue

New York, New York 10010

 

The Lenders From Time to time party to the Credit Agreement

 

Ladies and Gentlemen:

 

We have acted as special counsel to Specialized Technology Resources, Inc., a Delaware corporation (the “Borrower”), in connection with the making of loans (the “Loans”) in the aggregate principal amount of up to $75,000,000 to the Borrower by the Lenders (the “Lenders”) referred to in the Second Lien Credit Agreement dated as of June 15, 2007 (the “Credit Agreement”) by and among STR Holdings LLC, a Delaware limited liability company, STR Acquisition, Inc., a Delaware corporation (which substantially simultaneously with the execution of the Credit Agreement is to be merged with and into the Borrower, with the Borrower being the surviving entity), Credit Suisse, as administrative agent for the Lenders (the “Administrative Agent”), Credit Suisse, as collateral agent for the lenders (the “Collateral Agent”) and the Lenders. We have also acted as counsel to each of (i) Specialized Technology Resources (International), Inc., a Delaware corporation (“SII”), (ii) Shuster Laboratories, Inc., a Delaware corporation (“SLI”), (iii) Supply Chain Consulting Services Corp., a Delaware corporation (“SCCSC”) and (iv) STR Materials Science, Inc., a Delaware corporation (“STRMSI” and, together with SII, SLI and SCCSC, collectively, the “Delaware Guarantors”).

 

The Loans are being made pursuant to the documents listed on Exhibit A to this opinion, and entered into by the various parties thereto (the “Documents”). This opinion is being delivered to you pursuant to Article IV(d)(ii) of the Credit Agreement. As used in this opinion, all capitalized terms shall have the meanings set forth herein, or in Exhibit A hereto, or as ascribed to them in the Documents, unless the context otherwise requires.

 

In connection with this opinion, we have reviewed and relied upon originals or copies, certified or otherwise authenticated to our satisfaction, of the Certificates of Incorporation, Bylaws, and records of the corporate proceedings of the Borrower (including the Certificate of Incorporation and By-Laws which are to be become effective upon the merger of STR Acquisition, Inc. and the Borrower, with the Borrower being the surviving entity) and each of the Delaware Guarantors, certificates of public officials, executed copies of the Documents and, with

 

BOSTON          HARTFORD          NEW HAVEN          STAMFORD          WOBURN

 



 

respect to factual matters only, certificates of Barry A. Morris, Vice President, Chief Financial Officer, Treasurer and Secretary of the Borrower, Vice President, Chief Financial Officer, Treasurer and Secretary of SII, Vice President, Treasurer and Secretary of SLI, Vice President, Chief Financial Officer, Treasurer and Secretary of STRMSI, Vice President, Chief Financial Officer, and Assistant Secretary of Cal Safety Compliance Corporation (“CSCC”) (a California corporation which is a subsidiary of the Borrower), Vice President, Treasurer and Secretary of Specialized Technology Resources (Florida), Inc. (“STRFI”) (a Florida corporation which is a subsidiary of the Borrower), and a certificate of Thomas D. Vitro, Assistant Secretary of SCCSC (all of such certificates of Barry A. Morris and Thomas D. Vitro collectively herein called, the “Certificates”). As to the legal existence of the Borrower, SII, SLI, SCCSC and STRMSI, we have relied solely on certificates of the Secretary of State of the State of Delaware attached hereto as Exhibits B, C, D, E and F . As to the qualification of the Borrower to transact business in the State of Connecticut, we have relied solely on a certificate of the Secretary of the State of the State of Connecticut attached hereto as Exhibit G . As to the qualification of SLI to transact business in the Commonwealth of Massachusetts, we have relied solely on a certificate of the Secretary of the Commonwealth of Massachusetts attached hereto as Exhibit H . As to the qualification of SCCSC to transact business in the State of California, we have relied solely on a certificate of the Secretary of the State of California attached hereto as Exhibit I . As to various questions of fact material to our opinion, we have relied upon statements of fact (as opposed to legal conclusions) contained in the documents we have examined or made to us by Barry A. Morris who by reason of his positions would be expected to have knowledge of such facts.  In addition, we have reviewed such provisions of law as we have deemed necessary in order to express the opinions hereinafter set forth.

 

With respect to matters stated herein to be “to our knowledge” or words of similar import, our opinions are limited to matters (i) within the present conscious awareness of the attorneys at this firm who have worked on this transaction and (ii) disclosed in the Certificates attached hereto as Exhibits J, K, L, M, N, O and P , respectively. We have no actual knowledge of any fact or circumstance which would lead us to believe that we are not justified in relying on such Certificates. We have not searched the dockets of any court or agency for litigation or proceedings against the Borrower or any of the Delaware Guarantors.

 

We have assumed that the documents to which the Delaware Guarantors are parties (collectively, the “Delaware Guarantor Documents”) will not be made unenforceable against any of the Delaware Guarantors due to lack of consideration (without investigation by us of the nature or extent of the consideration being received by any of the Delaware Guarantors).

 

We express no opinion as to the laws of any jurisdiction other than the laws of the State of Connecticut and the General Corporation Law of the State of Delaware.

 

For purposes of this opinion, we have assumed the following:

 

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(i)           that each of the parties to the Documents other than the Borrower and the Delaware Guarantors (each party to any of the Documents other than the Borrower or the Delaware Guarantors herein individually called, an “Other Party” and all of the parties to the Documents other than the Borrower and the Delaware Guarantors herein collectively called, the “Other Parties”) have the power under their respective charter documents to enter into the transactions contemplated by the Documents, that such transactions are in compliance with all laws and regulations applicable to each of such Other Parties, and that those of the Documents to which any Other Party is a party have been duly authorized, executed and delivered by such Other Party or Other Parties, as the case may be, and constitute the valid and binding obligations of such Other Party or Other Parties, as the case may be, enforceable against such Other Party or Other Parties, as the case may be, in accordance with their respective terms;

 

(ii)          the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies, whether certified or not;

 

(iii)         the genuineness of all signatures on the Documents;

 

(iv)        the Borrower and each of the Delaware Guarantors have acquired good and marketable title to, and therefore own, their real and personal property, subject only to encumbrances which have been disclosed to, and accepted by, the Administrative Agent, the Collateral Agent and the Lenders;

 

(v)         the competency of each natural person executing the Documents or related documents or certificates;

 

(vi)        the accuracy and completeness of all representations and warranties of factual matters made by the Borrower and/or the Delaware Guarantors in the Documents, without any independent investigation on our part;

 

(vii)       the accuracy and completeness of all records made available to us by the Borrower and the Delaware Guarantors;

 

(viii)      the accuracy and completeness of all governmental records examined by us;

 

(ix)         that STR Acquisition, Inc. has merged with and into the Borrower, with the Borrower being the surviving entity; and

 

(x)          that the Certificate of Incorporation and By-Laws attached hereto as Exhibits Q and R , respectively, are the Certificate of Incorporation and By-Laws of the Borrower

 

3



 

in effect immediately after the completion of the aforementioned merger of STR Acquisition, Inc. with and into the Borrower.

 

To the extent that our opinions herein relate to matters as to which governmental agencies have issued certificates, or as to which certificates or affidavits have been relied upon, such opinions speak as of the respective dates of such certificates or affidavits.

 

Based upon and subject to the foregoing, we are of the opinion that:

 

1.             The Borrower is a corporation legally existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on the business of product testing and manufacturing. SII is a corporation legally existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on the business of a holding company. SLI is a corporation legally existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on the business of product testing. SCCSC is a corporation legally existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on the business of consulting and inspection services. STRMSI is a corporation legally existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on the business permitted in its Certificate of Incorporation.

 

2.             The Borrower has all requisite corporate power and authority to enter into the Documents to which it is a party (the “Borrower Documents”) and to execute, deliver and perform its obligations under the terms of the Borrower Documents.

 

3.             The Borrower is qualified to transact business as a foreign corporation in the State of Connecticut.

 

4.             Each of the Delaware Guarantors has all requisite corporate power and authority to enter into the Delaware Guarantor Documents and to execute, deliver and perform its obligations under the terms of the Delaware Guarantor Documents.

 

5.             SLI is qualified to transact business as a foreign corporation, and is in good standing, in the Commonwealth of Massachusetts.

 

6.             SCCSC is qualified to transact business as a foreign corporation in the State of California.

 

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7.             The execution and delivery of the Borrower Documents on behalf of the Borrower, the performance of the obligations undertaken by it therein, and the grant of security interests by it pursuant thereto, have been duly authorized by all necessary corporate action on the part of the Borrower.

 

8.             The execution and delivery of the Delaware Guarantor Documents on behalf of each of the Delaware Guarantors, the performance of the obligations undertaken by each of the Delaware Guarantors therein, and the grant of security interests by each of the Delaware Guarantors thereunder have been duly authorized by all necessary corporate action on the part of each of the Delaware Guarantors.

 

9.             The execution and delivery by the Borrower of, the performance by the Borrower of its obligations under, and the grant of security interests by the Borrower pursuant to the Borrower Documents do not (a) violate any provisions of the Certificate of Incorporation or Bylaws of the Borrower; (b) to our knowledge breach, or constitute a default under, any existing obligation of the Borrower under any indenture, mortgage, lease, license, franchise, agreement, judgment, decree, order, writ, injunction or other instrument to which the Borrower is a party or by which its property is bound; or (c) violate any provision of any statute, rule or regulation of general application applicable to the Borrower. Specifically excluded from this opinion, however, are any laws, rules or regulations with respect to subdivision, zoning or other land use and development matters.

 

10.           The execution and delivery by the Delaware Guarantors of, the performance by the Delaware Guarantors of their obligations under, and the grant of security interests by the Delaware Guarantors pursuant to, the Delaware Guarantor Documents do not (a) violate any provisions of the Certificates of Incorporation or Bylaws of the Delaware Guarantors; (b) to our knowledge, breach, or constitute a default under, any existing obligation of any of the Delaware Guarantors under any indenture, mortgage, lease, license, franchise, agreement, judgment, decree, order, writ, injunction or other instrument to which any of the Delaware Guarantors is a party or by which any property of any of the Delaware Guarantors is bound; or (c) violate any provision of any statute, rule or regulation of general application applicable to any of the Delaware Guarantors. Specifically excluded from this opinion, however, are any laws, rules or execution regulations with respect to subdivision, zoning or other land use and development matters.

 

11.           To our knowledge, except as set forth on Schedule 3.09 of the Credit Agreement, no judgments are outstanding against the Borrower or any of the Delaware Guarantors, and no litigation, contested claim or governmental proceeding is now pending or threatened by or against the Borrower or any of the Delaware Guarantors or affecting their business or property.

 

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12.           No authorization, approval or other action by, and no notice to, consent of, order of or filing with, any Connecticut State governmental authority is required to be made or obtained by the Borrower in connection with the execution, delivery and performance by the Borrower of the Borrower Documents or the grant by the Borrower of the security interests under the Borrower Documents, other than (i) such reports to United States governmental authorities regarding international capital and foreign currency transactions as may be required pursuant to 31 C.F.R. Part 128, (ii) those that have been made or obtained and are in full force and effect or as to which the failure to be made or obtained or to be in full force and should not result individually or in the aggregate, in a material adverse effect on the Borrower and its Subsidiaries, taken as a whole, (iii) such registrations, filings and approvals under the laws of the State of Connecticut as may be necessary in connection with the exercise of remedies or sale of collateral or the granting of additional security interests or guarantees pursuant to the Documents, (iv) such registrations, filings or approvals that are required in order to perfect or record liens and/or security interests granted under the Documents and (v) such registrations, filings and approvals that may be required because of the legal or regulatory status of any Lender or because of any other facts specifically pertaining to any Lender.

 

13.           No authorization, approval or other action by, and no notice to, consent of, order of or filing with, any Connecticut State governmental authority is required to be made or obtained by any Delaware Guarantor in connection with the execution, delivery and performance by such Delaware Guarantor of the security interests under the Delaware Guarantor Documents, other than (i) such reports to United States governmental authorities regarding international capital and foreign currency transactions as may be required pursuant to 31 C.F.R. Part 128, (ii) those that have been made or obtained and are in full force and effect or as to which the failure to be made or obtained or to be in full force and effect should not result, individually or in the aggregate, in a material adverse effect on the Borrower and its Subsidiaries, taken as a whole, (iii) such registrations, filings and approvals under the laws of the State of Connecticut as may be necessary in connection with the exercise of remedies or sale of collateral or the granting of additional security interests or guarantees pursuant to the Documents, (iv) such registrations, filings or approvals that are required in order to perfect or record liens and/or security interests granted under the Documents and (iv) such registrations, filings and approvals that may be required because of the legal or regulatory status of any Lender or because of any other facts specifically pertaining to any Lender.

 

14.           The execution and delivery by CSCC of, the performance by CSCC of its obligations under, and the grant of security interests by CSCC pursuant to, the Documents to which it is a party do not, to our knowledge, breach or constitute a default under, any existing obligation of CSCC under any indenture, mortgage, lease, license, franchise agreement, judgment, decree, order, writ, injunction or other instrument to which CSCC is a party or by which its property is bound.

 

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15.           The execution and delivery by STRFI of, the performance by STRFI of its obligations under, and the grant of security interests by STRFI pursuant to, the Documents to which it is a party do not, to our knowledge, breach or constitute a default under, any existing obligation of STRFI under any indenture, mortgage, lease, license, franchise agreement, judgment, decree, order, writ, injunction or other instrument to which STRFI is a party or by which its property is bound.

 

The foregoing is subject to the following:

 

(a)          Our opinions are limited to only those laws, rules and regulations that we have, in the exercise of customary professional diligence, but without any special investigation, recognized as generally applicable to the transactions contemplated by the Documents or to business organizations of the same type as the Borrower and the Delaware Guarantors. In addition, we express no opinion as to any law, rule or regulation, the violation of which would not have a material effect on you, the Borrower or the Delaware Guarantors.

 

(b)         No opinion is expressed herein with respect to the enforceability of any of the Documents against any party thereto nor with respect to the creation, perfection or priority of any lien or security interest created by any of the Documents. We note that we have delivered a separate legal opinion dated the date hereof to the Administrative Agent and the Lenders addressing the enforceability of the Mortgage.

 

This opinion is rendered only as of the date hereof. We undertake no obligation to update or supplement this opinion to reflect any matters which may hereafter come to our attention or any amendments to the Documents or change in law or any other matter that may occur after the date of this opinion. This opinion is issued for the benefit of the Administrative Agent and the other Lenders and may be relied upon by the Administrative Agent and the Lenders and any of their successors or assigns and participants in the Loans in connection with the transactions contemplated by the Documents, but it may not be relied upon by any other person or for any other purpose whatsoever, without in each such other instance obtaining our prior written consent.

 

 

Very truly yours,

 

 

 

MURTHA CULLINA LLP

 

 

 

 

 

By:

/s/ Frank J. Saccomandi, III

 

 

Frank J. Saccomandi, III

 

 

A Partner of the Firm

 

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CITYPLACE 1

185 ASYLUM STREET

HARTFORD, CONNECTICUT 06103-3469

ATTORNEYS AT LAW

TELEPHONE (860) 240-6000

 

FACSIMILE (860) 240-6150

 

www.murthalaw.com

 

June 15, 2007

 

Credit Suisse,

as Administrative Agent, Collateral Agent,
Issuing Bank and Swingline Lender
under the Credit Agreement referred to below
Eleven Madison Avenue

New York, New York 10010

 

The Lenders from time to time party to the Credit Agreement

 

Re:          Second Lien Credit Agreement dated as of June 15, 2007 (the “Credit Agreement”), among STR Acquisition, Inc., a Delaware corporation, which substantially simultaneously with the execution of the Credit Agreement shall be merged with and into Specialized Technology Resources, Inc. (the “Mortgagor”), STR Holdings LLC, a Delaware limited liability company, the lenders from time to time party thereto (the “Lenders”) and Credit Suisse, Administrative Agent for the Lenders and Collateral Agent for the Secured Parties.

 

Ladies and Gentlemen:

 

We have acted as special Connecticut counsel to the Mortgagor in connection with the making of the Loans by the Lenders pursuant to the Credit Agreement. The Mortgage, as defined below, is being granted by the Mortgagor as security for the Loans, which Loans comprise term loans in the aggregate principal amount not to exceed $75,000,000, to be advanced and fully funded on June 15, 2007.

 

Capitalized terms used herein, but not otherwise defined herein, shall have the meanings ascribed to such terms in the Credit Agreement or the Mortgage. This opinion is delivered to you, at our client’s request, pursuant to Article IV(d)(ii) of the Credit Agreement.

 

In connection with this opinion, we have examined :

 

BOSTON

HARTFORD

NEW HAVEN

STAMFORD

WOBURN

 



 

(a)                     the Credit Agreement; and

 

(b)       that certain Second Lien Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement, dated as of June 15, 2007 (the “Mortgage”, and together with the Credit Agreement, the “Documents”), granted by Mortgagor to Credit Suisse (in such capacity, the “Mortgagee”), encumbering certain real property of Mortgagor located at 10 Water Street, Enfield, Connecticut 06082, which Mortgage is to be recorded in the Land Records of the Town of Enfield, Connecticut (the “Local Recording Office”).

 

In addition, we have made such investigation of law, as we have deemed necessary or advisable in connection with this opinion.

 

With respect to matters stated herein to be “to our knowledge” or words of similar import, we have limited our opinions to matters within the actual conscious awareness of attorneys in this firm who have rendered substantive attention to this transaction. We have not reviewed our files or made any other investigations with respect to matters stated herein to be “to our knowledge” or similarly qualified.

 

For purposes of this opinion we have assumed that:

 

(A)      each of the parties to the Documents is, and during the terms of such Documents will remain, in compliance with the provisions of Connecticut law governing the transaction of its business in Connecticut;

 

(B)       the Credit Agreement constitutes the valid and binding obligation of each party signatory thereto enforceable against such parties in accordance with its terms;

 

(C)       the Mortgagor owns, good and indefeasible fee simple title to, (or in the case of personal property, good and valid title to) the property it is purported to own as described in the Mortgage;

 

(D)       the Mortgagee will only seek foreclosure of the Mortgage with respect to all of the indebtedness secured thereby, notwithstanding any provision which may be contained in the Documents relating to the establishment of priority of the lien created thereby between the parties for whose benefit such Mortgage was granted; and

 

(E)       that STR Acquisition, Inc. has merged with and into the Mortgagor, with the Mortgagor being the surviving entity.

 

We have also assumed: (a) the genuineness of all signatures; (b) the competency of each natural person executing the Documents, or related documents; and (c) that the terms and conditions of the Documents have not been amended, modified or supplemented, directly or indirectly, by any other agreement or understanding of the parties or by waiver of any of the material provisions of the Documents by any of the parties to such documents.

 

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We have not verified any of the foregoing assumptions, but we have no knowledge of any facts which are inconsistent with those assumptions.

 

As to various questions of fact material to our opinion, we have relied upon statements of fact (as opposed to legal conclusions) contained in the documents we have examined and based on our knowledge, nothing has come to our attention that leads us to believe that we are not justified in so relying thereon.

 

Based upon, and subject to, the foregoing, and subject also to the qualifications, exceptions and limitations set forth below, we are of the opinion that:

 

1.              Except for filings which are necessary to publish notice of the existence of the Mortgage as an encumbrance on the real property described in the Mortgage, and/or to perfect the security interests granted under the Mortgage in fixtures located, or to be located, on the real property described in the Mortgage, no authorizations or approvals of, and no filings with, any governmental or regulatory authority or agency of the State of Connecticut are necessary for the execution, delivery or performance of the Mortgage by the Mortgagor.

 

2.              The Mortgage, which by its terms is to be governed in its entirety by the laws of the State of Connecticut, constitutes the legal, valid and binding obligation of the Mortgagor, enforceable against the Mortgagor in accordance with its terms.

 

3.              The execution and delivery by the Mortgagor of the Mortgage, and the consummation of the transaction contemplated thereby, do not conflict with, or violate, any Connecticut law, rule or regulation applicable to the Mortgagor.

 

4.              The choice of the Connecticut law to govern the Mortgage will be upheld and enforced by Connecticut state courts and federal courts sitting in Connecticut. We believe that a Connecticut state court or a federal court sitting in the Connecticut would give effect to the choice of law provisions set forth in the Credit Agreement stipulating that the validity, construction and enforceability of such Credit Agreement will be governed by the laws of the State of New York, unless such court were to determine that (x) the State of New York has no substantial relationship to the parties to the Credit Agreement or the transactions described therein, as applicable, or (y) the result obtained from applying the law of the State of New York would be contrary to the public policy of the State of Connecticut.

 

5.              The Mortgage is in proper form for recording, and upon due recordation of the Mortgage in the Local Recording Office, the Mortgage will create and constitute a valid, legal, binding and enforceable lien of record in favor of the Mortgagee, for the benefit of the Lenders, on all of the Mortgagor’s right, title and interest in the real property described in the Mortgage (the “Real Property”). No other filing or recording, or re-filing or re-recording, is necessary or advisable in order to publish notice of the Mortgagee’s interest in the Real Property or to preserve the lien created on the Mortgagor’s interest therein encumbered by the Mortgage.

 

3



 

6.              As provided in the Mortgage, the creation, perfection and enforcement of the security interest created by the Mortgage in fixtures of the Mortgagor located, or to be located, on the Real Property described in the Mortgage is governed by the laws of the State of Connecticut. The Mortgage constitutes a valid security agreement and fixture filing and creates a valid, legal, binding and enforceable security interest in favor of the Mortgagee, as secured party, and against the Mortgagor, as debtor, in that portion of the Mortgaged Property (as defined in the Mortgage) constituting fixtures attached to the Real Property described in the Mortgage and in which a security interest may be created under the provisions of Article 9 of the Uniform Commercial Code as in effect in the State of Connecticut as of the date hereof (the “UCC”). We note, however, that the definition of the term Mortgaged Property as contained in the Mortgage is sufficiently broad to encompass both personal property and fixtures attached to the Real Property. We further note that the Mortgagee’s security interest in the Mortgagor’s interest in such items of the Mortgaged Property constituting fixtures attached to the Real Property described in the Mortgage will not “attach”, as such term is used in the UCC, until the Mortgagor acquires rights therein or the right to transfer its interest therein. Upon the recording of the Mortgage in the Local Recording Office, the Mortgagee will have a perfected security interest in the Mortgagor’s interest in those items of the Mortgaged Property which constitute fixtures attached to the Real Property described in such Mortgage in which the Mortgagor now has rights or the right to transfer its interest and in which a security interest can be perfected by recording in the Local Recording Office under the UCC. Thereafter, at such time as the Mortgagor acquires rights in, or the right to transfer its interest in, additional items of such Mortgaged Property, the Mortgagee shall have a perfected security interest in the Mortgagor’s interest in that portion of such additional items of Mortgaged Property which constitute fixtures attached to the Real Property in which a security interest may be perfected by recording in the Local Recording Office under the UCC. Our opinions in this numbered paragraph 6 are qualified as follows:

 

I.              Insofar as security interests relate to proceeds, the continued perfection of such security interests is subject to the provisions of Section 9-315 of the UCC;

 

II.            We have assumed that the Lenders have “given value” as that term is used in the UCC; and

 

III.           No opinion is expressed with respect to the creation or perfection of a security interest in any of the Mortgaged Property other than fixtures as expressly set forth above.

 

7.              To the extent the substantive laws of the State of Connecticut (without regard to choice of law principles) were to apply, the Loans will not violate any applicable usury laws of the State of Connecticut or other applicable laws regulating the interest rate, fees and other charges that may be collected with respect to the Loans. By way of explanation, the provisions of Connecticut General Statutes § 37-4, et seq ., constitute the laws of the State of Connecticut relating to interest charges in excess of the lawful rate, commonly referred to as usury (“Connecticut’s Usury Statutes”). Connecticut’s Usury Statutes contain an exemption for loans made to foreign or domestic corporations, statutory trusts, limited liability companies and general or limited partnerships (among other entities) involved primarily in commercial, manufacturing, industrial or nonconsumer pursuits and provided further that the funds received

 

4



 

by such entities are utilized in such entities’ business or investment activities and are not utilized for consumer purposes and provided further that the original indebtedness to be repaid is in excess of two hundred fifty thousand dollars. Connecticut’s Usury Statutes also contain an exemption for bona fide mortgages of real property for a sum in excess of five thousand dollars. Based upon the provisions of the Documents, the transaction evidenced by the Documents qualifies for the exemption(s) set forth above and Connecticut’s Usury Statutes would not be applicable to such transaction.

 

8.              To the extent that the sole activity of the Mortgagee, any Lender, or any other party to the Documents (except the Mortgagor) in the State of Connecticut is the recording of the Mortgage against the Real Property (as described above) or the enforcement of the Mortgage, such activity, in and of itself, would not constitute the transaction of business within the State of Connecticut within the purview of § 33-920 of the Connecticut General Statutes (which constitutes the laws of the State of Connecticut enumerating activities undertaken in the State of Connecticut by corporations which do not constitute the transaction of business in the State of Connecticut), and the Mortgagee or such other party would not be required under the laws of the State of Connecticut to qualify or register as a foreign entity in order to so accept the Mortgage or enforce the same. If it were later determined that such qualification, registration and/or filing were required, the validity of the Mortgage would not be affected thereby, and the Mortgagee could thereafter seek qualification as such foreign entity, but if the Mortgagee is not so qualified, it might be precluded from enforcing its rights (but could, in any case defend any action) in the courts of the State of Connecticut until such time as the Mortgagee is qualified to transact business in the State of Connecticut. We express no opinion as to whether the Mortgagee, any Lender or any other party to the Documents (other than the Mortgagor) has heretofore undertaken such other activities or transacted such business or is currently engaged in such other activities or transacting such business, as would require Mortgagee, any such Lender, or such other party, or any of them, to obtain a certificate of authority from the Secretary of the State of the State of Connecticut to transact business in the State of Connecticut.

 

9.              Subject to the procedural requirements set forth in Connecticut General Statutes §49-1 as described below and as discussed in the exceptions to this opinion, and subject to the provisions dealing with the obtaining of a deficiency judgment after the foreclosure of a mortgage set forth in Connecticut General Statutes §49-14 as discussed below, the foreclosure of the Mortgage will not restrict or impair the liabilities of the Mortgagor (provided, however, we express no opinion herein with respect to the Credit Agreement or any of the obligations or liabilities of any of the parties thereunder) with respect to the Loans or the Mortgagee’s or any Lender’s rights or remedies with respect to the foreclosure or enforcement of any other security interests or liens securing the Loans, and the laws of the State of Connecticut do not require a lienholder to elect to pursue its remedies either against mortgaged realty or personalty if such lienholder holds security interests and liens on both real and personal property of a debtor. Pursuant to Connecticut General Statutes §49-1, once a foreclosure action on a mortgage is commenced, no further action on the mortgage debt, note or other obligations secured by such mortgage may be taken during the pendency of such foreclosure action against the person or persons who are liable for the payment thereof who are made

 

5



 

parties to the foreclosure or against any person or persons upon whom service of process to constitute an action in personam could have been made within the State of Connecticut at the commencement of the foreclosure action, but the pendency of such a foreclosure action is not a bar to any further action upon the mortgage debt, note or obligation secured by such mortgage as to any person liable for the same upon whom service of process to constitute an action in personam could not have been made within the State of Connecticut at the commencement of such foreclosure action. Pursuant to Connecticut General Statutes §49-14, a foreclosing creditor has a statutory period of thirty (30) days after the redemption period has expired in a foreclosure action to file a motion for a deficiency judgment. If a motion for deficiency judgment is not filed within such aforesaid statutory period, the foreclosing creditor is not entitled to seek to recover any deficiency remaining after the foreclosure. If a motion seeking a deficiency judgment is timely filed, a hearing shall be held, a valuation for the mortgaged property shall be established and the deficiency between the valuation of the mortgaged property and the foreclosing creditor’s claim, if any, shall be established. In any further action on the debt, note or obligation which was secured by the foreclosed mortgage, the recovery is limited to the amount of the deficiency judgment.

 

10.            Under the laws of the State of Connecticut, no mortgage, documentary, stamp, intangible or similar tax is payable in connection with the execution, delivery or enforcement of the Documents or the recording of the Mortgage, other than nominal recording fees paid upon the recording of the Mortgage.

 

The opinions set forth above are subject to the following qualifications and limitations:

 

(a)            Except with respect to the $75,000,000 principal amount of the Loans advanced and fully funded at closing under the Credit Agreement, we express no opinion as to whether the Mortgage adequately describes the obligations secured thereby or the effect on the enforceability of the Mortgage against third parties to the extent of such portions of the obligations as are deemed not to be adequately described. In particular, we note that to the extent the Mortgage is intended to secure the Mortgagor’s obligations with respect to any Hedging Agreement (as defined in the Credit Agreement), the Mortgage is not and would not be effective under Connecticut law to create or preserve, or render enforceable, any lien with respect to any such Hedging Agreement as it applies to the Mortgage or the Mortgagor’s undertaking(s) with respect thereto under any of the Documents, purported to be secured by the Mortgage.

 

(b)            The enforceability of all rights, remedies and obligations is subject to procedural due process and to laws of general application relating to, and affecting the enforceability of, creditors’ rights and remedies generally, under applicable bankruptcy, insolvency, reorganization, arrangement, moratorium and fraudulent transfer or conveyance law and to state and federal forfeiture laws and similar laws related to illegal drugs, anti-money laundering, terrorist or similar activities.

 

(c)            The enforceability of the Mortgage is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

6



 

(d)            Certain provisions of the Mortgage may not be enforceable, but such unenforceability will not render the Mortgage invalid as a whole or preclude (i) subject to the statutory provision barring further action on the debt when foreclosure has commenced pursuant to Connecticut General Statutes § 49-1, and subject to Connecticut General Statutes §§ 49-14 and 49-28 affecting deficiency judgments, the judicial enforcement of the obligation of the Mortgagor to repay the principal balance of the Loans then outstanding, as provided therein (to the extent not deemed a penalty), and (ii) foreclosure of the Mortgage. We note that to the extent the Mortgage is in favor of the Mortgagee, while any promissory note or notes evidencing all or any portion of the indebtedness secured by the Mortgages are in favor of the Lender(s) pursuant to the Credit Agreement, evidence of the power and authority of the Mortgagee to act for and on behalf of the Lender(s) with respect to such promissory note(s) or an assignment of such promissory note(s) to the Mortgagee would be required to foreclose the Mortgage.

 

(e)            Subject to the provisions of subparagraph (d) above, no opinion is expressed as to the enforceability of (i) provisions related to self-help, (ii) provisions which purport to establish evidentiary standards, (iii) provisions related to waiver of remedies (or the delay or omission of enforcement thereof), disclaimers, releases of legal or equitable rights, discharge of defenses, or liquidated damages, (iv) provisions releasing, exculpating or exempting a party from, or requiring indemnification of a party for, liability for its own action or inaction to the extent the action or inaction involves negligence, recklessness, willful misconduct, unlawful conduct or conduct against public policy, or (v) any particular remedy where another remedy has been selected; provided, however, that such reservation in the aggregate will not affect the general legal, valid, binding and enforceable nature of the obligations of the Mortgagor under the Mortgage.

 

(f)            Provisions in the Mortgage which permit the Mortgagee to make determinations or to take actions may be subject to requirements that such determinations be made or actions be taken on a reasonable basis and in good faith.

 

(g)            No opinion is expressed as to the ownership by the Mortgagor of any real or personal property. No opinion is expressed as to the priority of any lien or security interest created in any property or as to any person’s rights in any collateral.

 

(h)            Provisions of the Mortgage which purport to encumber after-acquired real property are unenforceable.

 

(i)             We express no opinion as to any compliance with, the effect of, or need for, any governmental approvals, licenses, permits or other authorizations required for the operation of any property owned by the Mortgagor or the conduct of the Mortgagor’s business, including but not limited to, any applicable health, safety, subdivision, zoning, land use or environmental law, rule or regulation.

 

(j)             We are qualified to practice law in the State of Connecticut. We express no opinion as to the laws of any jurisdiction other than the laws of the State of Connecticut.

 

7



 

(k)            The opinions herein expressed are limited to the matters expressly set forth in this opinion letter and no opinion is implied, or may be inferred, beyond the matters expressly so stated.

 

This opinion is rendered only as of the date hereof. We undertake no obligation to update or supplement this opinion to reflect any matters which may hereafter come to our attention or any amendments to the Documents, or change in law or any other matter that may occur after the date of this opinion. This opinion is issued for the benefit of the Institutions to whom this opinion is addressed (the “Institutions”) and may be relied upon by the Institutions, their respective counsel, and any of their successors or assigns in connection with the transactions contemplated by the Documents, but it may not be relied upon by any other person or for any other purpose whatsoever, without in each such other instance obtaining our prior written consent.

 

 

Very truly yours,

 

 

 

MURTHA CULLINA LLP

 

 

 

By:

/s/ Frank J. Saccomandi III

 

 

Frank J. Saccomandi III

 

 

A Partner of the Firm

 

8


 

EXHIBIT G

 

[FORM OF]

INTEREST ELECTION REQUEST

 

Credit Suisse, as Administrative Agent
for the Lenders referred to below

Eleven Madison Avenue

New York, NY 10010

 

Attention: Agency Group

 

[Date]

 

Ladies and Gentlemen:

 

Reference is made to the Second Lien Credit Agreement dated as of June 15, 2007 (as amended, restated, supplemented, waived or otherwise modified from time to time, the Credit Agreement ”), among STR Acquisition, Inc., a Delaware corporation (the Borrower ”), STR Holdings LLC, a Delaware limited liability company, the lenders from time to time party thereto (the Lenders ”), and Credit Suisse, as administrative agent (in such capacity, the Administrative Agent ”) for the Lenders. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

 

This notice constitutes a notice of Interest Election under Section 2.06(a) of the Credit Agreement, and the Borrower hereby irrevocably notifies the Administrative Agent of the following information with respect to the Interest Election requested hereby:

 

(i)

Borrowing to which Interest Election applies:

 

 

Principal Amount:

 

 

Type (ABR/Eurodollar):

 

 

Interest Period (if Eurodollar):

 

 

Interest Election (Cash/PIK):

 

 

 

 

(ii)

Effective Date of Election:

 

 



 

The undersigned certifies, represents and warrants on behalf of the Borrower that the Borrower is entitled to make the requested Interest Election under the terms and conditions of the Credit Agreement.

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.,

 

 

 

By:

 

 

 

 

 

 

Name:

 

 

Title:

 




Exhibit 10.13

 

EXECUTION VERSION

 

AMENDMENT No. 1 dated as of October 5, 2009 (this “ Amendment ”), to the Second Lien Credit Agreement dated as of June 15, 2007 as amended, supplemented or otherwise modified (the Credit Agreement ”), among STR ACQUISITION INC., a Delaware corporation which substantially simultaneously with the execution thereof merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (the “ Borrower ”), STR HOLDINGS LLC, a Delaware limited liability company (“ Existing Holdings ”), the Lenders (as defined in the Credit Agreement), and CREDIT SUISSE, as administrative agent (in such capacity, the “ Administrative Agent ”) and as collateral agent (in such capacity the “Collateral Agent” ) for the Lenders.

 

WHEREAS the Borrower and Existing Holdings have informed the Administrative Agent that they intend to cause New Holdings (as defined below) to effect an initial public offering pursuant to which New Holdings’ common Equity Interests will be offered and sold.

 

WHEREAS the Borrower and the Lenders have agreed to permit (a) the formation of a Delaware limited liability company that will elect to be treated as a corporation for Federal income tax purposes, as a direct, wholly owned subsidiary of the Borrower (“ New Holdings ”) and a Delaware corporation, as a direct, wholly owned subsidiary of New Holdings (“ Merger Sub ”), (b) the merger of Merger Sub with and into the Borrower with the Borrower surviving and Existing Holdings receiving all of the Equity Interests in New Holdings, (c) the transfer from Existing Holdings to New Holdings of any and all Obligations of Existing Holdings under the Loan Documents as contemplated by, and in accordance with, Section 4 of this Amendment, (d) the liquidation of Existing Holdings, and (e) the conversion of New Holdings to a Delaware corporation pursuant to the filing of a certificate of conversion with the Secretary of State of Delaware (collectively, the “ IPO Restructuring Transactions ”).

 

WHEREAS the Borrower, the Administrative Agent and the Required Lenders have agreed, on the terms and subject to the conditions set forth herein, to amend the Credit Agreement in the manner set forth herein.

 

NOW, THEREFORE, Existing Holdings, the Borrower, the Required Lenders, and the Administrative Agent hereby agree as follows:

 

SECTION 1.  Defined Terms .   Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement.

 

SECTION 2.  Amendments . (a)   The definition of the term “Qualified Public Offering” set forth in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to “$50,000,000” therein with a reference to “$25,000,000”.

 

(b)  Section 1.01 of the Credit Agreement is amended to add definitions of the following terms in appropriate alphabetical order:

 



 

Agreement ” shall mean this Credit Agreement as modified, supplemented, amended, restated (including any amendment and restatement hereof), extended or renewed from time to time.

 

Amendment No. 1 ” shall mean Amendment No. 1 dated as of October 5, 2009, to this Agreement.

 

IPO Restructuring Transactions ” shall have the meaning ascribed thereto in Amendment No. 1.

 

(c)  Section 6.05 of the Credit Agreement is hereby amended, effective upon the Effective Date (as defined below), by deleting in its entirety existing clause (v) thereof and renumbering existing clause (u) as new clause (v), existing clause (v) currently reads as follows:

 

“(v) Holdings may merge, liquidate, reorganize or otherwise be restructured into a newly-formed Loan Party in a transaction the purpose of which is to re-organize Holdings as a corporation; provided that (1) such transaction (or series of transactions) does not result in a material increase in the Tax obligations payable in cash (on a consolidated basis) for Holdings, the Borrower, each Subsidiary of the Borrower and the holders of Equity Interests in Holdings and (2) immediately following such transaction, Holdings is in compliance with all requirements of the Guarantee and Collateral Agreement and has satisfied its obligations under Section 5.11 (including the execution of any further documents, financing statements, agreements and instruments, and the taking of all other actions, that may be reasonably requested by the Required Lenders, the Administrative Agent or the Collateral Agent).”

