Exhibit 10.26


 


EXECUTION COPY




 





 


AMENDED AND RESTATED


LIMITED LIABILITY COMPANY OPERATING AGREEMENT


 


 


of


 


 


VGG HOLDING LLC


 


 


Dated as of August 15, 2007




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  ARTICLE II FORMATION

  	
  9

  
	
  2.1

  	
  Organization

  	
  10

  
	
  2.2

  	
  Name

  	
  10

  
	
  2.3

  	
  Term

  	
  10

  
	
  2.4

  	
  Registered Agent and Office

  	
  10

  
	
  2.5

  	
  Principal Office

  	
  10

  
	
  2.6

  	
  Purpose and Limitation on Activities

  	
  10

  
	
  2.7

  	
  Statutory Compliance

  	
  10

  
	
  2.8

  	
  Preservation of Status as Limited Liability Company

  	
  11

  
	
  2.9

  	
  Title to Property

  	
  11

  
	
  2.10

  	
  Payments of Individual Obligations

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE III CLASSES OF
  MEMBERSHIP, CONTRIBUTIONS AND CAPITAL ACCOUNTS

  	
  11

  
	
  3.1

  	
  Two Classes of Membership Interest

  	
  11

  
	
  3.2

  	
  Contributions

  	
  11

  
	
  3.3

  	
  Additional Members

  	
  11

  
	
  3.4

  	
  Maintenance of Capital Accounts

  	
  12

  
	
  3.5

  	
  Additional Capital Contributions

  	
  13

  
	
  3.6

  	
  Right of First Offer on Issuance of New Equity Securities

  	
  13

  
	
  3.7

  	
  Other Matters

  	
  14

  
	
  3.8

  	
  Redemption of Class A Membership Interests

  	
  14

  
	
  3.9

  	
  Issuance of Class B Membership Interests after the IPO

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV ALLOCATIONS AND
  DISTRIBUTIONS

  	
  15

  
	
  4.1

  	
  Allocation of Net Profits and Net Loss of the Company

  	
  15

  
	
  4.2

  	
  Reduction of Class B Percentage Interests

  	
  16

  
	
  4.3

  	
  Available Cash

  	
  17

  
	
  4.4

  	
  Distributions

  	
  17

  
	
  4.5

  	
  Distributions Other Than Cash

  	
  18

  
	
  4.6

  	
  Amounts Withheld

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE V RIGHTS AND DUTIES OF
  MEMBERS

  	
  18

  
	
  5.1

  	
  Liability of Members

  	
  18

  
	
  5.2

  	
  Representations and Warranties

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI INDEMNIFICATION OF
  MEMBERS

  	
  20

  
	
  6.1

  	
  General

  	
  20

  
	
  6.2

  	
  Company Expenses

  	
  20

  
	
  6.3

  	
  Limitations

  	
  21

  



 


i

















 


	
  ARTICLE VII MANAGEMENT

  	
  21

  
	
  7.1

  	
  General

  	
  21

  
	
  7.2

  	
  Board of Managers

  	
  22

  
	
  7.3

  	
  Indemnification of Managers and Officers; Exculpation of
  Managers

  	
  25

  
	
  7.4

  	
  Matters Requiring Investor Approval

  	
  26

  
	
  7.5

  	
  Other Businesses of Investors

  	
  27

  
	
  7.6

  	
  Certain Actions

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII DISPOSITION OF
  MEMBERSHIP INTERESTS; OTHER RIGHTS

  	
  28

  
	
  8.1

  	
  Restrictions on Transfer

  	
  28

  
	
  8.2

  	
  Rights of First Refusal on Transfers by Class A
  Members

  	
  29

  
	
  8.3

  	
  Class A Right of Co-Sale

  	
  31

  
	
  8.4

  	
  Liquidity Rights

  	
  32

  
	
  8.5

  	
  Class B Member Tag Along Rights

  	
  34

  
	
  8.6

  	
  Investor Drag Along Rights

  	
  34

  
	
  8.7

  	
  Repurchase by the Company

  	
  35

  
	
  8.8

  	
  Legends

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX ACCOUNTING AND
  RECORDS; BOARD OBSERVER RIGHTS; CERTAIN TAX MATTERS

  	
  36

  
	
  9.1

  	
  Records to be Maintained

  	
  36

  
	
  9.2

  	
  Reports

  	
  37

  
	
  9.3

  	
  Consultation

  	
  37

  
	
  9.4

  	
  Access

  	
  38

  
	
  9.5

  	
  Tax Returns; Information

  	
  38

  
	
  9.6

  	
  Tax Matters Member; Tax Matters

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE X WITHDRAWALS; ACTION FOR
  PARTITION

  	
  39

  
	
  10.1

  	
  Waiver of Partition

  	
  39

  
	
  10.2

  	
  Covenant Not to Withdraw or Dissolve

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI DISSOLUTION AND
  WINDING UP

  	
  39

  
	
  11.1

  	
  Dissolution; Liquidating Events

  	
  39

  
	
  11.2

  	
  Effect of Dissolution

  	
  39

  
	
  11.3

  	
  Distribution of Assets on Dissolution

  	
  39

  
	
  11.4

  	
  Winding Up and Certificate of Cancellation

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII AMENDMENT

  	
  40

  
	
  12.1

  	
  Amendment

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII MISCELLANEOUS PROVISIONS

  	
  40

  
	
  13.1

  	
  Confidentiality

  	
  40

  
	
  13.2

  	
  Logo

  	
  41

  
	
  13.3

  	
  Entire Agreement

  	
  41

  
	
  13.4

  	
  Loans by Members, Transactions with Affiliates

  	
  41

  
	
  13.5

  	
  No Partnership Intended for Nontax Purposes

  	
  41

  
	
  13.6

  	
  Rights Of Creditors and Third Parties under Agreement

  	
  42

  



 


ii

















 


	
  13.7

  	
  No Employment or Service Contract

  	
  42

  
	
  13.8

  	
  No Waiver

  	
  42

  
	
  13.9

  	
  Notices

  	
  42

  
	
  13.10

  	
  Binding Effect

  	
  42

  
	
  13.11

  	
  Construction

  	
  42

  
	
  13.12

  	
  Headings

  	
  42

  
	
  13.13

  	
  Severability

  	
  42

  
	
  13.14

  	
  Incorporation by Reference

  	
  43

  
	
  13.15

  	
  Further Action

  	
  43

  
	
  13.16

  	
  Variation of Pronouns

  	
  43

  
	
  13.17

  	
  Remedies

  	
  43

  
	
  13.18

  	
  Governing Law

  	
  43

  
	
  13.19

  	
  Counterpart Execution

  	
  43

  
	
  13.20

  	
  Consent to Jurisdiction

  	
  43

  
	
   

  	
   

  	
   

  
	
  SCHEDULE A

  	
  –
  Class A Members; Capital Contributions; Percentage Interests

  	
   

  
	
  SCHEDULE B

  	
  –
  Class B Members; Capital Contributions; Percentage Interests

  	
   

  
	
  EXHIBIT A

  	
  –
  Initial Board of Managers

  	
   

  
	
  EXHIBIT B

  	
  –
  Registration Rights Agreement

  	
   

  
				



 


iii














 


Amended and Restated Limited Liability
Company Operating Agreement


 


of


 


VGG HOLDING LLC


 


This Amended and Restated Limited Liability
Company Operating Agreement of VGG Holding LLC (the “Company”), a
Delaware limited liability company, is made and entered into and shall be
effective as of August 15, 2007, by and among The Veritas Capital Fund
III, L.P. (the “Veritas Fund”), AX Holding LLC (the “Veritas LLC”
and together with the Veritas Fund, “Veritas”), GS Direct, L.L.C (“Goldman”),
Golden Gate Capital Investment Fund II, L.P. (“GGC II”), Golden Gate
Capital Investment Annex Fund II, L.P. (“GGC Annex II”), Golden Gate
Capital Investment Fund II (AI), L.P., Golden Gate Capital Investment Annex
Fund II (AI), L.P., Golden Gate Capital Associates II-QP, LLC, Golden Gate
Capital Associates II-AI, LLC, CCG AV, LLC-series A, CCG AV, LLC-series C, CCG
AV, LLC-series I (collectively, “Golden Gate”, each of Veritas, Goldman
and Golden Gate and their respective Permitted Transferees individually an “Investor”
and collectively the “Investors”), those employees and non-employee
directors of AX Holding Corp., a Delaware corporation (“AX Holding”),
and/or the Subsidiaries of the Company (AX Holding together with any other
Subsidiaries of the Company being hereinafter collectively referred to as the “AX
Holding Group”) listed on the signature pages of this Agreement or who
may hereafter be admitted as Additional Members, and the other Persons listed
as Members on the signature pages of this Agreement.


 


WHEREAS, pursuant to the Limited Liability
Company Operating Agreement of VGG Holding LLC, dated as of July 13, 2007
(the “Existing Operating Agreement”), entered into by Veritas LLC, the
Company was originally formed; and


 


WHEREAS, the parties hereto desire to amend
and restate the Existing Operating Agreement in its entirety upon the terms set
forth herein;


 


NOW, THEREFORE, in consideration of the
mutual terms, covenants and conditions contained herein, Veritas and the other
Members party hereto hereby agree that the Existing Operating Agreement is
hereby amended and restated in its entirety as follows:


 


ARTICLE
I


 


DEFINITIONS


 


For purposes of this Agreement unless the
context clearly indicates otherwise, the following terms shall have the
following meanings:


 


“Act” means the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6.
§§18-101 to 18-1109.


 


“Additional Class A Members”
means those Persons admitted as Class A Members of the Company pursuant to
Section 3.3.


 

















 


“Additional Class B Members”
means those Persons admitted as Class B Members of the Company pursuant to
Section 3.3.


 


“Additional Members” means those
Persons admitted as Additional Class A Members or Additional Class B
Members of the Company pursuant to Section 3.3.


 


“Affiliate” shall mean with respect to
any Person, any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such Person, and with
respect to any individual, shall mean his or her spouse, sibling, child, step
child, grandchild, or parent of such Person, or the spouse thereof (“Immediate
Family”), or the heirs, executors, testamentary administrators,
testamentary trustees, testamentary legatees or testamentary beneficiaries of
any such Person or any member of their Immediate Family or a trust or family
limited partnership for the benefit of such Person or Persons, and, with
respect to a corporation, limited liability company or partnership, shall mean
its respective members, stockholders, general partners and/or limited partners,
officers, directors or managers as applicable. 
For purposes of this definition, “control” (including, with correlative
meanings, the terms “controlling,” “controlled by” and “under common control
with”), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise.


 


“Agreement” means this Amended and
Restated Limited Liability Company Operating Agreement, as originally executed
and as amended from time to time, as the context requires.  Words such as “herein”, “hereinafter”,
“hereto”, “hereby” and “hereunder”, when used with reference to this Agreement,
refer to this Agreement as a whole, unless the context otherwise requires.


 


“Applicable Law” means, for any
Person, any domestic or foreign law, rule or regulation, or judgment,
decree, order, permit, license, certificate of authority, order or governmental
approval, in each case, of or by any Governmental Entity, to which the Person
or any of its business is subject.


 


“Auction Notice” shall have the
meaning set forth in Section 8.4(a).


 


“Auction Sale” shall have the meaning
set forth in Section 8.4(a).


 


“Available Cash” means the gross cash
proceeds of the Company from all sources less all amounts used to pay or
establish reserves for all Company expenses, all as determined by the Board of
Managers.  “Available Cash” shall not be
reduced by depreciation, amortization, cost recovery deductions or similar
allowances, but shall be increased by any reductions of reserves previously
established pursuant to the first sentence of this definition.