 

(d) A new Section 9.19 is hereby added to the Credit Agreement that reads in its entirety as follows:

 

“SECTION 9.19. Holdings . New Holdings (as defined in Amendment No. 1) shall be deemed to be a successor in interest to Existing Holdings (as defined in Amendment No. 1) and all references in this Agreement to “Holdings” (other than (a) in the preamble and (b) in the definitions of the terms “Acquisition”, “Equity Contribution”, “Fee Letter” and “Transactions”) shall be deemed to be references to New Holdings and Existing Holdings.  Notwithstanding anything to the contrary in this Agreement, the Borrower and Holdings shall be permitted to engage in any one or more of the IPO Restructuring Transactions, whether or not contemporaneous (although the Borrower and Holdings expect the IPO Restructuring Transactions, other than clauses (d) and (e) described in the definition thereof, will occur substantially contemporaneously).”

 

SECTION 3.  Waiver.  Effective as of the Effective Date (as defined below), the Lenders, the Administrative Agent and the Collateral Agent waive any non-compliance under the Credit Agreement that may arise solely to the extent necessary to give effect to the IPO Restructuring Transactions, other than compliance with the procedures and obligations set forth in Sections 5.06 and 5.11 of the Credit Agreement and Section 4 of this Amendment.

 

SECTION 4.  Release and Transfer of Obligations .  Upon written notification by the Borrower, Existing Holdings shall be released of any and all Obligations arising

 

2



 

under the Loan Documents; provided that on or prior to such time (i) New Holdings shall have executed and delivered to the Collateral Agent a counterpart of the Second Lien Guarantee and Collateral Agreement and any and all such other documents as the Collateral Agent may reasonably request, (ii) New Holdings shall have pledged to the Collateral Agent 100% of the Equity Interests in the Borrower, (iii) Existing Holdings shall have assigned to New Holdings and New Holdings shall have assumed from Existing Holdings any and all Obligations of Existing Holdings arising under the Loan Documents pursuant to an assignment and assumption agreement or other instrument satisfactory to the Collateral Agent; and (iv) New Holdings, Existing Holdings, and the Borrower shall have executed any and all further documents, financing statements, agreements and instruments, and taken all further action (including filing Uniform Commercial Code and other financing statements, mortgages and deeds of trust) that may be required under applicable law, or that the Required Lenders, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by clause (i) through and including clause (iii) of this proviso.

 

SECTION 5.  Amendment Fee .    The Borrower agrees to pay on the Effective Date to the Administrative Agent, for the account of each Lender that executes and delivers a counterpart of this Amendment to the Administrative Agent (or its counsel) on or prior to October 5, 2009 at 12:00 p.m., New York City time (each such Lender a “ Consenting Lender ”), an amendment fee (collectively, the “ Amendment Fees ”) in an amount equal to 0.25% of the aggregate amount of Loans of such Consenting Lender.

 

SECTION 6.  Conditions to Effectiveness; Counterparts; Amendments .   This Amendment shall become binding on the parties and irrevocable as of the date set forth above on the date on which (a) copies hereof that, when taken together, bear the signatures of Existing Holdings, the Borrower and the Required Lenders, shall have been received by the Administrative Agent, (b) the representations and warranties set forth in Article III of the Credit Agreement shall be true and correct in all material respects with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they are true and correct in all material respects as of such earlier date (c) no Default or Event of Default shall have occurred and be continuing, (d) the Administrative Agent and Lenders shall have received payment of the Amendment Fees, and (e) the Administrative Agent and Lenders shall have received all fees and other amounts due and payable pursuant to that certain fee letter dated as of September 29, 2009, relating to this Amendment, and payment of all out-of-pocket expenses, including the reasonable and documented fees, charges and disbursements of Cravath, Swaine & Moore LLP, counsel for the Administrative Agent and the Collateral Agent, to the extent invoiced and required to be paid or reimbursed to it by the Borrower under Section 9.05 of the Credit Agreement (the Effective Date ) .   This Amendment may not be amended nor may any provision hereof be waived except pursuant to a writing signed by Existing Holdings, the Borrower, the Administrative Agent and the Required Lenders.  This Amendment may be executed in any number of counterparts, each of which shall constitute an original but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page of this Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment.

 

3



 

SECTION 7.  Representations and Warranties .   To induce the other parties hereto to enter into this Amendment, each of Existing Holdings and the Borrower represents and warrants to each of the Lenders and the Administrative Agent that, after giving effect to this Amendment, (a) the representations and warranties set forth in Article III of the Credit Agreement are true and correct in all material respects on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date, in which case they are true and correct in all material respects as of such earlier date, and (b) no Default or Event of Default has occurred and is continuing.

 

SECTION 8.  Notices .   All notices hereunder shall be given in accordance with the provisions of Section 9.01 of the Credit Agreement.

 

SECTION 9.  Loan Document Pursuant to Credit Agreement .  This Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with all of the terms and provisions of the Credit Agreement, as amended hereby.  On and after the date hereof, any reference to the Credit Agreement contained in the Loan Documents shall mean the Credit Agreement as modified hereby.

 

SECTION 10.  Full Force and Effect; Limited Amendment .   Except as expressly set forth herein, this Amendment (a) shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Administrative Agent, Existing Holdings or the Borrower under the Credit Agreement or any other Loan Document and (b) shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect.  Nothing herein shall be deemed to entitle Existing Holdings or the Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances.

 

SECTION 11.  Headings .   The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

 

SECTION 12.  Applicable Law Waiver of Jury Trial .   (A) THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

(B) EACH PARTY HERETO HEREBY AGREES AS SET FORTH IN SECTION 9.11 OF THE SECOND LIEN CREDIT AGREEMENT AS IF SUCH SECTION WERE SET FORTH IN FULL HEREIN.

 

[Remainder of this page intentionally left blank]

 

4



 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized officers, all as of the date and year first above written.

 

 

 

STR HOLDINGS LLC

 

 

 

by

 

 

 

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Executive Vice President and Chief Financial Officer

 

 

[Amendment No. 1 to Second Lien Credit Agreement]

 



 

 

CREDIT SUISSE, CAYMAN ISLANDS BRANCH, individually and as Administrative Agent and Collateral Agent,

 

 

 

by 

 

 

 

/s/ Rianka Mohan

 

 

 Name: Rianka Mohan

 

 

 Title: Vice President

 

 

 

 

 

 

 

by 

 

 

 

/s/ Vipul Dhadda

 

 

 Name: Vipul Dhadda

 

 

 Title: Associate

 

 

[Amendment No. 1 to Second Lien Credit Agreement]

 




Exhibit 10.14

 

EXECUTION COPY

 

 

 

SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT

 

dated as of

 

June 15, 2007

 

among

 

STR ACQUISITION, INC.,

 

STR HOLDINGS LLC,

 

the Subsidiaries of the Borrower

from time to time party hereto

 

and

 

CREDIT SUISSE,

as Collateral Agent

 

THIS IS THE SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT REFERRED TO IN (A) THE INTERCREDITOR AGREEMENT OF EVEN DATE HEREWITH AMONG STR ACQUISITION, INC., STR HOLDINGS LLC, THE SUBSIDIARIES OF THE BORROWER FROM TIME TO TIME PARTY THERETO AND CREDIT SUISSE, AS FIRST LIEN COLLATERAL AGENT AND AS SECOND LIEN COLLATERAL AGENT AND (B) THE OTHER SECURITY DOCUMENTS REFERRED TO IN THE CREDIT AGREEMENTS REFERRED TO HEREIN.

 

 

 



 

TABLE OF CONTENTS

 

 

 

Page

 

ARTICLE I

 

Definitions

 

SECTION 1.01.

Credit Agreement

2

SECTION 1.02.

Other Defined Terms

2

 

 

 

ARTICLE II

 

Guarantee

SECTION 2.01.

Guarantee

6

SECTION 2.02.

Guarantee of Payment

7

SECTION 2.03.

No Limitations, Etc

7

SECTION 2.04.

Reinstatement

8

SECTION 2.05.

Agreement To Pay; Subrogation

8

SECTION 2.06.

Information

9

 

 

 

ARTICLE III

 

 

Pledge of Securities

 

 

 

SECTION 3.01.

Pledge

9

SECTION 3.02.

Delivery of the Pledged Collateral

10

SECTION 3.03.

Representations, Warranties and Covenants

10

SECTION 3.04.

Certification of Limited Liability Company Interests and Limited Partnership Interests

12

SECTION 3.05.

Registration in Nominee Name; Denominations

12

SECTION 3.06.

Voting Rights; Dividends and Interest, Etc.

12

 

 

 

ARTICLE IV

 

 

Security Interests in Personal Property

 

 

 

SECTION 4.01.

Security Interest

15

SECTION 4.02.

Representations and Warranties

16

SECTION 4.03.

Covenants

18

SECTION 4.04.

Other Actions

21

SECTION 4.05.

Covenants Regarding Patent, Trademark and Copyright Collateral

24

 



 

ARTICLE V

 

 

 

Remedies

 

 

 

SECTION 5.01.

Remedies Upon Default

26

SECTION 5.02.

Application of Proceeds

27

SECTION 5.03.

Grant of License to Use Intellectual Property

28

SECTION 5.04.

Securities Act, Etc

28

 

 

 

ARTICLE VI

 

 

 

Indemnity, Subrogation and Subordination

 

 

 

SECTION 6.01.

Indemnity and Subrogation

29

SECTION 6.02.

Contribution and Subrogation

30

SECTION 6.03.

Subordination

30

 

 

 

ARTICLE VII

 

Miscellaneous

 

SECTION 7.01.

Notices

30

SECTION 7.02.

Security Interest Absolute

31

SECTION 7.03.

Survival of Agreement

31

SECTION 7.04.

Binding Effect; Several Agreement

31

SECTION 7.05.

Successors and Assigns

32

SECTION 7.06.

Collateral Agent’s Fees and Expenses; Indemnification

32

SECTION 7.07.

Collateral Agent Appointed Attorney-in-Fact

32

SECTION 7.08.

Applicable Law

33

SECTION 7.09.

Waivers; Amendment

33

SECTION 7.10.

WAIVER OF JURY TRIAL

34

SECTION 7.11.

Severability

34

SECTION 7.12.

Counterparts

34

SECTION 7.13.

Headings

35

SECTION 7.14.

Jurisdiction; Consent to Service of Process

35

SECTION 7.15.

Termination or Release

35

SECTION 7.16.

Additional Subsidiaries

36

SECTION 7.17.

Right of Setoff

36

 

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Schedules

 

Schedule I

Subsidiary Guarantors

 

Schedule II

Equity Interests; Pledged Debt Securities

 

Schedule III

Intellectual Property

 

 

 

 

Exhibits

 

 

 

 

 

Exhibit A

Form of Supplement

 

Exhibit B

Form of Perfection Certificate

 

 

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SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT dated as of June 15, 2007 (this “ Agreement ”), among STR ACQUISITION, INC., a Delaware corporation, which substantially simultaneously with the execution hereof shall be merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (“ STR ”), with STR being the surviving entity (the “ Borrowe r ”), STR HOLDINGS LLC, a Delaware limited liability company ( Holdings ), the Subsidiaries of the Borrower from time to time party hereto and CREDIT SUISSE (“ Credit Suisse ”), as collateral agent (in such capacity, the “ Collateral Agent ”) .

 

PRELIMINARY STATEMENT

 

Reference is made to (a) the Second Lien Credit Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrower, Holdings, the lenders from time to time party thereto (the “ Lenders ”) and Credit Suisse, as administrative agent (in such capacity, the “ Administrative Agent ”) and Collateral Agent, (b) the First Lien Credit Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the “ First Lien Credit Agreement ”), among the Borrower, Holdings, the Lenders and Credit Suisse, as administrative agent, (c) the First Lien Guarantee and Collateral Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the “ First Lien Guarantee and Collateral Agreement ”) among the Borrower, Holdings, the Subsidiaries of the Borrower from time to time party thereto and Credit Suisse, as first lien collateral agent (in such capacity, the “ First Lien Collateral Agent ”), and (d) the Intercreditor Agreement dated as of June 15, 2007 (as amended, supplemented or otherwise modified from time to time, the “ Intercreditor Agreement ”), among Borrower, Holdings, the Subsidiaries of the Borrower from time to time party thereto and Credit Suisse, in its capacities as the Collateral Agent and as the First Lien Collateral.

 

The Lenders have agreed to extend credit to the Borrower pursuant to, and upon the terms and conditions specified in, the Credit Agreement. The obligations of the Lenders to extend credit to the Borrower are conditioned upon, among other things, the execution and delivery of this Agreement by the Borrower and each Guarantor (such term and each other capitalized term used but not defined in this preliminary statement having the meaning given or ascribed to it in Article I). Each Guarantor is an affiliate of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement and is willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows:

 



 

ARTICLE I

 

Def in i tions

 

SECTION 1.01. Credit Agreement . (a) Capitalized terms used in this Agreement and not otherwise defined herein have the meanings set forth in the Credit Agreement. All capitalized terms defined in the New York UCC (as such term is defined herein) and not defined in this Agreement have the meanings specified therein. All references to the Uniform Commercial Code shall mean the New York UCC.

 

(b) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to this Agreement.

 

SECTION 1.02. Other Defined Terms . As used in this Agreement, the following terms have the meanings specified below:

 

Accounts Receivable shall mean all Accounts and all right, title and interest in any returned goods, together with all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired.

 

Administrative Agent shall have the meaning assigned to such term in the preliminary statement.

 

Article 9 Collateral shall have the meaning assigned to such term in Section 4.01.

 

Assi gnmen t of Distr i bu tions shall mean the assignment of distribution substantially in the form of Exhibit C.

 

Borrower shall have the meaning assigned to such term in the preamble.

 

Collateral shall mean the Article 9 Collateral and the Pledged Collateral.

 

Collateral Agent shall have the meaning assigned to such term in the preamble.

 

Copyright License shall mean any written agreement, now or hereafter in effect, granting any right to any third person under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third person, and all rights of such Grantor under any such agreement.

 

Copyrights shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or

 

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otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office (or any successor office or any similar office in any other country), including those listed on Schedule III.

 

Discharge of First Lien Obligations shall have the meaning assigned to such term in the Intercreditor Agreement.

 

Excluded Assets shall mean (a) any lease, license, contract, property right or agreement to which any Grantor is a party or any of its rights or interests thereunder if and only for so long as the grant of a security interest hereunder shall constitute or result in a breach, termination or default under any such lease, license, contract, property right or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of any relevant jurisdiction or any other applicable law or principles of equity); provided, however, that any portion of any such lease, license, contract, property right or agreement shall cease to constitute an Excluded Asset pursuant to this clause at the time and to the extent that the grant of security interest therein does not result in any of the consequences specified above, (b) motor vehicles the perfection of a security interest in which is excluded from the Uniform Commercial Code in the relevant jurisdiction, (c) interests in real property, (d) any Equity Interest in an Excluded Entity and (e) any application to register Trademarks in the U.S. Patent and Trademark Office based upon Grantor’s “intent to use” such Trademark (but only if the grant of security interest to such intent-to-use Trademark violates 15 U.S.C. § 1060(a)) unless and until a “Statement of Use” or “Amendment to Allege Use” is filed in the U.S. Patent and Trademark Office with respect thereto, at which point the Collateral shall include, and the security interest granted hereunder shall attach to, such application.

 

Excluded Entity shall mean each of (i) STR-Registrar LLC, (ii) CTC Asia Ltd. and (iii) Specialized Technology Resources (India) Pvt Ltd. to the extent that the necessary governmental consents to make a valid and enforceable pledge of 66% of its issued and outstanding stock to the Collateral Agent have not been obtained.

 

Federal Securities Laws shall have the meaning assigned to such term in Section 5.04.

 

First Lien Collateral Agent shall have the meaning assigned to such term in the preliminary statement.

 

First Lien Credit Agreement shall have the meaning assigned to such term in the preliminary statement.

 

First Lien Guarantee and Collateral Agreement shall have the meaning assigned to such term in the preliminary statement.

 

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Fi rst Lien Loan Documents shall have the meaning assigned to the term “Loan Documents” in the First Lien Credit Agreement.

 

Fi rst Lien Obligations shall have the meaning assigned to such term in the Intercreditor Agreement.

 

Fi rst Priority Liens shall have the meaning assigned to such term in the Intercreditor Agreement.

 

General Intangibles shall mean all choses in action and causes of action and all other intangible personal property of any Grantor of every kind and nature (other than Accounts) now owned or hereafter acquired by any Grantor, including all rights and interests in partnerships, limited partnerships, limited liability companies and other unincorporated entities, corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Hedging Agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts.

 

Grantors shall mean the Borrower and the Guarantors.

 

Guarantors shall mean Holdings and the Subsidiary Guarantors.

 

Ho ldi ngs shall have the meaning assigned to such term in the preamble.

 

Intellectual Property shall mean all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

 

Lic ense shall mean any Patent License, Trademark License, Copyright License or other license or sublicense agreement relating to Intellectual Property to which any Grantor is a party, including those listed on Schedule III.

 

New York UCC shall mean the Uniform Commercial Code as from time to time in effect in the State of New York.

 

Obl i ga tions shall mean (a) the due and punctual payment of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations of the Borrower to any of the Secured Parties under the

 

4



 

Credit Agreement and each of the other Loan Documents, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower under or pursuant to the Credit Agreement and each of the other Loan Documents, and (c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to this Agreement and each of the other Loan Documents.

 

Patent License shall mean any written agreement, now or hereafter in effect, granting to any third person any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now or hereafter owned by any third person, is in existence, and all rights of any Grantor under any such agreement.

 

Patents shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office (or any successor or any similar offices in any other country), including those listed on Schedule III, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

 

Perfection Certificate shall mean a certificate substantially in the form of Exhibit B, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of the Borrower.

 

Pledged Collateral shall have the meaning assigned to such term in Section 3.01.

 

Pledged Debt Securities shall have the meaning assigned to such term in Section 3.01.

 

Pledged Securities shall mean any promissory notes, stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

 

Pledged Stock shall have the meaning assigned to such term in Section 3.01.

 

Secured Parties shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) the beneficiaries of each indemnification obligation

 

5



 

undertaken by any Loan Party under any Loan Document and (e) the successors and assigns of each of the foregoing.

 

Security Interest shall have the meaning assigned to such term in Section 4.01.

 

Subsidiary Guarantor shall mean (a) the Subsidiaries identified on Schedule I hereto as Subsidiary Guarantors and (b) each other Subsidiary that becomes a party to this Agreement as a Subsidiary Guarantor after the Closing Date; provided , however, that in no event shall STR-Registrar LLC become a Subsidiary Guarantor.

 

Trademark License shall mean any written agreement, now or hereafter in effect, granting to any third person any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third person, and all rights of any Grantor under any such agreement.

Trademarks shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office (or any successor office) or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule III, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.

 

Unfunded Advances shall mean the aggregate amount, if any (i) made available to the Borrower on the assumption that each Lender has made its portion of the applicable Borrowing available to the Administrative Agent as contemplated by Section 2.02(d) of the Credit Agreement and (ii) with respect to which a corresponding amount shall not in fact have been returned to the Administrative Agent by the Borrower or made available to the Administrative Agent by any such Lender.

 

ARTICLE II

 

Guarantee

 

SECTION 2.01. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Obligations. Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation for the ratable

 

6



 

benefit of the Secured Parties. Each Guarantor waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of any Obligation, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.

 

SECTION 2.02.  Guarantee of Payment. Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any security held for the payment of the Obligations or to any balance of any Deposit Account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower or any other person.

 

SECTION 2.03. Nature of Guarantee. (a) If and to the extent required in order for the Obligations to be enforceable under applicable federal, state and other laws relating to the insolvency of debtors, the maximum liability of such Guarantor hereunder shall be limited to the greatest amount which can lawfully be guaranteed by such Guarantor under such laws, after giving effect to any rights of contribution, reimbursement and subrogation arising under Article VI. Each Guarantor acknowledges and agrees that, to the extent not prohibited by applicable law, (i) such Guarantor (as opposed to its creditors, representatives of creditors or bankruptcy trustee, including such Guarantor in its capacity as debtor in possession exercising any powers of a bankruptcy trustee) has no personal right under such laws to reduce, or request any judicial relief that has the effect of reducing, the amount of its liability under this Agreement, (ii) such Guarantor (as opposed to its creditors, representatives of creditors or bankruptcy trustee, including such Guarantor in its capacity as debtor in possession exercising any powers of a bankruptcy trustee) has no personal right to enforce the limitation set forth in this Section 2.03(a) or to reduce, or request judicial relief reducing, the amount of its liability under this Agreement, and (iii) the limitation set forth in this Section 2.03(a) may be enforced only to the extent required under such laws in order for the obligations of such Guarantor under this Agreement to be enforceable under such laws and only by or for the benefit of a creditor, representative of creditors or bankruptcy trustee of such Guarantor or other person entitled, under such laws, to enforce the provisions thereof.

 

(b) Except for termination of a Guarantor’s obligations hereunder as expressly provided in Section 7.15, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement, (iii) the release of, or any impairment of or failure to perfect any Lien on or security interest in, any security held by the Collateral Agent or any other Secured Party for the Obligations or any of them,

 

7



 

(iv) any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). Subject to the terms of this Agreement, each Guarantor expressly authorizes the Collateral Agent to take and hold security for the payment and performance of the Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in its sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder.

 

(c) To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise any other right or remedy available to them against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Loan Party, as the case may be, or any security.

 

SECTION 2.04. Reinstatement. Each Guarantor agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Collateral Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower, any other Loan Party or otherwise.

 

SECTION 2.05. Agreement To Pay; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, if the Borrower or any other Loan Party shall fail to pay any Obligation when and as the same shall become due (after taking into account any applicable grace period), whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation. Upon payment by any Guarantor of any sums to the Collateral Agent as provided above, all rights of such Guarantor against the Borrower or any other Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement,

 

8



 

indemnity or otherwise shall in all respects be subject to Article VI, provided that each Guarantor reserves any and all other rights of reimbursement, contribution or subrogation at any time available to it against any other Guarantor.

 

SECTION 2.06. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s and each other Loan Party’s financial condition and assets and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that neither the Collateral Agent nor any other Secured Party will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

 

ARTICLE III

 

Pledge of Securities

 

SECTION 3.01. Pledge. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest, in, to and under (a)(i) the Equity Interests owned by such Grantor on the date hereof (including all such Equity Interests listed on Schedule II), (ii) any other Equity Interests obtained in the future by such Grantor and (iii) the certificates representing all such Equity Interests (all the foregoing collectively referred to herein as the Pledged Stoc k ); provided , however , that the Pledged Stock shall not include (x) more than 66% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary or (y) an Excluded Asset, (b)(i) the debt securities held by such Grantor on the date hereof (including all such debt securities listed opposite the name of such Grantor on Schedule II), (ii) any debt securities in the future issued to such Grantor and (iii) the promissory notes and any other instruments evidencing such debt securities (all the foregoing collectively referred to herein as the Pledged Debt Securities ), (c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 3.01, (d) subject to Section 3.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a) and (b) above, (e) subject to Section 3.06, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above, and (f) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the Pledged Colla teral ); provided, however, that notwithstanding any other provision in this agreement, this Section 3.01 shall not, at any time, constitute a grant of security interest in an Excluded Asset.

 

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the

 

9



 

Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

 

SECTION 3.02. Delivery of the Pledged Collateral. (a) Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent) any and all certificates, instruments or other documents representing or evidencing Pledged Securities.

 

(b) Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent) any and all Pledged Debt Securities.

 

(c) Upon delivery to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent), (i) any certificate, instrument or document representing or evidencing Pledged Securities shall be accompanied by undated stock powers duly executed in blank or other undated instruments of transfer satisfactory to the Collateral Agent and duly executed in blank and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the applicable securities, which schedule shall be attached hereto as Schedule II and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of the pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

 

(d) In accordance with the terms of the Intercreditor Agreement, all Pledged Collateral delivered to the First Lien Collateral Agent shall be held by the First Lien Collateral Agent, until the transfer of possession of such Pledged Collateral to the Collateral Agent following the Discharge of First Lien Obligations, as gratuitous bailee for the Secured Parties solely for the purpose of perfecting the security interest therein granted under this Agreement.

 

SECTION 3.03. Representations, Warranties and Covenants. The Grantors jointly and severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the Secured Parties, that:

 

(a) Schedule II correctly sets forth in all material respects the percentage of the issued and outstanding shares of each class of the Equity Interests of the issuer thereof represented by such Pledged Stock and includes all Equity Interests, debt securities and promissory notes required to be pledged hereunder;

 

10


 

(b) the Pledged Stock and Pledged Debt Securities have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable and (ii) in the case of Pledged Debt Securities, are legal, valid and binding obligations of the issuers thereof;

 

(c) except for the security interests granted hereunder (or otherwise permitted under the Credit Agreement), each Grantor (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Grantor, (ii) holds the same free and clear of all Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than transfers made in compliance with the Credit Agreement, and (iv) subject to Section 3.06 and the terms of the Intercreditor Agreement, will cause any and all Pledged Collateral, whether for value paid by such Grantor or otherwise, to be forthwith deposited with the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent) and pledged or assigned hereunder;

 

(d) except for restrictions and limitations imposed by the Loan Documents or securities laws generally, the Pledged Collateral is and will continue to be freely transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

 

(e) each Grantor (i) has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than any Lien created or permitted by the Loan Documents), however arising, of all persons whomsoever;

 

(f) no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect or those that, if not obtained, could not reasonably be expected to result in a Material Adverse Effect,);

 

(g) by virtue of the execution and delivery by each Grantor of this Agreement, when any Pledged Securities are delivered to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent) in accordance with this Agreement, the Collateral Agent will obtain a legal, valid and perfected first priority (subject to the Intercreditor Agreement) lien upon and security interest in

 

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such Pledged Securities as security for the payment and performance of the Obligations; and

 

(h) the pledge effected hereby is effective to vest in the Collateral Agent, for the ratable benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth herein and all action by any Grantor necessary or desirable to protect and perfect the Lien on the Pledged Collateral has been duly taken.

 

SECTION 3.04. Certi fication of Limited Liability Company Interests and Limited Partnership Interests . No interest of any Grantor in any limited liability company or limited partnership which is a Subsidiary and pledged hereunder is represented by a certificate. The Grantors shall not, without the consent of the Administrative Agent, agree to any amendment of the certificate of formation or limited liability company agreement (or other comparable constituent document) governing Pledged Stock which has the effect of turning previously uncertificated capital stock or membership interests into certificated capital stock or membership interests or which elects to treat any membership interest that is part of the Pledged Stock as a “security” under Section 8-103 of the New York UCC.

 

SECTION 3.05. Registration in Nominee Name ; Denominations. The Collateral Agent, on behalf of the Secured Parties, at any time after the Discharge of First Lien Obligations, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as Pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Collateral Agent. Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities in its capacity as the registered owner thereof. The Collateral Agent shall at any time after the Discharge of First Lien Obligations and during the occurrence and continuation of an Event of Default have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

 

SECTION 3.06. Voting Rights; Dividends and Interest, Etc . (a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given the Grantors reasonable advance notice of its intent to exercise its rights under this Agreement (which notice shall be deemed to have been given immediately upon the occurrence of an Event of Default under paragraph (g) or (h) of Article VII of the Credit Agreement):

 

(i)                                Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided, however, that such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Securities or the rights and remedies of any of the

 

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Collateral Agent or the other Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

 

(ii)                             The Collateral Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to each Grantor, all such proxies, powers of attorney and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (i) above.

 

(iii)                          Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable law; provided, however, that any noncash dividends, interest, principal or other distributions that would constitute Pledged Stock or Pledged Debt Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the ratable benefit of the Secured Parties and shall be forthwith delivered to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent) in the same form as so received (with any necessary endorsement or instrument of assignment). This paragraph (iii) shall not apply to dividends between or among the Borrower, the Guarantors and any Subsidiaries only of property subject to a perfected security interest under this Agreement; provided that the Borrower notifies the Collateral Agent in writing, specifically referring to this Section 3.06 at the time of such dividend and takes any actions the Collateral Agent specifies to ensure the continuance of its perfected security interest in such property under this Agreement.

 

(b) Upon the occurrence and during the continuance of an Event of Default and in any case subject to the terms of the Intercreditor Agreement, after the Collateral Agent shall have notified (or shall be deemed to have notified pursuant to Section 3.06(a)) the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 3.06, then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.06

 

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shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 3.06 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and, subject to the rights of the First Lien Collateral Agent and the obligations of the Grantors under the First Lien Loan Documents and the Intercreditor Agreement, shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement or instrument of assignment). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and each applicable Grantor has delivered to the Administrative Agent certificates to that effect, the Collateral Agent shall, promptly after all such Events of Default have been cured or waived, repay to each applicable Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.06 and that remain in such account.

 

(c)        Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified (or shall be deemed to have notified pursuant to Section 3.06(a)) the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 3.06, then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.06, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 3.06, shall cease, and all such rights shall thereupon become, subject to the rights of the First Lien Collateral Agent and the obligations of the Grantors under the First Lien Loan Documents and the Intercreditor Agreement, vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, subject to the terms of the Intercreditor Agreement, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights.

 

(d)       Any notice given by the Collateral Agent to the Grantors exercising its rights under paragraph (a) of this Section 3.06 (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

 

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ARTICLE IV

 

Security In terests in Personal Property

 

SECTION 4.01. Security In terest. (a) As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest (the Security Interest ) , in all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the Article 9 Collateral ):

 

(i)                                 all Accounts;

 

(ii)                              all Chattel Paper;

 

(iii)                           all cash and Deposit Accounts;

 

(iv)                          all Documents;

 

(v)                             all Equipment;

 

(vi)                          all General Intangibles;

 

(vii)                       all Instruments;

 

(viii)                    all Inventory;

 

(ix)                            all Investment Property;

 

(x)                               all Letter-of-Credit Rights;

 

(xi)                            all Commercial Tort Claims;

 

(xii)                         all books and records pertaining to the Article 9 Collateral; and

 

(xiii)                      to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any person with respect to any of the foregoing.

 

Notwithstanding any provision in this Agreement, this Section 4.01(a) shall not, at any time, constitute a grant of security interest in an Excluded Asset.

 

(b) Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) with respect to the Article 9 Collateral or any part thereof and amendments thereto that (i)   indicate the Article 9 Collateral as “all assets” of

 

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such Grantor or words of similar effect, and (i) contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (B) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Article 9 Collateral relates. Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

 

Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

 

The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party.

 

(c) The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.

 

SECTION 4.02. Representations and Warranties . The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that:

 

(a)       Each Grantor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent, for the ratable benefit of the Secured Parties, the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than (i) any consent or approval that has been obtained or (ii) those that, if not obtained, could not reasonably be expected to result in a Material Adverse Effect.

 

(b)      The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein (including (x) the exact legal name of each Grantor and (y) the jurisdiction of organization of each Grantor) is correct and complete as of the Closing Date. Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations containing a description of the Article 9 Collateral have been prepared by the Collateral Agent based upon the information provided to the Administrative Agent and the Secured Parties in the Perfection Certificate for filing in each governmental, municipal or other office specified in Section 2 of the Perfection Certificate (or specified by notice from the Borrower to the

 

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Administrative Agent after the Closing Date in the case of filings, recordings or registrations required by Sections 5.06 or 5.11 of the Credit Agreement), which are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in the Article 9 Collateral consisting of United States Patents, Trademarks and Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. Each Grantor represents and warrants that a fully executed short form agreement in the form requested by the Collateral Agent and containing a description of all material Article 9 Collateral consisting of Intellectual Property with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights has been delivered to the Collateral Agent for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. §261, 15 U.S.C. §1060 or 17 U.S.C. §205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof).

 

(c) The Security Interest constitutes (i) a legal and valid security interest in all Article 9 Collateral securing the payment and performance of the Obligations, (ii) upon completion of the filings described in Section 4.02(b), a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a security interest that shall be perfected in all Article 9 Collateral to the extent that a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable. The Security Interest is and shall be prior to any other Lien on any of

 

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the Article 9 Collateral, other than Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement that have priority as a matter of law.

 

(d) The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement. As of the Closing Date, no Grantor has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office, (iii) any notice under the Assignment of Claims Act, or (iv) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement and prior existing Liens no longer in effect. No Grantor holds any Commercial Tort Claims seeking damages in excess of $250,000 except as indicated on the Perfection Certificate.

 

SECTION 4.03. Covenants. (a) Each Grantor agrees promptly to notify the Collateral Agent in writing of any change in (i) its legal name, (ii) its identity or type of organization or corporate structure, (iii) its Federal Taxpayer Identification Number or organizational identification number or (iv) its jurisdiction of organization. Each Grantor agrees promptly to provide the Collateral Agent with certified organizational documents reflecting any of the changes described in the first sentence of this paragraph. Each Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority (subject to the Intercreditor Agreement) security interest in all the Article 9 Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any material portion of the Article 9 Collateral owned or held by such Grantor is damaged or destroyed.

 

(b) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Article 9 Collateral owned by it as is consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any material part of the Article 9 Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any material Article 9 Collateral, provided that , unless an Event of Default has occurred and is continuing, the Collateral Agent shall be limited to one such requests in each calendar year.

 

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(c)  Each Grantor shall, at its own expense, take any and all actions reasonably necessary to defend title to the Article 9 Collateral against all persons and to defend the Security Interest of the Collateral Agent in the Article 9 Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement.

 

(d) Each Grantor agrees, at its own expense, promptly to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, obtain, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and Taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing or continuation statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable to any Grantor under or in connection with any of the Article 9 Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper, in excess of $250,000 individually or $500,000 in the aggregate, then such Instrument or Tangible Chattel Paper shall be promptly pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent, except to the extent the costs of such actions are, in the Collateral Agent’s reasonable judgment, excessive in relation to the value of the security to be afforded thereby or to the extent prohibited by applicable law (or in the case of an amount payable by any Foreign Subsidiary, to the extent such actions would, in the Borrower’s good faith determination, result in adverse tax consequences); provided that prior to the Discharge of First Lien Obligations, such delivery shall be made to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent.

 

Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule III or adding additional schedules hereto to identify specifically any asset or item of a Grantor that may, in the Collateral Agent’s reasonable judgment, constitute material Copyrights, Licenses, Patents or Trademarks; provided that any Grantor shall have the right, exercisable within 10 days after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any material inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use its commercially reasonable efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct in all material respects with respect to such Collateral within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Collateral.

 

(e) Subject to the terms of the Intercreditor Agreement, the Collateral Agent and such persons as the Collateral Agent may designate shall have the right, at the applicable Grantor’s own cost and expense, to inspect the Article 9 Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Article 9 Collateral is located, to discuss the applicable Grantor’s affairs with the officers of such Grantor and its independent accountants and to verify the

 

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existence, validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, in the case of Accounts or other Article 9 Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party.

 

(f) At its option upon, the occurrence and continuance of an Event of Default, the Collateral Agent may discharge past due Taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not expressly permitted pursuant to Section 5.03 or Section 6.02 of the Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any reasonable and documented payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to Taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

 

(g) If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other person to secure payment and performance of an Account, the value of which exceeds $250,000 individually or $500,000 in the aggregate, such Grantor shall promptly assign such security interest to the Collateral Agent for the ratable benefit of the Secured Parties. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other person granting the security interest

 

(h) Each Grantor shall remain liable to observe and perform all the material conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance.

 

(i) No Grantor shall make or permit to be made an assignment, pledge or hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9 Collateral or permit any notice to be filed under the Assignment of Claims Act, except, in each case, as expressly permitted by Section 6.02 of the Credit Agreement. No Grantor shall make or permit to be made any transfer of the Article 9 Collateral and each Grantor shall remain at all times in possession or otherwise in control of the Article 9 Collateral owned by it, except as permitted by the Credit Agreement.

 

(j) No Grantor will, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any Accounts included in the Article 9

 

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Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises, compoundings or settlements granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practice used in industries that are the same as or similar to those in which such Grantor is engaged.

 

(k) In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required under the Credit Agreement or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of any Grantor hereunder or any Default or Event of Default and subject to the Intercreditor Agreement, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this paragraph, including attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby.

 

(l) Each Grantor shall maintain, in form and manner satisfactory to the Collateral Agent, records of its Chattel Paper and its books, records and documents evidencing or pertaining thereto.

 

SECTION 4.04. Other Actions. In order to further insure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Security Interest in the Article 9 Collateral, each Grantor agrees, in each case at such Grantor’s own expense, to take the following actions with respect to the following Article 9 Collateral:

 

(a)  Instruments. If any Grantor shall at any time hold or acquire any Instruments having a value in excess of $250,000, such Grantor shall forthwith endorse, assign and deliver the same to the Collateral Agent (or, prior to the Discharge of First Lien Obligations, to the First Lien Collateral Agent as a gratuitous bailee of the Collateral Agent), accompanied by such undated instruments of endorsement, transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably specify, except to the extent the costs of such actions are, in the Collateral Agent’s reasonable judgment, excessive in relation to the value of the security to be afforded thereby or to the extent prohibited by applicable law (or in the case of an amount payable by any Foreign Subsidiary, to the extent such actions would, in the Borrower’s good faith determination, result in adverse tax consequences).

 

(b)  Deposit Accounts. For each Deposit Account that any Grantor at any time opens or maintains, other than Deposit Accounts (A) that are payroll accounts, withholdings tax accounts, petty cash accounts or flexible spending benefit accounts or trust, escrow or other fiduciary accounts or (B) which do not hold for any period of five consecutive days, an aggregate amount in excess of

 

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$1,000,000, such Grantor shall, upon the Collateral Agent’s request, either (i) cause the depositary bank to agree to comply at any time with instructions from the Collateral Agent (or, prior to the Discharge of First Lien Obligations, the First Lien Collateral Agent) to such depositary bank directing the disposition of funds from time to time credited to such Deposit Account, without further consent of such Grantor or any other person, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, or (ii) arrange for the Collateral Agent (or, prior to the Discharge of First Lien Obligations, the First Lien Collateral Agent) to become the customer of the depositary bank with respect to the Deposit Account, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw funds from such Deposit Account. The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such instructions or withhold any withdrawal rights from any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any withdrawal, would occur; provided, however , upon the waiver by the applicable Required Lenders of such Event of Default, so long as no other Event of Default shall then exist or be continuing, the Collateral Agent shall revoke any such instruction. The provisions of this paragraph shall not apply to any Deposit Account for which any Grantor, the depositary bank and the Collateral Agent have entered into a cash collateral agreement specially negotiated among such Grantor, the depositary bank and the Collateral Agent for the specific purpose set forth therein.

 

(c)  Investment Property. If any securities, whether certificated or uncertificated, or other Investment Property having a value in excess of $50,000 in the aggregate now or hereafter acquired by any Grantor are held by such Grantor or its nominee through a Securities Intermediary or Commodity Intermediary, such Grantor shall promptly notify the Collateral Agent thereof and, at the Collateral Agent’s request and option, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause such Securities Intermediary or Commodity Intermediary, as the case may be, to agree to comply with Entitlement Orders from the Collateral Agent (or, prior to the Discharge of First Lien Obligations, the First Lien Collateral Agent) to such Securities Intermediary as to such securities or other Investment Property, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such Commodity Intermediary, in each case without further consent of any Grantor or such nominee, or (ii) in the case of Financial Assets (as governed by Article 8 of the New York UCC) or other Investment Property held through a Securities Intermediary, arrange for the Collateral Agent (or, prior to the Discharge of First Lien Obligations, the First Lien Collateral Agent) to become the Entitlement Holder with respect to such Investment Property, with the Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such Investment Property. The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such Entitlement Orders or instructions or directions to any such issuer, Securities Intermediary or Commodity Intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing

 

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rights by any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur; provided, however , upon the waiver by the applicable Required Lenders of such Event of Default, so long as no other Event of Default shall then exist or be continuing, the Collateral Agent shall revoke any such instruction. The provisions of this paragraph shall not apply to any Financial Assets credited to a Securities Account for which the Collateral Agent is the Securities Intermediary.

 

(d)  Electronic Chattel Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any Electronic Chattel Paper or any “ transferable record ”, as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, shall take such action as the Collateral Agent may request to vest in the Collateral Agent (or, prior to the Discharge of First Lien Obligations, the First Lien Collateral Agent) control under New York UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Collateral Agent agrees with such Grantor that the Collateral Agent will arrange, pursuant to procedures satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agent’s loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such Electronic Chattel Paper or transferable record.

 

(e)  Letter-of-Credit Rights. If any Grantor is at any time a beneficiary under a letter of credit having a value in excess of $500,000, now or hereafter issued in favor of such Grantor (other than Letters of Credit and Letters of Credit Rights that do not constitute Supporting Obligations in respect of other Collateral), such Grantor shall promptly notify the Collateral Agent thereof and, at the request and option of the Collateral Agent, and subject to the rights of the First Lien Collateral Agent and the Obligations of the Grantors under the First Lien Loan Documents and the Intercreditor Agreement, such Grantor shall, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of the letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be paid to the applicable Grantor unless an Event of Default has occurred or is continuing.

 

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(f)  Commercial Tort Claims. If any Grantor shall at any time hold or acquire a Commercial Tort Claim seeking damages in an amount reasonably estimated to exceed $250,000, the Grantor shall promptly notify the Collateral Agent thereof in a writing signed by such Grantor including a summary description of such claim and grant to the Collateral Agent, for the ratable benefit of the Secured Parties, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Collateral Agent.

 

SECTION 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Grantor agrees that it will not, and will not permit any of its licensees to, do any act, or omit to do any act, whereby any Patent that is material to the conduct of such Grantor’s business may become abandoned, invalidated or dedicated to the public, and agrees that it shall use commercially reasonable efforts to continue to mark any products covered by a material Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

 

(b)  Except as could not reasonably be expected to result in a Material Adverse Effect, each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor’s business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) use commercially reasonable efforts to maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights.

 

(c)  Each Grantor (either itself or through its licensees or sublicensees) will, for each work covered by a Copyright material to the conduct of such Grantor’s business, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

 

(d)  Each Grantor shall notify the Collateral Agent promptly if it knows or has reason to know that any Patent, Trademark or Copyright material to the conduct of its business may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor’s ownership of any Patent, Trademark or Copyright, its right to register the same, or its right to keep and maintain the same.

 

(e)  Except as could not reasonably be expected to result in a Material Adverse Effect, no Grantor shall, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office,

 

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United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly notifies the Collateral Agent, and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Security Interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

 

(f)  Except as could not reasonably be expected to result in a Material Adverse Effect, each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor’s business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancellation proceedings against third parties.

 

(g) In the event that any Grantor knows or has reason to believe that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor’s business has been or is about to be infringed, misappropriated or diluted by a third person, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Article 9 Collateral.

 

(h) Upon the occurrence and during the continuance of an Event of Default, each Grantor shall use its commercially reasonable efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License, and each other material License, to effect the assignment of all such Grantor’s right, title and interest thereunder to the Collateral Agent, for the ratable benefit of the Secured Parties, or its designee.

 

SECTION 4.06. Assignment of Distr ibutions.  The Borrower shall execute the Assignment of Distributions in the form attached hereto as Exhibit C in favor of the Collateral Agent with respect to its rights to any distributions of STR-Registrar LLC.

 

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ARTICLE V

 

Remedies

 

SECTION 5.01. Remedies Upon Default. Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Grantor to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice (except any notice required by law) or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

 

The Collateral Agent shall give each applicable Grantor 10 days’ written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale.  At any such sale, the

 

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Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Agreement, any Secured Party may bid for or purchase, free (to the extent permitted by applicable law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by applicable law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, subject to Section 5.02 of this Agreement, notwithstanding the fact that after the Collateral Absent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

 

Any remedies provided in this Section 5.01 shall be subject to the Intercreditor Agreement.

 

SECTION 5.02. Application of Proceeds. Subject to the Intercreditor Agreement, the Collateral Agent shall apply the proceeds of any collection, sale, foreclosure or other realization upon any Collateral, including any Collateral consisting of cash, as follows:

 

FIRST, to the payment of all costs and expenses incurred by the Administrative Agent or the Collateral Agent (in their respective capacities as such hereunder or under any other Loan Document) in connection with such

 

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Collection, sale, foreclosure or realization or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Administrative Agent and/or the Collateral Agent hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;

 

SECOND, to the payment in full of Unfunded Advances (the amounts so applied to be distributed between or among the Secured Parties pro rata in accordance with the amounts of Unfunded Advances owed to them on the date of any such distribution);

 

THIRD, to the payment in full of all other Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution);

 

FOURTH, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

 

The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.

 

SECTION 5.03. Grant of License to Use Intellectual Property.   For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors), to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Collateral Agent may be exercised, at the option of the Collateral Agent, only upon the occurrence and during the continuation of an Event of Default; provided, however , that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon each Grantor notwithstanding any subsequent cure of an Event of Default.

 

SECTION 5.04. Securities Act, Etc.   In view of the position of the Grantors in relation to the Pledged Collateral, or because of other current or future

 

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circumstances, a question may arise under the U.S. Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the Federal Securities Laws ) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable “blue sky” or other state securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Collateral, limit the purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion (subject to the Intercreditor Agreement) (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a limited number of potential purchasers (including a single potential purchaser) to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Collateral Agent, in its sole and absolute discretion (subject to the terms of the Intercreditor Agreement), may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a limited number of purchasers (or a single purchaser) were approached. The provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells.

 

ARTICLE VI

 

Indemnity, Subrogation and Subordination

 

SECTION 6.01. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor under this Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part a claim of any

 

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Secured Party, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.

 

SECTION 6.02. Contribution and Subrogation. Each Guarantor (a Con tributing Guarantor ) agrees (subject to Section 6.03) that, in the event a payment shall be made by any other Guarantor hereunder in respect of any Obligation, or assets of any other Guarantor shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party, and such other Guarantor (the Claiming Guarantor ) shall not have been fully indemnified by the Borrower as provided in Section 6.01, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to (i) the amount of such payment or (ii) the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 7.16, the date of the supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 6.02 shall be subrogated to the rights of such Claiming Guarantor under Section 6.01 to the extent of such payment.

 

SECTION 6.03. Subordination. (a) Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 6.01 and 6.02 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 6.01 and 6.02 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of its obligations hereunder.

 

(b) The Borrower and each Guarantor hereby agree that all Indebtedness and other monetary obligations owed by it to any Subsidiary that is not a Loan Party (or, in the case of the Borrower, any Subsidiary) shall be fully subordinated to the indefeasible payment in full in cash of the Obligations, it being agreed that, for greater certainty, other than upon the occurrence and during the continuance of an Event of Default, the Borrower and each Guarantor shall be allowed to make payments with respect to Indebtedness permitted to be incurred pursuant to Section 6.01 of the Credit Agreement in accordance with the terms thereof.

 

ARTICLE VII

 

Mi scel laneous

 

SECTION 7.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any

 

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Subsidiary Guarantor shall be given to it in care of the Borrower as provided in Section 9.01 of the Credit Agreement.

 

SECTION 7.02. Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument relating to the foregoing, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement.

 

SECTION 7.03. Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any Lender or on their behalf and notwithstanding that the Collateral Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under any Loan Document is outstanding and unpaid or the aggregate L/C Exposure does not equal zero and so long as the Commitments have not expired or terminated.

 

SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Loan Party and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Loan Party, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Loan Party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated or permitted by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

 

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SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

 

SECTION 7.06. Collateral Agent’s Fees and Expenses; Indemnification. (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.05 of the Credit Agreement.

 

(b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other indemnitees against, and hold each indemnitee harmless from, any and all losses, claims, damages, liabilities, and related out of pocket expenses, including the fees, charges and disbursements of any counsel for any indemnitee, incurred by or asserted against any indemnitee arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any agreement or instrument contemplated hereby or any claim, litigation, investigation or proceeding relating to any of the foregoing or to the Collateral, regardless of whether any indemnitee is a party thereto or whether initiated by a third party or by a Loan Party or any Affiliate thereof; provided, however, that such indemnity shall not, as to any indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such indemnitee. To the extent permitted by applicable law, no Grantor shall assert, and each Grantor hereby waives any claim against any indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of proceeds thereof.

 

(c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.06 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 7.06 shall be payable on written demand therefor and shall bear interest, on and from the date of demand, at the rate specified in Section 2.06(a) of the Credit Agreement.

 

SECTION 7.07. Collateral Agent Appointed Attorney-in-Fact.   Subject to the terms of the Intercreditor Agreement, each Grantor hereby appoints the Collateral Agent as the attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof,

 

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which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, subject to the terms of the Intercreditor Agreement, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent’s name or in the name of such Grantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof, (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral, (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral, (d) to send verifications of Accounts Receivable to any Account Debtor, (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral, (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral, (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent, and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement in accordance with its terms, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided, however , that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence, wilful misconduct or bad faith. Notwithstanding anything to the contrary in this Section 7.07, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for herein unless an Event of Default shall have occurred and be continuing.

 

SECTION 7.08. Applicable Law.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 7.09. Waivers; Amendment.  (a) No failure or delay by the Collateral Agent, the Administrative Agent or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver hereof or thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent, the Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any

 

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event be effective unless the same shall be permitted by paragraph (b) of this Section 7.09, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Collateral Agent or any Lender may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.

 

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08, of the Credit Agreement.

 

SECTION 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

 

SECTION 7.11. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 7.12. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 7.04. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

34



 

SECTION 7.13. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

 

SECTION 7.14. Jurisdiction; Consent to Service of Process. (a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America, sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each party hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Collateral Agent, the Administrative Agent, or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Grantor or its properties in the courts of any jurisdiction.

 

(b)  Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (a) of this Section 7.14. Each party hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(c)  Each party hereto hereby irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement or any other Loan Document will affect the right of the Collateral Agent to serve process in any other manner permitted by law.

 

SECTION 7.15. Termination of Release. (a) This Agreement, the guarantees made herein, the Security Interest, the pledge of the Pledged Collateral and all other security interests granted hereby shall terminate when all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement.

 

(b) A Subsidiary Guarantor shall automatically be released from its obligations hereunder and the Security Interests created hereunder in the Collateral of such Subsidiary Guarantor shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Subsidiary Guarantor ceases to be a Subsidiary.

 

35



 

(c)  Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Credit Agreement to any person that is not the Borrower or a Guarantor, or, upon the effectiveness of any written consent to the release of the Security Interest granted hereby in any Collateral pursuant to Section 9.08 of the Credit Agreement, the Security Interest in such Collateral shall be automatically released.

 

(d) In connection with any termination or release pursuant to paragraph (a), (b) or (c) above, the Collateral Agent shall promptly execute and deliver to any Grantor, at such Grantor’s expense, all Uniform Commercial Code termination statements and similar documents that such Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 7.15 shall be without recourse to or representation or warranty by the Collateral Agent or any Secured Party. Without limiting the provisions of Section 7.06, the Borrower shall reimburse the Collateral Agent upon demand for all costs and out of pocket expenses, including the fees, charges and expenses of counsel, incurred by it in connection with any action contemplated by this Section 7.15.

 

SECTION 7.16. Additional Subsidiaries. Any Subsidiary that is required to become a party hereto pursuant to Section 5.11 of the Credit Agreement shall enter into this Agreement as a Subsidiary Guarantor and a Grantor upon becoming such a Subsidiary. Upon execution and delivery by the Collateral Agent and such Subsidiary of a supplement in the form of Exhibit A hereto, such Subsidiary shall become a Subsidiary Guarantor and a Grantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor and a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any other Loan Party hereunder. The rights and obligations of each Loan Party hereunder shall remain in full force and effect notwithstanding the addition of any new Loan Party as a party to this Agreement.

 

SECTION 7.17. Right of Setoff. If an Event of Default shall have occurred and is continuing, each Secured Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all Collateral (including any deposits (general or special, time or demand, provisional or final)) at any time held and other obligations at any time owing by such Secured Party to or for the credit or the account of any Grantor against any and all of the obligations of such Grantor now or hereafter existing under this Agreement and the other Loan Documents held by such Secured Party, irrespective of whether or not such Secured Party shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Secured Party under this Section 7.17 are in addition to other rights and remedies (including other rights of setoff) which such Secured Party may have.

 

SECTION 7.18. Intercreditor Agreement Governs. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE LIEN AND SECURITY INTEREST GRANTED TO THE COLLATERAL AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, PURSUANT TO THIS AGREEMENT AND THE EXERCISE OF ANY RIGHT OR REMEDY BY THE COLLATERAL AGENT AND THE OTHER SECURED PARTIES HEREUNDER ARE SUBJECT TO

 

36



 

THE PROVISIONS OF THE INTERCREDITOR AGREEMENT. IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THE INTERCREDITOR AGREEMENT AND THIS AGREEMENT, THE PROVISIONS OF THE INTERCREDITOR AGREEMENT SHALL CONTROL.

 

SECTION 7.19. Obligations of Grantors. To the extent that the obligations of any Grantor hereunder shall conflict, or shall be inconsistent, with the obligations of such Grantor under the First Lien Guarantee and Collateral Agreement, the provisions of the First Lien Guarantee and Collateral Agreement shall control.

 

SECTION 7.20. Delivery of Collateral. Notwithstanding anything herein to the contrary, prior to the Discharge of First Lien Obligations, to the extent any Grantor is required hereunder to deliver Collateral to the Collateral Agent for purposes of possession and control and is unable to do so as a result of having previously delivered such Collateral to the First Lien Collateral Agent in accordance with the terms of the First Lien Guarantee and Collateral Agreement, such Grantor’s obligations hereunder with respect to such delivery shall be deemed satisfied by the delivery to the First Lien Collateral Agent, acting as a gratuitous bailee of the Collateral Agent.

 

[Remainder of page intentionally left blank]

 

37



 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

 

 

STR ACQUISITION, INC.,

 

 

 

 by

 

 

 

 

 

 

/s/ Jason Metakis

 

 

Name: Jason Metakis

 

 

Title: Treasurer

 

 

 

 

STR HOLDINGS LLC,

 

 

 

 

 by

 

 

 

 

 

 

/s/ Jason Metakis

 

 

Name: Jason Metakis

 

 

Title: Treasurer

 

 

 

 

SPECIALIZED TECHNOLOGY
RESOURCES, INC.,

 

 

 

 

 by

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Secretary

 

 

 

 

CAL SAFETY COMPLIANCE
CORPORATION,

 

 

 

 

 by

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Assistant Secretary

 

[Second Lien Guarantee and Collateral Agreement]

 



 

 

SPECIALIZED TECHNOLOGY
RESOURCES (INTERNATIONAL), INC.,

 

 

 

 

 by

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Secretary

 

 

 

 

SHUSTER LABORATORIES, INC.,

 

 

 

 

 by

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Secretary

 

 

 

 

SUPPLY CHAIN CONSULTING
SERVICES CORPORATION,

 

 

 

 

 by

 

 

 

 

 

 

/s/ Thomas D. Vitro

 

 

Name: Thomas D. Vitro

 

 

Title: Assistant Secretary

 

 

 

 

SPECIALIZED TECHNOLOGY
RESOURCES (FLORIDA), INC.,

 

 

 

 

 by

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Secretary

 

 

 

 

STR MATERIALS SCIENCE, INC.,

 

 

 

 

 by

 

 

 

 

 

 

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Secretary

 

[Second Lien Guarantee and Collateral Agreement]

 



 

 

CREDIT SUISSE, CAYMAN ISLANDS
BRANCH, as Collateral Agent,

 

 

 

 

 by

 

 

 

 

 

 

/s/ Rianka Mohan

 

 

Name: RIANKA MOHAN

 

 

Title: VICE PRESIDENT

 

 

 

 

 

 

 

 by

 

 

 

 

 

 

/s/ James Neira

 

 

Name: JAMES NEIRA

 

 

Title: ASSOCIATE

 

[Second Lien Guarantee and Collateral Agreement]

 




Exhibits 10.15

 

SUPPLEMENT NO. 1 (this “ Supplement ”) dated as of November 5, 2009 to the Second Lien Guarantee and Collateral Agreement dated as of June 15, 2007 (the “ Guarantee and Collateral Agreement ”), among SPECIALIZED TECHNOLOGY RESOURCES, INC. (successor by merger to STR Acquisition, Inc.), a Delaware corporation (the “ Borrower ”), STR HOLDINGS LLC, a Delaware limited liability company (“ Existing Holdings ”), each Subsidiary of the Borrower from time to time party thereto (each such Subsidiary individually a “ Subsidiary Guarantor ” and collectively, the “ Subsidiary Guarantors ”; the Subsidiary Guarantors, the Borrower and Holdings are referred to collectively herein as the “ Grantors ”) and CREDIT SUISSE (together with its affiliates, “ Credit Suisse ”), as collateral agent (in such capacity, the “ Collateral Agent ”) for the Secured Parties (as defined therein).

 

A.  Reference is made to the Second Lien Credit Agreement dated as of June 15, 2007 as amended on October 5, 2009, (and amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrower, Existing Holdings, the lenders from time to time party thereto (the “ Lenders ”) and Credit Suisse, as administrative agent for the Lenders and as Collateral Agent.

 

B.  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement or the Guarantee and Collateral Agreement referred to therein, as applicable.

 

C.  The Grantors have entered into the Guarantee and Collateral Agreement in order to induce the Lenders to make Loans and the Issuing Banks to issue Letters of Credit.  The undersigned STR Holdings (New) LLC, a Delaware limited liability company (“ New LLC ” and, together with STR Holdings, Inc., a Delaware corporation, the corporate successor of New LLC by way of a conversion to be consummated on or around the date hereof, “ New Holdings ”) is executing this Supplement to confirm that it is becoming a Guarantor and a Grantor under the Guarantee and Collateral Agreement as successor in interest to Existing Holdings.

 

D.  Existing Holdings and New Holdings have executed and delivered to the Collateral Agent the Assignment and Assumption Agreement dated as of November 5, 2009 (the “ Assignment and Assumption Agreement ”), attached hereto as Exhibit A , pursuant to which Existing Holdings assigned to New Holdings and New Holdings assumed from Existing Holdings any and all Obligations of Existing Holdings arising under the Loan Documents.

 

Accordingly, the Collateral Agent and New Holdings agree as follows:

 

SECTION 1.  New Holdings as successor in interest to Existing Holdings is, and by its signature below confirms that it is and shall continue to be, a Grantor and Guarantor under the Guarantee and Collateral Agreement with the same force and effect

 



 

as if originally named therein as a Grantor and Guarantor and New Holdings hereby (a) agrees to all the terms and provisions of the Guarantee and Collateral Agreement applicable to it as a Grantor and Guarantor thereunder, (b) represents and warrants that the representations and warranties made by it as a Grantor and Guarantor thereunder are true and correct on and as of the date hereof, and (c) represents and warrants that attached hereto as Exhibit A is a true and complete copy of the Assignment and Assumption Agreement, currently in full force and effect, which continues to be legally valid, binding and enforceable against any and all parties thereto in accordance with its terms, and as of the date hereof, has not been altered, amended, supplemented or revised in any manner.  In furtherance of the foregoing, New Holdings, as security for the payment and performance in full of the Obligations (as defined in the Guarantee and Collateral Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of New Holdings’s right, title and interest in and to the Collateral (as defined in the Guarantee and Collateral Agreement) of New Holdings.  Each reference to a “Grantor” or “Guarantor” in the Guarantee and Collateral Agreement shall be deemed to include New Holdings.  The Guarantee and Collateral Agreement is hereby incorporated herein by reference.

 

SECTION 2.  New Holdings represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

 

SECTION 3.  This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of New Holdings and the Collateral Agent.  Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

 

SECTION 4.  New Holdings hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of (i) any and all Equity Interests and Pledged Debt Securities now owned by New Holdings and (ii) any and all Intellectual Property now owned by New Holdings and (b) set forth under its signature hereto, is the true and correct legal name of New Holdings and its jurisdiction of organization.

 

SECTION 5.  New Holdings shall be deemed to be a successor in interest to Existing Holdings and all references in the Guarantee and Collateral Agreement to “Holdings” shall be deemed to be references to New Holdings and Existing Holdings.

 

SECTION 6.  Except as expressly supplemented hereby, the Guarantee and Collateral Agreement shall remain in full force and effect.

 

A-2



 

SECTION 7.  THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 8.  In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 9.  All communications and notices hereunder shall (except as otherwise expressly permitted by the Guarantee and Collateral Agreement) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to New Holdings shall be given to it in care of the Borrower as provided in Section 9.01 of the Credit Agreement.

 

SECTION 10.  New Holdings agrees to reimburse the Collateral Agent for its out-of-pocket expenses in connection with this Supplement, including the fees, other charges and disbursements of counsel for the Collateral Agent.

 

A-3



 

IN WITNESS WHEREOF, New Holdings and the Collateral Agent have duly executed this Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.

 

 

 

STR HOLDINGS (NEW) LLC,

 

 

 

by

 

 

 

/s/ Barry A. Morris

 

 

Name: Barry A. Morris

 

 

Title: Vice President and Chief Financial Officer

 

 

Address:

 

 

Legal Name:

 

 

Jurisdiction of Formation:

 

 

 

 

 

CREDIT SUISSE, CAYMAN ISLANDS BRANCH,
as Collateral Agent,

 

 

 

by

 

 

 

/s/ Rianka Mohan

 

 

Name: Rianka Mohan

 

 

Title: Vice President

 

 

 

 

by

 

 

 

/s/ Vipul Dhadda 

 

 

Name: Vipul Dhadda 

 

 

Title: Associate

 

A-4



 

Collateral of New Holdings

 

EQUITY INTERESTS

 

Issuer

 

Number of
Certificate

 

Registered
Owner

 

Number and
Class of
Equity Interest

 

Percentage
of Equity
Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PLEDGED DEBT SECURITIES

 

Issuer

 

Principal
Amount

 

Date of Note

 

Maturity Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTELLECTUAL PROPERTY

 




Exhibit 10.16

 

EXECUTION COPY

 

 

INTERCREDITOR AGREEMENT

 

dated as of

 

June 15, 2007,

 

among

 

STR ACQUISITION, INC.,

 

as Borrower,

 

STR HOLDINGS LLC

 

as Holdings,

 

the Subsidiaries of the Borrower
from time to time party hereto,

 

CREDIT SUISSE,

 

as First Lien Collateral Agent

 

and

 

CREDIT SUISSE,

 

as Second Lien Collateral Agent

 

THIS IS THE INTERCREDITOR AGREEMENT REFERRED TO IN (A) THE FIRST LIEN GUARANTEE AND COLLATERAL AGREEMENT OF EVEN DATE HEREWITH AMONG STR ACQUISITION, INC., STR HOLDINGS LLC, CERTAIN SUBSIDIARIES OF STR ACQUISITION, INC. AND CREDIT SUISSE, AS FIRST LIEN COLLATERAL AGENT, (B) THE SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT OF EVEN DATE HEREWITH AMONG STR ACQUISITION, INC., STR HOLDINGS LLC, CERTAIN SUBSIDIARIES OF STR ACQUISITION, INC. AND CREDIT SUISSE, AS SECOND LIEN COLLATERAL AGENT, AND (C) THE OTHER SECURITY DOCUMENTS REFERRED TO IN THE CREDIT AGREEMENTS REFERRED TO HEREIN.

 

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

ARTICLE I

 

 

 

 

DEFINITIONS

 

 

 

 

SECTION 1.01.

Certain Defined Terms

2

SECTION 1.02.

Other Defined Terms

2

SECTION 1.03.

Terms Generally

7

 

 

 

ARTICLE II

 

 

 

 

LIEN PRIORITIES

 

 

 

 

SECTION 2.01.

Relative Priorities

7

SECTION 2.02.

Prohibition on Contesting Liens

8

SECTION 2.03.

No New Liens

8

SECTION 2.04.

Similar Liens and Agreements

8

 

 

 

ARTICLE III

 

 

 

 

ENFORCEMENT OF RIGHTS; MATTERS RELATING TO COLLATERAL

 

 

 

 

SECTION 3.01.

Exercise of Rights and Remedies

9

SECTION 3.02.

No Interference

11

SECTION 3.03.

Rights as Unsecured Creditors

13

SECTION 3.04.

Automatic Release of Second Priority Liens

13

SECTION 3.05.

Automatic Release of First Priority Liens

14

SECTION 3.06.

Insurance and Condemnation Awards

14

 

 

 

ARTICLE IV

 

 

 

 

PAYMENTS

 

 

 

 

SECTION 4.01.

Application of Proceeds

15

SECTION 4.02.

Payment Over

15

SECTION 4.03.

Certain Agreements with Respect to Unenforceable Liens

16

 

 

 

ARTICLE V

 

 

 

 

BAILMENT FOR PERFECTION OF CERTAIN SECURITY INTERESTS

 

 



 

ARTICLE VI

 

 

 

 

INSOLVENCY OR LIQUIDATION PROCEEDINGS

 

 

 

 

SECTION 6.01.

Finance and Sale Matters

17

SECTION 6.02.

Relief from the Automatic Stay

19

SECTION 6.03.

Reorganization Securities

19

SECTION 6.04

Post-Petition Interest

19

SECTION 6.05.

Certain Waivers by the Second Lien Secured Parties

19

SECTION 6.06.

Certain Voting Matters

20

 

 

 

ARTICLE VII

 

 

 

 

OTHER AGREEMENTS

 

 

 

 

SECTION 7.01.

Matters Relating to Loan Documents

20

SECTION 7.02.

Effect of Refinancing of Indebtedness under First Lien Loan Documents

22

SECTION 7.03.

No Waiver by First Lien Secured Parties

23

SECTION 7.04.

Reinstatement

23

SECTION 7.05.

Further Assurances

23

 

 

 

ARTICLE VIII

 

 

 

 

REPRESENTATIONS AND WARRANTIES

 

 

 

 

SECTION 8.01.

Representations and Warranties of Each Party

23

SECTION 8.02.

Representations and Warranties of Each Collateral Agent

24

 

 

 

ARTICLE IX

 

 

 

 

NO RELIANCE; NO LIABILITY; OBLIGATIONS ABSOLUTE

 

 

 

 

SECTION 9.01.

No Reliance; Information

24

SECTION 9.02.

No Warranties or Liability

25

SECTION 9.03.

Obligations Absolute

25

 

 

 

ARTICLE X

 

 

 

 

MISCELLANEOUS

 

 

 

 

SECTION 10.01.

Notices

26

SECTION 10.02.

Conflicts

27

SECTION 10.03.

Effectiveness; Survival

27

SECTION 10.04.

Severability

27

SECTION 10.05.

Amendments; Waivers

27

SECTION 10.06.

Subrogation

28

SECTION 10.07.

Applicable Law; Jurisdiction; Consent to Service of Process

28

SECTION 10.08.

Waiver of Jury Trial

29

SECTION 10.09.

Parties in Interest

29

SECTION 10.10.

Specific Performance

29

SECTION 10.11.

Headings

29

 

ii



 

SECTION 10.12.

Counterparts

29

SECTION 10.13.

Provisions Solely to Define Relative Rights

29

 

iii



 

INTERCREDITOR AGREEMENT dated as of June 15, 2007 (this Agreement ”), STR ACQUISITION, INC., a Delaware corporation, which substantially simultaneously with the execution hereof shall be merged with and into SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation (the Borrower ”), STR HOLDINGS LLC, a Delaware limited liability company (“ Holdings ”), CREDIT SUISSE, as collateral agent for the First Lien Lenders (as defined below) (in such capacity the First Lien Collateral Agent ), and CREDIT SUISSE, as collateral agent for the Second Lien Lenders (as defined below) (in such capacity, the “ Second Lien Collateral Agent ”).

 

PRELIMINARY STATEMENT

 

Reference is made to (a) the First Lien Credit Agreement dated as of June 15, 2007 (the First Lien Credit Agreement ”), among the Borrower, Holdings, the lenders from time to time party thereto (the First Lien Lenders ”) and Credit Suisse, as administrative agent for the First Lien Lenders (in such capacity, the “ First Lien Administrative Agent ”) and First Lien Collateral Agent, (b) the Second Lien Credit Agreement dated as of June 15, 2007 (the Second Lien Credit Agreement and, together with the First Lien Credit Agreement, the Credit Agreements ”), among the Borrower, Holdings, the lenders from time to time party thereto (the Second Lien Lenders ”) and Credit Suisse, as administrative agent for the Second Lien Lenders(in such capacity, the Second Lien Administrative Agent ”) and Second Lien Collateral Agent, (c)   the First Lien Guarantee and Collateral Agreement dated as of June 15, 2007 (the First Lien Guarantee and Collateral Agreement ”), among the Borrower, Holdings, the subsidiaries of the Borrower from time to time party thereto and Credit Suisse as First Lien Collateral Agent, (d) the Second Lien Guarantee and Collateral Agreement dated as of June 15, 2007 (the Second Lien Guarantee and Collateral Agreement ”), among the Borrower, Holdings, the subsidiaries of the Borrower from time to time party thereto and Credit Suisse as Second Lien Collateral Agent, and (e) the other Security Documents referred to in the Credit Agreements.

 

RECITALS

 

A.   The First Lien Lenders have agreed to make loans and other extensions of credit to the Borrower pursuant to the First Lien Credit Agreement on the condition, among others, that the First Lien Obligations (such term and each other capitalized term used but not defined in the preliminary statement or these recitals having the meaning given it in Article I) shall be secured by first priority Liens on, and security interests in, the Collateral.

 

B.    The Second Lien Lenders have agreed to make loans to the Borrower pursuant to the Second Lien Credit Agreement on the condition, among others, that the

 



 

Second Lien Obligations shall be secured by second priority Liens on, and security interests in, the Collateral.

 

C. The Credit Agreements require, among other things, that the parties thereto set forth in this Agreement, among other things, their respective rights, obligations and remedies with respect to the Collateral.

 

Accordingly, the parties hereto agree as follows:

 

ARTICLE I

 

Definitions

 

SECTION 1.01. Certain Defined Terms . Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings set forth in the First Lien Credit Agreement, the Second Lien Credit Agreement, the First Lien Guarantee and Collateral Agreement or the Second Lien Guarantee and Collateral Agreement, as applicable.

 

SECTION 1.02. Other Defined Terms . As used in the Agreement, the following terms shall have the meanings specified below:

 

Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy,” as now and hereinafter in effect, or any successor statute.

 

Bank ruptcy Law” shall mean the Bankruptcy Code and any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law.

 

“Borrower” shall have the meaning assigned to such term in the preamble to this Agreement.

 

“Cap Amount” shall have the meaning assigned to such term in Section 7.01(a)(ii).

 

Collateral shall mean, collectively, the First Lien Collateral and the Second Lien Collateral.

 

“Collateral Agents” shall mean the First Lien Collateral Agent and the Second Lien Collateral Agent.

 

“Comparable Second Lien Security Document” shall mean, in relation to any Collateral subject to any Lien created under any First Lien Security Document, the Second Lien Security Document that creates a Lien on the same Collateral, granted by the same Grantor.

 

“Credit Agreements shall have the meaning assigned to such term in the preliminary statement of this Agreement.

 

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‘‘DI P Ca p Amount” shall mean the Cap Amount determined without giving effect to clause (A)(2) of the definition thereof.

 

“DIP Financing” shall have the meaning assigned to such term in Section 6.01(a).

 

“DIP Financing Liens” shall have the meaning assigned to such term in Section 6.01(a).

 

“Discharge of First Lien Obligations” shall mean, subject to Sections 7.02 and 7.04, (a) payment in full in cash of the principal of and interest (including interest accruing during the pendency of any Insolvency or Liquidation Proceeding, regardless of whether allowed or allowable in such Insolvency or Liquidation Proceeding) and premium, if any, on all Indebtedness outstanding under the First Lien Loan Documents, (b) payment in full of all other First Lien Obligations that are due and payable or otherwise accrued and owing at or prior to the time such principal and interest are paid, (c) cancellation of or the entry into arrangements satisfactory to the First Lien Administrative Agent and the Issuing Bank with respect to all letters of credit issued and outstanding under the First Lien Credit Agreement and (d) termination or expiration of all commitments to lend and all obligations to issue or extend letters of credit under the First Lien Credit Agreement.

 

“Disposition shall mean any sale, lease, exchange, transfer or other disposition. Dispose shall have a correlative meaning.

 

“Fi rst Lien Adm inistrative Agent” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

 

“First Lien Collateral” shall mean all “Collateral”, as defined in the First Lien Guarantee and Collateral Agreement, and any other assets of any Grantor now or at any time hereafter subject to Liens securing any First Lien Obligations.

 

“Fi rst Lien Collateral Agent” shall have the meaning assigned to such term in the preamble to this Agreement.

 

“Fir st Lien Credit Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

 

“Fi rst Lien Guarantee and Collateral Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

 

“Fi rst Lien Lenders” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

 

‘‘Fi rst Lien Loan Documents” shall mean the “Loan Documents” as defined in the First Lien Credit Agreement.

 

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“First Lien Mortgages” shall mean, collectively, each mortgage, deed of trust, assignment of leases and rents, modifications and any other agreement, document or instrument pursuant to which a Lien on real property is granted to secure any First Lien Obligations or under which rights or remedies with respect to any such Lien are governed.

 

“First Lien Obligations” shall mean the “Obligations”, as defined in the First Lien Guarantee and Collateral Agreement.

 

“First Lien Required Lenders” shall mean the “Required Lenders”, as defined in the First Lien Credit Agreement.

 

“First Lien Secured Parties” shall mean, at any time, (a) the First Lien Lenders, (b) the First Lien Administrative Agent (c)   the First Lien Collateral Agent, (d) the Issuing Bank, (e) each other person to whom any of the First Lien Obligations (including First Lien Obligations under any Hedging Agreement and indemnification obligations) is owed and (f) the successors and assigns of each of the foregoing.

 

“First Lien Security Documents” shall mean the “Security Documents”, as defined in the First Lien Credit Agreement, and any other agreement, document or instrument pursuant to which a Lien is granted to secure any First Lien Obligations or under which rights or remedies with respect to any such Lien are governed.

 

“First Priority Liens” shall mean all Liens on the First Lien Collateral securing the First Lien Obligations, whether created under the First Lien Security Documents or acquired by possession, statute (including any judgment lien), operation of law, subrogation or otherwise.

 

“Grantors” shall mean Holdings, the Borrower and each other person that shall have created or purported to create any First Priority Lien or Second Priority Lien on all or any part of its assets to secure any First Lien Obligations or any Second Lien Obligations.

 

“Guarantors” shall mean, collectively, Holdings and each Subsidiary that has Guaranteed, or that may from time to time hereafter Guarantee, the First Lien Obligations or the Second Lien Obligations, whether by executing and delivering the applicable Guarantee and Collateral Agreement, a supplement thereto or otherwise.

 

“Indebtedness” shall mean and includes all obligations that constitute “Indebtedness”, as defined in the First Lien Credit Agreement or the Second Lien Credit Agreement, as applicable.

 

“Insolvency or Liquidation Proceeding” shall mean (a) any voluntary or involuntary proceeding under the Bankruptcy Code or any other Bankruptcy Law with respect to any Grantor, (b) any voluntary or involuntary appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Grantor or for a substantial part of the property or assets of any Grantor, (c) any voluntary or involuntary

 

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winding-up or liquidation of any Grantor, or (d) a general assignment for the benefit of creditors by any Grantor.

 

“Li en shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b)   the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third person with respect to such securities.

 

“Loa n Documents” shall mean the First Lien Loan Documents and the Second Lien Loan Documents.