 


“AX Holding” is defined in the
Preamble.


 


“AX Holding Group” is defined in the
Preamble.


 


2

















 


“AX Holding Shares” means shares of
common stock, par value $0.01 per share, of AX Holding (or any successor
thereto formed for the purpose of pursuing an initial public offering).


 


“Bankruptcy” means, with respect to a
Person, the occurrence of any of the following events:  (a) the filing by that Person of a
petition commencing a voluntary case in bankruptcy under applicable bankruptcy
laws; (b) entry against that Person of an order for relief under applicable
bankruptcy laws; (c) written admission by that Person of its inability to
pay its debts as they mature, or an assignment by that Person for the benefit
of creditors; or (d) appointment of a receiver for the property or affairs
of that Person.


 


“Board of Managers” is defined in Section 7.1(a).


 


“Book Value” means, with
respect to any Company property, the Company’s adjusted basis for federal
income tax purposes, adjusted from time to time to reflect the adjustments
required or permitted by Treasury Regulation Section 1.704-1(b)(2)(iv)(d)-(g).


 


“Business Day” means each day of the
calendar year other than days on which banks are required or authorized to
close in the State of Delaware.


 


“Capital Account” means the account
maintained for a Member determined in accordance with Article III.


 


“Capital Contribution” means the
amount of capital to be contributed by the Members to the Company as set forth
on Schedule A, as it may be modified or supplemented from time to time
pursuant to Sections 3.3 and 3.5.


 


“Certificate of Formation” means the
document filed with the Secretary of State of Delaware on July 13, 2007
and through which the Company was formed and any duly authorized, executed and
filed amendments or restatements thereof.


 


“Change of Control” is defined in Section 4.2(b).


 


“Class A Member” means a Member
identified on Schedule A at the time of reference.


 


“Class A Membership Interest”
means each Class A Membership Interest described in Section 3.1.


 


“Class A Percentage Interest”
means, with respect to any Class A Member, the Percentage Interest held by
such Class A Member in its capacity as a Class A Member, as set forth
opposite such Class A Member’s name on Schedule A, as it may be
modified or supplemented from time to time.


 


“Class B Limit” is defined in Section 3.3.


 


“Class B Member” means a Member
identified on Schedule B at the time of reference.


 


3

















 


“Class B Membership Interest”
means each Class B Membership Interest described in Section 3.1.


 


“Class B Percentage Interest”
means, with respect to any Class B Member, the Percentage Interest held by
such Class B Member in its capacity as a Class B Member, as set forth
opposite such Class B Member’s name on Schedule B, as it may be
modified or supplemented from time to time.


 


“Closing Date” shall mean the date on
which the transactions contemplated by the Merger Agreement are consummated.


 


“Code” means the Internal Revenue Code
of 1986, as amended from time to time (or any corresponding provisions of succeeding
law).


 


“Company” is defined in the Preamble.


 


“Competitive Activity” means , whether
individually, as a director, manager, member, stockholder, partner, owner,
employee, consultant or agent of any business, or in any other capacity, other
than on behalf of the Company or a Subsidiary, organize, establish, own,
operate, manage, control, engage in, participate in, invest in, act as a
consultant or advisor to or render services for (alone or in association with
any Person) any Competitor except for owning for passive investment purposes
not intended to circumvent this Agreement, less than five percent (5%) of the
publicly traded common equity securities of any Person.


 


“Competitor” shall mean any Person
(other than the Company and its Affiliates) engaged in the business of owning
or operating a business designing, engineering or manufacturing
microelectronics, test or measurement equipment to the aerospace, defense, or
automotive industry or communications markets, or integrated circuits to the
medical industry anywhere in the world.


 


“Confidential Information” means all
confidential and proprietary information (irrespective of the form of
communication) obtained by or on behalf of, a Member from the Company or its
Representatives or through the ownership of a Membership Interest in the
Company, other than information which (i) was or becomes generally
available to the public other than as a result of a breach of this Agreement by
such Member or Representative, (ii) was or becomes available to such Member
on a nonconfidential basis prior to disclosure to the Member by the Company or
their respective Representatives or through its ownership of a Membership
Interest in the Company, (iii) was or becomes available to the Member from
a source other than the Company or its Representatives or through such Member’s
ownership of a Membership Interest in the Company, provided that such source is
not known by such Member to be bound by a confidentiality agreement with the
Company, or (iv) is or was independently developed by such Member without
the use of any such information received under this Agreement.  Confidential information also includes,
subject to the foregoing exclusions, all understandings, agreements and other
arrangements between and among the Members, and all other non-public
information received from, or otherwise relating to the Company and the AX
Holding Group and any Member or any other investor in any of the foregoing.


 


“Co-Sale Member” shall have the
meaning set forth in Section 8.3(a).


 


4

















 


“Co-Sale Notice” shall have the
meaning set forth in Section 8.3(a).


 


“Decline Notice” shall have the
meaning set forth in Section 8.2(e).


 


“Distribution” means a transfer of
property to a Member on account of a Membership Interest as described in Article IV.


 


“Electing Member” is defined in Section 3.8.


 


“Equity Securities” is defined in Section 3.6.


 


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


 


“Excluded Class B Holders” means
employees, officers, or managers of either (i) an Investor, (ii) an
Affiliate of an Investor, or (iii) the direct or indirect general partner
or investment manager of a Person referred to in the foregoing clause (i) or
(ii).


 


“Fair Market Value” means, as of the
date of determination, (i) with respect to any cash, the amount thereof in
U.S. dollars as of such date, (ii) with respect to any security that is
listed on a U.S. national securities exchange, the average of the closing
prices per share of such security as reported on such exchange or market for
each of the ten (10) trading days immediately prior to such date, and (iii) with
respect to any other property, the value that would be paid by a willing buyer
to an unaffiliated willing seller in a transaction not involving distress or
necessity of either party, determined in good faith by the Board of
Managers.  The Board of Managers’
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
value of the property at issue is reasonably likely, in the determination of
the Board of Managers, to exceed $1,000,000.


 


“Financing Documents” means (i) the
Credit and Guaranty Agreement, dated as of August 15, 2007 among AX
Acquisition Corp., AX Holding, certain subsidiaries of AX Holding, Goldman
Sachs Credit Partners L.P., as Sole Lead Arranger and Sole Book Runner, as
Administrative Agent and as Sole Syndication Agent, and the other lenders named
therein, (ii) the Exchangeable Senior Unsecured Credit and Guaranty
Agreement, dated as of August 15, 2007 among AX Acquisition Corp., AX
Holding, certain subsidiaries of AX Holding, Goldman Sachs Credit Partners
L.P., as Sole Lead Arranger and Sole Book Runner, as Administrative Agent and
as Sole Syndication Agent, and the other lenders named therein and (iii) the
Exchangeable Senior Subordinated Unsecured Credit and Guaranty Agreement, dated
as of August 15, 2007 among AX Acquisition Corp., AX Holding, certain
subsidiaries of AX Holding, as Sole Lead Arranger and Sole Book Runner, as
Administrative Agent and as Sole Syndication Agent, and the other lenders named
therein and in each case any amendment or refinancing thereof.


 


“Fiscal Year” means the fiscal year of
the Company, as determined by the Board of Managers.


 


“GAAP” means accounting principles
generally accepted in the United States of America as in effect from time to
time, consistently applied and maintained throughout the applicable periods
both as to classification or items and amounts.


 


5

















 


“Golden Gate” is defined in the
Preamble.


 


“Goldman” is defined in the Preamble.


 


“Governmental Entity” means the United
States of America or any other nation, any state, province or other political subdivision,
any international or supra-national
entity, or any entity exercising executive, legislative, judicial, regulatory
or administrative functions of government, including any court, in each case
having jurisdiction over the Company or any of the property or other assets of
the Company.


 


“Initiating Holder” shall have the
meaning set forth in Section 8.4(a).


 


“Invested Capital” means the aggregate
amount of the Capital Contributions made by a Class A Member.


 


“Invested Capital Contribution Date”
means the date any Class A Member made a contribution of Invested Capital.


 


“Investor” and “Investors” are
defined in the Preamble.


 


“IPO” shall mean the first public
offering of common stock of any member of the AX Holding Group (or any
successor thereto formed for the purpose of pursuing an initial public
offering) pursuant to a registration statement filed with and declared
effective by the SEC either (x) resulting in proceeds to the Company of at
least $50 million or (y) approved by all the Investors.


 


“IPO Lock-Up Period” means the time
period required by the underwriters and specified in any lock-up letter entered
into by the Company and each of the Investors in connection with an IPO;
provided, that if the underwriters waive the restrictions under any such
lock-up letter with respect to any Investor the IPO Lock-Up Period shall end on
the date of such waiver.


 


“IPO Notice” shall have the meaning
set forth in Section 8.4(d).


 


“Manager” means a member of the Board
of Managers.


 


“Marketable Securities” means any
capital stock, bonds, notes, debentures, trust receipts, partnership interests,
instruments or evidences of indebtedness commonly referred to as securities,
warrants or options that (a) are of a class listed or quoted for trading
on one or more national securities exchanges on such date and (b) either (i) have
been registered under the Securities Act for issuance to the Members or (ii) are
subject to registration rights reasonably satisfactory to the Class A
Members.


 


“Member” means each Person who is a Class A
Member and/or a Class B Member.


 


6

















 


“Membership Interest” means the rights
of a Member in Distributions (liquidating or otherwise) and allocations of the
profits, losses, gains, deductions, and credits of the Company.


 


“Merger Agreement” means the Agreement
and Plan of Merger, dated as of May 25, 2007, by and among AX Holding, AX
Acquisition Corp. and Aeroflex Incorporated.


 


“Net Profits” and “Net Loss”
means, for each Fiscal Year or other period, an amount equal to the Company’s
taxable income or loss for such year or period, determined in accordance with
Code Section 703(a) (for this purpose, all items of income, gain,
loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall
be included in taxable income or loss), with the following adjustments:


 


(i)            any income of the Company that is exempt from
federal income tax not otherwise taken into account in computing Net Profits or
Net Loss shall be added to such taxable income or loss; and


 


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


 


“Observer” shall have the meaning set
forth in Section 7.2(m).


 


“Offered Membership Interests” shall
have the meaning set forth in Section 8.2(b).


 


“Other Member” is defined in Section 8.4.


 


“Percentage Interest” means, with
respect to any Member, the total percentage interest set forth opposite each
Member’s name on Schedule A or Schedule B, as the case may be, as
it may be modified or supplemented from time to time in accordance with the
terms of this Agreement.


 


“Permitted Transferee” means with
respect to any Member, an Affiliate of such Member.


 


“Person” shall mean any individual,
firm, partnership, corporation, trust, joint venture, association, joint stock
company, limited liability company, unincorporated organization or any other
entity or organization, including a government or agency or political
subdivision thereof, and shall include any successor (by merger or otherwise)
of such entity.


 


“Priority Return” means, for each calendar
quarter, a sum sufficient to result in a pre-tax 12% per annum internal rate of
return (compounded quarterly and accruing daily) on the Unreturned Invested
Capital of the Class A Members.  In
calculating (a) the amount of any Distribution to be made during a
calendar quarter, the portion of the Priority Return for such portion of such
quarter elapsing before such Distribution is made shall be taken into account
and (b) the Priority Return shall be calculated commencing from the
Invested Capital Contribution 


 


7

















 


Date. For the purposes of
calculating the Priority Return, the Special Distribution shall, with respect
to the Special Members, be considered Unreturned Invested Capital until it is
distributed to the Special Members pursuant to Section 4.4 hereof.


 


“Proceeding” means any administrative,
judicial, or adversary proceeding, including, without limitation, litigation,
arbitration, administrative adjudication, mediation, and appeal or review of
any of the foregoing.


 


“Purchase Offer” shall have the
meaning set forth in Section 8.2(a).


 


“Qualifying Sale Transaction” is
defined in Section 8.3.


 


“Redemption Notice” is defined in Section 3.8.


 


“Redemption Price” is defined in Section 3.8.


 


“Reduction Percentage” is defined in Section 4.2(a).


 


“Registration Rights Agreement” means
the Registration Rights Agreement of even date herewith by and between the
Company and AX Holding attached hereto as Exhibit B.


 


“Regulations” means, except where the
context indicates otherwise, the permanent and temporary regulations of the
Department of the Treasury under the Code, as such regulations may be lawfully
changed from time to time (including corresponding provisions of succeeding
regulations).


 


“Related Companies” shall have the
meaning set forth in Section 7.5.


 


“Representatives” is defined in Section 13.1.


 


“Residual Membership Interest” is
defined in Section 3.8.


 


“Rule 144” is defined in Section 5.2(i).


 


“Sale Notice” shall have the meaning
set forth in Section 4.4(a).


 


“Sale Transaction” means the
Transfer by the Investors of all of their Membership Interests to one or more
Persons or group of Persons (other than an Affiliate of the Investors).


 


“SEC” shall mean
the Securities and Exchange Commission, or any successor agency having
jurisdiction to enforce the Securities Act.


 


“Securities Act” means the Securities
Act of 1933, as amended.


 


“Senior Officer” shall mean the Chief
Executive Officer of AX Holding and any officer of AX Holding that reports
directly to the Chief Executive Officer of AX Holding.


 


“Special Distribution” means the sum
of $3,175,000 distributable to the Special Members under Section 4.4.


 


8

















 


“Special Members” means the
individuals designated as such on Schedule A. 
For the avoidance of doubt, the Special Members shall be Class A
Members; provided, that to the extent the Special Members hold Class B
Membership Interests, they will be subject to the terms of this Agreement
applicable to the Class B Members in so far as such provisions relate to
their Class B Membership Interests.


 


“Subsidiary” means, with respect to
any Person, any corporation, limited liability company, partnership,
association, bank, savings bank, or other organization or business entity,
whether incorporated or unincorporated, which is consolidated with such Person
for financial reporting purposes under GAAP. 
For purposes hereof, references to a “Subsidiary” of any Person shall be
given effect only at such times that such Person has one or more Subsidiaries
and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary
of the Company.


 


“Termination Date” is defined in Section 4.2(a).


 


“Total Percentage Interest” means the
sum of all outstanding Class A Percentage Interests and all Class B
Percentage Interests and shall be equal to 100%.


 


“Transfer” means any sale, transfer,
assignment, exchange, conveyance or other transfer, alienation, lease,
mortgage, pledge, encumbrance or hypothecation or other disposition of an interest
(whether with or without consideration, whether voluntary or involuntary or by
operation of law).  The terms “Transferee,”
“Transferor,” “Transferred,” and other forms of the word
“Transfer” shall have the correlative meanings.


 


“Unreturned Invested Capital” means,
with respect to any Class A Member, such Class A Member’s Invested
Capital less all distributions made with respect to such Member’s Unreturned
Invested Capital pursuant to Section 4.4(a).  If a Class A
Membership Interest is Transferred in accordance with the terms of this
Agreement, the Transferee of such interest shall succeed to the Unreturned
Invested Capital of the Transferor to the extent the Unreturned Invested
Capital relates to the interest so Transferred.


 


“Veritas” is defined in the Preamble.


 


“Veritas Fund” is defined in the
Preamble.


 


“Veritas LLC” is defined in the
Preamble.


 


ARTICLE
II


 


FORMATION


 


This Amended and Restated Limited Liability
Company Operating Agreement of VGG Holding LLC is entered into and shall be
effective as of the date first above written by and among the Members set forth
on the signature pages hereof, pursuant to the provisions of the Act, on
the following terms and conditions:


 


9

















 


2.1           Organization.  The Members hereby enter into this Agreement
for the purpose of establishing the affairs of the Company and the conduct of
its business in accordance with the provisions of the Act.


 


2.2           Name.  The name of the Company is “VGG Holding
LLC”.  All business conducted in the
State of Delaware shall be conducted under such name.  All business of the Company shall be
conducted under that name or under any other name, but in any case, only to the
extent permitted by Applicable Law.


 


2.3           Term.  The term of the Company commenced upon the
filing of the Certificate of Formation in accordance with the Act, and shall
continue until the existence of the Company is terminated pursuant to
Article XI.


 


2.4           Registered Agent and Office.  The registered agent for the service of
process and the registered office shall be that Person and location reflected
in the Certificate of Formation as filed in the office of the Secretary of
State of Delaware.  The Company may, from
time to time, change the registered agent or office through appropriate filings
with the Secretary of State of Delaware. 
In the event the registered agent ceases to act as such for any reason
or the registered office shall change, the Company shall promptly designate a
replacement registered agent or file a notice of change of address, as the case
may be.


 


2.5           Principal Office.  The principal office of the Company shall be
located c/o the Veritas Fund at 590 Madison Avenue, New York, New York 10022,
or at such other place as may be determined by the Board of Managers.  The Company may also have such other offices
as the Board of Managers may determine.


 


2.6           Purpose and Limitation on
Activities.


 


(a)           The purposes of the Company shall be (i) to hold, directly or
indirectly, the AX Holding Shares, to exercise all of the rights of a holder of
the AX Holding Shares and (ii) to take such other actions as may be
reasonably related to or incidental to the furtherance of the foregoing
purposes.


 


(b)           The Company (i) has not engaged and shall not engage in any business
or activities other than the business and activities set forth in Section 2.6(a),
(ii) does not have and shall not have any employees, and (iii) has
not incurred and shall not incur any liabilities other than liabilities
reasonably related to the performance of the Company’s obligations under this
Agreement and the operation of the Company.


 


2.7           Statutory Compliance.  The Company shall exist under and be governed
by, and this Agreement shall be construed in accordance with, the Applicable
Laws of the State of Delaware.  The Board
of Managers shall cause the Company to make all filings and disclosures
required by, and shall otherwise cause the Company to comply with, all such
laws.  The Board of Managers shall cause
an authorized person within the meaning of the Act to execute and file in the
appropriate records any assumed or fictitious name certificates and other
documents and instruments as may be necessary or appropriate with respect to
the formation of, and conduct of business by, the Company.


 


10














 


2.8           Preservation of Status as Limited Liability Company.  The Company shall (i)  maintain its
existence as a legal entity separate from the Members and any other Person; (ii) not
commingle its assets with assets of any other Person and hold all of its assets
in its own name; (iii)  conduct its business and own its properties in its
own name and comply in all material respects with organizational formalities to
maintain its separate existence; (iv) correct any known misunderstanding
regarding its separate identity; and (v)  observe in all material respects
the formalities required of a limited liability company under Delaware law.


 


2.9           Title to Property.  All real and personal property
owned by the Company shall be owned by the Company as an entity and no Member
shall have any ownership interest in such property in its individual name or
right, and each Member’s interest in the Company shall be deemed personal
property for all purposes.  The Company
shall hold all of its real and personal property in the name of the Company and
not in the name of any Member.


 


2.10         Payments of Individual Obligations. 
The Company’s credit and assets shall be used solely for the benefit of
the Company, and no asset of the Company shall be transferred or encumbered for
or in payment of any individual obligation of a Member.


 


ARTICLE
III


 


CLASSES
OF MEMBERSHIP, CONTRIBUTIONS AND CAPITAL ACCOUNTS


 


3.1           Two Classes of Membership Interest. 
The Company shall have two classes of Membership Interests, Class A
Membership Interests and Class B Membership Interests.  Class B Membership Interests shall be
issued only to employees or directors of the AX Holding Group who are not, at
the time of issuance, Excluded Class B Holders.  Each of the Class A Membership Interests
and Class B Membership Interests shall have identical rights, obligations
and privileges, except as otherwise provided in this Agreement.


 


3.2           Contributions.  The names, addresses, Capital
Contributions and Class A Percentage Interests of the Class A Members
are set forth on Schedule A.  The
names, addresses, Capital Contributions and Class B Percentage Interests
of the Class B Members are set forth on Schedule B.


 


3.3           Additional Members.  Subject, in the case of the
issuance of Class A Membership Interests, to Section 3.6, following
the Company’s formation, the Company may admit one or more Additional Class A
Members or Additional Class B Members from time to time by an amendment to
Schedule A or Schedule B, as the case may be, to this Agreement
approved in writing by the Board of Managers and the Additional Members in
accordance with this Agreement and no other consent or approval of any other
Members shall be required in connection therewith, except as provided in Section 7.4(a).  The Capital Contributions and Percentage
Interests of any Additional Members shall be reasonably determined by the Board
of Managers and valued at Fair Market Value by the Board of Managers (acting in
good faith and on behalf of the Company); provided, however, that
no Person shall be admitted as an Additional Class A Member or allocated a
Class A Membership Interest except upon the payment of a Capital
Contribution in the form of cash or securities or other property.  Upon the admission to the Company of any
Additional Members who are allocated Membership Interests in accordance


 


11

















 


with this Section 3.3,
the Membership Interests of the other Members shall be reduced accordingly on a
pro  rata basis.  Schedule
A and Schedule B shall be amended from time to time in accordance
with the provisions of this Section 3.3 effective as of the
effective date of the admission of an Additional Member to the Company.  As a condition to being admitted to the
Company, each Additional Member shall execute an agreement to be bound by the
terms and conditions of this Agreement. 
For avoidance of doubt, the issuance of Class B Percentage
Interests to Additional Class B Members shall reduce the Class A
Percentage Interests of the Class A Members on a pro rata basis until such
time as the aggregate Class A Percentage Interest is reduced to 90% and,
to the extent the aggregate Class B Percentage Interests would exceed 10%,
the Class B Percentage Interests of the Class B Members on a pro rata
basis; and the issuance of Class A Percentage Interests to Additional Class A
Members shall reduce the Class A Percentage Interests of the Class A
Members on a pro rata basis and the Class B Percentage Interests of the Class B
Members on a pro rata basis. Notwithstanding anything in this Agreement to the
contrary, (i) in no event shall the aggregate Class B Percentage
Interests exceed 10% (such limit, which shall be reduced proportionately in the
event of any issuance of Class A Membership Interests after the date of
this Agreement, the “Class B Limit”), and (ii) in the event
that Class B Percentage Interests are issued to Additional Class B
Members and the issuance or vesting of such Class B Percentage Interests
gives rise to a deduction for income tax purposes, such deduction shall be
specially allocated to the Class A Members in accordance with their
respective Class A Percentage Interests and, to the extent the aggregate Class B
Percentage Interests exceed 10% immediately prior to such issuance, to the Class B
Members immediately prior to such issuance in accordance with their respective Class B
Percentage Interests immediately prior to such issuance.


 


3.4           Maintenance of Capital Accounts. 
The Company shall establish and maintain Capital Accounts for each
Member.  Each Member’s Capital Account
shall be credited with (i) the amount of any money actually contributed by
the Member to the capital of the Company, (ii) the Fair Market Value of
any property actually contributed by the Member, as determined by the Board of
Managers (acting in good faith and on behalf of the Company) and the
contributing Member at arm’s length at the time of contribution (net of
liabilities assumed by the Company or subject to which the Company takes such
property), and (iii) the Member’s share of Net Profits (or items of income
or gain).  Each Member’s Capital Account
shall be decreased by (a) the amount of any money actually distributed to
the Member from the capital of the Company, (b) the Fair Market Value of
any property distributed to the Member, as reasonably determined by the Board
of Managers (acting in good faith and on behalf of the Company) at the time of
distribution (net of liabilities of the Company assumed by the Member or
subject to which the Member takes such property), and (c) the Member’s
share of Net Loss (or items of loss, expense or deduction).