 

“New First Lien Collateral Agent” shall have the meaning assigned to such term in Section 7.02.

 

“New First Lien Loan Documents” shall have the meaning assigned to such term in Section 7.02.

 

“New First Lien Obligations” shall have the meaning assigned to such term in Section 7.02.

 

“Ple dged or Controlled Collateral” shall have the meaning assigned to such term in Article V.

 

Ref inance” shall mean, in respect of any Indebtedness, to refinance, extend, renew, restructure or replace or to issue other Indebtedness in exchange or replacement for, such Indebtedness, in whole or in part. Refinanced and Refinancing shall have correlative meanings.

 

“Refinancing Notice” shall have the meaning assigned to such term in Section 7.02.

 

“Release” shall have the meaning assigned to such term in Section 3.04.

 

“Second Lien Adm inistrative Agent” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

 

“Second Lien Collateral” shall mean all “Collateral”, as defined in the Second Lien Guarantee and Collateral Agreement, and any other assets of any Grantor now or at any time hereafter subject to Liens securing any Second Lien Obligations.

 

“Second Lien Collateral Agent” shall have the meaning assigned to such term in the preamble to this Agreement.

 

“Second Lien Credit Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

 

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“Second Lien Guarantee and Collateral Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

 

“Second Lien Lenders” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

 

“Second Lien Loan Documents” shall mean the “Loan Documents”, as defined in the Second Lien Credit Agreement.

 

“Second Lien Mortgages” shall mean, collectively, each mortgage, deed of trust, leasehold mortgage, assignment of leases and rents, modifications and any other agreement, document or instrument pursuant to which any Lien on real property is granted to secure any Second Lien Obligations or under which rights or remedies with respect to any such Lien are governed.

 

“Second Lien Obligations” shall mean the “Obligations”, as defined in the Second Lien Guarantee and Collateral Agreement.

 

“Second Lien Perm itted Actions” shall have the meaning assigned to such term in Section 3.01(a).

 

“Second Lien Required Lenders” shall mean the “Required Lenders”, as defined in the Second Lien Credit Agreement.

 

“Second Lien Secured Parties” shall mean, at any time, (a) the Second Lien Lenders, (b) the Second Lien Administrative Agent, (c) the Second Lien Collateral Agent, (d) each other person to whom any of the Second Lien Obligations (including indemnification obligations) is owed and (e) the successors and assigns of each of the foregoing.

 

“Second Lien Security Documents” shall mean the “Security Documents”, as defined in the Second Lien Credit Agreement, and any other agreement, document or instrument pursuant to which a Lien is granted to secure any Second Lien Obligations or under which rights or remedies with respect to any such Lien are governed.

 

“Second Priority Liens” shall mean all Liens on the Second Lien Collateral securing the Second Lien Obligations, whether created under the Second Lien Security Documents or acquired by possession, statute (including any judgment lien), operation of law, subrogation or otherwise.

 

“Security Documents” shall mean the First Lien Security Documents and the Second Lien Security Documents.

 

“St ands till Period” shall have the meaning assigned to such term in Section 3.02(a).

 

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“subsidiary” shall mean, with respect to any person (herein referred to as the “parent” ) , any corporation, partnership, limited liability company, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership or membership interests are, at the time any determination is being made, owned, Controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

 

“Subsidiary” shall mean any subsidiary of the Borrower.

 

Un iform Commercial Code” or UCC shall mean the Uniform Commercial Code (or any similar or equivalent legislation) as in effect from time to time in any applicable jurisdiction.

 

SECTION 1.03. Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified, (b) any reference herein (i) to any person shall be construed to include such person’s successors and assigns and (ii) to the Borrower or any other Grantor shall be construed to include the Borrower or such Grantor as debtor and debtor-in-possession and any receiver or trustee for the Borrower or any other Grantor, as the case may be, in any Insolvency or Liquidation Proceeding, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles or Sections shall be construed to refer to Articles or Sections of this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

ARTICLE II

 

Lien Priorities

 

SECTION 2.01. Rela tive Priorities . Notwithstanding the date, manner or order of grant, attachment or perfection of any Second Priority Lien or any First Priority Lien, and notwithstanding any provision of the UCC or any other applicable law or the provisions of any Security Document or any other Loan Document or any other circumstance whatsoever, the Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, hereby agrees that, so long as the Discharge of First Lien Obligations has not occurred, (a) any First Priority Lien now or hereafter held

 

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by or for the benefit of any First Lien Secured Party shall be senior in right, priority, operation, effect and all other respects to any and all Second Priority Liens and (b) any Second Priority Lien now or hereafter held by or for the benefit of any Second Lien Secured Party shall be junior and subordinate in right, priority, operation, effect and all other respects to any and all First Priority Liens. The First Priority Liens shall be and remain senior in right, priority, operation, effect and all other respects to any Second Priority Liens for all purposes, whether or not any First Priority Liens are subordinated in any respect to any other Lien securing any other obligation of the Borrower, any other Grantor or any other person.

 

SECTION 2.02. Prohibition on Contesting Liens. Each of the First Lien Collateral Agent, for itself and on behalf of the other First Lien Secured Parties, and the Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, agrees that it will not, and hereby waives any right to, contest or support any other person in contesting, in any proceeding (including any Insolvency or Liquidation Proceeding), the priority, validity or enforceability of any Second Priority Lien or any First Priority Lien, as the case may be; provided that nothing in this Agreement shall be construed to prevent or impair the rights of the First Lien Collateral Agent or any other First Lien Secured Party to enforce this Agreement.

 

SECTION 2.03. No New Liens . The parties hereto agree that, so long as the Discharge of First Lien Obligations has not occurred, none of the Grantors shall, or shall permit any of its subsidiaries to, (a) grant or permit any additional Liens on any asset to secure any Second Lien Obligation unless it has granted, or concurrently therewith grants, a Lien on such asset to secure the First Lien Obligations or (b) grant or permit any additional Liens on any asset to secure any First Lien Obligations unless it has granted, or concurrently therewith grants, a Lien on such asset to secure the Second Lien Obligations, with each such Lien to be subject to the provisions of this Agreement. To the extent that the provisions of the immediately preceding sentence are not complied with for any reason, without limiting any other right or remedy available to the First Lien Collateral Agent or the other First Lien Secured Parties, the Second Lien Collateral Agent agrees, for itself and on behalf of the other Second Lien Secured Parties, that any amounts received by or distributed to any Second Lien Secured Party pursuant to or as a result of any Lien granted in contravention of this Section 2.03 shall be subject to Section 4.02.

 

SECTION 2.04. Similar Liens and Agreements . The parties hereto acknowledge and agree that it is their intention that the First Lien Collateral and the Second Lien Collateral be identical. In furtherance of the foregoing, the parties hereto agree:

 

(a) to cooperate in good faith in order to determine, upon any reasonable request by the First Lien Collateral Agent or the Second Lien Collateral Agent, the specific assets included in the First Lien Collateral and the Second Lien Collateral, the steps taken to perfect the First Priority Liens and the Second Priority

 

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Liens thereon and the identity of the respective parties obligated under the First Lien Loan Documents and the Second Lien Loan Documents; and

 

(b) that the documents, agreements and instruments creating or evidencing the Second Lien Collateral and the Second Priority Liens shall be in all material respects in the same form as the documents, agreements and instruments creating or evidencing the First Lien Collateral and the First Priority Liens, other than with respect to the first priority and second priority nature of the Liens created or evidenced thereunder, the identity of the Secured Parties that are parties thereto or secured thereby and other matters contemplated by this Agreement.

 

ARTICLE III

 

Enforcement of Rights; Matters Relating to Collateral

 

SECTION 3.01. Exercise of Rights and Remedies. (a)   So long as the Discharge of First Lien Obligations has not occurred, whether or not any Insolvency or Liquidation Proceeding has been commenced, the First Lien Collateral Agent and the other First Lien Secured Parties shall have the exclusive right to enforce rights and exercise remedies (including any right of setoff) with respect to the Collateral (including making determinations regarding the release, Disposition or restrictions with respect to the Collateral), or to commence or seek to commence any action or proceeding with respect to such rights or remedies (including any foreclosure action or proceeding or any Insolvency or Liquidation Proceeding), in each case, without any consultation with or the consent of the Second Lien Collateral Agent or any other Second Lien Secured Party; provided that, notwithstanding the foregoing, (i) in any Insolvency or Liquidation Proceeding, the Second Lien Collateral Agent may file a proof of claim or statement of interest with respect to the Second Lien Obligations; (ii) the Second Lien Collateral Agent may take any action to preserve or protect the validity and enforceability of the Second Priority Liens, provided that no such action is, or could reasonably be expected to be, (A) adverse to the First Priority Liens or the rights of the First Lien Collateral Agent or any other First Lien Secured Party to exercise remedies in respect thereof or (B) otherwise inconsistent with the terms of this Agreement, including the automatic release of Second Priority Liens provided in Section 3.04; (iii) the Second Lien Secured Parties may file any responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any person objecting to or otherwise seeking the disallowance of the claims of the Second Lien Secured Parties, including any claims secured by the Collateral or otherwise make any agreements or file any motions pertaining to the Second Lien Obligations, in each case, to the extent not inconsistent with the terms of this Agreement; (iv) the Second Lien Secured Parties may exercise rights and remedies as unsecured creditors, as provided in Section 3.03; and (v) subject to Section 3.02(a), the Second Lien Collateral Agent and the other Second Lien Secured Parties may enforce any of their rights and exercise any of their remedies with respect to the Collateral after the termination of the Standstill Period (the actions described in this proviso being referred to herein as the “ Second Lien Permitted Actions ”) Except for the Second Lien Permitted Actions, unless and until the Discharge

 

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of First Lien Obligations has occurred, the sole right of the Second Lien Collateral Agent and the other Second Lien Secured Parties with respect to the Collateral shall be to receive the proceeds of the Collateral, if any, remaining after the Discharge of First Lien Obligations has occurred and in accordance with the Second Lien Loan Documents and applicable law.

 

(b) In exercising rights and remedies with respect to the Collateral, the First Lien Collateral Agent and the other First Lien Secured Parties may enforce the provisions of the First Lien Loan Documents and exercise remedies thereunder, all in such order and in such manner as they may determine in their sole discretion. Such exercise and enforcement shall include the rights of an agent appointed by them to Dispose of Collateral upon foreclosure, to incur expenses in connection with any such Disposition and to exercise all the rights and remedies of a secured creditor under the Uniform Commercial Code, the Bankruptcy Code or any other Bankruptcy Law. The First Lien Collateral Agent agrees to provide at least five days’ prior written notice to the Second Lien Collateral Agent of its intention to foreclose upon or Dispose of any Collateral.

 

(c)   The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, hereby acknowledges and agrees that no covenant, agreement or restriction contained in any Second Lien Security Document or any other Second Lien Loan Document shall be deemed to restrict in any way the rights and remedies of the First Lien Collateral Agent or the other First Lien Secured Parties with respect to the Collateral as set forth in this Agreement and the other First Lien Loan Documents.

 

(d) Notwithstanding anything in this Agreement to the contrary, following the acceleration of the Indebtedness then outstanding under the First Lien Credit Agreement, the Second Lien Secured Parties may, at their sole expense and effort, upon notice to the Borrower and the First Lien Collateral Agent, require the First Lien Secured Parties to transfer and assign to the Second Lien Secured Parties, without warranty or representation or recourse, all (but not less than all) of the First Lien Obligations; provided that (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, and (y) the Second Lien Secured Parties shall have paid to the First Lien Collateral Agent, for the account of the First Lien Secured Parties, in immediately available funds, an amount equal to 100% of the principal of such Indebtedness plus all accrued and unpaid interest thereon plus all accrued and unpaid Fees (as defined in the First Lien Credit Agreement) plus all the other First Lien Obligations then outstanding (which shall include, with respect to (i) the aggregate face amount of the letters of credit outstanding under the First Lien Credit Agreement, an amount in cash equal to 102% thereof, and (ii) Hedging Agreements that constitute First Lien Obligations, 100% of the aggregate amount of such First Lien Obligations (giving effect to any netting arrangements) that the applicable Loan Party would be required to pay if such Hedging Agreements were terminated at such time).   In order to effectuate the foregoing, the First Lien Collateral Agent

 

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shall calculate , upon the written request of the Second Lien Collateral Agent from time to time, the amount in cash that would be necessary so to purchase the First Lien Obligations.

 

SECTION 3.02. No Interference (a) The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, agrees that, whether or not any Insolvency or Liquidation Proceeding has been commenced, the Second Lien Secured Parties:

 

(i) except for Second Lien Permitted Actions, will not, so long as the Discharge of First Lien Obligations has not occurred, (A) enforce or exercise, or seek to enforce or exercise, any rights or remedie, (including any right of setoff) with respect to any Collateral (including the enforcement of any right under any account control agreement, landlord waiver or bailee’s letter or any similar agreement or arrangement to which the Second Lien Collateral Agent or any other Second Lien Secured Party is a party) or (B) commence or join with any person (other than the First Lien Collateral Agent) in commencing, or petition for or vote in favor of any resolution for, any action or proceeding with respect to such rights or remedies (including any foreclosure action); provided, however, that the Second Lien Collateral Agent may enforce or exercise any or all such rights and remedies, or commence, join with any person in commencing, or petition for or vote in favor of any resolution for, any such action or proceeding, after a period of 180 days has elapsed since the date on which the Second Lien Collateral Agent has delivered to the First Lien Collateral Agent written notice of the acceleration of the Indebtedness then outstanding under the Second Lien Credit Agreement (the “ Standstill Period ”) ; provided further, however, that (A) notwithstanding the expiration of the Standstill Period or anything herein to the contrary, in no event shall the Second Lien Collateral Agent or any other Second Lien Secured Party enforce or exercise any rights or remedies with respect to any Collateral, or commence, join with any person in commencing, or petition for or vote in favor of any resolution for, any such action or proceeding, if the First Lien Collateral Agent or any other First Lien Secured Party shall have commenced, and shall be diligently pursuing (or shall have sought or requested relief from or modification of the automatic stay or any other stay in any Insolvency or Liquidation Proceeding to enable the commencement and pursuit thereof), the enforcement or exercise of any rights or remedies with respect to any Collateral or any such action or proceeding (prompt written notice thereof to be given to the Second Lien Collateral Agent by the First Lien Collateral Agent) and (B) after the expiration of the Standstill Period, so long as neither the First Lien Collateral Agent nor the First Lien Secured Parties have commenced any action to enforce their Lien on any material portion of the Collateral, in the event that and for so long as the Second Lien Secured Parties (or the Second Lien Collateral Agent on their behalf) have commenced any actions to enforce their Lien with respect to all or any material portion of the Collateral to the extent permitted hereunder and are diligently pursuing such

 

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actions, neither the First Lien Secured Parties nor the First Lien Collateral Agent shall take any action of a similar nature with respect to such Collateral; provided that all other provisions of this Intercreditor Agreement (including the turnover provisions of Article IV) are complied with;

 

(ii) will not contest, protest or object to any foreclosure action or proceeding brought by the First Lien Collateral Agent or any other First Lien Secured Party, or any other enforcement or exercise by any First Lien Secured Party of any rights or remedies relating to the Collateral under the First Lien Loan Documents or otherwise, so long as Second Priority Liens attach to the proceeds thereof subject to the relative priorities set forth in Section 2.01;

 

(iii) subject to the rights of the Second Lien Secured Parties under clause (i) above, will not object to the forbearance by the First Lien Collateral Agent or any other First Lien Secured Party from commencing or pursuing any foreclosure action or proceeding or any other enforcement or exercise of any rights or remedies with respect to the Collateral;

 

(iv) will not, so long as the Discharge of First Lien Obligations has not occurred and except for Second Lien Permitted Actions, take or receive any Collateral, or any proceeds thereof or payment with respect thereto, in connection with the exercise of any right or enforcement of any remedy (including any right of setoff) with respect to any Collateral or in connection with any insurance policy award under a policy of insurance relating to any Collateral or any condemnation award (or deed in lieu of condemnation) relating to any Collateral;

 

(v) will not, except for Second Lien Permitted Actions, take any action that would, or could reasonably be expected to, hinder, in any manner, any exercise of remedies under the First Lien Loan Documents, including any Disposition of any Collateral, whether by foreclosure or otherwise;

 

(vi) will not, except for Second Lien Permitted Actions, object to the manner in which the First Lien Collateral Agent or any other First Lien Secured Party may seek to enforce or collect the First Lien Obligations or the First Priority Liens, regardless of whether any action or failure to act by or on behalf of the First Lien Collateral Agent or any other First Lien Secured Party is, or could be, adverse to the interests of the Second Lien Secured Parties, and will not assert, and hereby waive, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or claim the benefit of any marshalling, appraisal, valuation or other similar right that may be available under applicable law with respect to the Collateral or any similar rights a junior secured creditor may have under applicable law; and

 

(vii) will not attempt, directly or indirectly, whether by judicial proceeding or otherwise, to challenge or question the validity or enforceability of any First Lien Obligation or any First Lien Security Document, including

 

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this Agreement, or the validity or enforceability of the priorities, rights or obligations established by this Agreement.

 

SECTION 3.03. Rights as Unsecured Creditors . The Second Lien Collateral Agent and the other Second Lien Secured Parties may, in accordance with the terms of the Second Lien Loan Documents and applicable law, enforce rights and exercise remedies against the Borrower and any Guarantor as unsecured creditors; provided that no such action is otherwise inconsistent with the terms of this Agreement. Nothing in this Agreement shall prohibit the receipt by the Second Lien Collateral Agent or any other Second Lien Secured Party of the required payments of principal, premium, interest, fees and other amounts due under the Second Lien Loan Documents so long as such receipt is not the direct or indirect result of the enforcement or exercise by the Second Lien Collateral Agent or any other Second Lien Secured Party of rights or remedies as a secured creditor (including any right of setoff) or enforcement in contravention of this Agreement of any Second Priority Lien (including any judgment lien resulting from the exercise of remedies available to an unsecured creditor, to the extent such judgment lien applies to Collateral).

 

SECTION 3.04. Automatic Release of Second Priority Liens .   (a) If, in connection with (i) any Disposition of any Collateral permitted under the terms of the First Lien Loan Documents or (ii) the enforcement or exercise of any rights or remedies with respect to the Collateral, including any Disposition of Collateral, the First Lien Collateral Agent, for itself and on behalf of the other First Lien Secured Parties, (x) releases any of the First Priority Liens, or (y) releases any Guarantor from its obligations under its guarantee of the First Lien Obligations (in each case, a Relea se ), other than any such Release granted following the Discharge of First Lien Obligations, then, subject to Section 3.04(b), the Second Priority Liens on such Collateral, and the obligations of such Guarantor under its guarantee of the Second Lien Obligations, shall be automatically, unconditionally and simultaneously released, and the Second Lien Collateral Agent shall, for itself and on behalf of the other Second Lien Secured Parties, promptly execute and deliver to the First Lien Collateral Agent, the relevant Grantor or such Guarantor such termination statements, releases and other documents as the First Lien Collateral Agent or the relevant Grantor or Guarantor may reasonably request to effectively confirm such Release; provided that, in the case of a Disposition of Collateral (other than any such Disposition in connection with the enforcement or exercise of any rights or remedies with respect to the Collateral), the Second Priority Liens shall not be so released if such Disposition is not permitted under the terms of the Second Lien Credit Agreement.

 

(b) In the event that the aggregate principal amount of the loans, letters of credit and unused revolving credit commitments outstanding under the First Lien Loan Documents, at any time, is less than 15% of the sum of such amount and the aggregate principal amount of the loans outstanding under the Second Lien Loan Documents, then any Release (other than a Release in connection with a Disposition of Collateral in connection with the enforcement or exercise of any rights or remedies with respect to the Collateral permitted hereunder) shall require

 

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the consent of the holders of First Lien Obligations and Second Lien Obligations representing in the aggregate more than 50% of the sum of (i) the aggregate principal amount of loans, letters of credit and unused revolving credit commitments outstanding under the First Lien Loan Documents and (ii) the aggregate principal amount of the loans outstanding under the Second Lien Loan Documents.

 

(c) Until the Discharge of First Lien Obligations occurs, the Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, hereby appoints the First Lien Collateral Agent, and any officer or agent of the First Lien Collateral Agent, with full power of substitution, as the attorney-in-fact of each Second Lien Secured Party for the purpose of carrying out the provisions of this Section 3.04 and taking any action and executing any instrument that the First Lien Collateral Agent may deem necessary or advisable to accomplish the purposes of this Section 3.04 (including any endorsements or other instruments of transfer or release), which appointment is irrevocable and coupled with an interest.

 

SECTION 3.05. Automatic Release of First Priority Liens.       If, in connection with the enforcement or exercise of any rights or remedies with respect to the Collateral after the expiration of the Standstill Period that is permitted in accordance with clause (A) of the second proviso to Section 3.02 (a)(i), including any Disposition of Collateral, the Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, (x) releases any of the Second Priority Liens, or (y) releases any Guarantor from its obligations under its guarantee of the Second Lien Obligations (in each case, a Second Lien Release ), then the First Priority Liens on such Collateral, and the obligations of such Guarantor under its guarantee of the First Lien Obligations, shall be automatically, unconditionally and simultaneously released, and the First Lien Collateral Agent shall, for itself and on behalf of the other First Lien Secured Parties, promptly execute and deliver to the Second Lien Collateral Agent, the relevant Grantor or such Guarantor such termination statements, releases and other documents as the Second Lien Collateral Agent or the relevant Grantor or Guarantor may reasonably request to effectively confirm such release; provided that so long as the Discharge of First Lien Obligations has not occurred, the proceeds of, or payments with respect to, any Second Lien Release that are received by the Second Lien Collateral Agent or any other Second Lien Secured Party, shall be segregated and held in trust and forthwith transferred or paid over to the First Lien Collateral Agent for the benefit of the First Lien Secured Parties in accordance with Section 4.02.

 

SECTION 3.06. Insurance and Condemnation Awards. So long as the Discharge of First Lien Obligations has not occurred, the First Lien Collateral Agent and the other First Lien Secured Parties shall have the exclusive right, subject to the rights of the Grantors under the First Lien Loan Documents, to settle and adjust claims in respect of Collateral under policies of insurance covering Collateral and to approve any award granted in any condemnation or similar proceeding, or any deed in lieu of condemnation, in respect of the Collateral. All proceeds of any such policy and any such award, or any payments with respect to a deed in lieu of condemnation, shall (a) first, prior to the

 

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Discharge of First Lien Obligations and subject to the rights of the Grantors under the First Lien Loan Documents, be paid to the First Lien Collateral Agent for the benefit of First Lien Secured Parties pursuant to the terms of the First Lien Loan Documents, (b) second, after the Discharge of First Lien Obligations and subject to the rights of the Grantors under the Second Lien Loan Documents, be paid to the Second Lien Collateral Agent for the benefit of the Second Lien Secured Parties pursuant to the terms of the Second Lien Loan Documents, and (c) third, if no Second Lien Obligations are outstanding, be paid to the owner of the subject property, such other person as may be entitled thereto or as a court of competent jurisdiction may otherwise direct. Until the Discharge of First Lien Obligations has occurred, if the Second Lien Collateral Agent or any other Second Lien Secured Party shall, at any time, receive any proceeds of any such insurance policy or any such award or payment, it shall transfer and pay over such proceeds to the First Lien Collateral Agent in accordance with Section 4.02.

 

ARTICLE IV

 

Payments

 

SECTION 4.01. Application of Proceeds . So long as the Discharge of First Lien Obligations has not occurred, any Collateral or proceeds thereof received by the First Lien Collateral Agent in connection with any Disposition of, or collection on, such Collateral upon the enforcement or exercise of any right or remedy (including any right of setoff) shall be applied by the First Lien Collateral Agent to the First Lien Obligations. Upon the Discharge of First Lien Obligations, the First Lien Collateral Agent shall deliver to the Second Lien Collateral Agent any remaining Collateral and any proceeds thereof then held by it in the same form as received, together with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct, to be applied by the Second Lien Collateral Agent to the Second Lien Obligations.

 

SECTION 4.02. Payment Over . So long as the Discharge of First Lien Obligations has not occurred, any Collateral, or any proceeds thereof or payment with respect thereto (together with assets or proceeds subject to Liens referred to in the final sentence of Section 2.03), received by the Second Lien Collateral Agent or any other Second Lien Secured Party in connection with any Disposition of, or collection on, such Collateral upon the enforcement or the exercise of any right or remedy (including any right of setoff) with respect to the Collateral, or in connection with any insurance policy claim or any condemnation award (or deed in lieu of condemnation), shall be segregated and held in trust and forthwith transferred or paid over to the First Lien Collateral Agent for the benefit of the First Lien Secured Parties in the same form as received, together with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct. Until the Discharge of First Lien Obligations occurs, the Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, hereby appoints the First Lien Collateral Agent, and any officer or agent of the First Lien Collateral Agent, with full power of substitution, the attorney-in-fact of each Second Lien Secured Party for the purpose of carrying out the provisions of this Section 4.02 and taking any action and executing any instrument that the First Lien Collateral Agent may deem

 

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necessary or advisable to accomplish the purposes of this Section 4.02, which appointment is irrevocable and coupled with an interest.

 

SECTION 4.03. Certain Agreements with Respect to Unenforceable Liens. Notwithstanding anything to the contrary contained herein, if in any Insolvency or Liquidation Proceeding a determination is made that any Lien encumbering any Collateral is not enforceable for any reason, then the Second Lien Collateral Agent and the Second Lien Secured Parties agree that, any distribution or recovery they may receive with respect to, or allocable to, the value of the assets intended to constitute such Collateral or any proceeds thereof shall (for so long as the Discharge of First Lien Obligations has not occurred) be segregated and held in trust and forthwith paid over to the First Lien Collateral Agent for the benefit of the First Lien Secured Parties in the same form as received without recourse, representation or warranty (other than a representation of the Second Lien Collateral Agent that it has not otherwise sold, assigned, transferred or pledged any right, title or interest in and to such distribution or recovery) but with any necessary endorsements or as a court of competent jurisdiction may otherwise direct until such time as the Discharge of First Lien Obligations has occurred. Until the Discharge of First Lien Obligations occurs, the Second Lien Collateral Agent, for itself and on behalf of each other Second Lien Secured Party, hereby appoints the First Lien Collateral Agent, and any officer or agent of the First Lien Collateral Agent, with full power of substitution, the attorney-in-fact of each Second Lien Secured Party for the limited purpose of carrying out the provisions of this Section 4.03 and taking any action and executing any instrument that the First Lien Collateral Agent may deem necessary or advisable to accomplish the purposes of this Section 4.03, which appointment is irrevocable and coupled with an interest.

 

ARTICLE V

 

Bailment for Perfection of Certain Security Interests

 

(a)      The First Lien Collateral Agent agrees that if it shall at any time hold a First Priority Lien on any Collateral that can be perfected by the possession or control of such Collateral or of any account in which such Collateral is held, and if such Collateral or any such account is in fact in the possession or under the control of the First Lien Collateral Agent, or of agents or bailees of the First Lien Collateral Agent (such Collateral being referred to herein as the Pledged or Controlled Collateral ) , the First Lien Collateral Agent shall, solely for the purpose of perfecting the Second Priority Liens granted under the Second Lien Loan Documents and subject to the terms and conditions of this Article V, also hold such Pledged or Controlled Collateral as gratuitous bailee for the Second Lien Collateral Agent.

 

(b)      So long as the Discharge of First Lien Obligations has not occurred, the First Lien Collateral Agent shall be entitled to deal with the Pledged or Controlled Collateral in accordance with the terms of this Agreement and the other

 

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First Lien Loan Documents as if the Second Priority Liens did not exist. The obligations and responsibilities of the First Lien Collateral Agent to the Second Lien Collateral Agent and the other Second Lien Secured Parties under this Article V shall be limited solely to holding or controlling the Pledged or Controlled Collateral as gratuitous bailee in accordance with this Article V. Without limiting the foregoing, the First Lien Collateral Agent shall have no obligation or responsibility to ensure that any Pledged or Controlled Collateral is genuine or owned by any of the Grantors. The First Lien Collateral Agent acting pursuant to this Article V shall not, by reason of this Agreement, any other Security Document or any other document, have a fiduciary relationship in respect of any other First Lien Secured Party, the Second Lien Collateral Agent or any other Second Lien Secured Party.

 

(c) Upon the Discharge of First Lien Obligations, the First Lien Collateral Agent shall transfer the possession and control of the Pledged or Controlled Collateral, together with any necessary endorsements but without recourse or warranty, (i) if the Second Lien Obligations are outstanding at such time, to the Second Lien Collateral Agent, and (ii) if no Second Lien Obligations are outstanding at such time, to the applicable Grantor, in each case so as to allow such person to obtain possession and control of such Pledged or Controlled Collateral. In connection with any transfer under clause (i) of the immediately preceding sentence, the First Lien Collateral Agent agrees to take all actions in its power as shall be reasonably requested by the Second Lien Collateral Agent to permit the Second Lien Collateral Agent to obtain, for the benefit of the Second Lien Secured Parties, a first priority security interest in the Pledged or Controlled Collateral.

 

ARTICLE VI

 

Inso lvency of Liquidation Proceedings

 

SECTION 6.01. Finance and Sale Matters . (a) Until the Discharge of First Lien Obligations has occurred, the Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, agrees that, in the event of any Insolvency or Liquidation Proceeding, the Second Lien Secured Parties:

 

(i) will not oppose or object to the use of any Collateral constituting cash collateral under Section 363 of the Bankruptcy Code, or any comparable provision of any other Bankruptcy Law, unless the First Lien Secured Parties, or a representative authorized by the First Lien Secured Parties, shall oppose or object to such use of cash collateral;

 

(ii) will not oppose or object to any post-petition financing, whether provided by the First Lien Secured Parties or any other person, under Section 364 of the Bankruptcy Code, or any comparable provision of any other Bankruptcy Law (a “ DIP Financing ”), or the Liens securing any DIP Financing ( DIP Financing Lien s ) , unless the First Lien Secured Parties, or

 

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a representative authorized by the First Lien Secured Parties, shall then oppose or object to such DIP Financing or such DIP Financing Liens, and, to the extent that such DIP Financing Liens are senior to, or rank pari passu with, the First Priority Liens, the Second Lien Collateral Agent will, for itself and on behalf of the other Second Lien Secured Parties, subordinate the Second Priority Liens to the First Priority Liens and the DIP Financing Liens on the terms of this Agreement; provided that the foregoing shall not prevent the Second Lien Secured Parties from proposing any other DIP Financing to any Grantors or to a court of competent jurisdiction;

 

(iii) except to the extent permitted by paragraph (b) of this Section 6.01, in connection with the use of cash collateral as described in clause (i) above or a DIP Financing, will not request adequate protection or any other relief in connection with such use of cash collateral, DIP Financing or DIP Financing Liens; and

 

(iv) will not oppose or object to any Disposition of any Collateral free and clear of the Second Priority Liens or other claims under Section 363 of the Bankruptcy Code, or any comparable provision of any other Bankruptcy Law, if the First Lien Secured Parties, or a representative authorized by the First Lien Secured Parties, shall consent to such Disposition.

 

(b)   The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, agrees that no Second Lien Secured Party shall contest, or support any other person in contesting, (i) any request by the First Lien Collateral Agent or any other First Lien Secured Party for adequate protection or (ii) any objection, based on a claim of a lack of adequate protection, by the First Lien Collateral Agent or any other First Lien Secured Party to any motion, relief, action or proceeding. Notwithstanding the immediately preceding sentence, if, in connection with any DIP Financing or use of cash collateral, (A) any First Lien Secured Party is granted adequate protection in the form of a Lien on additional collateral, the Second Lien Collateral Agent may, for itself and on behalf of the other Second Lien Secured Parties, seek or request adequate protection in the form of a Lien on such additional collateral, which Lien will be subordinated to the First Priority Liens and DIP Financing Liens on the same basis as the other Second Priority Liens are subordinated to the First Priority Liens under this Agreement or (B) any Second Lien Secured Party is granted adequate protection in the form of a Lien on additional collateral, the First Lien Collateral Agent shall, for itself and on behalf of the other First Lien Secured Parties, be granted adequate protection in the form of a Lien on such additional collateral that is senior to such Second Priority Lien as security for the First Lien Obligations.

 

(c) Notwithstanding the foregoing, the applicable provisions of Section 6.01(a) and (b) shall only be binding on the Second Lien Secured Parties with respect to any DIP Financing to the extent (i) the amount of such DIP Financing plus (ii) the aggregate outstanding principal amount of all loans

 

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outstanding under the First Lien Loan Documents as of the date of such DIP Financing does not exceed the DIP Cap Amount.

 

SECTION 6.02. Relief from the Automatic Stay . The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, agrees that, so long as the Discharge of First Lien Obligations has not occurred, no Second Lien Secured Party shall, without the prior written consent of the First Lien Collateral Agent, seek or request relief from or modification of the automatic stay or any other stay in any Insolvency or Liquidation Proceeding in respect of any part of the Collateral, any proceeds thereof or any Second Priority Lien.

 

SECTION 6.03. Reorganization Securities . If, in any Insolvency or Liquidation Proceeding, debt obligations of the reorganized debtor secured by Liens upon any property of the reorganized debtor are distributed, pursuant to a plan of reorganization or similar dispositive restructuring plan, on account of both the First Lien Obligations and the Second Lien Obligations, then, to the extent the debt obligations distributed on account of the First Lien Obligations and on account of the Second Lien Obligations are secured by Liens upon the same assets or property, the provisions of this Agreement will survive the distribution of such debt obligations pursuant to such plan and will apply with like effect to the Liens securing such debt obligations.

 

SECTION 6.04. Post-Petition Interest . (a) The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, agrees that no Second Lien Secured Party shall oppose or seek to challenge any claim by the First Lien Collateral Agent or any other First Lien Secured Party for allowance in any Insolvency or Liquidation Proceeding of First Lien Obligations consisting of post-petition interest, fees or expenses to the extent of the value of the First Priority Liens (it being understood and agreed that such value shall be determined without regard to the existence of the Second Priority Liens on the Collateral).

 

(b) The First Lien Collateral Agent, for itself and on behalf of the other First Lien Secured Parties, agrees that no First Lien Secured Party shall oppose or seek to challenge any claim by the Second Lien Collateral Agent or any other Second Lien Secured Party for allowance in any Insolvency or Liquidation Proceeding of Second Lien Obligations consisting of
post-petition interest, fees or expenses to the extent of the value of the Second Priority Liens (it being understood and agreed that such value shall be determined taking into account the First Priority Liens on the Collateral).

 

SECTION 6.05. Certain Waivers by the Second Lien Secured Parties . The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, waives any claim any Second Lien Secured Party may hereafter have against any First Lien Secured Party arising out of (a) the election by any First Lien Secured Party of the application of Section 1111(b)(2) of the Bankruptcy Code, or any comparable provision of any other Bankruptcy Law, or (b) any use of cash collateral or

 

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financing arrangement, or any grant of a security interest in the Collateral, in any Insolvency or Liquidation Proceeding.

 

SECTION 6.06.   Certain Voting Matters .     Each of the First Lien Collateral Agent, on behalf of the First Lien Secured Parties and the Second Lien Collateral Agent on behalf of the Second Lien Secured Parties, agrees that, without the written consent of the other, it will not seek to vote with the other as a single class in connection with any plan of reorganization in any Insolvency or Liquidation Proceeding. Except as provided in this Section 6.06, nothing in this Agreement is intended, or shall be construed, to limit the ability of the Second Lien Collateral Agent or the Second Lien Secured Parties to vote on any plan of reorganization.

 

ARTICLE VII

 

Other Agreements

 

SECTION 7.01.   Matters Relating to Loan Documents. (a)   The First Lien Loan Documents may be amended, restated, supplemented or otherwise modified in accordance with their terms, and the Indebtedness under the First Lien Credit Agreement may be Refinanced, in each case, without the consent of any Second Lien Secured Party; provided, however, that, without the consent of the Second Lien Required Lenders, no such amendment, restatement, supplement, modification or Refinancing (or successive amendments, restatements, supplements, modifications or Refinancings) shall (i) contravene any provision of this Agreement, (ii) increase by more than $15,000,000 the sum of (A) (1) the aggregate principal amount of all loans outstanding under the First Lien Loan Documents as of the date of this Agreement minus (2) the aggregate amount of any permanent repayments of Loans under the First Lien Loan Documents (excluding any repayments of revolving facilities without corresponding reductions of Commitments and any repayments of Indebtedness in connection with a substantially contemporaneous refinancing thereof) plus  (B) the amount of unused revolving credit commitments under the First Lien Loan Documents as of the date of this Agreement, plus (C) the aggregate principal amount of Indebtedness that may be incurred pursuant to one or more incremental term loan or incremental revolving credit facilities pursuant to the First Lien Loan Documents as in effect as of the date of this Agreement (the maximum amount of Indebtedness permitted to be incurred pursuant to this Section 7.01(a)(ii) being referred to herein as the Cap Amount ) , (iii) increase the “Applicable Percentage” or similar component of the interest rate under the First Lien Loan Documents by more than 300 basis points (excluding increases resulting from the accrual of interest at the default rate) or (iv) extend the scheduled maturity date of the Indebtedness under the First Lien Credit Agreement or any Refinancing thereof beyond the scheduled maturity of the Indebtedness under the Second Lien Credit Agreement and provided further that the holders of the Indebtedness resulting from any such Refinancing, or a duly authorized agent on their behalf, agree in writing to be bound by the terms of this Agreement.