 


In the event any Member Transfers any
Membership Interest in accordance with the terms of this Agreement, the
Transferee shall succeed to the Capital Account of the Transferor to the extent
it relates to the Transferred Membership Interest.


 


The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of Capital Accounts
are intended to comply with Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Regulations and any
amendment or successor provision thereto.


 


12

















 


3.5           Additional Capital Contributions. 
Other than contributions by Additional Members, no Member shall be
required to make any Capital Contributions to the Company in excess of the
amounts set forth in Schedule A. 
No Member may make an additional Capital Contribution without the prior
written consent of the Board of Managers, and any additional Capital
Contribution shall be in the form of cash or securities or other property.  At such time as any Member makes an
additional Capital Contribution to the Company, the Capital Contributions and
Percentage Interests of such Member shall be reasonably determined by the Board
of Managers and valued at Fair Market Value by the Board of Managers (acting in
good faith and on behalf of the Company), the Membership Interests of the other
Members shall be reduced accordingly on a pro  rata basis based on
such additional Capital Contribution.  Schedule
A and Schedule B shall be amended from time to time in accordance
with the foregoing provisions of this Section 3.5.


 


3.6           Right of First Offer on Issuance of New Equity Securities.


 


(a)           Prior to an IPO each Class A Member shall have a right of first
offer to purchase its pro  rata share (as defined below) of all
Equity Securities that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, including pursuant to Sections  3.3
and 3.5, other than the Equity Securities excluded by Section 3.6(d) hereof.  For purposes of this Section 3.6,
each Class A Member’s pro  rata share is equal to the ratio
of (a) the aggregate Class A Percentage Interests which such Member
is deemed to be a holder immediately prior to the issuance of such Equity
Securities to (b) the aggregate Class A Percentage Interests of all Class A
Members outstanding immediately prior to the issuance of the Equity
Securities.  The term “Equity
Securities” shall mean (i) any class or series of equity security of
the Company or any member of the AX Holding Group, (ii) any security
convertible, with or without consideration, into any such equity security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any such
equity security or (iv) any such warrant or right.


 


(b)           If the Company proposes to issue any Equity Securities, it shall give
each Class A Member written notice of its intention, describing the Equity
Securities, the price and the terms and conditions upon which the Company
proposes to issue the same.  Each Class A
Member shall have fifteen (15) Business Days from the giving of such notice to
agree to purchase his, her or its pro  rata share of the Equity Securities
for the price and upon the terms and conditions specified in the notice by
giving written notice to the Company and stating therein the quantity of Equity
Securities to be purchased. 
Notwithstanding the foregoing, the Company shall not be required to
offer or sell such Equity Securities to any Class A Member who would cause
the Company to be in violation of applicable federal securities laws by virtue
of such offer or sale.


 


(c)           If a Class A Member fails to exercise in full the right of first offer
set forth in this Section 3.6, the Company shall have ninety (90)
days thereafter to sell the Equity Securities in respect of which such Class A
Member’s rights were not exercised, at the same or a greater price, and upon
such terms and conditions (other than price) which, when taken as a whole, are
no more favorable to the purchasers thereof than those specified in the Company’s
notice to the Class A Members pursuant to this Section 3.6.  If the Company has not sold such Equity
Securities within ninety (90) days of the notice provided pursuant to this Section 3.6,
the


 


13

















 


Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities to
the Class A Members in the manner provided above.


 


(d)           The right of first offer established by this Section 3.6
shall have no application to any of the following Equity Securities:


 


(i)            Equity Securities issued to third-party debt
financing sources that are none of Veritas, Golden Gate, Goldman or their
respective Affiliates nor Excluded Class B Holders, at Fair Market Value
as determined by the Board of Managers (acting in good faith and on behalf of
the Company);


 


(ii)           Equity Securities issued as consideration to
a third party unaffiliated with Veritas, Golden Gate, Goldman or the Company in
a joint venture, merger, consolidation, acquisition or similar business
combination;


 


(iii)          Incentive Equity Securities issued to
Managers, officers, directors and employees of the Company or any of its
Subsidiaries in accordance with the terms of any applicable incentive plans of
the Company or any of its Subsidiaries approved by the Board of Managers;


 


(iv)          Equity Securities issued in connection with
an IPO; and


 


(v)           Equity Securities issued to a member of the
AX Holding Group.


 


3.7           Other Matters.


 


(a)           Except as otherwise provided in this Agreement, no Member shall demand or
receive a return of his, her or its Capital Contributions or withdraw from the
Company.  No Member shall have the right
to withdraw any part of his, her or its Capital Contributions from the Company
prior to its liquidation and termination, unless such withdrawal is permitted
under this Agreement.


 


(b)           No Member shall receive any interest, salary, or drawing with respect to
his, her or its Capital Contributions or his, her or its Capital Account or for
services rendered on behalf of the Company or otherwise in his, her or its
capacity as a Member.


 


3.8           Redemption of Class A Membership Interests.  Notwithstanding any other provision of this
Agreement, at any time from and after the occurrence of an IPO, any Class A
Member holding Class A Membership Interests may require the Company to
redeem all, but not less than all (other than any Residual Membership Interest
as defined below), of his, her or its Class A Membership Interests in
exchange for AX Holding Shares upon written notice (the “Redemption Notice”)
to the Company (each such Class A Member, an “Electing Member”).  The Redemption Notice shall be irrevocable
unless the Company agrees otherwise. 
Such Electing Member shall give the Company customary representations
and warranties on ownership of, and title to, its Class A Membership
Interests at the time of redemption.  The
redemption price for the Class A Membership Interests redeemed pursuant to
this Section 3.8 shall be an amount equal to the amount that would be
distributed to such Electing Member in respect of such Class A Membership
Interests subject to redemption if the Company were


 


14

















 


liquidated as of the date of
the Redemption Notice in accordance with Section 11.3 of the Agreement
(the “Redemption Price”); provided, however, that if the
Redemption Notice is given prior to the sixth anniversary of the Closing Date, (i) the
Redemption Price shall be calculated based on the assumption that the aggregate
Class B Percentage Interests is equal to the Class B Limit and that
the Class B Membership Interests in such amount are fully vested, and (ii) the
Electing Member shall, in addition to the Redemption Price, retain upon
redemption of such Class A Membership Interests, a residual membership
interest in the Company equal to such Electing Member’s pro rata share of any
increase in the aggregate Class A Membership Percentage Interest resulting
from the Class B Percentage Interest being less than the Class B
Limit upon the liquidation of the Company pursuant to Section 11.3 (the “Residual
Membership Interest”).  The
Redemption Price shall be paid in AX Holding Shares having a Fair Market Value
in the aggregate equal to the Redemption Price or, at the election of the
Electing Member, the cash proceeds of a number of AX Holding Shares sold by the
Company having a Fair Market Value in the aggregate equal to the Redemption
Price.  The redemption under this Section 3.8
shall occur on the fifth Business Day following the Company’s receipt of the
Redemption Notice or such other time and date as the Company and the applicable
Electing Member shall agree.  In the
event gain is recognized with respect to such redemption, appropriate
allocation of income shall be made to the Electing Member. In connection with
any redemption under this Section 3.8, the Company shall, and shall cause
AX Holding to, take all such actions as are necessary to ensure that such
Electing Member becomes a party to the Registration Rights Agreement and has
all of the rights and obligations of an Investor Holder under the Registration
Rights Agreement by entering into a joinder to the Registration Rights
Agreement with AX Holding, and upon the execution and delivery of such joinder
by such Electing Member and AX Holding, such Electing Member shall for all
purposes be an Investor Holder under the Registration Rights Agreement.


 


3.9           Issuance of Class B Membership Interests after the IPO.  From and after the IPO, the prior approval of
each of the Veritas Fund (so long as Veritas owns Membership Interests), Golden
Gate (so long as it owns Membership Interests) and Goldman (so long as it owns
Membership Interests) shall be required before the Company may issue any Class B
Membership Interests.


 


ARTICLE
IV


 


ALLOCATIONS
AND DISTRIBUTIONS


 


4.1           Allocation of Net Profits and Net Loss of the Company.


 


(a)           Net Profits and Net Loss of the Company in each Fiscal Year shall be
allocated to the Members in such a manner that, as of the end of such Fiscal
Year, the sum of the Capital Account of each Member shall be equal to the
respective net amounts, positive or negative, which would be distributed to
them under this Agreement, determined as if the Company were to (i) liquidate
the assets of the Company for an amount equal to their Book Value and (ii) distribute
the proceeds of liquidation pursuant to Section 11.3.


 


15

















 


(b)           In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax purposes
and its initial Fair Market Value using the “traditional method” under
Regulations Section 1.704-3(b).


 


4.2           Reduction of Class B Percentage Interests.  (a)  Subject to Section 4.2(b),
in the event that prior to August 15, 2012 or the fifth anniversary of the
date the subject Class B Member became a full-time employee or
non-employee director of the AX Holding Group, as the case may be (the “Employment/Directorship
Date”), whichever is later, the employment of a Class B Member by the
AX Holding Group on a full time basis terminates for any reason or a Class B
Member’s directorship with the AX Holding Group terminates for any reason, then
as of the date of such termination of full-time employment or termination of
directorship, as the case may be (the “Termination Date”), the Class B
Percentage Interest of such Class B Member shall be reduced by the
following percentage (the “Reduction Percentage”):


 


	
  Termination
  Date

  	
   

  	
  Reduction

  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Prior to August 15, 2008 or the first
  anniversary of the Employment/Directorship Date, whichever is later

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  After August 15, 2008 or the first
  anniversary of the Employment/ Directorship Date, whichever is later, but
  prior to August 15, 2009 or the second anniversary of the Employment/
  Directorship Date, whichever is later

  	
   

  	
  80

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  After August 15, 2009 or the second
  anniversary of the Employment/ Directorship Date, whichever is later, but
  prior to August 15, 2010 or the third anniversary of the Employment/
  Directorship Date, whichever is later

  	
   

  	
  60

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  After August 15, 2010 or the third
  anniversary of the Employment/ Directorship Date, whichever is later, but
  prior to August 15, 2011 or the fourth anniversary of the Employment/Directorship
  Date, whichever is later

  	
   

  	
  40

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  After August 15, 2011 or the fourth
  anniversary of the Employment/ Directorship Date, whichever is later, but
  prior to August 15, 2012 or the fifth anniversary of the
  Employment/Directorship Date, whichever is later

  	
   

  	
  20

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  After August 15, 2012 or the fifth
  anniversary of the Employment/Directorship Date, whichever is later

  	
   

  	
  0

  	
  %

  



 


16

















 


By way of example, if a Class B Member
whose Employment/Directorship Date was prior to August 15, 2007 were to
terminate his employment with AX Holding Group on August 15, 2010, his Class B
Percentage Interest would be reduced by 40%. 
For the avoidance of doubt, employment as a consultant shall not be
deemed to be “full-time employment”.


 


(b)           Upon a Change of Control, the Reduction Percentage shall be 0%.  For purposes of this Agreement, “Change of
Control” means the occurrence of any of the following events:


 


(i)            the Company ceases to be the record or
beneficial owner (as such term is defined in Rules 13d-3 and 13d-5 under
the Securities Exchange Act of 1934, as amended) of a majority in the aggregate
of the total voting power of all classes of capital stock of AX Holding then
outstanding and normally entitled to vote on the election of directors;


 


(ii)           the sale of all or substantially all of the
assets of the AX Holding Group to a third party not Affiliated with Veritas,
Golden Gate or Goldman; or


 


(iii)          a Sale Transaction.


 


(c)           Upon a reduction in the Class B Percentage Interest of a Class B
Member in accordance with Section 4.2(a), Schedule B shall
be amended to reflect such reduction, and the portion of such Class B
Member’s Class B Percentage Interest which is so reduced shall be
allocated to the Class A Members in proportion to their respective Class A
Percentage Interests.  In the event of
such a reduction, such Class B Member shall be entitled to no payment
whatsoever as compensation for such reduction in his or her Class B
Percentage Interest.


 


4.3           Available Cash.  Any distributions of Available
Cash shall be made as soon as practicable following the receipt thereof by the
Company.


 


4.4           Distributions.  Available Cash shall be
distributed to the Members as follows:


 


(a)           first, to the Class A Members in
proportion to their Unreturned Invested Capital until such time as they have
received cumulative distributions under this Section 4.4(a) equal
to all of their Invested Capital, and no distribution shall be made pursuant to
paragraphs (b), (c), (d) or (e) below until the Unreturned Invested
Capital of the Class A Membership Interests is equal to zero;


 


(b)           second to the Special Members in the
amount of the Special Distribution pro rata in accordance with their respective
Capital Contributions;


 


(c)           third, to the Class A Members in
proportion to their unpaid Priority Returns until such time as they have
received cumulative distributions under this Section 4.4(c) equal
to their Priority Return, and no distribution shall be made pursuant to
paragraphs (d) or (e) below until the full amount of the Priority
Return has been distributed to the Class A Members;


 


17

















 


(d)           fourth, to the Class B Members pro
rata in accordance with their respective Class B Percentage
Interests until such time as they have received pursuant to this Section 4.4(d) an
amount equal to the sum of (A) the product of (i) the aggregate Class B
Percentage Interests and (ii) the aggregate amount distributed to the Class A
Members under Section 4.4(c) plus (B) the product of (i) the
aggregate Class B Percentage Interests and (ii) the amount resulting
from the calculation in clause (A) plus (C) the product of (i) the
aggregate Class B Percentage Interests and (ii) the amount resulting
from the calculation in clause (B); and


 


(e)           thereafter, to the Members pro  rata
in accordance with their respective Percentage Interests, including any
Residual Membership Interest.


 


4.5           Distributions Other Than Cash. 
Except as set forth in Section 3.8 or a complete liquidation of the
Company pursuant to Section 11.3(b), the Company may not, without the
consent of each of the Investors, make distributions of Marketable Securities
or other property other than cash.  Upon
a distribution of Marketable Securities or other property other than cash, such
Marketable Securities or other in-kind property shall be deemed to have been
sold at their Fair Market Value (as determined by the Board of Managers in good
faith and acting on behalf of the Company) on the date of such distribution and
the proceeds of such sale shall be deemed to have been distributed to the
Members for all purposes of this Agreement.


 


4.6           Amounts Withheld.  All amounts withheld pursuant
to the Code or any provision of any state or local tax law with respect to any
payment, distribution or allocation to the Company or the Members shall be
treated as amounts distributed to the Members pursuant to this Section 4.6
for all purposes under this Agreement. 
The Company is authorized to withhold from distributions, or with
respect to allocations, to the Members and to pay over to any federal, state,
or local government any amounts required to be so withheld pursuant to the Code
or any provisions of any other federal, state or local law and shall allocate
such amounts to the Members with respect to which such amount was withheld.


 


ARTICLE
V


 


RIGHTS
AND DUTIES OF MEMBERS


 


5.1           Liability of Members. 
No Member shall be liable in its capacity as a Member for the
liabilities of the Company.  The failure
of the Company to observe any formalities or requirements relating to the
exercise of its powers or management of its business or affairs under this
Agreement or the Act shall not be grounds for imposing personal liability on
the Members for liabilities of the Company.


 


5.2           Representations and Warranties. 
As of the date of this Agreement, each of the Members hereby, severally
but not jointly, represents and warrants to each of the other Members and the
Company as follows:


 


(a)           The Membership Interest being acquired by such Member is being purchased
for such Member’s own account and not with a view to, or for sale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act or any applicable state securities laws except as provided in Section 8.1(b)(ii).  Such Member


 


18

















 


understands that his, her or its
Membership Interest has not been registered under the Securities Act or any
state securities laws by reason of their contemplated issuance in transactions
exempt from the registration and prospectus delivery requirements thereof and
that the reliance of the Company and others upon such exemptions is predicated
in part by the representations and warranties of such Member contained herein.  No other Person has any right with respect to
or interest in the Membership Interest acquired by such Member, nor has such
Member agreed to give any Person any such interest or right in the future.


 


(b)           Such Member has the requisite power and authority (whether corporate or
otherwise) and legal capacity to enter into, and to carry out his, her or its
obligations under, this Agreement.  The
execution and delivery by such Member of this Agreement and the consummation by
such Member of the transactions contemplated hereby have been duly authorized
by all necessary action (corporate or otherwise) on the part of such Member.


 


(c)           This Agreement has been duly executed and delivered by such Member and
constitutes a valid and binding obligation enforceable against such Member in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar law of general application
affecting creditors and general principles of equity.


 


(d)           Such Member is not subject to, or obligated under, any provision of (i) any
agreement, contract, arrangement or understanding, (ii) any license,
franchise or permit, or (iii) any law, regulation, order, judgment or
decree, that would be breached or violated, or in respect of which a right of
termination or acceleration or any encumbrance or other lien on any of such
Member’s assets would be created, by such Member’s execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.


 


(e)           No authorization, consent or approval of, waiver or exemption by, or
filing or registration with, any public body, court or other governmental
authority or any other third party is necessary on such Member’s part for the
consummation of the transactions contemplated by this Agreement that has not
previously been obtained by such Member.


 


(f)            No Person has or will have, as a result of any act or omission by such
Member, any right, interest or valid claim against the Company or any other
Member for any commission, fee or other compensation as a finder or broker, or
in any similar capacity, in connection with any of the transactions
contemplated by this Agreement.


 


(g)           Unless such Member is an individual, neither such Member nor any of its
Affiliates is, nor will the Company as a result of such Member holding an
interest in the Company be, an “investment company” as defined in, or subject
to regulation under, the Investment Company Act of 1940, as amended.


 


(h)           Such Member is acquiring his, her or its Membership Interest based upon
his, her or its own investigation, and the exercise by such Member of his, her
or its rights and the performance of his, her or its obligations under this
Agreement will be based upon his, her or its own investigation, analysis and
expertise.  Such Member has knowledge and
experience in financial and business matters such that such Member is capable
of evaluating the merits and risks of the investment contemplated by this
Agreement and such Member is able to bear the


 


19

















 


economic risk of his, her or its
investment in the Company (including a complete loss of his, her or its
investment).  During negotiation of the
transactions contemplated herein, such Member has been afforded full and free
access to books, financial statements, records, contracts, documents and other
information concerning the Company and the AX Holding Group, and has been
afforded the opportunity to ask questions concerning the business, operations,
financial condition, assets and liabilities of the Company and the AX Holding
Group and other relevant matters as such Member has deemed necessary or
desirable and has been provided with all such information as has been
requested.


 


(i)            Such Member recognizes that no public market exists for the Membership Interest
acquired hereunder, and no representation has been made to such Member that any
such public market will exist in the future. 
Such Member understands that he, she or it must bear the economic risk
of such Member’s investment in the Company indefinitely unless such Member’s
Membership Interest is registered pursuant to the Securities Act or an
exemption from such registration is available, and unless the disposition of
such Membership Interest is registered or qualified under applicable state
securities laws or an exemption from such registration or qualification is
available, and that the Company has no obligation or intention of so
registering or qualifying such Membership Interest.  Such Member understands that there is no
assurance that any exemption from the Securities Act will be available, or, if
available, that such exemption will allow such Member to dispose of or
otherwise Transfer any or all of such Member’s Membership Interest, in the
amounts or at the times any such Member might desire.  Such Member understands that at the present
time Rule 144 (other than Rule 144(k) promulgated under the
Securities Act by the Securities and Exchange Commission (“Rule 144”)) is
not applicable to the sale of any or all of such Member’s Membership Interest because
such Membership Interest is not registered under Section 12 of the
Securities Exchange Act of 1934, as amended, and the information concerning the
Company specified in Rule 144 is not publicly available.  Such Member acknowledges that the Company is
not presently under any obligation to register the Membership Interests under Section 12
of the Securities Exchange Act of 1934, as amended, or to make publicly
available the information specified in Rule 144 and that it may never be
required to do so.


 


ARTICLE
VI


 


INDEMNIFICATION
OF MEMBERS


 


6.1           General.  The Company, its receiver or
its trustee (to the extent of the Company’s assets) shall indemnify, save
harmless, and pay all judgments and claims against each Officer, Manager or
Member or any officers, directors or managers of such Member relating to any
liability or damage incurred by reason of any act performed or omitted to be
performed by such Member, Officer or Manager in connection with the business of
the Company, including reasonable attorneys’ fees and expenses incurred by such
Member, Officer or Manager in connection with the defense of any action based
on any such act or omission, which attorneys’ fees and expenses may be paid as
incurred, including all such liabilities under federal and state securities
laws (including the Securities Act) as permitted by law.


 


6.2           Company Expenses.  The Company shall indemnify,
save harmless, and pay all expenses, costs, or liabilities reasonably incurred
by any Member who for the benefit of the


 


20














 


Company and consistent with
its purpose, makes any deposit, acquires any option, or makes any other similar
payment or assumes any obligation in connection with any property proposed to
be acquired by the Company, which action shall have been consented to by the
Board of Managers, and who suffers any financial loss as the result of such
action.


 


6.3           Limitations.


 


(a)           Notwithstanding anything to the contrary in Sections 6.1 and 6.2
above, no Member shall be indemnified from any liability for fraud, bad faith,
willful misconduct, or gross negligence.


 


(b)           Notwithstanding anything to the contrary in Sections 6.1, 6.2
and 6.3(a) above, in the event that any provision of such Sections
is determined to be invalid in whole or in part, the remainder of such Sections
shall be enforceable to the maximum extent permitted by law.


 


ARTICLE VII


 


MANAGEMENT


 


7.1           General.


 


(a)           Except for situations in which the approval of any Member is expressly
required by non-waivable provisions of Applicable Law or as otherwise expressly
required by this Agreement, (i) the powers of the Company shall be
exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, a board of Managers (the “Board
of Managers”) and (ii) the Board of Managers may make all decisions
and take all actions for the Company not otherwise expressly provided for in
this Agreement including, without limitation, the issuance of Class B
Membership Interests not in excess of an aggregate of the Class B Limit
after giving effect to Class B Membership Interests granted as of such
date following such issuance; provided, however, that with respect to
any decisions made by the Board of Managers concerning the issuance of Class B
Membership Interests, (i) in no event shall the Chief Executive Officer,
or any other executive officer, of AX Holding participate in such determination
by the Board of Managers and (ii) such decisions shall require the
affirmative approval of at least one Manager designated by each of Golden Gate
and Goldman in each case so long as such party is entitled to designate a
Manager.  The Board of Managers shall be
the managers of the Company within the meaning of Section 18-402 of the
Act.  Subject to the Act or as otherwise
provided in this Agreement, the Board of Managers must act as a board, and no
individual Manager, as such, shall have any authority to bind or act for, or
assume any obligation or responsibility on behalf of, the Company unless
expressly authorized to do so by action taken by the Board of Managers in
accordance with this Agreement.