 

(b) Without the prior written consent of the First Lien Required Lenders, no Second Lien Loan Document may be amended, restated, supplemented

 

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or otherwise modified, or entered into, to the extent such amendment, restatement, supplement or modification, or the terms of such new Second Lien Loan Document, would (i) contravene the provisions of this Agreement, (ii) increase the “Applicable Percentage” or similar component of the interest rate under the Second Lien Loan Documents by more than 300 basis points (excluding increases resulting from the accrual of interest at the default rate) (iii) change to earlier dates any scheduled dates for payment of principal or of interest on Indebtedness under the Second Lien Loan Documents, (iv) change any default or event of default provisions set forth in the Second Lien Loan Documents in a manner adverse to the First Lien Secured Parties, (v) change the redemption, prepayment or defeasance provisions set forth in the Second Lien Loan Documents in a manner adverse to the First Lien Secured Parties, (vi) add to the Second Lien Collateral other than as specifically provided by this Agreement or (vii) otherwise materially increase the obligations of the Borrower or the other loan parties thereunder or confer additional rights on the Second Lien Secured Parties in a manner adverse to the First Lien Secured Parties.  As an intercreditor agreement only and without prejudice to any rights of the First Lien Lenders under the First Lien Credit Agreement (including any covenants therein that may restrict such Refinancings), Indebtedness under the Second Lien Loan Documents may be Refinanced if (A) the terms and conditions of such Refinancing Indebtedness are no less favorable in the aggregate to the Borrower and the other loan parties thereunder and to the First Lien Secured Parties than the terms and conditions of the Indebtedness then outstanding under the Second Lien Credit Agreement, (B) the final maturity and the average life to maturity of such Refinancing Indebtedness is at least equal to that of the Indebtedness then outstanding under the Second Lien Credit Agreement and (C) if such Refinancing Indebtedness is secured, the holders of such Refinancing Indebtedness, or a duly authorized agent on their behalf, agree in writing to be bound by the terms of this Agreement.

 

(c) Each of the Borrower and the Second Lien Collateral Agent agrees that the Second Lien Credit Agreement and each Second Lien Security Document shall contain the applicable provisions set forth on Annex I hereto, or similar provisions approved by the First Lien Collateral Agent, which approval shall not be unreasonably withheld or delayed. Each of the Borrower and the Second Lien Collateral Agent further agrees that each Second Lien Mortgage covering any Collateral shall contain such other language as the First Lien Collateral Agent may reasonably request to reflect the subordination of such Second Lien Mortgage to the First Lien Mortgage covering such Collateral pursuant to this Agreement.

 

(d) In the event that the First Lien Collateral Agent or the other First Lien Secured Parties and the relevant Grantor enter into any amendment, modification, waiver or consent in respect of any of the First Lien Security Documents (other than this Agreement), then such amendment, modification, waiver or consent shall apply automatically to any comparable provisions of the applicable Comparable Second Lien Security Document, in each case, without the consent of any Second Lien Secured Party and without any action by the  Second Lien

 

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Collateral Agent, the Borrower or any other Grantor; provided, that (i) no such amendment, modification, waiver or consent shall (A) remove assets subject to the Second Priority Liens or release any such Liens, except to the extent that such release is permitted or required by Section 3.04 and provided that there is a concurrent release of the corresponding First Priority Liens, (B) amend, modify or otherwise affect the rights or duties of the Second Lien Collateral Agent without its prior written consent or (C) permit Liens on the Collateral (other than DIP Financing Liens) which are not permitted under the terms of the Second Lien Loan Documents and (ii) notice of such amendment, modification waiver or consent shall have been given to the Second Lien Collateral Agent no later than the tenth Business Day following the effective date of such amendment, modification, waiver or consent.

 

SECTION 7.02. Effect of Refinancing of Indeb tedness under First Lien Loan Documents. If, substantially contemporaneously with the Discharge of First Lien Obligations, the Borrower Refinances Indebtedness outstanding under the First Lien Loan Documents and provided that (a) such Refinancing is permitted hereby and (b) the Borrower gives to the Second Lien Collateral Agent written notice (the Re financing Notice ) electing the application of the provisions of this Section 7.02 to such Refinancing Indebtedness, then (i) such Discharge of First Lien Obligations shall automatically be deemed not to have occurred for all purposes of this Agreement, (ii) such Refinancing Indebtedness and all other obligations under the loan documents evidencing such Indebtedness (the New First Lien Obligations ) shall automatically be treated as First Lien Obligations for all purposes of this Agreement, including for purposes of the Lien priorities and rights in respect of Collateral set forth herein, (iii) the credit agreement and the other loan documents evidencing such Refinancing Indebtedness (the New First Lien Loan Documents ) shall automatically be treated as the First Lien Credit Agreement and the First Lien Loan Documents and, in the case of New First Lien Loan Documents that are security documents, as the First Lien Security Documents for all purposes of this Agreement, (iv) the collateral agent under the New First Lien Loan Documents (the New First Lien Collateral Agent ) shall be deemed to be the First Lien Collateral Agent for all purposes of this Agreement and (v) the lenders under the New First Lien Loan Documents shall be deemed to be the First Lien Lenders for all purposes of this Agreement. Upon receipt of a Refinancing Notice, which notice shall include the identity of the New First Lien Collateral Agent, the Second Lien Collateral Agent shall promptly enter into such documents and agreements (including amendments or supplements to this Agreement) as the Borrower or such New First Lien Collateral Agent may reasonably request in order to provide to the New First Lien Collateral Agent the rights and powers contemplated hereby, in each case consistent in all material respects with the terms of this Agreement. The Borrower shall cause the agreement, document or instrument pursuant to which the New First Lien Collateral Agent is appointed to provide that the New First Lien Collateral Agent agrees to be bound by the terms of this Agreement. In furtherance of Section 2.03, if the New First Lien Obligations are secured by assets of the Grantors that do not also secure the Second Lien Obligations, the applicable Grantors shall promptly grant a Second Priority Lien on such assets to secure the Second Lien Obligations.

 

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SECTION 7.03. No Waiver by First Lien Secured Parties . Other than with respect to the Second Lien Permitted Actions, nothing contained herein shall prohibit or in any way limit the First Lien Collateral Agent or any other First Lien Secured Party from opposing, challenging or objecting to, in any Insolvency or Liquidation Proceeding or otherwise, any action taken, or any claim made, by the Second Lien Collateral Agent or any other Second Lien Secured Party, including any request by the Second Lien Collateral Agent or any other Second Lien Secured Party for adequate protection or any exercise by the Second Lien Collateral Agent or any other Second Lien Secured Party of any of its rights and remedies under the Second Lien Loan Documents or otherwise.

 

SECTION 7.04. Reinstatement . If, in any Insolvency or Liquidation Proceeding or otherwise, all or part of any payment with respect to the First Lien Obligations previously made shall be rescinded for any reason whatsoever, then the First Lien Obligations shall be reinstated to the extent of the amount so rescinded and, if theretofore terminated, this Agreement shall be reinstated in full force and effect and such prior termination shall not diminish, release, discharge, impair or otherwise affect the Lien priorities and the relative rights and obligations of the First Lien Secured Parties and the Second Lien Secured Parties provided for herein.

 

SECTION 7.05. Further Assurances . Each of the First Lien Collateral Agent, for itself and on behalf of the other First Lien Secured Parties, and the Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, and each Grantor party hereto, for itself and on behalf of its subsidiaries, agrees that it will execute, or will cause to be executed, any and all further documents, agreements and instruments, and take all such further actions, as may be required under any applicable law, or which the First Lien Collateral Agent or the Second Lien Collateral Agent may reasonably request, to effectuate the terms of this Agreement, including the relative Lien priorities provided for herein.

 

ARTICLE VIII

 

Representations and Warranties

 

SECTION 8.01. Representations and Warranties of Each Party . Each party hereto represents and warrants to the other parties hereto as follows:

 

(a) Such party is duly organized, validly existing and, to the extent such concept is applicable in such jurisdiction, in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to execute and deliver this Agreement and perform its obligations hereunder.

 

(b) This Agreement has been duly executed and delivered by such party and constitutes a legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms.

 

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(c) The execution, delivery and performance by such party of this Agreement (i) do not require any consent or approval of, registration or filing with or any other action by any governmental authority, except those that, if not obtained or made, could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, and (ii) will not violate (A) any provision of law, statute, rule or regulation in a manner that could reasonably be expected to result in a Material Adverse Effect, or of the certificate or articles of incorporation or other constitutive documents or by-laws of such party or (B) any order of any governmental authority or any provision of any indenture, agreement or other instrument binding upon such party in a manner that could reasonably be expected to result in a Material Adverse Effect.

 

SECTION 8.02. Representations and Warranties of Each Collateral Agent . Each Collateral Agent represents and warrants to the other parties hereto that it has been authorized by the Lenders under and as defined in the First Lien Credit Agreement or the Second Lien Credit Agreement, as applicable, to enter into this Agreement.

 

ARTICLE IX

 

No Reliance; No Liability; Obligations Absolute

 

SECTION 9.01. No Reliance; Information . Each Collateral Agent, for itself and on behalf of the applicable other Secured Parties, acknowledges that (a) it and such Secured Parties have, independently and without reliance upon, in the case of the First Lien Secured Parties, any Second Lien Secured Party and, in the case of the Second Lien Secured Parties, any First Lien Secured Party, and based on such documents and information as they have deemed appropriate, made their own credit analysis and decision to enter into the Loan Documents to which they are party and (b) it and such Secured Parties will, independently and without reliance upon, in the case of the First Lien Secured Parties, any Second Lien Secured Party and, in the case of the Second Lien Secured Parties, any First Lien Secured Party, and based on such documents and information as they shall from time to time deem appropriate, continue to make their own credit decision in taking or not taking any action under this Agreement or any other Loan Document to which they are party. The First Lien Secured Parties and the Second Lien Secured Parties shall have no duty to disclose to any Second Lien Secured Party or to any First Lien Secured Party, respectively, any information relating to the Borrower, Holdings or any of the Subsidiaries, or any other circumstance bearing upon the risk of nonpayment of any of the First Lien Obligations or the Second Lien Obligations, as the case may be, that is known or becomes known to any of them or any of their Affiliates. In the event any First Lien Secured Party or any Second Lien Secured Party, in its sole discretion, undertakes at any time or from time to time to provide any such information to, respectively, any Second Lien Secured Party or any First Lien Secured Party, it shall be under no obligation (i) to make, and shall not make or be deemed to have made, any express or implied representation or warranty, including with respect to the accuracy, completeness, truthfulness or validity of the information so provided, (ii) to provide any

 

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additional information or to provide any such information on any subsequent occasion or (iii) to undertake any investigation.

 

SECTION 9.02.   No Warranties or Liability.         (a) The First Lien Collateral Agent, for itself and on behalf of the other First Lien Secured Parties, acknowledges and agrees that, except for the representations and warranties set forth in Article VIII, neither the Second Lien Collateral Agent nor any other Second Lien Secured Party has made any express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectibility or enforceability of any of the Second Lien Loan Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon.  The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, acknowledges and agrees that, except for the representations and warranties set forth in Article VIII, neither the First Lien Collateral Agent nor any other First Lien Secured Party has made any express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectibility or enforceability of any of the First Lien Loan Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon.

 

(b)  The Second Lien Collateral Agent and the other Second Lien Secured Parties shall have no express or implied duty to the First Lien Collateral Agent or any other First Lien Secured Party, and the First Lien Collateral Agent and the other First Lien Secured Parties shall have no express or implied duty to the Second Lien Collateral Agent or any other Second Lien Secured Party, to act or refrain from acting in a manner which allows, or results in, the occurrence or continuance of a default or an event of default under any First Lien Loan Document and any Second Lien Loan Document (other than, in each case, this Agreement), regardless of any knowledge thereof which they may have or be charged with.

 

(c)  The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, agrees no First Lien Secured Party shall have any liability to the Second Lien Collateral Agent or any other Second Lien Secured Party, and hereby waives any claim against any First Lien Secured Party, arising out of any and all actions which the First Lien Collateral Agent or the other First Lien Secured Parties may take or permit or omit to take with respect to (i) the First Lien Loan Documents (other than this Agreement), (ii) the collection of the First Lien Obligations or (iii) the maintenance of, the preservation of, the foreclosure upon or the Disposition of any Collateral.

 

SECTION 9.03. Obligations Absolute . The Lien priorities provided for herein and the respective rights, interests, agreements and obligations hereunder of the First Lien Collateral Agent and the other First Lien Secured Parties and the Second Lien Collateral Agent and the other Second Lien Secured Parties shall remain in full force and effect irrespective of:

 

(a) any lack of validity or enforceability of any Loan Document;

 

25



 

(b) any change in the time, place or manner of payment of, or in any other term of (including, subject to the limitations set forth in Section 7.01(a), the Refinancing of), all or any portion of the First Lien Obligations, it being specifically acknowledged that a portion of the First Lien Obligations consists or may consist of Indebtedness that is revolving in nature, and the amount thereof that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed;

 

(c) any change in the time, place or manner of payment of, or, subject to the limitations set forth in Section 7.01(a), in any other term of, all or any portion of the First Lien Obligations;

 

(d) any amendment, waiver or other modification, whether by course of conduct or otherwise, of any Loan Document;

 

(e) the securing of any First Lien Obligations or Second Lien Obligations with any additional collateral or Guarantees, or any exchange, release, voiding, avoidance or non-perfection of any security interest in any Collateral or any other collateral or any release of any Guarantee securing any First Lien Obligations or Second Lien Obligations; or

 

(f) any other circumstances that otherwise might constitute a defense available to, or a discharge of, the Borrower or any other loan party in respect of the First Lien Obligations or this Agreement, or any of the Second Lien Secured Parties in respect of this Agreement.

 

ARTICLE X

 

Miscellaneous

 

SECTION 10.01. Notices . Notices and other communications provided for herein shall be in writing and shall be delivered by hand or nationally recognized overnight courier service, mailed by certified or registered mail or sent by fax, as follows:

 

(a) if to the Borrower or any other Grantor, to it at 10 Water Street, Enfield, CT 06082, Attention of Chief Financial Officer (Fax No. (860) 749-9158); with a copy to STR Holdings LLC, c/o DLJ Merchant Banking, Attention of Dan Gerwitz (Fax No. (860) 749-9158); and

 

(b) if to the First Lien Collateral Agent or the Second Lien Collateral Agent, to Credit Suisse, at Eleven Madison Avenue, New York, NY 10010, Attention of Agency Group (Fax No. (212) 325-8304).

 

All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or nationally recognized overnight courier service or sent by fax or on the date five Business Days after dispatch by certified or registered

 

26


 

mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 10.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 10.01. As agreed to among Holdings, the Borrower and any Collateral Agent from time to time, notices and other communications may also be delivered by
e-mail to the e-mail address of a representative of the applicable person provided from time to time by such person so long as a copy of such notice or other communication is also sent by one of the other methods set forth above.

 

SECTION 10.02. Conflicts . In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the other Loan Documents, the provisions of this Agreement shall control.

 

SECTION 10.03. Effectiveness; Survival . This Agreement shall become effective when executed and delivered by the parties hereto. All covenants, agreements, representations and warranties made by any party in this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement. The terms of this Agreement shall survive, and shall continue in full force and effect, in any Insolvency or Liquidation Proceeding. The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, hereby waives any and all rights the Second Lien Secured Parties may now or hereafter have under applicable law to revoke this Agreement or any of the provisions of this Agreement.

 

SECTION 10.04. Severability . In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 10.05. Amendments; Waivers . (a) No failure or delay on the part of any party hereto in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereto are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 10.05, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.

 

27



 

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the First Lien Collateral Agent and the Second Lien Collateral Agent; provided that no such agreement shall amend, modify or otherwise affect the rights or obligations of any Grantor without such person’s prior written consent.

 

SECTION 10.06. Subrogation. The Second Lien Collateral Agent, for itself and on behalf of the other Second Lien Secured Parties, hereby waives any rights of subrogation it or they may acquire as a result of any payment hereunder until the Discharge of First Lien Obligations has occurred; provided, however, that, as between the Borrower and the other Grantors, on the one hand, and the Second Lien Secured Parties, on the other hand, any such payment that is paid over to the First Lien Collateral Agent pursuant to this Agreement shall be deemed not to reduce any of the Second Lien Obligations unless and until the Discharge of First Lien Obligations shall have occurred and the First Lien Collateral Agent delivers any such payment to the Second Lien Collateral Agent.

 

SECTION 10.07. Applicable Law; Jurisdiction; Consent to Service of Process . (a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

(b) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined only in such New York State court or, to the extent permitted by law, in such Federal court. Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

(c) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State court or in any such Federal court. Each party hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

 

28



 

SECTION 10.08. Waiver of Jury Trial . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.08.

 

SECTION 10.09. Parties in Interest . This provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, as well as the other First Lien Secured Parties and Second Lien Secured Parties, all of whom are intended to be bound by, and to be third party beneficiaries of, this Agreement. No other person shall have or be entitled to assert rights or benefits hereunder.

 

SECTION 10.10. Specific Performance . Each Collateral Agent may demand specific performance of this Agreement and, on behalf of itself and the respective other Secured Parties, hereby irrevocably waives any defense based on the adequacy of a remedy at law and any other defense that might be asserted to bar the remedy of specific performance in any action which may be brought by the respective Secured Parties.

 

SECTION 10.11. Headings . Article and Section headings used herein and the Table of Contents hereto are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

 

SECTION 10.12. Counterparts . This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 10.03. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

SECTION 10.13. Provisions Solely to Define Rela tive Rights . The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the First Lien Secured Parties, on the one hand, and the Second Lien Secured Parties, on the other hand. None of the Borrower, any other Grantor, any Guarantor or any other creditor thereof shall have any rights or obligations, except as expressly provided in this Agreement, hereunder and none of the Borrower, any other Grantor or any Guarantor may rely on the terms hereof. Nothing in this Agreement is intended to or shall impair the obligations of the Borrower or any other Grantor or any Guarantor, which are absolute and unconditional, to pay the First Lien Obligations and

 

29



 

the Second Lien Obligations as and when the same shall become due and payable in accordance with their terms.

 

[Remainder of this page intentionally left blank]

 

30



 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

 

 

STR ACQUISITION, INC.

 

 

 

 

 

By

/s/ Jason Metakis

 

 

 

Name: Jason Metakis

 

 

 

Title: Treasurer

 

 

 

 

 

STR HOLDINGS LLC

 

 

 

 

 

 

By

/s/ Jason Metakis

 

 

 

Name: Jason Metakis

 

 

 

Title: Treasurer

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES,
INC.,

 

 

 

 

 

 

By

/s/ Barry A. Morris

 

 

 

Name: Barry A. Morris

 

 

 

Title: Secretary

 

 

 

 

 

CAL SAFETY COMPLIANCE CORPORATION,

 

 

 

 

 

 

By

/s/ Barry A. Morris

 

 

 

Name: Barry A. Morris

 

 

 

Title: Assistant Secretary

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES (INTERNATIONAL), INC.,

 

 

 

 

 

 

By

/s/ Barry A. Morris

 

 

 

Name: Barry A. Morris

 

 

 

Title: Secretary

 

 

 

 

 

[Intercreditor Agreement]

 



 

 

SHUSTER LABORATORIES, INC.,

 

 

 

 

 

 

By

/s/ Barry A. Morris

 

 

 

Name: Barry A. Morris

 

 

 

Title: Secretary

 

 

 

 

 

SUPPLY CHAIN CONSULTING SERVICES
CORPORATION,

 

 

 

 

 

 

By

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES
(FLORIDA), INC.,

 

 

 

 

 

 

By

/s/ Barry A. Morris

 

 

 

Name: Barry A. Morris

 

 

 

Title: Secretary

 

 

 

 

 

STR MATERIALS SCIENCE, INC.,

 

 

 

 

 

 

By

/s/ Barry A. Morris

 

 

 

Name: Barry A. Morris

 

 

 

Title: Secretary

 

[Intercreditor Agreement]

 



 

 

SUPPLY CHAIN CONSULTING
SERVICES CORPORATION

 

 

 

 

 

 

by

 

 

 

 

/s/ Thomas D. Vitro

 

 

 

Name: Thomas D. Vitro

 

 

 

Title: Assistant Secretary

 

 

 

 

 

 

 

 

[Intercreditor Agreement]

 



 

 

CREDIT SUISSE, CAYMAN ISLANDS BRANCH,

 

as First Lien Collateral Agent,

 

 

 

 

 

 

By

/s/ Rianka Mohan

 

 

 

Name: RIANKA MOHAN

 

 

 

Title: VICE PRESIDENT

 

 

 

 

By

/s/ James Neira

 

 

 

Name: JAMES NEIRA

 

 

 

Title: ASSOCIATE

 

 

 

 

 

CREDIT SUISSE, CAYMAN ISLANDS BRANCH,

 

as Second Lien Collateral Agent,

 

 

 

 

 

 

By

/s/ Rianka Mohan

 

 

 

Name: RIANKA MOHAN

 

 

 

Title: VICE PRESIDENT

 

 

 

 

By

/s/ James Neira

 

 

 

Name: JAMES NEIRA

 

 

 

Title: ASSOCIATE

 

[Intercreditor Agreement]

 



 

ANNEX I

 

Provision for the Second Lien Credit Agreement

 

“Reference is made to the Intercreditor Agreement dated as of June 15, 2007 (as amended, restated, supplemented or otherwise modified from time to time, the “ Intercreditor Agreement ”) , among the Borrower, Holdings, the Subsidiaries of the Borrower party thereto, Credit Suisse, as First Lien Collateral Agent (as defined therein), and Credit Suisse, as Second Lien Collateral Agent (as defined therein). Each Lender hereunder (a) acknowledges that it has received a copy of the Intercreditor Agreement, (b) consents to the subordination of Liens provided for in the Intercreditor Agreement, (c) agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor Agreement and (d) authorizes and instructs the Collateral Agent to enter into the Intercreditor Agreement as Collateral Agent and on behalf of such Lender. The foregoing provisions are intended as an inducement to the lenders under the First Lien Credit Agreement to permit the incurrence of Indebtedness under the Second Lien Credit Agreement and to extend credit to the Borrower and such lenders are intended third party beneficiaries of such provisions.”

 

Provision for the Second Lien Security Documents

 

“Reference is made to the Intercreditor Agreement dated as of June 15, 2007 (as amended, restated, supplemented or otherwise modified from time to time, the “ Intercreditor Agreement ”) , among the Borrower, Holdings, the Subsidiaries of the Borrower party thereto, Credit Suisse, as First Lien Collateral Agent (as defined therein), and Credit Suisse, as Second Lien Collateral Agent (as defined therein). Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Agent, for the benefit of the Secured Parties, pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent and the other Secured Parties hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of the Intercreditor Agreement, and this Agreement, the provisions of the Intercreditor Agreement shall control.”

 




Exhibit 10.17

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

T his ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of November 5, 2009 (this “ Assignment and Assumption Agreement ”), between STR Holdings LLC, a Delaware limited liability company (“ Predecessor LLC ”) and STR Holdings (New) LLC, a Delaware limited liability company (“ New LLC ” and together with any corporate successor to New LLC by way of conversion, “ Newco ”).

 

W I T N E S S E T H:

 

WHEREAS, Predecessor LLC will file a Certificate of Cancellation and liquidate pursuant to the Plan of Complete Liquidation and Dissolution, dated as of November 5, 2009 (the “ Liquidation and Dissolution ”).

 

WHEREAS, New LLC has entered into the Agreement and Plan of Merger, by and among Specialized Technology Resources, Inc. (“ STR ”), New LLC and STR Merger, Inc., dated as of November 5, 2009 (the “ Merger Agreement ”), whereby STR will become a wholly-owned subsidiary of New LLC.

 

WHEREAS, Predecessor LLC is party as “Holdings” to the First Lien Credit Agreement, dated as of June 15, 2007, among STR, the Lenders party thereto and Credit Suisse, as Administrative Agent and to the Second Lien Credit Agreement, dated as of June 15, 2007, among STR, the Lenders party thereto and Credit Suisse, as Administrative Agent (collectively, the “ Credit Agreements ”).

 

WHEREAS, immediately prior to the Liquidation and Dissolution (the “ Effective Time ”), Predecessor LLC shall assign all of its rights, title, interest and obligations under each “Loan Document” (as such term is defined under each Credit Agreement, collectively the “ Loan Documents ”) to Newco, subject to the terms and conditions of this Assignment and Assumption Agreement.

 

WHEREAS, in accordance with the terms of this Assignment and Assumption Agreement, Predecessor LLC and Newco have agreed to provide for (a) such assignment from Predecessor LLC to Newco of the Loan Documents from and after the Effective Time, and (b) the acceptance by Newco of such assignment and the assumption by Newco of (i) all obligations to be performed by Predecessor under the Loan Documents and (ii) the assumed liabilities related to the Loan Documents (the “ Assumed Liabilities ”).

 

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1.                                        Assignment .  Predecessor LLC hereby assigns, transfers and conveys to Newco, to the extent that such are legally assignable and any necessary consents to

 



 

assignment have been obtained, all of Predecessor LLC’s right, title and interest in, under and to the Loan Documents from and after the Effective Time.

 

2.                                        Acceptance and Assumption .  Newco hereby (a) accepts the assignment, transfer and conveyance, to the extent that such are legally assignable and necessary consents to assignment have been obtained, of Predecessor LLC’s right, title and interests in, under and to the Loan Documents; (b) assumes, undertakes and agrees, subject to valid claims and defenses, to pay, satisfy, perform or discharge in accordance with the terms thereof all obligations and liabilities of any kind arising out of, or required to be performed under, such assigned Loan Documents; and (c) assumes, undertakes and agrees to pay, satisfy, perform or discharge in accordance with the terms thereof all of the Loan Documents and all obligations and liabilities of any kind arising out of Newco’s assumption of the Assumed Liabilities.

 

3.                                        Parties in Interest .  This Assignment and Assumption Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

 

4.                                        Counterparts .  This Assignment and Assumption Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, and all of which together shall constitute one and the same instrument.

 

5.                                        Governing Law .  This Assignment and Assumption Agreement and the rights and obligations of the parties hereunder shall be governed by, and construed in accordance with, the laws of the State of New York as applied to contracts made and performed entirely in such State.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

2



 

IN WITNESS WHEREOF, the parties hereto have executed this Assignment and Assumption Agreement on the date first written above.

 

 

 

STR HOLDINGS LLC

 

 

 

By:

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title:

Executive Vice President and Chief Financial Officer

 

 

 

 

 

STR HOLDINGS (NEW) LLC

 

 

 

 

 

By:

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title:

Executive Vice President and Chief Financial Officer

 

[SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT]

 




Exhibit 10.18

 

RESTRICTED COMMON STOCK AGREEMENT
FOR OFFICERS HOLDING C, D AND E UNITS

 

RESTRICTED COMMON STOCK AGREEMENT (this “Agreement”) made as of November 6, 2009 (the “Effective Date”), by and between STR Holdings, Inc., a Delaware corporation (the “Company”), and [                    ] (the “Holder”).

 

WHEREAS, STR Holdings LLC (“Old LLC”) entered into that certain Incentive Unit Grant Agreement with the Holder dated as of June 15, 2007 (the “Grant Agreement”), whereby Old LLC granted incentive units of Old LLC to the Holder;

 

WHEREAS, on the date hereof, Old LLC will enter into a corporate reorganization, whereby the unitholders of Old LLC will become unitholders of STR Holdings (New) LLC (“New LLC”);

 

WHEREAS, pursuant to that certain Plan of Conversion by New LLC, dated as of November 6, 2009 (the “Plan of Conversion”), New LLC filed with the Secretary of State of the State of Delaware a certificate of conversion converting New LLC into the Company and automatically converting the membership interests of New LLC into shares of common stock, par value $0.01 per share (“Common Stock”), of the Company;

 

WHEREAS, due to the conversion of New LLC into the Company, any unvested incentive units of Old LLC granted pursuant to the Grant Agreement and converted in the corporate reorganization into unvested incentive units of New LLC shall be converted from unvested incentive units of New LLC into Restricted Shares (as defined below) subject to the terms and conditions herein;

 

WHEREAS, in consideration of the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged; and

 

WHEREAS, certain capitalized terms used herein are defined in Section 6 hereof.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.             Restricted Shares .  Subject to the terms and conditions of this Agreement and pursuant to the Plan of Conversion, the Company hereby issues to the Holder [        ] shares of Common Stock (the “Restricted Shares”), of which [        ] shares of Restricted Shares shall be Time Vesting Restricted Shares (as defined below) and [        ] shares of Restricted Shares shall be Performance Vesting Restricted Shares (as defined below).

 

2.             Holder Representations and Warranties .

 

(a)           As an inducement to the Company to issue the Restricted Shares to the Holder and as a condition thereto, the Holder represents, acknowledges and agrees (as applicable) that this Agreement constitutes the legal, valid and binding obligation of the Holder, enforceable against the Holder in accordance with its terms, except to the extent the enforceability thereof may be limited by bankruptcy laws, insolvency laws, moratorium laws or other laws affecting creditors’ rights generally or by general equitable principles, and the execution, delivery and performance of this Agreement by the Holder does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which the Holder is a party or any judgment, order or decree to which the Holder is subject.

 



 

(b)           In addition, the Holder represents, acknowledges and agrees (as applicable) that:

 

(i)         (x) the Restricted Shares have not been registered under the Securities Act, (y) the Restricted Shares are restricted securities under the Securities Act and (z) the Restricted Shares may not be resold or transferred unless they are first registered under the Securities Act or unless an exemption from such registration is available;

 

(ii)        the Holder hereby makes the representations and warranties set forth in Exhibit A hereto; and

 

(iii)       the Company may, but shall not be obligated to, register or qualify the issuance, or the resale, of any of the Restricted Shares under the Securities Act or any other applicable law.

 

3.             Vesting of Shares .

 

(a)           All Restricted Shares shall initially be unvested and shall be subject to forfeiture to the Company pursuant to this Agreement.  At such time as a Restricted Share vests in accordance with this Section 3, it shall no longer be a Restricted Share and shall not be subject to forfeiture.

 

(b)           Time Vesting .  [      ] of the Restricted Shares shall vest based on the passage of time (“Time Vesting Restricted Shares”).

 

(i)         Vesting Schedule .  Subject to Section 3(b)(ii) and to the Holder’s continued employment with the Company on each vesting date, the Time Vesting Restricted Shares shall vest in equal 1/32 installments as of the last day of each of the 32 calendar months following the Effective Date, which for the sake of clarity means November 30, 2009.

 

(ii)        Acceleration upon Change of Control .  Upon the occurrence of a Change of Control, all then unvested Time Vesting Restricted Shares shall immediately vest in full, subject to Section 3(b)(iii).

 

(iii)       Termination .

 

Upon the termination of the Holder’s employment or for any reason, all unvested Time Vesting Restricted Shares shall be forfeited.

 

(c)           Performance Vesting .  [      ] of the Restricted Shares shall vest based on the Company attaining the following performance criteria (“Performance Vesting Restricted Shares”).

 

(i)         Vesting Schedule .  Subject to Section 3(c)(ii) and to the Holder’s continued employment with the Company on each vesting date, the Performance Vesting Restricted Shares shall vest in three (3) equal installments following the three successive Fiscal Years, beginning with the Fiscal Year ending on December 31, 2009 (for the 2009 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.  If the Performance Target for any of the first two 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 the 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

 

2



 

the Performance Target is not achieved for the 2009 and 2010 Fiscal Years but is achieved for the 2011 Fiscal Year, in 2011, the Yearly Amounts for both 2010 and 2011 would become vested.

 

(ii)        Acceleration upon Change of Control .  Upon the occurrence of a Change of Control, all then unvested Performance Vesting Restricted Shares shall immediately vest in full, so long as the Holder is employed with the Company on the date of the Change of Control.

 

(iii)       Termination .  Upon the termination of employment of the Holder for any reason, the unvested Performance Vesting Restricted Shares shall be forfeited.

 

4.             Legend.

 

(a)           Each certificate representing Restricted Shares shall bear each of the following legends.

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR STATE SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXCHANGED UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OR EXCHANGE COMPLIES WITH THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT AND THE RESTRICTED COMMON STOCK AGREEMENT, EACH AS AMENDED FROM TIME TO TIME, BETWEEN OR AMONG THE COMPANY AND THE INVESTORS PARTY THERETO.  IN ADDITION TO RESTRICTIONS ON TRANSFER, THE RESTRICTED COMMON STOCK AGREEMENT PROVIDES FOR THE VESTING OF THE SHARES ACCORDING TO THE SPECIFIC PROVISIONS OF THE RESTRICTED COMMON STOCK AGREEMENT.  COPIES OF THE REGISTRATION RIGHTS AGREEMENT AND THE RESTRICTED COMMON STOCK AGREEMENT ARE ON FILE WITH THE COMPANY.”

 

(b)           The certificates shall also bear any legend required by any applicable state securities law.

 

(c)           The certificates shall be deposited by the Holder, together with a stock power endorsed in blank, with the Company, to be held in escrow during any restriction period.

 

5.             Restrictions on Transfer and Conversion .

 

(a)           The Company and the Holder acknowledge and agree that the Restricted Shares are subject to and restricted by this Agreement.  Once vested, the Restricted Shares shall no longer be restricted by the terms of this Agreement but shall be subject to the restrictions set forth in the Registration Rights Agreement and the Securities Act.

 

(b)           The Restricted Shares shall only be transferable to Permitted Transferees of the Holder.  Any attempt to Transfer any of the Restricted Shares to Persons other than Permitted Transferees

 

3



 

of the Holder shall be null and void and have no force or effect, and the Company shall not, and shall cause any transfer agent not to, give any effect in such entity’s share records to such attempted Transfer.

 

(c)           The Holder acknowledges that the transfer restrictions contained in this Agreement are reasonable and in the best interests of the Company.  The Holder understands that this  Agreement contains forfeiture provisions in respect of the Restricted Shares in favor of the Company or its designee upon the Holder’s termination of employment.

 

6.             Definitions .

 

The following terms shall have the meanings ascribed below:

 

“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.

 

“Cause” means “cause” as defined in the Holder’s employment agreement with the Company or any of its subsidiaries.

 

“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 to a third party other than any of the Existing Stockholders 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 being held by a “person” or “group” (as such terms are used in the Exchange Act) that does not include any of the Existing Stockholders or any of their respective Affiliates;

 

(iii)          a merger or consolidation of the Company 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 Stockholders or any of their respective Affiliates; or

 

(iv)          the sale or Transfer by the DLJMB Stockholders to a prospective purchaser (other than a Permitted Transferee) of fifty percent (50%) or more of their original beneficial ownership of the Company.

 

“Control” and “Controlled” 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.

 

“Consolidated EBITDA” means Consolidated EBITDA as defined pursuant to that certain Credit Agreement, dated as of June 15, 2007, 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.

 

“Consolidated Net Debt” means (i) any Indebtedness of the Company and its subsidiaries minus (ii) 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.

 

4



 

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

 

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

 

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

 

“Existing Stockholders” means each of the Stockholders other than the Management Stockholders.

 

“Fiscal Year” means the twelve month period ending on the last day of each calendar year.

 

“Good Reason” means “good reason” as defined in the Holder’s employment agreement with the Company or any of its subsidiaries.

 

“Indebtedness” means, without duplication, the sum of:  (i) all principal and accrued (but unpaid) interest owing by the Company and its subsidiaries for debt for borrowed money owed to any third party (specifically excluding intercompany debt between the Company and any of its subsidiaries and any subsidiary of the Company and another subsidiary of the Company); plus (ii) all obligations of the Company and its subsidiaries under leases that have been recorded as capital leases under GAAP; plus (iii) indebtedness of any person other than the Company or any of its subsidiaries that is guaranteed by the Company or any of its subsidiaries.

 

“Initial Public Offering” means the underwritten initial public offering of Common Stock of the Company pursuant to an effective registration statement filed under the Securities Act.

 

“Management Stockholder” means any Stockholder who is an employee of the Company or any of its subsidiaries.  In no event shall any DLJMB Stockholder be deemed to be a Management Stockholder.

 

“Other Stockholder” means each of the Stockholders other than the DLJMB Stockholders, the Management Stockholders and the Whitney Stockholders.

 

“Performance Target” means the Equity Valuation target for each Fiscal Year as set forth on Schedule I hereto with respect to Performance Vesting Restricted Shares.

 

“Permitted Transferees” means (i) in the case of any DLJMB Stockholder, (A) any other DLJMB Stockholder, (B), any actual or prospective shareholder, member or general or limited partner of any DLJMB Stockholder (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 Stockholder 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 company or partnership the stockholders, members or general or limited

 

5



 

partners of which, include only such DLJMB Stockholders, DLJMB Affiliates, DLJMB Associates, their spouses or other lineal descendants;

 

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

 

(iii)          in the case of any Whitney Stockholders, any other Whitney Stockholder; and

 

(iv)          in the case of any Management Stockholder, (A) any spouse, lineal descendant, sibling, parent, heir, executor, administrator, testamentary trustee, legatee or beneficiary of the Holder, (B) a trust that is for the exclusive benefit of the Holder or the transferees listed in (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 the Holder or any of those Persons in clause (A) above.

 

“Person” means any individual or any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association or other entity and, where the context so permits, the legal representatives, successors in interest and permitted assigns of such Person.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of November 6, 2009, among the Company and certain stockholders of the Company, as amended, modified or supplemented from time to time.

 

“Restricted Share Permitted Transferees” means (i) any spouse, lineal descendant, sibling, parent, heir, executor, administrator, testamentary trustee, legatee or beneficiary of the Holder, (ii) a trust that is for the exclusive benefit of the Holder or its Restricted Share Permitted Transferees under clause (i) above or (iii) a limited liability company or corporation, all of the outstanding capital stock or membership interests of which is of record and beneficially owned by the Holder or any of those Persons in clause (i) above.

 

“Securities Act” means the Securities Act of 1933, as amended, or any successor federal law then in force.

 

“Stockholder” means each Person who held Common Stock of the Company prior to the Initial Public Offering together with any Permitted Transferees thereof, so long as such Person or Permitted Transferee thereof holds such Common Stock.

 

“Transfer” means the sale, transfer, assignment, pledge or other disposal (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) of any Restricted Shares.

 

“Whitney Stockholder” means Prairie Fire Trust, Michael R. Stone, Michael R. Stone 2008 GRAT, MRS Trust, Harrington Sound, LLC and Paul Vigano.

 

“Yearly Amount” means the number of Performance Vesting Restricted Shares divided by three (3).

 

6



 

7.             General Provisions .

 

(a)           Notices .  Any notification required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid.  A notice shall be addressed to the Company at its principal executive office and to the Holder at the address that he or she most recently provided to the Company.

 

(b)           Survival of Representations, Warranties and Agreements .  All representations, warranties and agreements contained herein shall survive indefinitely, including following termination of this Agreement or of the Holder’s employment with the Company.

 

(c)           Entire Agreement .  This Agreement and the Registration Rights Agreement shall constitute the entire contract between the parties hereto with regard to the subject matter hereof.  They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

 

(d)           Waiver .  No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.

 

(e)           Successors and Assigns .  The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Holder, the Holder’s assigns and the legal representatives, heirs and legatees of the Holder’s estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.

 

(f)            Choice of Law; Jurisdiction; Waiver of Jury Trial THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAWS.

 

SUBJECT TO THE TERMS OF THIS AGREEMENT, THE PARTIES AGREE THAT ANY AND ALL ACTIONS ARISING UNDER OR IN RESPECT OF THIS AGREEMENT SHALL BE LITIGATED IN THE FEDERAL OR STATE COURTS IN DELAWARE.  BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR ITSELF, HIMSELF, OR HERSELF AND IN RESPECT OF ITS, HIS OR HER PROPERTY WITH RESPECT TO SUCH ACTION.  EACH PARTY AGREES THAT VENUE WOULD BE PROPER IN ANY OF SUCH COURTS, AND HEREBY WAIVES ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.

 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

(g)           Amendment .  The Board of Directors of the Company, or the Compensation Committee thereof, may amend or alter this Agreement and the Restricted Shares issued hereunder at any time; provided that, no such amendment or alteration shall be made without the consent of the Holder if such action would materially diminish any of the rights of the Holder under this Agreement or with respect to the Restricted Shares.

 

7



 

(h)           Employment Rights .  Neither this Agreement nor any of its provisions is intended to confer or should be construed as conferring any rights on the Holder to continued employment with the Company or any rights of employment for a fixed term.  No contract of employment, express or implied, is created hereby and nothing contained herein shall be construed as creating a joint venture, partnership, agency or other enterprise between the parties.

 

(i)            No Waiver; Modifications in Writing .  No waiver of or consent to any departure from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof; provided, however, that the Company may amend, modify or terminate the terms of the Restricted Shares in accordance with the terms in the Company’s Certificate of Incorporation.

 

(j)            Severability . The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

(k)           Signature in Counterparts .  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

[ SIGNATURE PAGE FOLLOWS ]

 

8


 

IN WITNESS WHEREOF, the parties hereto have executed this Restricted Common Stock Agreement as of the date first written above.

 

 

 

STR HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title

 

 

 

 

HOLDER

 

 

 

 

 

 

 

 

 

[                            ]

 

9



 

EXHIBIT A

 

Investment Representations and Warranties

 

The Holder hereby represents and warrants to the Company that:

 

1.             The Restricted Shares received by him will be held by him for investment only for his own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof in violation of applicable U.S. federal or state or foreign securities laws.  The Holder has no current intention of selling, granting participation in or otherwise distributing the Restricted Shares in violation of applicable U.S. federal or state or foreign securities laws.  The Holder does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participation to such person or entity, or to any third person or entity, with respect to any of the Restricted Shares, in each case, in violation of applicable U.S. federal or state or foreign securities laws.

 

2.             The Holder understands that the Restricted Shares have not been registered under the Securities Act or any applicable U.S. federal, state or foreign securities laws, and that the Restricted Shares are being issued in reliance on an exemption from registration, which exemption depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Holder ’s representations as expressed herein.

 

3.             The Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of his owning the Restricted Shares.  The Holder is a sophisticated investor, has relied upon independent investigations made by the Holder and, to the extent believed by the Holder to be appropriate, the Holder ’s representatives, including the Holder ’s own professional, tax and other advisors, and is making an independent decision to invest in the Restricted Shares.  The Holder has been furnished with such documents, materials and information that the Holder deems necessary or appropriate concerning the terms and conditions of the transactions contemplated by the Agreement and the Holder ’s holding of the Restricted Shares and for evaluating an investment in the Company, and the Holder has read carefully such documents, materials and information and understands and has evaluated the types of risks involved with holding the Restricted Shares.  The Holder has not relied upon any representations or other information (whether oral or written) from the Company or its stockholders, directors, officers or affiliates, or from any other person or entity, in connection with his investment in the Restricted Shares.  The Holder acknowledges that the Company has not given any assurances with respect to the tax consequences of the ownership and disposition of the Restricted Shares.

 

4.             The Holder understands that no U.S. federal or state or foreign agency has passed upon the Restricted Shares or upon the Company, or upon the accuracy, validity or completeness of any documentation provided to the Holder in connection with the transactions contemplated by the Agreement, nor has any such agency made any finding or determination as to holding the Restricted Shares.

 

5.             The Holder understands that there are substantial restrictions on the transferability of the Restricted Shares and that on the date of the Agreement and for an indefinite period thereafter there will be no public market for the Restricted Shares and, accordingly, it may not be possible for the Holder to liquidate his investment in case of emergency, if at all.  In addition, the Holder understands that the Agreement contains substantial restrictions on the

 

A-1



 

transferability of the Restricted Shares and provide that, in the event that the conditions relating to the transfer of any Restricted Shares in such document have not been satisfied, the holder shall not transfer any such Restricted Shares, and unless otherwise specified the Company will not recognize the transfer of any such Restricted Shares on its books and records or issue any share certificates representing any such Restricted Shares, and any purported transfer not in accordance with the terms of the Agreement shall be void.  As such, Holder understands that: a restrictive legend or legends in a form to be set forth in the Agreement will be placed on the certificates representing the Restricted Shares; a notation will be made in the appropriate records of the Company indicating that each of the Restricted Shares are subject to restrictions on transfer and, if the Company should at some time in the future engage the services of a securities transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to the Restricted Shares; and the Holder will sell, transfer or otherwise dispose of the Restricted Shares only in a manner consistent with the Holder ’s representations set forth herein and then only in accordance with the Agreement.

 

6.             The Holder understands that (i) the Restricted Shares may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an exemption therefrom, (ii) the Restricted Shares have not been registered under the Securities Act; (iii) the Restricted Shares must be held indefinitely and he must continue to bear the economic risk of holding the Restricted Shares unless such shares are subsequently registered under the Securities Act or an exemption from such registration is available; (iv) the Holder is prepared to bear the economic risk of holding the Restricted Shares for an indefinite period of time; (v) it is not anticipated that there will be any public market for the Restricted Shares; (vi) the Restricted Shares are characterized as “restricted securities” under the U.S. federal securities laws; and (vii) the Restricted Shares may not be sold, transferred or otherwise disposed of except in compliance with federal, state and local law.

 

7.             The Holder understands that an investment in the Restricted Shares is not recommended for investors who have any need for a current return on this investment or who cannot bear the risk of losing their entire investment.  In that regard, the Holder understands that his holding the Restricted Shares involves a high degree of risk of loss.  The Holder acknowledges that: (i) he has adequate means of providing for his current needs and possible personal contingencies and has no need for liquidity in this investment; (ii) his commitment to investments which are not readily marketable is not disproportionate to his net worth; and (iii) his holding the Restricted Shares will not cause his overall financial commitments to become excessive.

 

8.             The Holder is/is not (circle one) an “accredited investor,” as such term is defined in Rule 501 of the Securities Act.

 



 

SCHEDULE I

 

Restricted Stock Performance Target Calculation

 

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

66.6

 

$

82.3

 

$

103.5

 

EV / EBITDA Multiple

 

10.0

x

10.0

x

10.0

x

Enterprise Value

 

$

665.6

 

$

823.1

 

$

1,034.5

 

 

 

 

 

 

 

 

 

Less: Net Debt on Balance Sheet

 

(235.9

)

(225.9

)

(206.4

)

Value of Common Equity

 

$

429.8

 

$

597.3

 

$

828.1

 

 

 

 

 

 

 

 

 

Performance Threshold

 

85.0

%

85.0

%

85.0

%

 

 

 

 

 

 

 

 

Performance Target

 

$

365.3

 

$

507.7

 

$

703.8

 

 




Exhibit 10.19

 

RESTRICTED COMMON STOCK AGREEMENT
HOLDERS OF C, D AND E UNITS

 

RESTRICTED COMMON STOCK AGREEMENT (this “Agreement”) made as of November 6, 2009 (the “Effective Date”), by and between STR Holdings, Inc., a Delaware corporation (the “Company”), and [                    ] (the “Holder”).

 

WHEREAS, STR Holdings LLC (“Old LLC”) entered into that certain Incentive Unit Grant Agreement with the Holder dated as of [          ] (the “Grant Agreement”), whereby Old LLC granted incentive units of Old LLC to the Holder;

 

WHEREAS, on the date hereof, Old LLC will enter into a corporate reorganization, whereby the unitholders of Old LLC will become unitholders of STR Holdings (New) LLC (“New LLC”);

 

WHEREAS, pursuant to that certain Plan of Conversion by New LLC, dated as of November 6, 2009 (the “Plan of Conversion”), New LLC filed with the Secretary of State of the State of Delaware a certificate of conversion converting New LLC into the Company and automatically converting the membership interests of New LLC into shares of common stock, par value $0.01 per share (“Common Stock”), of the Company;

 

WHEREAS, due to the conversion of New LLC into the Company, any unvested incentive units of Old LLC granted pursuant to the Grant Agreement and converted in the corporate reorganization into unvested incentive units of New LLC shall be converted from unvested incentive units of New LLC into Restricted Shares (as defined below) subject to the terms and conditions herein;

 

WHEREAS, in consideration of the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged; and

 

WHEREAS, certain capitalized terms used herein are defined in Section 6 hereof.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                        Restricted Shares .  Subject to the terms and conditions of this Agreement and pursuant to the Plan of Conversion, the Company hereby issues to the Holder [        ] shares of Common Stock (the “Restricted Shares”), of which [        ] shares of Restricted Shares shall be Time Vesting Restricted Shares (as defined below) and [        ] shares of Restricted Shares shall be Performance Vesting Restricted Shares (as defined below).

 

2.                                        Holder Representations and Warranties .

 

(a)                                   As an inducement to the Company to issue the Restricted Shares to the Holder and as a condition thereto, the Holder represents, acknowledges and agrees (as applicable) that this Agreement constitutes the legal, valid and binding obligation of the Holder, enforceable against the Holder in accordance with its terms, except to the extent the enforceability thereof may be limited by bankruptcy laws, insolvency laws, moratorium laws or other laws affecting creditors’ rights generally or by general equitable principles, and the execution, delivery and performance of this Agreement by the Holder does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which the Holder is a party or any judgment, order or decree to which the Holder is subject.

 



 

(b)                                  In addition, the Holder represents, acknowledges and agrees (as applicable) that:

 

(i)                            (x) the Restricted Shares have not been registered under the Securities Act, (y) the Restricted Shares are restricted securities under the Securities Act and (z) the Restricted Shares may not be resold or transferred unless they are first registered under the Securities Act or unless an exemption from such registration is available;

 

(ii)                         the Holder hereby makes the representations and warranties set forth in Exhibit A hereto; and

 

(iii)                      the Company may, but shall not be obligated to, register or qualify the issuance, or the resale, of any of the Restricted Shares under the Securities Act or any other applicable law.

 

3.                                        Vesting of Shares .

 

(a)                                   All Restricted Shares shall initially be unvested and shall be subject to forfeiture to the Company pursuant to this Agreement.  At such time as a Restricted Share vests in accordance with this Section 3, it shall no longer be a Restricted Share and shall not be subject to forfeiture.

 

(b)                                  Time Vesting .  [      ] of the Restricted Shares shall vest based on the passage of time (“Time Vesting Restricted Shares”).

 

(i)                            Vesting Schedule .  Subject to Section 3(b)(ii) and to the Holder’s continued employment with the Company on each vesting date, the Time Vesting Restricted Shares shall vest in equal 1/34 installments as of the last day of each of the 34 calendar months following the Effective Date, which for the sake of clarity means November 30, 2009.

 

(ii)                         Acceleration upon Change of Control .  Upon the occurrence of a Change of Control, all then unvested Time Vesting Restricted Shares shall immediately vest in full, subject to Section 3(b)(iii).

 

(iii)                      Termination .

 

Upon the termination of the Holder’s employment or for any reason, all unvested Time Vesting Restricted Shares shall be forfeited.

 

(c)                                   Performance Vesting .  [      ] of the Restricted Shares shall vest based on the Company attaining the following performance criteria (“Performance Vesting Restricted Shares”).

 

(i)                            Vesting Schedule .  Subject to Section 3(c)(ii) and to the Holder’s continued employment with the Company on each vesting date, the Performance Vesting Restricted Shares shall vest in three (3) equal installments following the three successive Fiscal Years, beginning with the Fiscal Year ending on December 31, 2009 (for the 2009 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.  If the Performance Target for any of the first two 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 the 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

 

2



 

the Performance Target is not achieved for the 2009 and 2010 Fiscal Years but is achieved for the 2011 Fiscal Year, in 2011, the Yearly Amounts for both 2010 and 2011 would become vested.

 

(ii)                         Acceleration upon Change of Control .  Upon the occurrence of a Change of Control, all then unvested Performance Vesting Restricted Shares shall immediately vest in full, so long as the Holder is employed with the Company on the date of the Change of Control.

 

(iii)                      Termination .  Upon the termination of employment of the Holder for any reason, the unvested Performance Vesting Restricted Shares shall be forfeited.

 

4.                                        Legend.

 

(a)                                   Each certificate representing Restricted Shares shall bear each of the following legends.

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR STATE SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXCHANGED UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OR EXCHANGE COMPLIES WITH THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT AND THE RESTRICTED COMMON STOCK AGREEMENT, EACH AS AMENDED FROM TIME TO TIME, BETWEEN OR AMONG THE COMPANY AND THE INVESTORS PARTY THERETO.  IN ADDITION TO RESTRICTIONS ON TRANSFER, THE RESTRICTED COMMON STOCK AGREEMENT PROVIDES FOR THE VESTING OF THE SHARES ACCORDING TO THE SPECIFIC PROVISIONS OF THE RESTRICTED COMMON STOCK AGREEMENT.  COPIES OF THE REGISTRATION RIGHTS AGREEMENT AND THE RESTRICTED COMMON STOCK AGREEMENT ARE ON FILE WITH THE COMPANY.”

 

(b)                                  The certificates shall also bear any legend required by any applicable state securities law.

 

(c)                                   The certificates shall be deposited by the Holder, together with a stock power endorsed in blank, with the Company, to be held in escrow during any restriction period.

 

5.                                        Restrictions on Transfer and Conversion .

 

(a)                                   The Company and the Holder acknowledge and agree that the Restricted Shares are subject to and restricted by this Agreement.  Once vested, the Restricted Shares shall no longer be restricted by the terms of this Agreement but shall be subject to the restrictions set forth in the Registration Rights Agreement and the Securities Act.

 

(b)                                  The Restricted Shares shall only be transferable to Permitted Transferees of the Holder.  Any attempt to Transfer any of the Restricted Shares to Persons other than Permitted Transferees

 

3



 

of the Holder shall be null and void and have no force or effect, and the Company shall not, and shall cause any transfer agent not to, give any effect in such entity’s share records to such attempted Transfer.

 

(c)                                   The Holder acknowledges that the transfer restrictions contained in this Agreement are reasonable and in the best interests of the Company.  The Holder understands that this  Agreement contains forfeiture provisions in respect of the Restricted Shares in favor of the Company or its designee upon the Holder’s termination of employment.

 

6.                                        Definitions .

 

The following terms shall have the meanings ascribed below:

 

“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.

 

“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 to a third party other than any of the Existing Stockholders 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 being held by a “person” or “group” (as such terms are used in the Exchange Act) that does not include any of the Existing Stockholders or any of their respective Affiliates;

 

(iii)                                a merger or consolidation of the Company 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 Stockholders or any of their respective Affiliates; or

 

(iv)                               the sale or Transfer by the DLJMB Stockholders to a prospective purchaser (other than a Permitted Transferee) of fifty percent (50%) or more of their original beneficial ownership of the Company.

 

“Control” and “Controlled” 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.

 

“Consolidated EBITDA” means Consolidated EBITDA as defined pursuant to that certain Credit Agreement, dated as of June 15, 2007, 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.

 

“Consolidated Net Debt” means (i) any Indebtedness of the Company and its subsidiaries minus (ii) 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.

 

“DLJMB Stockholders” means DLJ Merchant Banking Partners IV, L.P., DLJMB Offshore Partners IV, L.P., DLJ Merchant Banking Partners IV (Pacific), L.P. and MBP IV Plan

 

4



 

Investors, L.P., DLJ Merchant Banking Partners IV (Co-Investments), L.P., together with any Permitted Transferees thereof.

 

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

 

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

 

“Existing Stockholders” means each of the Stockholders other than the Management Stockholders.

 

“Fiscal Year” means the twelve month period ending on the last day of each calendar year.

 

“Indebtedness” means, without duplication, the sum of:  (i) all principal and accrued (but unpaid) interest owing by the Company and its subsidiaries for debt for borrowed money owed to any third party (specifically excluding intercompany debt between the Company and any of its subsidiaries and any subsidiary of the Company and another subsidiary of the Company); plus (ii) all obligations of the Company and its subsidiaries under leases that have been recorded as capital leases under GAAP; plus (iii) indebtedness of any person other than the Company or any of its subsidiaries that is guaranteed by the Company or any of its subsidiaries.

 

“Initial Public Offering” means the underwritten initial public offering of Common Stock of the Company pursuant to an effective registration statement filed under the Securities Act.

 

“Management Stockholder” means any Stockholder who is an employee of the Company or any of its subsidiaries.  In no event shall any DLJMB Stockholder be deemed to be a Management Stockholder.

 

“Other Stockholder” means each of the Stockholders other than the DLJMB Stockholders, the Management Stockholders and the Whitney Stockholders.

 

“Performance Target” means the Equity Valuation target for each Fiscal Year as set forth on Schedule I hereto with respect to Performance Vesting Restricted Shares.

 

“Permitted Transferees” means (i) in the case of any DLJMB Stockholder, (A) any other DLJMB Stockholder, (B), any actual or prospective shareholder, member or general or limited partner of any DLJMB Stockholder (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 Stockholder 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 company or partnership the stockholders, members or general or limited partners of which, include only such DLJMB Stockholders, DLJMB Affiliates, DLJMB Associates, their spouses or other lineal descendants;

 

(ii)                                   in the case of any Other Stockholder, (A) any entity that is an Affiliate of such Other Stockholder, (B) any actual or prospective shareholder, member or general or limited partner of any

 

5



 

such Other Stockholder, and any corporation, partnership, limited liability company, or other entity that is an Affiliate of any such Other Stockholder, (C) any spouse, lineal descendant, sibling, parent, heir, executor, administrator, testamentary trustee, legatee or beneficiary of such Other Stockholder, or (D) a trust that is for the exclusive benefit of such Other Stockholder or its Permitted Transferees under clause (B) above;

 

(iii)                                in the case of any Whitney Stockholders, any other Whitney Stockholder; and

 

(iv)                               in the case of any Management Stockholder, (A) any spouse, lineal descendant, sibling, parent, heir, executor, administrator, testamentary trustee, legatee or beneficiary of the Holder, (B) a trust that is for the exclusive benefit of the Holder or the transferees listed in (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 the Holder or any of those Persons in clause (A) above.

 

“Person” means any individual or any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association or other entity and, where the context so permits, the legal representatives, successors in interest and permitted assigns of such Person.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of November 6, 2009, among the Company and certain stockholders of the Company, as amended, modified or supplemented from time to time.

 

“Restricted Share Permitted Transferees” means (i) any spouse, lineal descendant, sibling, parent, heir, executor, administrator, testamentary trustee, legatee or beneficiary of the Holder, (ii) a trust that is for the exclusive benefit of the Holder or its Restricted Share Permitted Transferees under clause (i) above or (iii) a limited liability company or corporation, all of the outstanding capital stock or membership interests of which is of record and beneficially owned by the Holder or any of those Persons in clause (i) above.

 

“Securities Act” means the Securities Act of 1933, as amended, or any successor federal law then in force.

 

“Stockholder” means each Person who held Common Stock of the Company prior to the Initial Public Offering together with any Permitted Transferees thereof, so long as such Person or Permitted Transferee thereof holds such Common Stock.

 

“Transfer” means the sale, transfer, assignment, pledge or other disposal (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) of any Restricted Shares.

 

“Whitney Stockholder” means Prairie Fire Trust, Michael R. Stone, Michael R. Stone 2008 GRAT, MRS Trust, Harrington Sound, LLC and Paul Vigano.

 

“Yearly Amount” means the number of Performance Vesting Restricted Shares divided by three (3).

 

7.                                        General Provisions .

 

(a)                                   Notices .  Any notification required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or within three (3) days of deposit with

 

6



 

the United States Postal Service, by registered or certified mail, with postage and fees prepaid.  A notice shall be addressed to the Company at its principal executive office and to the Holder at the address that he or she most recently provided to the Company.

 

(b)                                  Survival of Representations, Warranties and Agreements .  All representations, warranties and agreements contained herein shall survive indefinitely, including following termination of this Agreement or of the Holder’s employment with the Company.

 

(c)                                   Entire Agreement .  This Agreement and the Registration Rights Agreement shall constitute the entire contract between the parties hereto with regard to the subject matter hereof.  They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

 

(d)                                  Waiver .  No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.

 

(e)                                   Successors and Assigns .  The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Holder, the Holder’s assigns and the legal representatives, heirs and legatees of the Holder’s estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.

 

(f)                                     Choice of Law; Jurisdiction; Waiver of Jury Trial THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAWS.

 

SUBJECT TO THE TERMS OF THIS AGREEMENT, THE PARTIES AGREE THAT ANY AND ALL ACTIONS ARISING UNDER OR IN RESPECT OF THIS AGREEMENT SHALL BE LITIGATED IN THE FEDERAL OR STATE COURTS IN DELAWARE.  BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR ITSELF, HIMSELF, OR HERSELF AND IN RESPECT OF ITS, HIS OR HER PROPERTY WITH RESPECT TO SUCH ACTION.  EACH PARTY AGREES THAT VENUE WOULD BE PROPER IN ANY OF SUCH COURTS, AND HEREBY WAIVES ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.

 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

(g)                                  Amendment .  The Board of Directors of the Company, or the Compensation Committee thereof, may amend or alter this Agreement and the Restricted Shares issued hereunder at any time; provided that, no such amendment or alteration shall be made without the consent of the Holder if such action would materially diminish any of the rights of the Holder under this Agreement or with respect to the Restricted Shares.

 

(h)                                  Employment Rights .  Neither this Agreement nor any of its provisions is intended to confer or should be construed as conferring any rights on the Holder to continued employment with the Company or any rights of employment for a fixed term.  No contract of employment, express or

 

7



 

implied, is created hereby and nothing contained herein shall be construed as creating a joint venture, partnership, agency or other enterprise between the parties.

 

(i)                                      No Waiver; Modifications in Writing .  No waiver of or consent to any departure from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof; provided, however, that the Company may amend, modify or terminate the terms of the Restricted Shares in accordance with the terms in the Company’s Certificate of Incorporation.

 

(j)                                      Severability . The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

(k)                                   Signature in Counterparts .  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

[ SIGNATURE PAGE FOLLOWS ]

 

8



 

IN WITNESS WHEREOF, the parties hereto have executed this Restricted Common Stock Agreement as of the date first written above.

 

 

 

STR HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

 Name:

 

 

 Title

 

 

 

 

HOLDER

 

 

 

 

 

 

 

[                            ]

 

9


 

EXHIBIT A

 

Investment Representations and Warranties

 

The Holder hereby represents and warrants to the Company that:

 

1.             The Restricted Shares received by him will be held by him for investment only for his own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof in violation of applicable U.S. federal or state or foreign securities laws.  The Holder has no current intention of selling, granting participation in or otherwise distributing the Restricted Shares in violation of applicable U.S. federal or state or foreign securities laws.  The Holder does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participation to such person or entity, or to any third person or entity, with respect to any of the Restricted Shares, in each case, in violation of applicable U.S. federal or state or foreign securities laws.

 

2.             The Holder understands that the Restricted Shares have not been registered under the Securities Act or any applicable U.S. federal, state or foreign securities laws, and that the Restricted Shares are being issued in reliance on an exemption from registration, which exemption depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Holder ’s representations as expressed herein.

 

3.             The Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of his owning the Restricted Shares.  The Holder is a sophisticated investor, has relied upon independent investigations made by the Holder and, to the extent believed by the Holder to be appropriate, the Holder ’s representatives, including the Holder ’s own professional, tax and other advisors, and is making an independent decision to invest in the Restricted Shares.  The Holder has been furnished with such documents, materials and information that the Holder deems necessary or appropriate concerning the terms and conditions of the transactions contemplated by the Agreement and the Holder ’s holding of the Restricted Shares and for evaluating an investment in the Company, and the Holder has read carefully such documents, materials and information and understands and has evaluated the types of risks involved with holding the Restricted Shares.  The Holder has not relied upon any representations or other information (whether oral or written) from the Company or its stockholders, directors, officers or affiliates, or from any other person or entity, in connection with his investment in the Restricted Shares.  The Holder acknowledges that the Company has not given any assurances with respect to the tax consequences of the ownership and disposition of the Restricted Shares.

 

4.             The Holder understands that no U.S. federal or state or foreign agency has passed upon the Restricted Shares or upon the Company, or upon the accuracy, validity or completeness of any documentation provided to the Holder in connection with the transactions contemplated by the Agreement, nor has any such agency made any finding or determination as to holding the Restricted Shares.

 

5.             The Holder understands that there are substantial restrictions on the transferability of the Restricted Shares and that on the date of the Agreement and for an indefinite period thereafter there will be no public market for the Restricted Shares and, accordingly, it may not be possible for the Holder to liquidate his investment in case of emergency, if at all.  In addition, the Holder understands that the Agreement contains substantial restrictions on the

 

A-1



 

transferability of the Restricted Shares and provide that, in the event that the conditions relating to the transfer of any Restricted Shares in such document have not been satisfied, the holder shall not transfer any such Restricted Shares, and unless otherwise specified the Company will not recognize the transfer of any such Restricted Shares on its books and records or issue any share certificates representing any such Restricted Shares, and any purported transfer not in accordance with the terms of the Agreement shall be void.  As such, Holder understands that: a restrictive legend or legends in a form to be set forth in the Agreement will be placed on the certificates representing the Restricted Shares; a notation will be made in the appropriate records of the Company indicating that each of the Restricted Shares are subject to restrictions on transfer and, if the Company should at some time in the future engage the services of a securities transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to the Restricted Shares; and the Holder will sell, transfer or otherwise dispose of the Restricted Shares only in a manner consistent with the Holder ’s representations set forth herein and then only in accordance with the Agreement.

 

6.             The Holder understands that (i) the Restricted Shares may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an exemption therefrom, (ii) the Restricted Shares have not been registered under the Securities Act; (iii) the Restricted Shares must be held indefinitely and he must continue to bear the economic risk of holding the Restricted Shares unless such shares are subsequently registered under the Securities Act or an exemption from such registration is available; (iv) the Holder is prepared to bear the economic risk of holding the Restricted Shares for an indefinite period of time; (v) it is not anticipated that there will be any public market for the Restricted Shares; (vi) the Restricted Shares are characterized as “restricted securities” under the U.S. federal securities laws; and (vii) the Restricted Shares may not be sold, transferred or otherwise disposed of except in compliance with federal, state and local law.

 

7.             The Holder understands that an investment in the Restricted Shares is not recommended for investors who have any need for a current return on this investment or who cannot bear the risk of losing their entire investment.  In that regard, the Holder understands that his holding the Restricted Shares involves a high degree of risk of loss.  The Holder acknowledges that: (i) he has adequate means of providing for his current needs and possible personal contingencies and has no need for liquidity in this investment; (ii) his commitment to investments which are not readily marketable is not disproportionate to his net worth; and (iii) his holding the Restricted Shares will not cause his overall financial commitments to become excessive.

 

8.             The Holder is/is not (circle one) an “accredited investor,” as such term is defined in Rule 501 of the Securities Act.

 



 

SCHEDULE I

 

Restricted Stock Performance Target Calculation

 

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

EV / EBITDA Multiple

 

 

 

 

 

 

 

Enterprise Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net Debt on Balance Sheet

 

 

 

 

 

 

 

Value of Common Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance Threshold

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance Target

 

 

 

 

 

 

 

 

 

 

 




Exhibit 10.20

 

UNIT GRANT AGREEMENT

 

THIS UNIT GRANT AGREEMENT is made as of November 6, 2009 (the “ Agreement ”), by and between STR Holdings (New) LLC, a Delaware limited liability company (the “ Company ”), and Dennis L. Jilot (the “ Grantee ”).

 

W I T N E S S E T H :

 

WHEREAS, the Grantee has entered into that certain Employment Agreement with Specialized Technology Resources, Inc. (“ STR ”) dated as of July 18, 2008 (as amended, the “ Employment Agreement ”) whereby the Grantee has agreed to render services to STR and its affiliates, including the Company.

 

WHEREAS, in exchange for the services to be rendered to or for the benefit of the Company by the Grantee and pursuant to the provisions of the Employment Agreement, the Company desires to issue and grant to the Grantee Units (as hereinafter defined), on the terms and conditions set forth in this Agreement and in the Second Amended and Restated Limited Liability Company Agreement of the Company, dated as of November 6, 2009 (as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “ LLC Agreement ”), a copy of which has been furnished to the Grantee.

 

NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual representations, warranties, covenants and agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.             Issuance and Grant .  Pursuant to the terms and subject to the conditions set forth in this Agreement, the Employment Agreement and the LLC Agreement, the Company hereby agrees to issue and grant to the Grantee 22,346 unrestricted Class A Units of the Company (the “ Unrestricted Units ”) and 201,118 restricted Class A Units of the Company (the “ Restricted Units ” and together with the Unrestricted Units, the “ Units ”).  For the avoidance of doubt, the Unrestricted Units shall not be subject to vesting.  The Company agrees the Grantee’s provision of services to or for the benefit of the Company constitutes sufficient consideration for the Units.  Capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meanings assigned to them in the LLC Agreement.

 

2.             Vesting .  The grant of the Units shall occur on the date hereof (the “ Grant Date ”).  The Restricted Units shall vest in equal 1/54 installments as of the last day of each of the 54 successive calendar months after the date hereof, which, for the sake of clarity, means that the first vesting date for such Restricted Units will be November 30, 2009; provided, however, if the Grantee is still actively employed in his current capacity as Chairman, President and Chief Executive Officer of STR as of July 18, 2012, the remaining unvested Restricted Units shall become immediately vested; provided, further that if the Grantee’s employment is terminated by STR for Cause (as defined in the Employment Agreement) or by the Grantee without Good Reason (as defined in the Employment Agreement), the Grantee shall immediately forfeit any Restricted Units that remain unvested as of the date of such termination.  In the event of a Change of Control (as defined in the Employment Agreement) or in the event the Grantee’s employment is terminated by the Company without Cause or by the Grantee for Good Reason (including by reason of the Grantee’s death or Disability (as defined in the Employment Agreement) whether prior to or after the issuance date of the Restricted Units, the Restricted

 



 

Units to the extent they then remain unvested, shall become immediately and fully vested and payable in accordance with the terms of this Section 2.

 

3.             Section 83(b) Election .  The Grantee shall have the option to make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (“ Code ” and such an election, an “ 83(b) Election ”), to include the fair market value of the Restricted Units in his current taxable income as of the date of issuance, and the Company agrees to reasonably cooperate with the Grantee if he chooses to make this election.

 

4.             Representations and Warranties of the Company .  The Company hereby represents and warrants to the Grantee as follows:

 

(a)           The Company is a limited liability company, duly organized, existing and in good standing, under the laws of its state of formation.

 

(b)           The Company has full limited liability company power and authority to enter into and perform this Agreement.  The execution, delivery and performance of this Agreement by the Company has been duly and validly approved by the Company.  This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding agreement of the Company, enforceable against Company in accordance with its terms.

 

(c)           When issued and delivered in accordance with this Agreement, the Units will be duly authorized, validly issued, fully paid and nonassessable and will be free of all preemptive rights and any other liens, claims, charges and other encumbrances other than restrictions on transfer under the LLC Agreement and applicable federal and state securities laws.

 

5.             Representations and Warranties of the Grantee .  The Grantee hereby represents and warrants to the Company that:

 

(a)           The Grantee has the power and authority to enter into and perform this Agreement and this Agreement constitutes a valid and legally binding obligation of the Grantee.

 

(b)           The Grantee is in a financial position to hold the Units for an indefinite period of time and is able to bear the economic risk and withstand a complete loss of the Grantee’s investment in the Units.

 

(c)           The Grantee believes the Grantee, either alone or with the assistance of the Grantee’s own professional advisor, has such knowledge and experience in financial and business matters that the Grantee is capable of reading and interpreting financial statements and evaluating the merits and risks of the prospective investment in the Units and has the net worth to undertake such risks.

 

(d)           The Grantee has obtained, to the extent the Grantee deems necessary, the Grantee’s own personal professional advice with respect to the tax consequences of receiving, and the risks inherent in, the investment in the Units, and the suitability of an investment in the Units in light of the Grantee’s financial condition and investment needs.

 



 

(e)           The Grantee believes that the investment in the Units is suitable for the Grantee based upon the Grantee’s investment objectives and financial needs, and the Grantee has adequate means for providing for the Grantee’s current financial needs and personal contingencies and has no need for liquidity of investment with respect to the Units.

 

(f)            The Grantee has had, prior to the issuance of the Units, been furnished with, and has carefully read, the LLC Agreement, and the Grantee has been given access to full and complete information regarding the Company and has utilized such access to the Grantee’s satisfaction for the purpose of obtaining information the Grantee believes to be relevant in making its investment decision and, particularly, the Grantee has either attended or been given reasonable opportunity to attend a meeting with representatives of the Company for the purpose of asking questions of, and receiving answers from, such representatives concerning the Company and to obtain any additional information, to the extent reasonably available, the Grantee believes to be relevant in making its investment decision.

 

(g)           The Grantee recognizes that an investment in the Units involves a high degree of risk, including, but not limited to, the risk of economic losses from operations of the Company.

 

(h)           The Grantee realizes that (i) the acquisition of the Units is a long-term investment; (ii) the Grantee must bear the economic risk of investment for an indefinite period of time because the Units have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), or under the securities laws of any state and, therefore, none of such Units can be sold unless they are subsequently registered under said laws or exemptions from such registrations are available, and there can be no assurance that any such registration will be effected at any time in the future; (iii) the Grantee may not be able to liquidate the Grantee’s investment in the event of an emergency or pledge any of such Units as collateral for loans; and (iv) the transferability of the Units is restricted in accordance with the LLC Agreement.

 

(i)            The Grantee is a bona fide resident of, is domiciled in and received the offer and made the decision to invest in the Units in the state set forth on the signature page below under “Address,” and the Units are being accepted by the Grantee in the Grantee’s name solely for the Grantee’s own beneficial interest and not as nominee for, or on behalf of, or for the beneficial interest of, or with the intention to transfer to, any other person, trust or organization.

 

(j)            The Grantee has not retained any finder, broker, agent, financial advisor, “Purchaser Representative” (as defined in Rule 501(h) of Regulation D of the Securities Act) or other intermediary in connection with the transactions contemplated by this Agreement and agrees to indemnify and hold harmless the Company from any liability for any compensation to any such intermediary retained by the Grantee and the fees and expenses of defending against such liability or alleged liability.

 

(k)           The Grantee has completed Schedule A to this Agreement as to his/her status as an “ Accredited Grantee ” (as defined therein) and such information is true and complete.

 

(l)            The Grantee agrees promptly to notify the Company should the Grantee become aware of any change in the information set forth in this Section 5.

 



 

6.               Conditions to Obligations of the Company .  The obligations of the Company to grant the Units are subject to the Grantee having entered into the LLC Agreement.

 

7.               Authority of the Board of Managers .  All decisions, interpretations and other actions of the Board of Managers and/or any committee designated by the Board of Managers, shall be final and binding on the Grantee and other persons deriving their rights from the Grantee.  Without limiting the generality of the foregoing, the Board of Managers and/or any committee designated by the Board of Managers may, in its sole discretion, clarify, construe or resolve any ambiguity in any provision of this Agreement, accelerate vesting, or waive any terms or conditions applicable to any Units.

 

8.               Counterparts .  This Agreement may be executed in one or more counterparts, each of which shall be considered an original, but all of which taken together shall constitute one and the same Agreement.

 

9.               Employment Rights .  Neither this Agreement nor any of its provisions is intended to confer or should be construed as conferring any rights on the Grantee to continued employment with the Company or any rights of employment for a fixed term.  No contract of employment, express or implied, is created hereby and nothing contained herein shall be construed as creating a joint venture, partnership, agency or other enterprise between the parties.

 

10.             No Waiver; Modifications in Writing .  This Agreement, together with the LLC Agreement and the other agreements referred to herein and therein and any exhibits, schedules or other documents referred to herein or therein, sets forth the entire understanding of the parties, and supersedes all prior agreements, arrangements, term sheets, presentations and communications, whether oral or written, with respect to the specific subject matter hereof.  No waiver of or consent to any departure from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof; provided, however, that the Company may amend, modify or terminate the Units accordance with the terms in the LLC Agreement.