 


(b)           The Members shall not have regular meetings or voting rights with respect
to the management of the Company and, except as expressly required by
nonwaivable provisions of Applicable Law, shall not be entitled to vote on or
consent to or approve or disapprove actions or decisions regarding the Company
except for those matters requiring approval specified in Section 7.4
or otherwise expressly provided for in this Agreement.


 


21

















 


(c)           Subject to, and as limited by the provisions of this Agreement, the
Managers, in the performance of their duties as such, shall owe to the Company
and its Members fiduciary duties of the type owed under law by directors and
officers of a business corporation incorporated under the Delaware General
Corporation Law of the State of Delaware; provided that the doctrine of
corporate opportunity or any substantially analogous doctrine shall not apply
to the Managers designated by the Investors (“Investor Managers”) and provided,
further, that no Investor Manager and no Investor that designated such
Investor Manager shall have any duty to disclose to the Company or the Board of
Managers confidential information regarding any corporate opportunity or other
potential investment in such Investor Manager’s or Investor’s possession even
if it is material and relevant information to the Company and/or the Board of
Managers and neither such Investor Manager nor such Investor shall be liable to
the Company or the other Members for breach of any duty (including the duty of
loyalty and any other fiduciary duties) as a Manager or Member by reason of
such lack of disclosure of such confidential information.  The provisions of this Agreement, to the
extent that they restrict or eliminate the duties (including the duty of
loyalty and other fiduciary duties) and liabilities of an Investor Manager
otherwise existing at law or in equity or by operation of the preceding
sentence, are agreed by the Members to replace such duties and liabilities of
such Investor Manager.  If an Investor
Manager acquires knowledge of a potential transaction or matter that may be a
business opportunity for both the Investor that has the right to designate such
Investor Manager hereunder and the Company or another Member, such Investor
Manager shall have no duty to communicate or offer such business opportunity to
the Company or any other Member and shall not be liable to the Company or the
other Members for breach of any duty (including the duty of loyalty and any
other fiduciary duties) as a Manager by reason of the fact that such Investor
Manager directs such opportunity to the Investor that has the right to
designate such Investor Manager or any other Person, or does not communicate
information regarding such opportunity to the Company, and any such direction
of an opportunity by such Investor Manager, and any action with respect to such
an opportunity by such Investor, shall not be wrongful or improper or
constitute a breach of any duty hereunder, at law, in equity or otherwise.


 


7.2           Board of Managers.


 


(a)           The Board of Managers shall initially consist of eight (8) members
and be adjusted as provided in Section 7.2(g).  The chief executive officer of AX Holding
shall be a member of the Board of Managers during the term of his or her
employment as chief executive officer. 
The names of the initial members of the Board of Managers are set forth
on Exhibit A.


 


(b)           From and after the date hereof, if Veritas owns Percentage Interests of
at least 33%, the Veritas Fund shall have the right to appoint four (4) members
of the Board of Managers.  If Veritas
owns Percentage Interests of less than 33%, but continues to own Percentage
Interests of at least 27%, the Veritas Fund shall have the right to appoint
three (3) members of the Board of Managers.  If Veritas owns Percentage Interests of less
than 27% but continues to own Percentage Interests of at least 20%, the Veritas
Fund shall have the right to appoint two (2) members of the Board of
Managers.  If Veritas owns Percentage
Interests of less than 20%, but continues to own Percentage Interests of at
least 5%, the Veritas Fund shall have the right to appoint one (1) member
of the Board of Managers.


 


22

















 


(c)           From and after the date hereof, if Golden Gate owns Percentage Interests
of at least 33%, GGCII shall have the right to appoint two (2) members of
the Board of Managers and GGC Annex II shall have the right to appoint one (1) member
of the Board of Managers.  If Golden Gate
owns Percentage Interests of less than 33%, but continues to own Percentage
Interests of at least 20%, GGCII and GGC Annex II shall each have the right to
appoint one (1) member of the Board of Managers; provided, that, if
an increase of Percentage Interests is the result of a Transfer from an
Investor, then Golden Gate shall only have the right to designate additional
Managers if such Investor’s right to designate Managers has correspondingly
decreased.  If Golden Gate owns
Percentage Interests of less than 20%, but continues to own Percentage
Interests of at least 5%, GGC Annex II shall have the right to appoint one (1) member
of the Board of Managers.


 


(d)           From and after the date hereof, if Goldman owns Percentage Interests of
at least 33%, it shall have the right to appoint two (2) members of the
Board of Managers; provided, that, if an increase of Percentage
Interests is the result of a Transfer from an Investor, then Goldman shall only
have the right to designate additional Managers if such Investor’s right to
designate Managers has correspondingly decreased.  If Goldman owns Percentage Interests of less
than 33%, but continues to own Percentage Interests of at least 5%, it shall
have the right to appoint one (1) member of the Board of Managers.


 


(e)           Each Manager shall hold office until his or her successor shall have been
appointed and qualified or until his or her earlier resignation, removal, death
or disability.


 


(f)            Subject to Section 7.2(g), each Investor shall have the exclusive
right to remove, with or without cause, any Manager designated by such Investor
and to fill any vacancy created by the death, disability, removal or
resignation of any Manager designated by such Investor.


 


(g)           In the event of a change in the Percentage Interest of an Investor that
results in such Investor no longer having the right to appoint one or more
Managers, (i) such Investor shall cause such Manager(s) to resign
from the Board of Managers immediately upon the occurrence of such change and
(ii)the size of the Board of Managers shall be reduced by the number of
Managers that have so resigned.  In the
event of a change in Percentage Interests of an Investor that results in such
Investor having the right to appoint one or more additional Managers, the size
of the Board of Managers shall be increased by the number of such additional
Managers.


 


(h)           The Board of Managers may not form or delegate any authority to any
committee or subset of the Board of Managers without the written consent of
each Investor then entitled to appoint one or more Managers.


 


(i)            The Board of Managers may, from time to time, designate one or more
persons to be officers of the Company (the “Officers”).  The Officers so designated shall have such
authority and perform such duties as the Board of Managers may, from time to
time, delegate to them.


 


23

















 


(j)            Each Officer shall serve until the earlier of his death, disability,
resignation or removal by the Board of Managers.  Any vacancy occurring in the office of any
Officer may be filled by the Board of Managers.


 


(k)           The composition of the board of directors of each of the Company’s
Subsidiaries shall be the same as that of the Board of Managers (except that
the Managers appointed by the Investors may determine in their discretion not
to serve on any such board of directors) or, alternatively, the board of
directors of Aeroflex Incorporated and each of the Company’s Subsidiaries shall
approve an authority matrix which shall provide that any matter requiring the
approval of the board of directors of such Subsidiary or any matter that is
subject to approval pursuant to Section 7.4(a) shall also require
approval of the Board of Managers or the board of directors of AX Holding.  Notwithstanding the foregoing, the
composition of the board of directors of AX Holding shall at all times be the
same as the Board of Managers.


 


(l)            Veritas shall have the right, so long as it has the right to designate
any Managers pursuant to Section 7.2, in addition to such Managers, to
appoint not more than three board observers (each an “Observer”) to
attend meetings of the Board of Managers and board of directors of AX Holding
or any committee thereof.  Any Observer
so appointed shall have the right to attend any meeting of the Board of
Managers and board of directors of AX Holding and any committee thereof and
shall be provided with all materials provided by or on behalf of the Company to
the members of the Board of Managers and board of directors of AX Holding or
such committee; provided, however, that any such Observer shall be excluded
from attending any board meeting or receiving any materials to the extent
necessary to preserve attorney-client privilege, to safeguard highly
proprietary or classified information or in the case of any conflict of
interest involving such Observer or the Person or group designating such
Observer.


 


(m)          Written notice stating the place, day and time of every meeting of the
Board of Managers and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be mailed not less than five nor more
than thirty calendar days before the date of the meeting (or if sent by
facsimile or email, not less than three Business Days before the date of the
meeting), in each case to each Manager at his or her notice address maintained
in the records of the Company.  Such
further notice shall be given as may be required by Applicable Law, but
meetings may be held without notice if all the members of the Board of Managers
entitled to vote at the meeting are present in person or by telephone or
represented by proxy or if notice is waived in writing by those not present,
either before or after the meeting.


 


(n)           Unless otherwise provided by Applicable Law or this Agreement, the presence of Managers constituting a majority
of the voting authority of the whole Board of Managers shall be necessary to
constitute a quorum for the transaction of business.  If such quorum is not present within sixty
minutes after the time appointed for such meeting, such meeting shall be
adjourned and the President or acting Chairman shall reschedule the meeting to
be held not fewer than two nor more than ten Business Days thereafter.  If such meeting is rescheduled two
consecutive times, then those Managers who are present or represented by proxy
at the second such rescheduled meeting shall constitute a valid quorum for all
purposes hereunder; provided that written notice of any rescheduled meeting
shall have been delivered to all Managers at least two Business Days prior to
the date of such rescheduled meeting. 
Notwithstanding any provision to the contrary contained herein,
interested Managers may be 


 


24

















 


counted in determining the
presence of a quorum at a meeting of the Board of Managers or of a committee
that authorizes any interested party contract or transaction.


 


7.3           Indemnification of Managers and Officers; Exculpation of Managers.


 


(a)           The Company shall indemnify and hold harmless, to the fullest extent
permitted by Applicable Law, any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a Manager or an Officer of the Company
(each, an “Indemnitee”), against expenses (including reasonable and
documented attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding; provided, however, no Indemnitee shall be entitled to
indemnification under this Section 7.3 if his actions were in bad
faith, were not done with reasonable belief that such actions were in the best
interests of the Company or with respect to a criminal act, to the extent such
Indemnitee had reasonable cause to believe his conduct was unlawful.


 


(b)           The Company shall pay or reimburse expenses (including reasonable and
documented attorneys’ fees) incurred by an Indemnitee in defending a civil,
criminal, administrative or investigative action, suit or proceeding brought by
a party (including on behalf of the Company) against the Indemnitee in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Indemnitee to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company as authorized in this Section 7.3.


 


(c)           Notwithstanding any other provision of this Section 7.3, the
Company shall pay or reimburse expenses (including reasonable and documented
attorneys’ fees) incurred by an Indemnitee in connection with such Indemnitee’s
appearance as a witness or other participant on behalf of the Company in a
proceeding involving or affecting the Company at a time when the Indemnitee is
not a named defendant or respondent in the proceeding.


 


(d)           The right of indemnification and reimbursement provided in this Section 7.3
shall be in addition to any rights to which an Indemnitee may otherwise be
entitled and shall inure to the benefit of the executors, administrators,
personal representatives, successors or assigns of each Indemnitee.


 


(e)           The rights to indemnification and reimbursement provided for in this Section 7.3
may be satisfied only out of the assets of the Company and none of the Members
shall be personally liable for any claim for indemnification or reimbursement
under this Section 7.3.


 


(f)            No Manager shall be personally liable for monetary damages to any other
Manager, the Company, any Member or any other Person for any loss suffered by
the Company or any monetary damages for breach of fiduciary duties as a Manager
except (i) for any breach of such Manager’s duty of loyalty to the Company
or its Members, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, or (iii) for
any transaction from which such Manager derived an improper personal
benefit.  The Managers shall 


 


25

















 


not be liable for the good faith
exercise of business judgment.  Any
Manager may consult with counsel and accountants and any Member, Manager,
Officer, employee, committee or other professional expert in respect of Company
affairs, and provided the Manager acts in good faith reliance upon the advice
or opinion of such counsel or accountants or other persons, the Manager shall
not be liable for any loss suffered by the Company in reliance thereon.  No Manager shall be (i) personally
liable for the debts, obligations or liabilities of the Company, including any
such debts, obligations or liabilities arising under a judgment, decree or
order of a court; (ii) obligated to cure any deficit in any Capital
Account; (iii) required to return all or any portion of any Capital
Contribution; or (iv) required to lend any funds to the Company.