 

11.             Indemnification .  The Grantee will, to the fullest extent permitted by applicable law, indemnify the Company and each member, manager, officer and employee (each an “ Indemnitee ”) against any losses, claims, damages or liabilities to which any of them may become subject in any capacity in any action, proceeding or investigation arising out of or based upon any false representation or warranty, or breach or failure by the Grantee to comply with any covenant or agreement made by the Grantee herein.  The Grantee will reimburse each Indemnitee for reasonable legal and other expenses (including the cost of any investigation and preparation) as they are incurred in connection with any such action, proceeding or investigation (whether incurred between any Indemnitee and the Grantee, or between any Indemnitee and any third party).  The reimbursement and indemnity obligations of the Grantee under this Section 11 will survive the Grant Date and will be in addition to any liability which the Grantee may otherwise have (including, without limitation, liabilities under the LLC Agreement), and will be binding upon and inure to the benefit of any successors, assigns, heirs, estates, executors, administrators and personal representatives of any Indemnitee.

 

12.             Binding Effect; Assignment .  The rights and obligations of each party under this Agreement may not be assigned to any other person or entity.  Except as expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any person or entity other than the parties to this Agreement, and their respective

 



 

successors and assigns.  This Agreement shall be binding upon the Company, the Grantee and their respective heirs, successors, legal representatives and permitted assigns.

 

13.             Severability of Provisions .  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

14.             Conflict with Other Agreements .  For so long as the LLC Agreement is in full force and effect, this Agreement shall be subject to the provisions of the LLC Agreement.  To the extent any of the provisions of this Agreement conflict or are inconsistent with any of the provisions of the LLC Agreement, the LLC Agreement shall control.  Upon the conversion of the Company to a corporation (the “ Conversion ”), this Agreement shall be subject to the provisions of the restricted stock agreement between the Grantee and the successor corporation to the Company (the “ Restricted Stock Agreement ”).  Following the Conversion, to the extent any of the provisions of this Agreement conflict or are inconsistent with any of the provisions of the Restricted Stock Agreement, the Restricted Stock Agreement shall control.

 

15.             Schedules and Descriptive Headings .  All Schedules to this Agreement shall be deemed to be a part of this Agreement.  The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

 

16.             Governing Law .  This Agreement, and all disputes, claims or causes of action that arise from or are in connection with this Agreement, shall be governed by and construed in accordance with the domestic substantive laws of the State of New York without giving effect to any choice or conflict of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

 

[The remainder of this page has been intentionally left blank.]

 



 

IN WITNESS WHEREOF, the Grantee has executed this Agreement as of the date first written above.

 

 

GRANTEE:

 

 

 

 

 

/ s / Dennis L. Jilot

 

Dennis L. Jilot

 

 

ACCEPTED AND AGREED,
as of the date first written above:

 

 

STR HOLDINGS (NEW) LLC

 

 

By:

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title:

Executive Vice President and

 

 

 

Chief Financial Officer

 

 

[SIGNATURE PAGE TO UNIT GRANT AGREEMENT]

 



 

Exhibit A

 

ELECTION TO INCLUDE CERTAIN CLASS A UNITS

 

IN GROSS INCOME PURSUANT TO

 

SECTION 83(b) OF THE INTERNAL REVENUE CODE

 

On                   , 2009 the undersigned was granted certain Class A Units (the “ Units ”) in STR Holdings (New) LLC (the “ Company ”).  The Units are subject to certain restrictions pursuant to the Second Amended and Restated Limited Liability Company Agreement of the Company, dated as of                 , 2009 (the “ Agreement ”).

 

Pursuant to §83(b) of the Internal Revenue Code of 1986, as amended, and Treasury Regulation §1.83-2 promulgated thereunder, the undersigned hereby makes an election, with respect to the Units, to report as taxable income for the calendar year 2009 the excess (if any) of the value of the Units on                2009 over the purchase price thereof.

 

The following information is supplied in accordance with Treasury Regulation §1.83-2(e):

 

1.                                        The name, address and social security number of the undersigned:

 

Name:

Address:

SSN:

 

2.                                        A description of the property with respect to which the election is being made:  restricted units in the Company known as Class A Units which entitle the holder thereof to a share of the Company’s capital and profits.

 

3.                                        (a)           The date on which the Units were transferred:                  , 2009 (the “ Grant Date ”).

 

(b)           The taxable year for which such election is made:  calendar        year 2009.

 

4.                                        The restrictions to which the property is subject:  The Units shall vest in equal installments of [        ] Units as of the last day of each of the [    ] successive calendar months after the date hereof, which, for the sake of clarity, means that the first vesting date for such Units will be November 30, 2009; provided, however, if the Grantee is still actively employed in his current capacity as Chairman, President and Chief Executive Officer

 



 

of Specialized Technology Resources, Inc. (“ STR ”) as of July 18, 2012, the remaining unvested Units shall become immediately vested; provided, further that if the Grantee’s employment is terminated by STR for Cause (as defined in the Employment Agreement with STR dated as of July 18, 2008 (as amended, the “ Employment Agreement ”)) or by the Grantee without Good Reason (as defined in the Employment Agreement), the Grantee shall immediately forfeit any Units that remain unvested as of the date of such termination.  In the event of a Change of Control (as defined in the Employment Agreement) or in the event the Grantee’s employment is terminated by the Company without Cause or by the Grantee for Good Reason (including by reason of the Grantee’s death or Disability (as defined in the Employment Agreement)) whether prior to or after the issuance date of the Units, the Units to the extent they then remain unvested, shall become immediately and fully vested and payable in accordance with the terms of the Agreement.

 

5.                                        The fair market value on                2009 of the property with respect to which the election is being made, determined without regard to any lapse restrictions:  [$    ].

 

6.                                        The amount paid for such property:  $0.

 

A copy of this election is being furnished to the Company pursuant to Treasury Regulation §1.83-2(e)(7).  A copy of this election will be submitted with the 2009 U.S. federal income tax return of the undersigned pursuant to Treasury Regulation §1.83-2(c).

 

Dated:                      , 2009

 

 

 

 

 

 



 

SCHEDULE A

 

ACCREDITED INVESTOR STATUS

 

The Grantee represents and warrants that he is an “ accredited investor ” as defined in Rule 501(a) promulgated under Regulation D of the Securities Act, because he meets at least one of the following criteria (please initial each applicable item):

 

o

 

The Grantee is a natural person whose individual net worth, or joint net worth with his or her spouse, exceeds $1,000,000 at the time of the subscriber’s purchase; or

 

 

 

o

 

The Grantee is a natural person who had an individual income in excess of $200,000 in each of the two most recent years (2007 and 2008) or joint income with the Grantee’s spouse in excess of $300,000 in each of those years and who reasonably expects to reach the same income level in the current year (2009); or

 

 

 

o

 

The Grantee is a corporation, or similar business trust, partnership or an organization described in Section 501(c)(3) of the Internal Revenue Code, not formed for the specific purpose of acquiring the Issuer Common Stock, with total assets in excess of $5,000,000; or

 

 

 

o

 

The Grantee is either (i) a bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity, (ii) a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended, (iii) an insurance company as defined in Section 2(13) of the Securities Act, (iv) an investment company registered under the Investment Company Act of 1940, as amended, or a business development company as defined in Section 2(a)(48) of such Act, (v) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, (vi) a plan established or maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000 or (vii) an employee benefit plan within in the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which plan fiduciary is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons who are accredited investors; or

 

 

 

o

 

The Grantee is a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended; or

 

 

 

o

 

The Grantee is a director or executive officer of the Company; or

 

 

 

o

 

The Grantee is a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, the purchase of which is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D promulgated under the Securities Act; or

 

 

 

o

 

The Grantee is any entity in which all of the equity owners are accredited investors. (Please submit a copy of this page countersigned by each such equity owner if relying on this item).

 




Exhibit 10.21

 

RESTRICTED COMMON STOCK AGREEMENT
FOR EXECUTIVE OFFICER HOLDING A UNITS

 

RESTRICTED COMMON STOCK AGREEMENT (this “Agreement”) made as of November 6, 2009 (the “Effective Date”), by and between STR Holdings, Inc., a Delaware corporation (the “Company”), and Dennis L. Jilot (the “Holder”).

 

WHEREAS, STR Holdings (New) LLC (“New LLC”) entered into that certain Unit Grant Agreement with the Holder dated as of November 5, 2009 (the “Grant Agreement”), whereby New LLC granted units of New LLC to the Holder;

 

WHEREAS, pursuant to that certain Plan of Conversion by New LLC, dated as of November 6, 2009 (the “Plan of Conversion”), New LLC filed with the Secretary of State of the State of Delaware a certificate of conversion converting New LLC into the Company and automatically converting the membership interests of New LLC into shares of common stock, par value $0.01 per share (“Common Stock”), of the Company;

 

WHEREAS, due to the conversion of New LLC into the Company, any unvested  units of New LLC granted pursuant to the Grant Agreement shall be converted from unvested units of New LLC into Restricted Shares (as defined below) subject to the terms and conditions herein;

 

WHEREAS, in consideration of the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged; and

 

WHEREAS, certain capitalized terms used herein are defined in Section 6 hereof.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.             Restricted Shares .  Subject to the terms and conditions of this Agreement and pursuant to the Plan of Conversion, the Company hereby issues to the Holder 397,491 shares of Common Stock (the “Restricted Shares”).

 

2.             Holder Representations and Warranties .

 

(a)           As an inducement to the Company to issue the Restricted Shares to the Holder and as a condition thereto, the Holder represents, acknowledges and agrees (as applicable) that this Agreement constitutes the legal, valid and binding obligation of the Holder, enforceable against the Holder in accordance with its terms, except to the extent the enforceability thereof may be limited by bankruptcy laws, insolvency laws, moratorium laws or other laws affecting creditors’ rights generally or by general equitable principles, and the execution, delivery and performance of this Agreement by the Holder does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which the Holder is a party or any judgment, order or decree to which the Holder is subject.

 

(b)           In addition, the Holder represents, acknowledges and agrees (as applicable) that:

 

(i)         (x) the Restricted Shares have not been registered under the Securities Act, (y) the Restricted Shares are restricted securities under the Securities Act and (z) the Restricted Shares may not be resold or transferred unless they are first registered under the Securities Act or unless an exemption from such registration is available;

 



 

(ii)        the Holder hereby makes the representations and warranties set forth in Exhibit A hereto; and

 

(iii)       the Company may, but shall not be obligated to, register or qualify the issuance, or the resale, of any of the Restricted Shares under the Securities Act or any other applicable law.

 

3.             Vesting of Shares .

 

(a)           All Restricted Shares shall initially be unvested and shall be subject to forfeiture to the Company pursuant to this Agreement.  At such time as a Restricted Share vests in accordance with this Section 3, it shall no longer be a Restricted Share and shall not be subject to forfeiture.

 

(b)           Vesting .  The Restricted Shares shall vest based on the passage of time.

 

(i)         Vesting Schedule .  Subject to Sections 3(b)(ii), 3(b)(iii), 3(b)(iv) and to the Holder’s continued employment with the Company on each vesting date, the Restricted Shares shall vest in equal 1/54 installments as of the last day of each of the 54 calendar months following the Effective Date, which for the sake of clarity means November 30, 2009.

 

(ii)        Acceleration upon Change of Control .  Upon the occurrence of a Change of Control, all then unvested Restricted Shares shall immediately vest in full, so long as the Holder is employed with the Company on the date of the Change of Control.

 

(iii)       Acceleration at July 18, 2012 .  On July 18, 2012, all then unvested Restricted Shares shall immediately vest in full, so long as the Holder is actively employed with the Company in the capacity of chairman, president and chief executive officer.

 

(iv)       Termination .  (A)  Upon the termination of employment by the Holder for Good Reason or by the Company without Cause, all then unvested Restricted Shares shall immediately vest in full.

 

(B)  Upon the termination of the Holder’s employment for Cause or for any reason other than pursuant to Clause (A) above, all unvested Restricted Shares shall be forfeited.

 

4.             Legend.

 

(a)           Each certificate representing Restricted Shares shall bear each of the following legends.

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR STATE SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXCHANGED UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OR EXCHANGE COMPLIES WITH THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT AND THE RESTRICTED

 

2



 

COMMON STOCK AGREEMENT, EACH AS AMENDED FROM TIME TO TIME, BETWEEN OR AMONG THE COMPANY AND THE INVESTORS PARTY THERETO.  IN ADDITION TO RESTRICTIONS ON TRANSFER, THE RESTRICTED COMMON STOCK AGREEMENT PROVIDES FOR THE VESTING OF THE SHARES ACCORDING TO THE SPECIFIC PROVISIONS OF THE RESTRICTED COMMON STOCK AGREEMENT.  COPIES OF THE REGISTRATION RIGHTS AGREEMENT AND THE RESTRICTED COMMON STOCK AGREEMENT ARE ON FILE WITH THE COMPANY.”

 

(b)           The certificates shall also bear any legend required by any applicable state securities law.

 

(c)           The certificates shall be deposited by the Holder, together with a stock power endorsed in blank, with the Company, to be held in escrow during any restriction period.

 

5.             Restrictions on Transfer and Conversion .

 

(a)           The Company and the Holder acknowledge and agree that the Restricted Shares are subject to and restricted by this Agreement.  Once vested, the Restricted Shares shall no longer be restricted by the terms of this Agreement but shall be subject to the restrictions set forth in the Registration Rights Agreement and the Securities Act.

 

(b)           The Restricted Shares shall only be transferable to Restricted Share Permitted Transferees of the Holder.  Any attempt to Transfer any of the Restricted Shares to Persons other than Restricted Share Permitted Transferees of the Holder shall be null and void and have no force or effect, and the Company shall not, and shall cause any transfer agent not to, give any effect in such entity’s share records to such attempted Transfer.

 

(c)           The Holder acknowledges that the transfer restrictions contained in this Agreement are reasonable and in the best interests of the Company.  The Holder understands that this  Agreement contains forfeiture provisions in respect of the Restricted Shares in favor of the Company or its designee upon the Holder’s termination of employment.

 

6.             Definitions .

 

The following terms shall have the meanings ascribed below:

 

“Cause” means “cause” as defined in the Holder’s employment agreement with the Company or any of its subsidiaries.

 

“Change of Control” means “Change of Control” as defined in the Holder’s employment agreement with the Company or any of its subsidiaries.

 

“Good Reason” means “good reason” as defined in the Holder’s employment agreement with the Company or any of its subsidiaries.

 

“Person” means any individual or any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association or other entity and, where the context so permits, the legal representatives, successors in interest and permitted assigns of such Person.

 

3



 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of November 6, 2009, among the Company and certain stockholders of the Company, as amended, modified or supplemented from time to time.

 

“Restricted Share Permitted Transferees” means (i) any spouse, lineal descendant, sibling, parent, heir, executor, administrator, testamentary trustee, legatee or beneficiary of the Holder, (ii) a trust that is for the exclusive benefit of the Holder or its Restricted Share Permitted Transferees under clause (i) above or (iii) a limited liability company or corporation, all of the outstanding capital stock or membership interests of which is of record and beneficially owned by the Holder or any of those Persons in clause (i) above.

 

“Securities Act” means the Securities Act of 1933, as amended, or any successor federal law then in force.

 

“Transfer” means the sale, transfer, assignment, pledge or other disposal (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) of any Restricted Shares.

 

7.             General Provisions .

 

(a)           Notices .  Any notification required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid.  A notice shall be addressed to the Company at its principal executive office and to the Holder at the address that he or she most recently provided to the Company.

 

(b)           Survival of Representations, Warranties and Agreements .  All representations, warranties and agreements contained herein shall survive indefinitely, including following termination of this Agreement or of the Holder’s employment with the Company.

 

(c)           Entire Agreement .  This Agreement and the Registration Rights Agreement shall constitute the entire contract between the parties hereto with regard to the subject matter hereof.  They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

 

(d)           Waiver .  No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.

 

(e)           Successors and Assigns .  The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Holder, the Holder’s assigns and the legal representatives, heirs and legatees of the Holder’s estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.

 

(f)            Choice of Law; Jurisdiction; Waiver of Jury Trial THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAWS.

 

SUBJECT TO THE TERMS OF THIS AGREEMENT, THE PARTIES AGREE THAT ANY AND ALL ACTIONS ARISING UNDER OR IN RESPECT OF THIS AGREEMENT SHALL BE LITIGATED IN THE FEDERAL OR STATE COURTS IN DELAWARE.  BY

 

4



 

EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR ITSELF, HIMSELF, OR HERSELF AND IN RESPECT OF ITS, HIS OR HER PROPERTY WITH RESPECT TO SUCH ACTION.  EACH PARTY AGREES THAT VENUE WOULD BE PROPER IN ANY OF SUCH COURTS, AND HEREBY WAIVES ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.

 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

(g)           Amendment .  The Board of Directors of the Company, or the Compensation Committee thereof, may amend or alter this Agreement and the Restricted Shares issued hereunder at any time; provided that, no such amendment or alteration shall be made without the consent of the Holder if such action would materially diminish any of the rights of the Holder under this Agreement or with respect to the Restricted Shares.

 

(h)           Employment Rights .  Neither this Agreement nor any of its provisions is intended to confer or should be construed as conferring any rights on the Holder to continued employment with the Company or any rights of employment for a fixed term.  No contract of employment, express or implied, is created hereby and nothing contained herein shall be construed as creating a joint venture, partnership, agency or other enterprise between the parties.

 

(i)            No Waiver; Modifications in Writing .  No waiver of or consent to any departure from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof; provided, however, that the Company may amend, modify or terminate the terms of the Restricted Shares in accordance with the terms in the Company’s Certificate of Incorporation.

 

(j)            Severability . The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

(k)           Signature in Counterparts .  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

[ SIGNATURE PAGE FOLLOWS ]

 

5



 

IN WITNESS WHEREOF, the parties hereto have executed this Restricted Common Stock Agreement as of the date first written above.

 

 

 

STR HOLDINGS, INC.

 

 

 

 

 

By:

/s/ Barry A. Morris

 

 

Name:

Barry A. Morris

 

 

Title

Executive Vice President and Chief Financial Officer

 

 

 

 

HOLDER

 

 

 

 

 

/s/ Dennis L. Jilot

 

Dennis L. Jilot

 

6



 

EXHIBIT A

 

Investment Representations and Warranties

 

The Holder hereby represents and warrants to the Company that:

 

1.             The Restricted Shares received by him will be held by him for investment only for his own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof in violation of applicable U.S. federal or state or foreign securities laws.  The Holder has no current intention of selling, granting participation in or otherwise distributing the Restricted Shares in violation of applicable U.S. federal or state or foreign securities laws.  The Holder does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participation to such person or entity, or to any third person or entity, with respect to any of the Restricted Shares, in each case, in violation of applicable U.S. federal or state or foreign securities laws.

 

2.             The Holder understands that the Restricted Shares have not been registered under the Securities Act or any applicable U.S. federal, state or foreign securities laws, and that the Restricted Shares are being issued in reliance on an exemption from registration, which exemption depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Holder ’s representations as expressed herein.

 

3.             The Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of his owning the Restricted Shares.  The Holder is a sophisticated investor, has relied upon independent investigations made by the Holder and, to the extent believed by the Holder to be appropriate, the Holder ’s representatives, including the Holder ’s own professional, tax and other advisors, and is making an independent decision to invest in the Restricted Shares.  The Holder has been furnished with such documents, materials and information that the Holder deems necessary or appropriate concerning the terms and conditions of the transactions contemplated by the Agreement and the Holder ’s holding of the Restricted Shares and for evaluating an investment in the Company, and the Holder has read carefully such documents, materials and information and understands and has evaluated the types of risks involved with holding the Restricted Shares.  The Holder has not relied upon any representations or other information (whether oral or written) from the Company or its stockholders, directors, officers or affiliates, or from any other person or entity, in connection with his investment in the Restricted Shares.  The Holder acknowledges that the Company has not given any assurances with respect to the tax consequences of the ownership and disposition of the Restricted Shares.

 

4.             The Holder understands that no U.S. federal or state or foreign agency has passed upon the Restricted Shares or upon the Company, or upon the accuracy, validity or completeness of any documentation provided to the Holder in connection with the transactions contemplated by the Agreement, nor has any such agency made any finding or determination as to holding the Restricted Shares.

 

5.             The Holder understands that there are substantial restrictions on the transferability of the Restricted Shares and that on the date of the Agreement and for an indefinite period thereafter there will be no public market for the Restricted Shares and, accordingly, it may not be possible for the Holder to liquidate his investment in case of emergency, if at all.  In addition, the Holder understands that the Agreement contains substantial restrictions on the

 



 

transferability of the Restricted Shares and provide that, in the event that the conditions relating to the transfer of any Restricted Shares in such document have not been satisfied, the holder shall not transfer any such Restricted Shares, and unless otherwise specified the Company will not recognize the transfer of any such Restricted Shares on its books and records or issue any share certificates representing any such Restricted Shares, and any purported transfer not in accordance with the terms of the Agreement shall be void.  As such, Holder understands that: a restrictive legend or legends in a form to be set forth in the Agreement will be placed on the certificates representing the Restricted Shares; a notation will be made in the appropriate records of the Company indicating that each of the Restricted Shares are subject to restrictions on transfer and, if the Company should at some time in the future engage the services of a securities transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to the Restricted Shares; and the Holder will sell, transfer or otherwise dispose of the Restricted Shares only in a manner consistent with the Holder ’s representations set forth herein and then only in accordance with the Agreement.

 

6.             The Holder understands that (i) the Restricted Shares may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an exemption therefrom, (ii) the Restricted Shares have not been registered under the Securities Act; (iii) the Restricted Shares must be held indefinitely and he must continue to bear the economic risk of holding the Restricted Shares unless such shares are subsequently registered under the Securities Act or an exemption from such registration is available; (iv) the Holder is prepared to bear the economic risk of holding the Restricted Shares for an indefinite period of time; (v) it is not anticipated that there will be any public market for the Restricted Shares; (vi) the Restricted Shares are characterized as “restricted securities” under the U.S. federal securities laws; and (vii) the Restricted Shares may not be sold, transferred or otherwise disposed of except in compliance with federal, state and local law.

 

7.             The Holder understands that an investment in the Restricted Shares is not recommended for investors who have any need for a current return on this investment or who cannot bear the risk of losing their entire investment.  In that regard, the Holder understands that his holding the Restricted Shares involves a high degree of risk of loss.  The Holder acknowledges that: (i) he has adequate means of providing for his current needs and possible personal contingencies and has no need for liquidity in this investment; (ii) his commitment to investments which are not readily marketable is not disproportionate to his net worth; and (iii) his holding the Restricted Shares will not cause his overall financial commitments to become excessive.

 

8.             The Holder is/is not (circle one) an “accredited investor,” as such term is defined in Rule 501 of the Securities Act.

 

8




Exhibit 10.22

 

RESTRICTED COMMON STOCK AGREEMENT
FOR ISSUANCES UNDER THE
STR HOLDINGS, INC. 2009 EQUITY INCENTIVE PLAN

 

RESTRICTED COMMON STOCK AGREEMENT (this “Agreement”) made as of [                              ] (the “Grant Date”), by and between STR Holdings, Inc., a Delaware corporation (the “Company”), and [                    ] (the “Participant”).

 

WHEREAS, the Company adopted the 2009 Equity Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made part of this Agreement.  Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan;

 

WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors of the Company has determined that it would be in the best interest of the Company and its stockholders to grant the restricted stock provided for herein to the Participant pursuant to the Plan and the terms set forth herein; and

 

WHEREAS, in consideration of the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                        Restricted Shares .  Subject to the terms and conditions of this Agreement and the Plan, the Company hereby issues to the Participant [        ] shares of Common Stock (the “Restricted Shares”), which shall vest and become nonforfeitable in accordance with Section 3.

 

2.                                        Certificates .   Certificates representing the Restricted Shares shall be issued by the Company and shall be registered in the name of the Participant on the stock transfer books of the Company promptly following execution of this Agreement by the Participant, but shall remain in the physical custody of the Company or its designee at all times prior to the vesting of such Restricted Shares pursuant to Section 3. As a condition to the receipt of this Agreement, the Participant shall deliver to the Company a stock power, duly endorsed in blank, relating to the Restricted Shares.

 

3.                                        Vesting of Shares .

 

(a)                                   Vesting Schedule .  Subject to the Participant’s continued Service on each vesting date, the Restricted Shares shall vest in [        ] equal installments on each of the first [        ] yearly anniversaries of the Grant Date.

 

(b)                                  Acceleration upon Change of Control .  Upon the occurrence of a Change of Control, all then-unvested Restricted Shares shall immediately vest in full, so long as the Participant’s Service has not been terminated before the date of the consummation of the Change of Control.

 

(c)                                   Acceleration upon Non-Election .  If the Participant is a member of the Board of Directors of the Company and fails to be re-elected to the Board following his or her

 

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nomination by the Board for re-election, then all then-unvested Restricted Shares shall immediately vest in full.

 

(d)                                  Forfeiture .  If the Participant’s Service is terminated for any reason, other than as set forth in Section 3(c) hereof, the Restricted Shares, to the extent not then vested, shall be forfeited by the Participant without consideration.

 

4.                                        No Right to Continued Service .  The granting of the Restricted Shares evidenced hereby and this Agreement shall impose no obligation on the Company or any Affiliate to continue the Service of the Participant and shall not lessen or affect any right that the Company or any Affiliate may have to terminate the Service of such Participant.

 

5.                                        Securities Laws/Legends on Certificates.   The issuance and delivery of the Restricted Shares shall comply with all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded. If the Company deems it necessary to ensure that the issuance of securities under the Plan is not required to be registered under any applicable securities laws, each Participant to whom such security would be issued shall deliver to the Company an agreement or certificate containing such representations, warranties and covenants as the Company may deem necessary which satisfies such requirements. The certificates representing the Restricted Shares shall be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

6.                                        Transferability .  The Restricted Shares may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant other than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. No such permitted transfer of the Restricted Shares to heirs or legatees of the Participant shall be effective to bind the Company unless the Committee shall have been furnished with written notice thereof and a copy of such evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions hereof.

 

7.                                        Adjustment of Restricted Shares .  Adjustments to the Restricted Shares shall be made in accordance with the terms of the Plan.

 

8.                                        Withholding .  The Participant may be required to pay to the Company or any Affiliate and the Company shall have the right and is hereby authorized to withhold, any applicable withholding taxes in respect of the Restricted Shares, their grant, vesting or otherwise and to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes.

 

9.                                        Notices .  Any notification required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid.  A notice shall be addressed to the Company, Attention: Secretary, at its principal

 

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executive office and to the Participant at the address that he or she most recently provided to the Company.

 

10.                                  Entire Agreement .  This Agreement and the Plan shall constitute the entire contract between the parties hereto with regard to the subject matter hereof.  They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

 

11.                                  Waiver .  No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.

 

12.                                  Successors and Assigns .  The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s assigns and the legal representatives, heirs and legatees of the Participant’s estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to be joined herein and be bound by the terms hereof.

 

13.                                  Choice of Law; Jurisdiction; Waiver of Jury Trial THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAWS.

 

SUBJECT TO THE TERMS OF THIS AGREEMENT, THE PARTIES AGREE THAT ANY AND ALL ACTIONS ARISING UNDER OR IN RESPECT OF THIS AGREEMENT SHALL BE LITIGATED IN THE FEDERAL OR STATE COURTS IN DELAWARE.  BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR ITSELF, HIMSELF, OR HERSELF AND IN RESPECT OF ITS, HIS OR HER PROPERTY WITH RESPECT TO SUCH ACTION.  EACH PARTY AGREES THAT VENUE WOULD BE PROPER IN ANY OF SUCH COURTS, AND HEREBY WAIVES ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.

 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

14.                                  Restricted Shares Subject to Plan .  By entering into this Agreement, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Restricted Shares are subject to the Plan. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference (subject to the limitation set forth in Section 15 hereof). In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. The Participant has had the opportunity to retain counsel, and has read carefully, and understands, the provisions of the Plan and this Agreement.

 

15.                                  Amendment .  The Committee may amend or alter this Agreement and the Restricted Shares granted hereunder at any time; provided that, subject to Articles 11, 12 and 13 of the Plan, no such amendment or alteration shall be made without the consent of the

 

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Participant if such action would materially diminish any of the rights of the Participant under this Agreement or with respect to the Restricted Shares.

 

16.                                  Section 83(b) Election . In the event the Participant determines to make an election with the Internal Revenue Service (the “IRS”) under Section 83(b) of the Code and the regulations promulgated thereunder (the “83(b) Election”), the Participant shall provide a copy of such form to the Company promptly following its filing, which is required under current law to be filed with the IRS no later than thirty (30) days after the Grant Date of the Restricted Shares. The Participant is advised to consult with his or her own tax advisors regarding the purchase and holding of the Restricted Shares, and the Company shall bear no liability for any consequence of the Participant making an 83(b) Election or failing to make an 83(b) Election.

 

17.                                  Severability . The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

18.                                  Signature in Counterparts .  This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

[ SIGNATURE PAGE FOLLOWS ]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Restricted Common Stock Agreement as of the date first written above.

 

 

 

STR HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title

 

 

 

PARTICIPANT

 

 

 

 

 

 

 

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Exhibit 10.23

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.
MANAGEMENT INCENTIVE PLAN

 

1.             Purpose .   This Plan includes a continuation of the management compensation program of the Company, which has been in place but informally documented for many years, and is designed to give to key managers of the Company additional incentive to promote the Company’s further development and success.

 

2.             Definitions .   The following terms shall have the meanings given below unless the context otherwise requires:

 

(a)           “Individual Incentive Plan” means, with respect to each Manager, an annual statement of goals or objectives for such Manager based primarily on the EBITDA or revenues of the Company and its Subsidiaries as a whole, or of such profit center or SBU of the Company as the Committee may determine, with respect to the performance or achievement of which the Manager’s bonus entitlement under the Plan shall be determined. The Individual Incentive Plan with respect to any Manager may also include such other qualitative or quantitative objectives or conditions as the Committee may determine in its sole discretion, in which event the Individual Incentive Plan shall include, as appropriate, a statement as to how such objectives shall be weighted in determining the Manager’s performance.

 

(b)           “Chief Executive Officer” means the President and Chief Executive Officer of the Company.

 

(c)           “Company” means Specialized Technology Resources, Inc. Unless the context otherwise requires, references to the Company shall be deemed to include its Subsidiaries.

 

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

 

(e)           “EBITDA” means earnings before interest, taxes, depreciation and amortization.

 

(f)            “Manager” means an eligible employee of the Company who has been granted a bonus under the Plan.

 

(g)           “Plan” means the Specialized Technology Resources, Inc. Management Incentive Plan.

 

(h)           “Plan Year” means a fiscal year of the Company.

 



 

(i)            “Salary” means, with respect to any Manager, such Manager’s annual base salary rate at the beginning of any Plan Year.

 

(j)            “SBU” means a strategic business unit of the Company.

 

(k)           “Subsidiary” means any entity in which the Company owns directly or indirectly a majority of the outstanding voting stock or other equity securities.

 

(1)           “Target Bonus” means that bonus, expressed as a Bonus Percentage of Salary, to which a Manager shall be entitled for a Plan Year during which the Manager is continuously employed by the Company on a full-time basis and achieves 100% of his or her annual financial and qualitative objectives.

 

(m)          “Target Bonus Multiplier” means a number ranging from 0.500 to 2.000 by which a Manager’s Target Bonus is multiplied to obtain the amount of the Manager’s bonus.

 

(n)           “Bonus Percentage” means a percentage of a Manager’s Salary ranging from a minimum of 5% to a maximum of 50% which the Manager may earn as a bonus under the Plan if the Manager achieves l 00% of his or her Individual Incentive Plan.

 

3.             Eligibility . Bonus rights may be granted under the Plan by the Committee to those full-time, salaried employees recommended by the Chief Executive Officer who, in the sole opinion of the Committee are, from time to time, responsible for the management and/or growth of all or part of the business of the Company, and who have signed the Company’s standard form of Non-Compete Agreement, as amended from time to time. Without limiting the foregoing discretion of the Committee, persons eligible to receive bonus awards under the Plan shall include, but not be limited to, the Company’s Chief Executive Officer, Chief Financial Officer, managers of SBU’s, regional SBU managers, designated foreign affiliate managers, senior level marketing and sales managers, and designated department managers.

 

4.             Granting of Bonuses Rights .  Bonuses rights may be granted under the Plan at the recommendation of the Chief Executive Officer, subject to approval by the Committee. The Chief Executive Officer, with the assistance of the Chief Financial Officer and Controller of the Company, shall prepare bonus recommendations for review and action by the Committee as soon as reasonably possible following the availability of audited financial statements of the Company for its most recently completed fiscal year. No such bonus right shall be deemed granted under the Plan unless and until such Manager’s bonus eligibility and Individual Incentive Plan have been approved by the Committee with the concurrence of the Chief Executive Officer. No Manager shall be deemed to have earned a bonus payment except in relation to the level of achievement of the Manager’s applicable Individual Incentive Plan and subject to the payment limitations in Section 7 and other provisions of the Plan. As soon as reasonably possible following the approval by the Committee with the concurrence of the Chief Executive Officer of a Manager’s bonus eligibility for a Plan Year, such Manager shall be provided in writing with a statement of such Manager’s bonus entitlement and the conditions to the earning and payment of such bonus including, but not limited to, the following information:

 

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(a)           the Manager’s Salary as of the beginning of the current Plan Year;

 

(b)           the Manager’s Target Bonus;

 

(c)           the Manager’s Bonus Percentage;

 

(d)           the Manager’s Individual Incentive Plan; and

 

(e)           in the event of multiple bonus criteria, the weightings to be given such criteria in determining the bonus.

 

5.             Minimum and Maximum Bonuses .   A Manager’s bonus entitlement under the Plan will range from 0% to 200% of his or her Target Bonus. Actual entitlement will be based upon performance relative to goals and objectives set forth in the Manager’s Individual Incentive Plan and revenue growth objectives individually established for Managers who are sales and marketing executives. Attachment 1 sets forth Bonus Plan Multipliers for use in connection with Individual Incentive Plans based upon SBU EBITDA of less than $4.0 million. SBU EBITDA of $4.0 million or greater, or revenue growth. All EBITDA targets will include fully funded provision for expected bonus payments at all performance payout levels so that such targets take into account the payment of bonuses as normal operating expenses in determining bonus entitlements at any level. All targets and EBITDA or revenue growth objectives will exclude the impact of any unbudgeted acquisition. With respect to Individual Incentive Plans based upon EBITDA, annual budgeted EBITDA must represent at least a 5% increase over the prior year’s actual results in order for the Manager to achieve any bonus entitlement during that Plan Year.

 

6.             Determination, Approval and Payment of Bonuses .   Bonuses payable under the Plan shall be determined by the Chief Financial Officer and Controller and shall be subject to approval by the Chief Executive Officer and the Committee. Payment of any bonus so approved shall be made on April 30 of the year following the year with respect to which the bonus is determined. In the event that the Company has not received its audited financial statements for the prior year by March 31 of such following year, such bonus shall be paid on April 30 of such year or as soon as practicable thereafter, consistent with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended, but in no event later than the last day of such following year.

 

7.             Payment Limitations .

 

(a)           No bonus shall be payable to any Manager who is not a full-time employee of the Company on the day such bonus would otherwise be paid, subject to any contrary provision which may appear in any contract between the Company and such Manager.

 

(b)           Any bonus otherwise payable to a Manager may be reduced or eliminated in the event that the payment of such bonus would cause the Company to be in violation or default of any bank financial covenant or in view of any extraordinary circumstance as determined by the Board of Directors of the Company; provided, however, that any such reduction or elimination shall be applied consistently and ratably to all eligible Managers.

 

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8.               Tax Withholding Requirements .  All bonus payments under the Plan shall be subject to any applicable federal, state, municipal and foreign tax withholding requirements.

 

9.               No Right to Receive Bonuses; No Employment Rights .  No eligible Manager shall have any right to receive bonuses except as the Committee may determine. The Plan does not confer upon any employee any right to continued employment with the Company or a Subsidiary, nor does it interfere in any way with the right of the Company or a Subsidiary to terminate the employment of any of its employees.

 

10.             Term, Termination and Amendment .  The Plan and continuation of the management compensation program of the Company which it contains was approved by the Board of Directors of the Company on May 14, 2002 and shall remain in effect until terminated by the Board of Directors, subject to such modifications and amendments of the Plan as the Board of Directors may from time to time adopt. However, no such termination, modification or amendment shall adversely affect any bonus entitlement of a Manager based upon an Individual Incentive Plan which has previously been approved by the Chief Executive Officer and the Committee and presented in writing to such Manager, other than as provided under 7. (b).

 

Issued fiscal year 2008

 

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Exhibit 10.24

 

THIS AGREEMENT (the “Award Agreement”) is made effective as of [                          ] (the “Date of Grant”) between STR Holdings, Inc., a Delaware corporation (with any successor, the “Company”), and [                      ] (the “Participant”):

 

R   E   C   I   T   A   L   S :

 

WHEREAS, the Company has adopted the STR Holdings, Inc. 2009 Equity Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Award Agreement.  Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and

 

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the option provided for herein to the Participant pursuant to the Plan and the terms set forth herein.

 

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

 

1.              Grant of the Option .  The Company hereby grants to the Participant the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of (i) [                ] Shares (the “Time Vesting Option Shares”) and (ii) [                ] Shares (the “Performance Vesting Option Shares”), subject to adjustment as set forth in the Plan.  The Option is intended to be an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).  If this Option does not qualify as such for any reason, then to the extent of such non-qualification, this option shall be regarded as a non-qualified stock option.

 

2.              Option Price .  The purchase price of the Shares subject to the Option shall be $[        ] per Share (the “Option Price”), subject to adjustment as set forth in the Plan; provided, that the Option Price shall not be less than 100% of the Fair Market Value of a Share on the Date of Grant (or 110% of such Fair Market Value in the case of a grant to a Ten Percent Stockholder).

 

3.              Vesting .

 

(a)            Time Vesting Option Shares .  Subject to the Participant’s continued Service on each vesting date and Sections 4 and 5(a), [                ] Time Vesting Option Shares shall vest on [                  ] with the remaining Time Vesting Option Shares vesting in equal monthly installments as of the last day of each of the successive[   ] months thereafter.