 


(g)           The Company shall obtain and cause at all times to be maintained in
effect, with financially sound insurers, a policy of Managers’ and officers’
liability insurance in a scope and amount customary for a business of its
nature.


 


7.4           Matters Requiring Investor Approval.


 


(a)           The approval of each of the Veritas Fund (so long as Veritas owns
Membership Interests), Golden Gate (so long as it owns Membership Interests)
and Goldman (so long as it owns Membership Interests) shall be required before
the Company may do, or commit to do, or permit the AX Holding Group to do, or
commit to do, any of the following:


 


(i)            until the fifth anniversary of the Closing
Date, any Change of Control, merger, consolidation, liquidation, dissolution or
recapitalization of membership interest or capital stock, as applicable, of the
Company or any member of the AX Holding Group (including any distribution of
dividends and any reorganization) and any public offering of securities of the
Company or any member of the AX Holding Group (whether by such entity or an
equityholder thereof or otherwise);


 


(ii)           any Transfer of Equity Securities, except as
permitted under Article VIII;


 


(iii)          prior to the expiration of the IPO Lock-Up
Period, any purchase, acquisition, investment in, sale, transfer, lease or
other disposition of any asset or group of assets (including equity interests)
with a book value or fair market value in excess of $25,000,000;


 


(iv)          prior to the expiration of the IPO Lock-Up
Period, any redemption or repurchase of membership interest or capital stock,
as applicable, of the Company or any member of the AX Holding Group other than
the repurchase of Class A Membership Interests pursuant to the
Contribution and Subscription Agreement dated as of the date hereof, between
Leonard Borow and the Company, and the repurchase by the Company of Class B
Membership Interests pursuant to Section 8.7 of this Agreement;


 


(v)           (A) the issuance of any Membership
Interests other than Class B Membership Interests up to the Class B
Limit after giving effect to Class B Membership Interests granted as of
such date following such issuance, (B) prior to the expiration of the IPO
Lock-Up Period, any issuance of Equity Securities, other than Membership 


 


26

















 


Interests, or (C) any
increase in the Percentage Interest of any Membership Interest, subject to the
last sentence of Section 3.3;


 


(vi)          prior to the expiration of the IPO Lock-Up
Period, any amendment, modification or waiver of the certificate of formation
of the Company, the certificate of incorporation or bylaws (or similar
organizational documents) of any member of the AX Holding Group or the
Financing Documents;


 


(vii)         entering into any transaction with any Investor, one
or more Affiliates of an Investor, or employees of an Investor or Affiliate of
an Investor, except transactions with portfolio companies of an Investor in the
ordinary course and on terms no less favorable to the Company or AX Holding
Group than those that would have been obtained in a comparable transaction by
the Company with a Person that is not an Affiliate of an Investor;


 


(viii)        prior to the expiration of the IPO Lock-Up Period,
hire, remove from office, dismiss or terminate the employment of, or amendment
or modification of any compensation arrangement of any Senior Officer;


 


(ix)           prior to the expiration of the IPO Lock-Up
Period, the approval of each annual budget of AX Holding (including management
bonus programs) and any material deviation from an approved budget; provided,
that if the Investors cannot agree to an annual budget, then the budget in
place for the prior year, with a 3% increase, shall be the annual budget, so
long as such budget, as modified, is consistent with and does not deviate from
that required by AX Holding to comply with covenants contained in the Financing
Documents and is consistent with the original projections provided to lenders
under the Financing Documents (and if otherwise, the budget will continue to be
subject to the approval of the Investors);


 


(x)            take any action that would cause the Company
to be taxed as a corporation for United States federal or state tax purposes;
or


 


(xi)           agree or commit to take any action set forth
in (i) through (x) above.


 


(b)           Each Investor agrees to cause any member of the board of directors of AX
Holding designated by such Investor not to permit any action set forth in Section 7.4(a) (i) through
(xi) to be taken unless approved by the Investors in accordance with Section 7.4(a).


 


7.5           Other Businesses of Investors. 
Each of the Members and the Company (i) acknowledges that the
Investors and their respective Affiliates own, and from time to time may
acquire and own, one or more Subsidiaries or investments in one or more other
entities (such Subsidiaries and entities, collectively, “Related Companies”)
that are direct competitors of, or that otherwise may have interests that do or
could conflict with those of the Company or a Subsidiary or Affiliate of the
Company, and (ii) agree that (A) the enjoyment, exercise and
enforcement of the rights, interests, privileges, powers and benefits granted
or available to the Investors and their respective Affiliates under this Agreement
shall not be in any manner reduced, diminished, affected or impaired, and the
obligations of the Investors or their respective 


 


27

















 


Affiliates or Subsidiaries
under this Agreement shall not be in any manner augmented or increased, by
reason of any act, circumstance, occurrence or event arising from or in any
respect relating to (x) the ownership by a Member or any of its Affiliates
or Subsidiaries of any interest in any Related Company, (y) the affiliation
of any Related Company with an Investor or any of its Affiliates or
Subsidiaries or (z) any action taken or omitted by an Investor or any of
its Affiliates or Subsidiaries in respect of any Related Company or in respect
of any Affiliate or Subsidiary of any Investor that directly or indirectly owns
any interest in any Related Company, (B) neither any Investor nor any of
its Affiliates or Subsidiaries (with the exception of Managers (in their
capacities as such) designated by a Member) is, and none shall by reason of
such ownership or any such action become, subject to any fiduciary duty to the
Company or any of its Subsidiaries or Affiliates, (C) none of the duties
imposed on an Investor or any of their respective Affiliates, whether by
contract or law, do or shall limit or impair the right of an Investor and their
respective Affiliates and Subsidiaries (including each Related Company)
lawfully to compete with the Company and its Affiliates and Subsidiaries as if
the Investors were not a party to this Agreement and (D) the Investors and
their respective Affiliates and Subsidiaries (including each Related Company)
are not and shall not be obligated to disclose to the Company or any of its
Subsidiaries and Affiliates any information related to its business or
opportunities, including acquisition opportunities, or to refrain from or in
any respect to be restricted in competing against the Company or any of its
Subsidiaries or Affiliates in any such business or as to any such
opportunities.


 


7.6           Certain Actions.  The Company shall not take any
action that would cause the Company to become an “investment company” as
defined in, or subject to regulation under, the Investment Company Act of 1940,
as amended.


 


ARTICLE
VIII


 


DISPOSITION
OF MEMBERSHIP INTERESTS; OTHER RIGHTS


 


8.1           Restrictions on Transfer.


 


(a)           Each Member agrees with each other Member and the Company that such
Member shall not Transfer directly or indirectly (including by Transferring a
majority of the interests in such Member or such Member’s parent entity) all or
any portion of Membership Interests held by such Member except as hereinafter
expressly permitted in this Article 8 (each such permitted Transfer, a “Permitted
Transfer”).  Any purported Transfer
in violation of this Agreement shall be null and void ab  initio
and the Company shall not recognize any such Transfer or accord to any
purported Transferee any rights as a Member of the Company.


 


(b)           (i)  Each Class A Member shall have the right to Transfer any
or all of the Class A Membership Interest owned by him, her or it, to a
Permitted Transferee, provided that at the time of any such Transfer, each such
Transferee agrees in writing (in form and substance satisfactory to the
Company) to be bound by all of the provisions of this Agreement applicable to
the Transferring Member so long as he, she or it continues to own any of the Class A
Membership Interest so Transferred.


 


28

















 


(ii)  Goldman shall have the right to Transfer
up to 30% of the Class A Percentage Interests held by it on the Closing
Date to one or more Persons upon the prior written consent of each of Veritas
and Golden Gate.


 


(c)           Until the earlier of (i) the third anniversary of the Closing Date
and (ii) the IPO, no Class A Member may Transfer any Membership
Interests except pursuant to Section 8.1(b).  From and after the third anniversary of the
Closing Date until the IPO, any Transfer of Class A Membership Interests
(including by Transferring a majority of the interests in such Member or such
Member’s parent entity), other than a Transfer pursuant to Section 8.1(b),
shall be subject to the right of first refusal provisions in Section 8.2
and the right of co-sale provisions in Section 8.3.


 


(d)           No Class B Member may, directly or indirectly, Transfer all or a
portion of his, her or its Membership Interests except (a) to a Permitted
Transferee, (b) pursuant to Rule 144, or (c) as otherwise
expressly provided in Section 8.4, 8.5, 8.6 or 8.7.


 


(e)           In no event shall any Member Transfer any Membership Interests to a
Competitor, and any such Transfer shall be void and of no force or effect; provided,
however, that any Member may Transfer Membership Interests to a
Competitor in connection with an Auction Sale pursuant to Section 8.4.


 


(f)            Notwithstanding anything in this Article 8 to the contrary,
no Transfer shall be permitted if the Board of Managers determines such
Transfer would cause, or create a significant risk of causing, the Company to
be taxed as a corporation pursuant to Code Section 7704 and the
Regulations thereunder.


 


8.2           Rights of First Refusal on Transfers by Class A Members.


 


(a)           If, at any time from and after the third anniversary of the Closing Date
until the IPO, any Class A Member (“Selling Holder”) wishes to
Transfer all or any portion of its Membership Interests other than pursuant to Section 8.1(b),
such Transfer of Membership Interests (“Offered Membership Interests”)
shall be made pursuant to the terms of a bona fide written all-cash offer
received from a third party.  In such event:


 


(i)            Such Selling Holder shall promptly notify the
Company in writing of such offer to sell such Offered Membership Interests,
which offer shall disclose (A) the identity of the proposed Transferee(s),
(B) the Percentage Interest represented by the Offered Membership
Interests proposed to be Transferred, (C) the Percentage Interests that
would be owned by the Selling Holder following such proposed Transfer and (D) all
of the material terms and conditions contained in the offer, and shall enclose
a copy of the written offer (the “Purchase Offer”).  The Purchase Offer shall further state that
the Company may acquire, in accordance with the provisions of this Section 8.2(a),
all or any portion of the Offered Membership
Interests for the same price and upon
the same terms and conditions set forth therein.  Within 15 calendar days after the receipt of
the Purchase Offer, the Company shall give notice to such Selling Holder of its
intent to purchase all or any portion of the Offered Membership Interests,
which, when taken in conjunction with the Purchase Offer, shall, subject to the
Company’s compliance with the Act, be 


 


29

















 


deemed to constitute a
valid, legally binding and enforceable agreement between the Selling Holder and
the Company for the sale and purchase of the Offered Membership Interests
covered thereby upon the terms of the Purchase Offer.  Any determination by the Company to acquire
all or any portion of the Offered Membership Interests hereunder shall be made
solely with the consent of each of the Investors (other than any Investor that
is the Selling Holder).


 


(ii)           In the event that the Company does not elect
to purchase all of the Offered Membership
Interests during such 15-day
period, then (A) the Selling Holder shall give prompt written notice to
each other Class A Member and (B) the Selling Holder shall make the
Purchase Offer (the “Subsequent Offer”) to such Class A Members
with respect to any Offered Membership Interests not elected to be purchased by the Company
pursuant to the previous clause (the “Unpurchased Membership Interests”).  Each such
Member shall have the right to purchase an amount of the Unpurchased Membership
Interests equal to such Member’s Percentage Interest.  Within 10 days after receipt of the Subsequent
Offer, each such Member shall give notice to such Selling Holder of its intent
to purchase all or any portion of Unpurchased Membership
Interests pursuant to the immediately preceding sentence.  If, upon expiration of such 10-day period, one or
more Members does not give notice to such Selling Holder of its intent to
purchase all of the Unpurchased Membership Interests to which it is entitled,
each Class A Member who has given notice to such Selling Holder shall have
the right to purchase an amount of such Unpurchased Membership Interests equal
to the Percentage Interest of such Class A Member divided by the aggregate
Percentage Interests of all Class A Members exercising their right to
purchase Unpurchased Membership Interests. 
A Class A Member’s notice to the Selling Holder of its intent to
purchase Unpurchased Membership Interests shall, when taken in conjunction with
the Subsequent Offer, be deemed to constitute a valid, legally binding and
enforceable agreement between the Selling Holder and such Member for the sale and purchase of the Unpurchased Membership Interests
covered thereby upon
the terms of the Purchase Offer.