 

(b)            Performance Vesting Option Shares .  Subject to the Participant’s continued Service on each vesting date and Section 4, [                ] Performance Vesting Option Shares shall vest on [                  ] with the remaining Performance Vesting Option Shares vesting on the terms set forth on Annex 1 hereto.

 



 

At any time, the portion of the Option which has become vested as described in this Section 3 is hereinafter referred to as the “Vested Portion.”  The Vested Portion of the Option shall remain exercisable for the period set forth in Section 6.

 

4.              Accelerated Vesting Upon a Change in Control . Upon the occurrence of a Change of Control, the unvested portion of the Option, to the extent not previously cancelled or forfeited, shall immediately vest in full, so long as the Participant’s Service has not been terminated before the date of the consummation of the Change of Control.

 

5.              Forfeiture .

 

(a)            If the Participant’s Service is terminated by the Participant for Good Reason or by the Company without Cause, the unvested portion of the Option for the Time Vesting Option Shares, to the extent not previously cancelled or forfeited, that would have vested had the Participant been employed for an additional twelve (12) months from the date of termination of employment shall vest immediately upon such date of termination.  Thereafter, the Option shall, to the extent not then vested, be cancelled by the Company without consideration and the Vested Portion of the Option shall remain exercisable for the period set forth in Section 6.

 

(b)            If the Participant’s Service is terminated for any reason other than pursuant to clause 5(a) above, the Option shall, to the extent not then vested, be cancelled by the Company without consideration and the Vested Portion of the Option shall remain exercisable for the period set forth in Section 6.

 

6.              Exercise of Option .

 

(a)            Period of Exercise .  Subject to the provisions of the Plan and this Award Agreement, the Participant may exercise all or any part of the Vested Portion of the Option at any time prior to the earliest to occur of:

 

(i)             the tenth anniversary of the Date of Grant (fifth anniversary of the Date of Grant for a Ten Percent Stockholder);

 

(ii)            the date that is ninety (90) days following termination of the Participant’s Service for any reason other than death, Permanent Disability or Cause;

 

(iii)           the date that is one (1) year following termination of the Participant’s Service due to death or Permanent Disability;

 

(iv)           the date of termination of the Participant’s Service due to Cause.

 

(b)            Method of Exercise .

 

(i)             Subject to Section 4, the Vested Portion of the Option may be exercised by delivering to the Company at its principal office written notice of intent to so exercise; provided that the Option may be exercised with respect to whole Shares only.  Such notice shall specify the number of Shares for which the Option is being exercised and shall be accompanied by payment in full of the Option Price.  In the event the Option is being exercised by the Participant’s representative, the notice shall be accompanied by

 

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proof (satisfactory to the Committee) of the representative’s right to exercise the Option.  The payment of the Option Price may be made at the election of the Participant (A) in cash or its equivalent (e.g., by cashier’s check), (B) to the extent permitted by the Committee, in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee, (C) partly in cash and, to the extent permitted by the Committee, partly in such Shares, (D) by reducing the number of Shares otherwise deliverable upon the exercise of the Option by the number of Shares having a Fair Market Value equal to the Option Price, or (E) if there is a public market for the Shares at such time, subject to such requirements as may be imposed by the Committee, through the delivery of irrevocable instructions to a broker to sell Shares obtained upon the exercise of the Option and to deliver promptly to the Company an amount out of the proceeds of such sale equal to the aggregate Option Price for the Shares being purchased.  The Committee may prescribe any other method of payment that it determines to be consistent with applicable law.  Neither the Participant nor the Participant’s representative shall have any rights to dividends or other rights of a stockholder with respect to Shares subject to an Option until the Participant has given written notice of exercise of the Option, paid in full for such Shares and, if applicable, has satisfied any other conditions imposed by the Committee pursuant to the Plan.

 

(ii)            Notwithstanding any other provision of the Plan or this Award Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole discretion determine to be necessary or advisable.

 

(iii)           Upon the Company’s determination that the Option has been validly exercised as to any of the Shares, the Company shall issue certificates in the Participant’s name for such Shares.  However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates to him, any loss of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.

 

(iv)           In the event of the Participant’s death, the Vested Portion of the Option shall remain exercisable during the period set forth in Section 6 by the Participant’s executor or administrator, or the person or persons to whom the Participant’s rights under this Award Agreement shall pass by will or by the laws of descent and distribution as the case may be.  Any heir or legatee of the Participant shall take rights herein granted subject to the terms and conditions hereof.

 

7.              No Right to Continued Service .  The granting of the Option evidenced hereby and this Award Agreement shall impose no obligation on the Company or any Affiliate to continue the Service of the Participant and shall not lessen or affect any right that the Company or any Affiliate may have to terminate the Service of such Participant.

 

8.              Securities Laws/Legend on Certificates .  The issuance and delivery of Shares shall comply with all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities

 

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market on which the Company’s securities may then be traded.  If the Company deems it necessary to ensure that the issuance of securities under the Plan is not required to be registered under any applicable securities laws, each Participant to whom such security would be issued shall deliver to the Company an agreement or certificate containing such representations, warranties and covenants as the Company may deem necessary which satisfies such requirements. The certificates representing the Shares shall be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

9.              Transferability .  You may transfer the Option granted hereunder only in accordance with the terms of the Plan and since your Option is intended to qualify as an incentive stock option, its transferability is limited.

 

10.            Adjustment of Option .  Adjustments to the Option (or any of the Shares underlying the Option) shall be made in accordance with the terms of the Plan.

 

11.            Definitions .  For purposes of this Award Agreement:

 

“Cause” shall have the meaning set forth in the Participant’s employment agreement with the Company or its Affiliates.

 

“Good Reason” shall have the meaning set forth in the Participant’s employment agreement with the Company or its Affiliates.

 

“Permanent Disability” shall have the meaning set forth in the Participant’s employment agreement with the Company or its Affiliates, if any, or if the Participant is not a party to an employment agreement with a definition of “Permanent Disability,” then “Permanent Disability” means any physical or mental disability rendering the Participant unable to perform his or her duties for a period of at least one hundred twenty (120) days out of any twelve (12) month period, as determined by a doctor approved by the Company.

 

“Share” means a share of common stock of the Company or such other class or kind of shares or other securities resulting from the application of Section 12.1 of the Plan.

 

12.            Withholding .  The Participant may be required to pay to the Company or any Affiliate and the Company shall have the right and is hereby authorized to withhold, any applicable withholding taxes in respect of the Option, its exercise or any payment or transfer under or with respect to the Option and to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes.

 

13.            Notices . Any notification required by the terms of this Award Agreement shall be given in writing and shall be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid.  A notice shall be addressed to the Company, Attention: Secretary, at its principal executive office and to the Participant at the address that he or she most recently provided to the Company.

 

14.            Notification of Disqualifying Disposition .  Your Option is intended to qualify as an incentive stock option and by exercising this Option you agree that you will notify

 

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the Company in writing within fifteen (15) days after the date of any disposition of any of the Shares issued upon exercise of this Option that occurs within two (2) years after the Date of Grant of this Option or within one (1) year after such Shares are transferred upon exercise of this Option.  You also agree to provide the Company with any information concerning any such transfer required by the Company for tax purposes. The Company may require you to reimburse the Company in an amount necessary to satisfy the Company’s obligation to withhold taxes incurred by reason of the disposition of the Shares acquired by exercise of the Option in a disqualifying disposition (within the meaning of Section 421(b) of the Code).

 

15.            Employment Requirement .  Your Option is an incentive stock option and, in order for you to obtain the federal income tax advantages associated with an “incentive stock option,” the Code requires that at all times beginning on the Date of Grant of this Option and ending on the day three (3) months before the date you exercise this Option, you must be an employee of the Company or an “Affiliate” (as defined in the Code), except in the event of your termination due to death or Permanent Disability.

 

16.            Limitation .   Your Option is an incentive stock option and, therefore, as provided in the Plan, to the extent that the aggregate Fair Market Value (determined as of the Date of Grant) of the Shares with respect to which this Option plus all other incentive stock options you hold are exercisable for the first time by you during any calendar year (under all plans of the Company and its “Affiliates,” as defined in the Code) exceeds one hundred thousand dollars ($100,000), your Option(s) or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as non-qualified stock options.

 

17.            Entire Agreement .  This Award Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof.  They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

 

18.            Waiver .  No waiver of any breach or condition of this Award Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.

 

19.            Successors and Assigns .  The provisions of this Award Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s assigns and the legal representatives, heirs and legatees of the Participant’s estate, whether or not any such person shall have become a party to this Award Agreement and agreed in writing to be joined herein and be bound by the terms hereof.

 

20.            Choice of Law; Jurisdiction; Waiver of Jury Trial THIS AWARD AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAWS.

 

SUBJECT TO THE TERMS OF THIS AWARD AGREEMENT, THE PARTIES AGREE THAT ANY AND ALL ACTIONS ARISING UNDER OR IN RESPECT OF THIS AWARD AGREEMENT SHALL BE LITIGATED IN THE FEDERAL OR STATE COURTS IN DELAWARE.  BY EXECUTING AND DELIVERING THIS AWARD AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR ITSELF, HIMSELF OR HERSELF AND IN RESPECT OF ITS, HIS OR HER PROPERTY WITH

 

5



 

RESPECT TO SUCH ACTION.  EACH PARTY AGREES THAT VENUE WOULD BE PROPER IN ANY OF SUCH COURTS, AND HEREBY WAIVES ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.

 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AWARD AGREEMENT.

 

21.            Option Subject to Plan .  By entering into this Award Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan.  The Option is subject to the Plan.  The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference (subject to the limitation set forth in Section 19).  In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.  The Participant has had the opportunity to retain counsel, and has read carefully, and understands, the provisions of the Plan and the Award Agreement.

 

22.            Amendment .  The Committee may amend or alter this Award Agreement and the Option granted hereunder at any time; provided that, subject to Articles 11, 12 and 13 of the Plan, no such amendment or alteration shall be made without the consent of the Participant if such action would materially diminish any of the rights of the Participant under this Award Agreement or with respect to the Option.

 

23.            Severability . The provisions of this Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

24.            Signature in Counterparts .  This Award Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

[ SIGNATURE PAGE FOLLOWS ]

 

6



 

IN WITNESS WHEREOF, the parties hereto have executed this Award Agreement.

 

 

STR HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

Agreed and acknowledged as

 

 

of the date first above written:

 

 

 

 

 

 

 

 

 

 

 

PARTICIPANT

 

 

 



 

Annex 1

 

Vesting shall be in two (2) equal installments following the two successive Fiscal Years, beginning with the Fiscal Year ending on December 31, 2010 (for the 2010 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.  If the Performance Target for the 2010 Fiscal Year referred to above is not attained, the Yearly Amount for the 2010 Fiscal Year which is not then vested shall become vested and exercisable at the end of the second Fiscal Year 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 2010 Fiscal Year but is achieved for the 2011 Fiscal Year, in 2011, the Yearly Amounts for both 2010 and 2011 would become vested.

 

“Consolidated EBITDA” means Consolidated EBITDA as defined pursuant to that certain Credit Agreement, dated as of June 15, 2007, 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.

 

“Consolidated Net Debt” means (i) any Indebtedness of the Company and its subsidiaries minus (ii) 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.

 

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

 

“Fiscal Year” means the twelve month period ending on the last day of each calendar year.

 

“Indebtedness” means, without duplication, the sum of:  (i) all principal and accrued (but unpaid) interest owing by the Company and its subsidiaries for debt for borrowed money owed to any third party (specifically excluding intercompany debt between the Company and any of its subsidiaries and any subsidiary of the Company and another subsidiary of the Company); plus (ii) all obligations of the Company and its subsidiaries under leases that have been recorded as capital leases under GAAP; plus (iii) indebtedness of any person other than the Company or any of its subsidiaries that is guaranteed by the Company or any of its subsidiaries.

 

Restricted Stock Performance Target Calculation

 

 

 

2010

 

2011

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

82.3

 

$

103.5

 

EV / EBITDA Multiple

 

10.0

x

10.0

x

Enterprise Value

 

$

823.1

 

$

1,034.5

 

 

 

 

 

 

 

Less: Net Debt on Balance Sheet

 

(225.9

)

(206.4

)

Value of Common Equity

 

$

597.3

 

$

828.1

 

 

 

 

 

 

 

Performance Threshold

 

85.0

%

85.0

%

 

 

 

 

 

 

Performance Target

 

$

507.7

 

$

703.8

 

 




Exhibit 10.25

 

THIS AGREEMENT (the “Award Agreement”) is made effective as of [                          ] (the “Date of Grant”) between STR Holdings, Inc., a Delaware corporation (with any successor, the “Company”), and [                      ] (the “Participant”):

 

R   E   C   I   T   A   L   S :

 

WHEREAS, the Company has adopted the STR Holdings, Inc. 2009 Equity Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Award Agreement.  Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and

 

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the option provided for herein to the Participant pursuant to the Plan and the terms set forth herein.

 

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

 

1.              Grant of the Option .  The Company hereby grants to the Participant the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of (i) [                ] Shares (the “Time Vesting Option Shares”) and (ii) [                ] Shares (the “Performance Vesting Option Shares”), subject to adjustment as set forth in the Plan.  The Option is intended to be an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).  If this Option does not qualify as such for any reason, then to the extent of such non-qualification, this option shall be regarded as a non-qualified stock option.

 

2.              Option Price .  The purchase price of the Shares subject to the Option shall be $[        ] per Share (the “Option Price”), subject to adjustment as set forth in the Plan; provided, that the Option Price shall not be less than 100% of the Fair Market Value of a Share on the Date of Grant (or 110% of such Fair Market Value in the case of a grant to a Ten Percent Stockholder).

 

3.              Vesting .

 

(a)            Time Vesting Option Shares .  Subject to the Participant’s continued Service on each vesting date and Sections 4 and 5(a), [                ] Time Vesting Option Shares shall vest on [                  ] with the remaining Time Vesting Option Shares vesting in equal monthly installments as of the last day of each of the successive[   ] months thereafter.

 

(b)            Performance Vesting Option Shares .  Subject to the Participant’s continued Service on each vesting date and Section 4, [                ] Performance Vesting Option Shares shall vest on [                  ] with the remaining Performance Vesting Option Shares vesting on the terms set forth on Annex 1 hereto.

 



 

At any time, the portion of the Option which has become vested as described in this Section 3 is hereinafter referred to as the “Vested Portion.”  The Vested Portion of the Option shall remain exercisable for the period set forth in Section 6.

 

4.              Accelerated Vesting Upon a Change in Control . Upon the occurrence of a Change of Control, the unvested portion of the Option, to the extent not previously cancelled or forfeited, shall immediately vest in full, so long as the Participant’s Service has not been terminated before the date of the consummation of the Change of Control.

 

5.              Forfeiture .  If the Participant’s Service is terminated for any reason, the Option shall, to the extent not then vested, be cancelled by the Company without consideration and the Vested Portion of the Option shall remain exercisable for the period set forth in Section 6.

 

6.              Exercise of Option .

 

(a)            Period of Exercise .  Subject to the provisions of the Plan and this Award Agreement, the Participant may exercise all or any part of the Vested Portion of the Option at any time prior to the earliest to occur of:

 

(i)             the tenth anniversary of the Date of Grant (fifth anniversary of the Date of Grant for a Ten Percent Stockholder);

 

(ii)            the date that is ninety (90) days following termination of the Participant’s Service for any reason other than death, Permanent Disability or Cause;

 

(iii)           the date that is one (1) year following termination of the Participant’s Service due to death or Permanent Disability;

 

(iv)           the date of termination of the Participant’s Service due to Cause.

 

(b)            Method of Exercise .

 

(i)             Subject to Section 4, the Vested Portion of the Option may be exercised by delivering to the Company at its principal office written notice of intent to so exercise; provided that the Option may be exercised with respect to whole Shares only.  Such notice shall specify the number of Shares for which the Option is being exercised and shall be accompanied by payment in full of the Option Price.  In the event the Option is being exercised by the Participant’s representative, the notice shall be accompanied by proof (satisfactory to the Committee) of the representative’s right to exercise the Option.  The payment of the Option Price may be made at the election of the Participant (A) in cash or its equivalent (e.g., by cashier’s check), (B) to the extent permitted by the Committee, in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee, (C) partly in cash and, to the extent permitted by the Committee, partly in such Shares, (D) by reducing the number of Shares otherwise deliverable upon the exercise of the Option by the number of Shares having a Fair Market Value equal to the Option Price, or (E) if there is a public market for the Shares at such time, subject to such requirements as may be imposed by the Committee, through the delivery of irrevocable instructions to a broker to sell Shares obtained upon the exercise of the Option and to deliver promptly to the Company an amount out of the proceeds of such sale equal to the

 

2



 

aggregate Option Price for the Shares being purchased.  The Committee may prescribe any other method of payment that it determines to be consistent with applicable law.  Neither the Participant nor the Participant’s representative shall have any rights to dividends or other rights of a stockholder with respect to Shares subject to an Option until the Participant has given written notice of exercise of the Option, paid in full for such Shares and, if applicable, has satisfied any other conditions imposed by the Committee pursuant to the Plan.

 

(ii)            Notwithstanding any other provision of the Plan or this Award Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole discretion determine to be necessary or advisable.

 

(iii)           Upon the Company’s determination that the Option has been validly exercised as to any of the Shares, the Company shall issue certificates in the Participant’s name for such Shares.  However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates to him, any loss of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.

 

(iv)           In the event of the Participant’s death, the Vested Portion of the Option shall remain exercisable during the period set forth in Section 6 by the Participant’s executor or administrator, or the person or persons to whom the Participant’s rights under this Award Agreement shall pass by will or by the laws of descent and distribution as the case may be.  Any heir or legatee of the Participant shall take rights herein granted subject to the terms and conditions hereof.

 

7.              No Right to Continued Service .  The granting of the Option evidenced hereby and this Award Agreement shall impose no obligation on the Company or any Affiliate to continue the Service of the Participant and shall not lessen or affect any right that the Company or any Affiliate may have to terminate the Service of such Participant.

 

8.              Securities Laws/Legend on Certificates .  The issuance and delivery of Shares shall comply with all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded.  If the Company deems it necessary to ensure that the issuance of securities under the Plan is not required to be registered under any applicable securities laws, each Participant to whom such security would be issued shall deliver to the Company an agreement or certificate containing such representations, warranties and covenants as the Company may deem necessary which satisfies such requirements. The certificates representing the Shares shall be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

3



 

9.              Transferability .  You may transfer the Option granted hereunder only in accordance with the terms of the Plan and since your Option is intended to qualify as an incentive stock option, its transferability is limited.

 

10.            Adjustment of Option .  Adjustments to the Option (or any of the Shares underlying the Option) shall be made in accordance with the terms of the Plan.

 

11.            Definitions .  For purposes of this Award Agreement:

 

“Cause” shall have the meaning set forth in the Participant’s employment agreement with the Company or its Affiliates or if such Participant does not have an employment agreement, or if not so defined:  the Participant’s (i) 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) 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) material breach of any employment agreement or non-competition agreement, which breach is not cured within 30 days following written notice; (iv) intentional wrongful act or gross negligence that has a material detrimental effect on the Company or its Subsidiaries; (v) unlawful use (including being under the influence) or possession of illegal drugs on the Company’s or any of its Subsidiaries’ premises; and (vi) the failure or refusal to follow the reasonable instructions of the board of directors of the Company or of any Subsidiary of the Company, which failure or refusal is not cured within 30 days following written notice.

 

“Permanent Disability” shall have the meaning set forth in the Participant’s employment agreement with the Company or its Affiliates, if any, or if the Participant is not a party to an employment agreement with a definition of “Permanent Disability,” then “Permanent Disability” means any physical or mental disability rendering the Participant unable to perform his or her duties for a period of at least one hundred twenty (120) days out of any twelve (12) month period, as determined by a doctor approved by the Company.

 

“Share” means a share of common stock of the Company or such other class or kind of shares or other securities resulting from the application of Section 12.1 of the Plan.

 

12.            Withholding .  The Participant may be required to pay to the Company or any Affiliate and the Company shall have the right and is hereby authorized to withhold, any applicable withholding taxes in respect of the Option, its exercise or any payment or transfer under or with respect to the Option and to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes.

 

13.            Notices . Any notification required by the terms of this Award Agreement shall be given in writing and shall be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid.  A notice shall be addressed to the Company, Attention: Secretary, at its principal executive office and to the Participant at the address that he or she most recently provided to the Company.

 

14.            Notification of Disqualifying Disposition .  Your Option is intended to qualify as an incentive stock option and by exercising this Option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the

 

4



 

Shares issued upon exercise of this Option that occurs within two (2) years after the Date of Grant of this Option or within one (1) year after such Shares are transferred upon exercise of this Option.  You also agree to provide the Company with any information concerning any such transfer required by the Company for tax purposes. The Company may require you to reimburse the Company in an amount necessary to satisfy the Company’s obligation to withhold taxes incurred by reason of the disposition of the Shares acquired by exercise of the Option in a disqualifying disposition (within the meaning of Section 421(b) of the Code).

 

15.            Employment Requirement .  Your Option is an incentive stock option and, in order for you to obtain the federal income tax advantages associated with an “incentive stock option,” the Code requires that at all times beginning on the Date of Grant of this Option and ending on the day three (3) months before the date you exercise this Option, you must be an employee of the Company or an “Affiliate” (as defined in the Code), except in the event of your termination due to death or Permanent Disability.

 

16.            Limitation .   Your Option is an incentive stock option and, therefore, as provided in the Plan, to the extent that the aggregate Fair Market Value (determined as of the Date of Grant) of the Shares with respect to which this Option plus all other incentive stock options you hold are exercisable for the first time by you during any calendar year (under all plans of the Company and its “Affiliates,” as defined in the Code) exceeds one hundred thousand dollars ($100,000), your Option(s) or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as non-qualified stock options.

 

17.            Entire Agreement .  This Award Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof.  They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

 

18.            Waiver .  No waiver of any breach or condition of this Award Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.

 

19.            Successors and Assigns .  The provisions of this Award Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s assigns and the legal representatives, heirs and legatees of the Participant’s estate, whether or not any such person shall have become a party to this Award Agreement and agreed in writing to be joined herein and be bound by the terms hereof.

 

20.            Choice of Law; Jurisdiction; Waiver of Jury Trial THIS AWARD AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAWS.

 

SUBJECT TO THE TERMS OF THIS AWARD AGREEMENT, THE PARTIES AGREE THAT ANY AND ALL ACTIONS ARISING UNDER OR IN RESPECT OF THIS AWARD AGREEMENT SHALL BE LITIGATED IN THE FEDERAL OR STATE COURTS IN DELAWARE.  BY EXECUTING AND DELIVERING THIS AWARD AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR ITSELF, HIMSELF OR HERSELF AND IN RESPECT OF ITS, HIS OR HER PROPERTY WITH RESPECT TO SUCH ACTION.  EACH PARTY AGREES THAT VENUE WOULD BE

 

5



 

PROPER IN ANY OF SUCH COURTS, AND HEREBY WAIVES ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.

 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AWARD AGREEMENT.

 

21.            Option Subject to Plan .  By entering into this Award Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan.  The Option is subject to the Plan.  The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference (subject to the limitation set forth in Section 19).  In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.  The Participant has had the opportunity to retain counsel, and has read carefully, and understands, the provisions of the Plan and the Award Agreement.

 

22.            Amendment .  The Committee may amend or alter this Award Agreement and the Option granted hereunder at any time; provided that, subject to Articles 11, 12 and 13 of the Plan, no such amendment or alteration shall be made without the consent of the Participant if such action would materially diminish any of the rights of the Participant under this Award Agreement or with respect to the Option.

 

23.            Severability . The provisions of this Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

24.            Signature in Counterparts .  This Award Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

[ SIGNATURE PAGE FOLLOWS ]

 

6



 

IN WITNESS WHEREOF, the parties hereto have executed this Award Agreement.

 

 

STR HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

Agreed and acknowledged as

 

 

of the date first above written:

 

 

 

 

 

 

 

 

 

 

 

PARTICIPANT

 

 

 



 

Annex 1

 

Vesting shall be in two (2) equal installments following the two successive Fiscal Years, beginning with the Fiscal Year ending on December 31, 2010 (for the 2010 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.  If the Performance Target for the 2010 Fiscal Year referred to above is not attained, the Yearly Amount for the 2010 Fiscal Year which is not then vested shall become vested and exercisable at the end of the second Fiscal Year 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 2010 Fiscal Year but is achieved for the 2011 Fiscal Year, in 2011, the Yearly Amounts for both 2010 and 2011 would become vested.

 

“Consolidated EBITDA” means Consolidated EBITDA as defined pursuant to that certain Credit Agreement, dated as of June 15, 2007, 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.

 

“Consolidated Net Debt” means (i) any Indebtedness of the Company and its subsidiaries minus (ii) 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.

 

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

 

“Fiscal Year” means the twelve month period ending on the last day of each calendar year.

 

“Indebtedness” means, without duplication, the sum of:  (i) all principal and accrued (but unpaid) interest owing by the Company and its subsidiaries for debt for borrowed money owed to any third party (specifically excluding intercompany debt between the Company and any of its subsidiaries and any subsidiary of the Company and another subsidiary of the Company); plus (ii) all obligations of the Company and its subsidiaries under leases that have been recorded as capital leases under GAAP; plus (iii) indebtedness of any person other than the Company or any of its subsidiaries that is guaranteed by the Company or any of its subsidiaries.

 

Restricted Stock Performance Target Calculation

 

 

 

2010

 

2011

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

82.3

 

$

103.5

 

EV / EBITDA Multiple

 

10.0

x

10.0

x

Enterprise Value

 

$

823.1

 

$

1,034.5

 

 

 

 

 

 

 

Less: Net Debt on Balance Sheet

 

(225.9

)

(206.4

)

Value of Common Equity

 

$

597.3

 

$

828.1

 

 

 

 

 

 

 

Performance Threshold

 

85.0

%

85.0

%

 

 

 

 

 

 

Performance Target

 

$

507.7

 

$

703.8

 

 




Exhibit 10.26

 

STR Holdings, Inc.
2009 Equity Incentive Plan

 

NONQUALIFIED STOCK OPTION AWARD AGREEMENT

 

THIS AGREEMENT (the “Award Agreement”) is made effective as of [                          ] (the “Date of Grant”) between STR Holdings, Inc., a Delaware corporation (with any successor, the “Company”), and [                      ] (the “Participant”):

 

R   E   C   I   T   A   L   S :

 

WHEREAS, the Company has adopted the STR Holdings, Inc.
2009 Equity Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Award Agreement.  Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and

 

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the option provided for herein to the Participant pursuant to the Plan and the terms set forth herein.

 

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

 

1.              Grant of the Option .  The Company hereby grants to the Participant the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of [                ] Shares, subject to adjustment as set forth in the Plan.   The Option is intended to be a nonqualified stock option, and is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended.

 

2.              Option Price .  The purchase price of the Shares subject to the Option shall be $[        ] per Share (the “Option Price”), subject to adjustment as set forth in the Plan.

 

3.              [Vesting .  Subject to the Participant’s continued Service on each vesting date, the Option shall vest in equal installments on each of the [                          ] anniversaries of the Date of Grant, so that [    ]% of the Option shall vest on each such anniversary.]

 

At any time, the portion of the Option which has become vested as described in this Section 3 is hereinafter referred to as the “Vested Portion.”  The Vested Portion of the Option shall remain exercisable for the period set forth in Section 6.

 

4.              Accelerated Vesting Upon a Change in Control . Upon the occurrence of a Change of Control, the unvested portion of the Option, to the extent not previously cancelled or forfeited, shall immediately vest in full, so long as the Participant’s Service has not been terminated before the date of the consummation of the Change of Control.

 

5.              Forfeiture .   If the Participant’s Service is terminated for any reason, the Option shall, to the extent not then vested, be cancelled by the Company without consideration and the Vested Portion of the Option shall remain exercisable for the period set forth in Section 6.

 



 

6.              Exercise of Option .

 

(a)            Period of Exercise .  Subject to the provisions of the Plan and this Award Agreement, the Participant may exercise all or any part of the Vested Portion of the Option at any time prior to the earliest to occur of:

 

(i)             the [          ] anniversary of the Date of Grant;

 

(ii)            the date that is ninety (90) days following termination of the Participant’s Service for any reason other than death, Permanent Disability or Cause;

 

(iii)           the date that is one (1) year following termination of the Participant’s Service due to death or Permanent Disability;

 

(iv)           the date of termination of the Participant’s Service due to Cause.

 

(b)            Method of Exercise .

 

(i)             Subject to Section 4, the Vested Portion of the Option may be exercised by delivering to the Company at its principal office written notice of intent to so exercise; provided that the Option may be exercised with respect to whole Shares only.  Such notice shall specify the number of Shares for which the Option is being exercised and shall be accompanied by payment in full of the Option Price.  In the event the Option is being exercised by the Participant’s representative, the notice shall be accompanied by proof (satisfactory to the Committee) of the representative’s right to exercise the Option.  The payment of the Option Price may be made at the election of the Participant (A) in cash or its equivalent (e.g., by cashier’s check), (B) to the extent permitted by the Committee, in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee, (C) partly in cash and, to the extent permitted by the Committee, partly in such Shares, (D) by reducing the number of Shares otherwise deliverable upon the exercise of the Option by the number of Shares having a Fair Market Value equal to the Option Price, or (E) if there is a public market for the Shares at such time, subject to such requirements as may be imposed by the Committee, through the delivery of irrevocable instructions to a broker to sell Shares obtained upon the exercise of the Option and to deliver promptly to the Company an amount out of the proceeds of such sale equal to the aggregate Option Price for the Shares being purchased.  The Committee may prescribe any other method of payment that it determines to be consistent with applicable law.  Neither the Participant nor the Participant’s representative shall have any rights to dividends or other rights of a stockholder with respect to Shares subject to an Option until the Participant has given written notice of exercise of the Option, paid in full for such Shares and, if applicable, has satisfied any other conditions imposed by the Committee pursuant to the Plan.

 

(ii)            Notwithstanding any other provision of the Plan or this Award Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole discretion determine to be necessary or advisable.

 

2



 

(iii)           Upon the Company’s determination that the Option has been validly exercised as to any of the Shares, the Company shall issue certificates in the Participant’s name for such Shares.  However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates to him, any loss of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.

 

(iv)           In the event of the Participant’s death, the Vested Portion of the Option shall remain exercisable during the period set forth in Section 6 by the Participant’s executor or administrator, or the person or persons to whom the Participant’s rights under this Award Agreement shall pass by will or by the laws of descent and distribution as the case may be.  Any heir or legatee of the Participant shall take rights herein granted subject to the terms and conditions hereof.

 

7.              No Right to Continued Service .  The granting of the Option evidenced hereby and this Award Agreement shall impose no obligation on the Company or any Affiliate to continue the Service of the Participant and shall not lessen or affect any right that the Company or any Affiliate may have to terminate the Service of such Participant.

 

8.              Securities Laws/Legend on Certificates .  The issuance and delivery of Shares shall comply with all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded.  If the Company deems it necessary to ensure that the issuance of securities under the Plan is not required to be registered under any applicable securities laws, each Participant to whom such security would be issued shall deliver to the Company an agreement or certificate containing such representations, warranties and covenants as the Company may deem necessary which satisfies such requirements. The certificates representing the Shares shall be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

9.              Transferability .  The Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant other than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.  No such permitted transfer of the Option to heirs or legatees of the Participant shall be effective to bind the Company unless the Committee shall have been furnished with written notice thereof and a copy of such evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions hereof.  During the Participant’s lifetime, the Option is exercisable only by the Participant.

 

10.            Adjustment of Option .  Adjustments to the Option (or any of the Shares underlying the Option) shall be made in accordance with the terms of the Plan.

 

3



 

11.            Definitions .  For purposes of this Award Agreement:

 

“Cause” shall have the meaning set forth in the Participant’s employment agreement with the Company or its Affiliates, if any, or if the Participant is not a party to an employment agreement with a definition of “Cause,” then “Cause” means the Participant’s (i) 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 Affiliates; (ii) 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) material breach of any employment agreement or non-competition agreement, which breach is not cured within 30 days following written notice; (iv) intentional wrongful act or gross negligence that has a material detrimental effect on the Company or its Affiliates; (v) unlawful use (including being under the influence) or possession of illegal drugs on the Company’s or any of its Affiliates’ premises; and (vi) the failure or refusal to follow the reasonable instructions of the board of directors of the Company or of any Affiliate of the Company, which failure or refusal is not cured within 30 days following written notice.

 

Permanent Disability” shall have the meaning set forth in the Participant’s employment agreement with the Company or its Affiliates, if any, or if the Participant is not a party to an employment agreement with a definition of “Permanent Disability,” then “Permanent Disability” means any physical or mental disability rendering the Participant unable to perform his or her duties for a period of at least one hundred twenty (120) days out of any twelve (12) month period.

 

“Share” means a share of common stock of the Company or such other class or kind of shares or other securities resulting from the application of Section 12.1 of the Plan.

 

12.            Withholding .  The Participant may be required to pay to the Company or any Affiliate and the Company shall have the right and is hereby authorized to withhold, any applicable withholding taxes in respect of the Option, its exercise or any payment or transfer under or with respect to the Option and to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes.

 

13.            Notices . Any notification required by the terms of this Award Agreement shall be given in writing and shall be deemed effective upon personal delivery or within three (3) days of deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid.  A notice shall be addressed to the Company, Attention: Secretary, at its principal executive office and to the Participant at the address that he or she most recently provided to the Company.

 

14.            Entire Agreement .  This Award Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof.  They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

 

15.            Waiver .  No waiver of any breach or condition of this Award Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.

 

4



 

16.            Successors and Assigns .  The provisions of this Award Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant, the Participant’s assigns and the legal representatives, heirs and legatees of the Participant’s estate, whether or not any such person shall have become a party to this Award Agreement and agreed in writing to be joined herein and be bound by the terms hereof.

 

17.            Choice of Law; Jurisdiction; Waiver of Jury Trial THIS AWARD AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAWS.

 

SUBJECT TO THE TERMS OF THIS AWARD AGREEMENT, THE PARTIES AGREE THAT ANY AND ALL ACTIONS ARISING UNDER OR IN RESPECT OF THIS AWARD AGREEMENT SHALL BE LITIGATED IN THE FEDERAL OR STATE COURTS IN DELAWARE.  BY EXECUTING AND DELIVERING THIS AWARD AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR ITSELF, HIMSELF OR HERSELF AND IN RESPECT OF ITS, HIS OR HER PROPERTY WITH RESPECT TO SUCH ACTION.  EACH PARTY AGREES THAT VENUE WOULD BE PROPER IN ANY OF SUCH COURTS, AND HEREBY WAIVES ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.

 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AWARD AGREEMENT.

 

18.            Option Subject to Plan .  By entering into this Award Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan.  The Option is subject to the Plan.  The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference (subject to the limitation set forth in Section 19).  In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.   The Participant has had the opportunity to retain counsel, and has read carefully, and understands, the provisions of the Plan and the Award Agreement .

 

19.            Amendment .  The Committee may amend or alter this Award Agreement and the Option granted hereunder at any time; provided that, subject to Articles 11, 12 and 13 of the Plan, no such amendment or alteration shall be made without the consent of the Participant if such action would materially diminish any of the rights of the Participant under this Award Agreement or with respect to the Option.

 

20.            Severability . The provisions of this Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

5



 

21.            Signature in Counterparts .  This Award Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

[ SIGNATURE PAGE FOLLOWS ]

 

6



 

IN WITNESS WHEREOF, the parties hereto have executed this Award Agreement.

 

 

STR HOLDINGS, INC.

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

Agreed and acknowledged as

 

 

of the date first above written:

 

 

 

 

 

 

 

 

 

 

 

 

PARTICIPANT

 

 

 

 




Exhibit 10.27

 

SUBSCRIPTION AGREEMENT

 

This SUBSCRIPTION AGREEMENT, dated as of September 30, 2009 (this “ Agreement ”), is by and between Specialized Technology Resources, Inc. (the “ Subscriber ”), and STR Holdings (New) LLC (the “ Company ”).

 

The Subscriber hereby subscribes for, and the Company hereby accepts such subscription and agrees to issue to the Subscriber 10 units representing membership interests in the Company, in consideration for the payment to the Company by the Subscriber of $1,000.00.

 

This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without regard to conflicts-of-law principles.

 

This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed an original, but such counterparts shall together constitute one and the same Agreement.

 

[ The remainder of this page is intentionally left blank. ]

 



 

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

 

 

Subscriber:

 

 

 

SPECIALIZED TECHNOLOGY RESOURCES, INC.

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

Company:

 

 

 

 

STR HOLDINGS (NEW) LLC

 

 

 

 

 

 

By:

/s/ BARRY A. MORRIS

 

Name:

Barry A. Morris

 

Title:

Executive Vice President and Chief

 

 

Financial Officer

 




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Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dennis L. Jilot, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of STR Holdings, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 17, 2009     /s/ DENNIS L. JILOT

      Name:   Dennis L. Jilot
      Title:   Chairman, President and
Chief Executive Officer
(Principal Executive Officer)



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CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Barry A. Morris, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of STR Holdings, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 17, 2009     /s/ BARRY A. MORRIS

      Name:   Barry A. Morris
      Title:   Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)



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CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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Exhibit 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as President and Chief Executive Officer of STR Holdings, Inc. (the "Company"), does hereby certify that to my knowledge:

      /s/ DENNIS L. JILOT

      Name:   Dennis L. Jilot
      Title:   Chairman, President and
Chief Executive Officer
(Principal Executive Officer)

Dated: November 17, 2009




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CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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Exhibit 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Executive Vice President and Chief Financial Officer of STR Holdings, Inc. (the "Company"), does hereby certify that to my knowledge:

      /s/ BARRY A. MORRIS

      Name:   Barry A. Morris
      Title:   Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)

Dated: November 17, 2009




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CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002