 


(iii)          Notwithstanding the foregoing, the Company
and a Class A Member shall only have the right to purchase Offered Membership Interests
pursuant to this Section 8.2 (a) if they are purchasing, in
the aggregate, all of the Offered Investor Membership
Interests.


 


(b)           Any Transfer by any Member (other than to a Permitted Transferee) shall
be for cash only.


 


(c)           Transfers of Class A Membership Interests to the Company or the Class A
Members under the terms of this Section 8.2 shall be made at the
offices of the Company on a mutually satisfactory Business Day within 30 days
after the expiration of the last applicable periods described in Section 8.2(a).  Delivery of certificates or other instruments
evidencing such Class A Membership Interests duly endorsed for Transfer
shall be made on such date against payment of the purchase price therefor, and
pursuant to documentation customary in transactions of a similar nature.


 


30














 


(d)           If all of the Offered Membership Interests offered by a Selling Holder
pursuant to this Section 8.2 are not purchased by the Company or
the Class A Members, such Selling Holder shall provide notice thereof to
the Company and the Class A Members (a “Decline Notice”), and the
unpurchased Offered Membership Interests may be sold by such Selling Holder to
the third party purchaser set forth in the Purchase Offer at any time within 90
days after the last applicable time period has expired.  Any such sale shall be at not
less than the price and upon other terms and conditions, if any, not more
favorable to the third party purchaser than those specified in the Purchase
Offer.  Any Membership Interests not sold
within such 90-day
period shall continue to be subject to the requirements of this Section 8.2.


 


(e)           The election by the Company or a Class A Member  not to exercise its rights under
this Section 8.2 in any one instance shall not affect the rights of
the Company or
such Class A Member as to any subsequent proposed Transfer.


 


8.3           Class A Right of Co-Sale. 
(a) From and after the third anniversary of the Closing Date until
the IPO, if any Class A Member (the “Transferring Holder”) proposes
to Transfer any or all of its Membership Interests (other than pursuant to Section 8.1(b),
but including, for avoidance of doubt, any Transfer to the Company or another Class A
Member pursuant to Section 8.2(a) above), then the
Transferring Holder shall deliver a written notice (the “Co-Sale Notice”) to each other Class A Member
(the “Co-Sale Members”) at least thirty calendar
days prior to making such Transfer, specifying in reasonable detail (A) the
identity of the proposed Transferee(s), (B) the Percentage Interest
represented by the Offered Membership Interests proposed to be Transferred, (C) the
Percentage Interests that would be owned by the Selling Holder following such
proposed Transfer and (D) the terms and conditions of the Transfer.  Each Co-Sale Member may elect to participate
in the contemplated Transfer at the same price per Membership Interest and on
the same terms and conditions by delivering written notice to the Transferring
Holder within fifteen calendar days after delivery of the Co-Sale Notice, which
notice shall specify the Percentage Interest that such Co-Sale Member desires
to include in such proposed Transfer.  If
none of the Co-Sale Members gives such notice prior to the expiration of the
10-calendar day period for giving such notice, then the Transferring Holder may
Transfer Membership Interests to the third party purchaser set forth in the
Co-Sale Notice on terms and conditions that are no more favorable to the
Transferring Holder than those set forth in the Co-Sale Notice at any time
within a period ending on the later to occur of (i) 90 calendar days
following the expiration of such period for giving notice or (ii) if a
definitive agreement to Transfer Membership Interests is entered into by the
Transferring Holder within such 90-day period, the date on which all applicable
approvals and consents of Governmental Entities with respect to such proposed
Transfer have been obtained and any applicable waiting periods under Applicable
Law have expired or been terminated. 
Each of the Company and the Class A Members hereby agrees to use
its commercially reasonable efforts to promptly obtain, or to assist the
Company or any other Class A Member in promptly obtaining, all of the
foregoing approvals and consents and to take such other actions as may be
reasonably requested by the Company or any other Class A Member in
connection with such Transfer.  Any such Class A
Membership Interests not Transferred by the Transferring Holder during such
time period or if any such agreement to Transfer is terminated shall again be
subject to the provisions of this Section 8.3 prior to any
subsequent Transfer.  If any Co-Sale
Members have elected to participate in such Transfer, then the Co-Sale Members
shall be entitled to sell in the contemplated Transfer, at the same price and
on the same terms, a number of Class A Membership Interests up to the number 


 


31

















 


equal to the total
Percentage Interest to be sold in the Transfer,
multiplied by a fraction (x) the numerator of which is the number of
Percentage Interest owned by such Co-Sale
Member, and (y) the denominator of which is the Percentage Interest owned, in the aggregate, by the
Transferring Holder and all participating Co-Sale Members.


 


(b)           Each Co-Sale Member Transferring Membership Interests pursuant to this Section 8.3
shall pay its own costs of any sale and a pro
rata share (based on the relative consideration to be received in
respect of the Membership Interests
to be sold) of the expenses incurred by the Transferring Holder in connection
with such Transfer and shall be obligated to provide the same representations,
warranties, covenants and agreements that the Transferring Holder agrees to
provide in connection with such Transfer. 
Each Co-Sale Member Transferring Membership Interests pursuant to this Section 8.3
shall be obligated to join severally on a pro
rata basis (based on
the relative consideration to be received in respect of the Membership Interests to be sold) in
any indemnification or other obligations that the Transferring Holder agrees to
provide or undertake in connection with such Transfer (including any
representations given with respect to the business and condition of the Company
and/or its Subsidiaries, but other than any such obligations that relate
specifically to a particular Co-Sale Member, such as indemnification with
respect to representations and warranties given by a Co-Sale Member regarding
such Co-Sale Member’s non-contravention, title and ownership of, and authority
to sell, such Membership Interests); provided that the liability
resulting from any such indemnity or similar obligation shall be several and
not joint as among the indemnitors, shall
be proportionate to such Co-Sale Member’s Percentage Interest, shall not exceed
the net proceeds to such Co-Sale Member in connection with such Transfer and that such Co-Sale Member shall not have
any liability for any indemnity or similar obligation arising out of any breach
of any representation, warranty, covenant or agreement by the
Transferring Holder or any other Co-Sale Member.


 


(c)           The election by an eligible Class A Member not to exercise its
rights under this Section 8.3 in any one instance shall not affect
the rights of such Members as to any subsequent proposed Transfer.


 


8.4           Liquidity Rights.


 


(a)           At any time following (i) the fifth anniversary of the Closing Date,
Veritas, and (ii) the sixth anniversary of the Closing Date, any Investor,
upon giving written notice (a “Sale Notice”) to the Company (with a copy
of the Sale Notice being delivered to each Investor), shall have the right to
cause the Company or AX Holding to engage an investment bank of national
reputation to conduct an auction for the sale, by merger, stock sale, asset
sale or otherwise, of all of the capital stock or all or substantially all of
the assets and liabilities of the Company, AX Holding or Aeroflex Incorporated
(an “Auction Sale”); provided that if an Investor has previously
delivered an IPO Notice pursuant to Section 8.4(d), then the right under
this Section 8.4(a) shall not be exercised without the prior written
consent of the Investor that delivered the IPO Notice until the earlier of (A) the
date such Investor abandons, upon written notice to the Company, the proposed
IPO or (B) the 180th day following the delivery of such IPO Notice.  The Investor initiating an Auction Sale is
referred to as the “Initiating Holder.”


 


(b)           In connection with an Auction Sale, the Company and each Member shall:


 


32

















 


(i)            take such actions within their control to
cause the Company or a member of the AX Holding Group to retain a nationally
recognized investment banking firm selected by the Initiating Holder (which may
be an Affiliate of an Investor) (the “Selling Bank”) and enter into a
customary engagement letter with the Selling Bank in connection with such
Auction Sale;


 


(ii)           take such actions within their control to
cause the Company and the AX Holding Group to make available to the Selling
Bank and bidders in the Auction Sale, and any attorney, accountant or other
agent retained by the Selling Bank or any bidder, all financial and other
records, pertinent corporate documents and properties of the Company and the AX
Holding Group as shall be reasonably necessary to enable them to make their due
diligence investigations of the Company and the AX Holding Group and to enable
the Selling Bank to prepare appropriate offering and other sale materials, and
will use reasonable best efforts to assure the cooperation of the officers,
Managers and employees of the Company and the AX Holding Group to supply all
information and respond to all inquiries reasonably requested by the Selling
Bank, any bidder or their respective representatives in connection with the
preparation of sale materials and the Auction Sale and the participation of
such officers, Managers and employees in reasonable marketing or placement
efforts in connection therewith; provided that such Selling Bank, and
any such accountant, bidder, representative or agent has executed a
confidentiality agreement in customary form with the Company or a member of the
AX Holding Group;


 


(iii)          if the Auction Sale involves the sale of the
Company, have the right to, and if required by the Initiating Holder will, sell
or Transfer all of the Membership Interests held by such Member in the manner
and on the same terms and conditions as the other Members (subject to the
distribution preferences in Section 4.4), and be and take such action
within their control to cause the Company to be, party to such agreements as
are reasonable and necessary to consummate any Auction Sale; and if the Auction
Sale involves the sale of a member of the AX Holding Group, take such action
within their control to cause the Company and each member of the AX Holding
Group to be party to such agreements as are reasonable and necessary to
consummate any Auction Sale, provided that in each case (A) such
agreements shall be customary for the kind of transactions contemplated and (B) no
Member shall be required to make representations and warranties in connection
with such Auction Sale other than customary representations and warranties, on
a several and not joint basis, regarding the power and authority of that Member
to engage in such Auction Sale, the receipt of appropriate corporate or similar
authorization, the absence of any consents or approvals applicable to such
Member (other than those which have been obtained), and that such Member has
good and marketable title to its Membership Interests, free and clear of all
liens, claims and other encumbrances, no Investor shall be required to provide
any non-competition or similar covenant, and if the Members have any
indemnification obligations in connection with such Auction Sale, the terms and
conditions of each Member’s indemnification obligation, if any, shall be
several, shall be proportionate to such Member’s Percentage Interest, shall not
exceed the net proceeds to such Member in connection with such Auction Sale and
shall exclude any liability for any breach of any representation, warranty,
covenant or agreement of any other Member; and


 


33

















 


(iv)          take all reasonable actions necessary and
desirable, in connection with the consummation of the Auction Sale, including
without limitation, the waiver of all dissenters’ rights or appraisal rights available
to any such Member under Applicable Law.


 


(c)           All reasonable fees and expenses payable to the Selling Bank in
connection with services performed pursuant this Section 8.4 shall
be paid by the Company, and the amount so paid shall be deducted from the
aggregate gross proceeds of an Auction Sale that are payable to the Members.


 


(d)           If AX Holding has not completed an IPO, at any time following (A) the
fifth anniversary of the Closing Date, then Veritas and (B) the sixth
anniversary of the Closing Date, then each Investor, upon giving written notice
(“IPO Notice”) to the Company (with a copy of the IPO Notice being given
to each other Investor) shall have the right to cause the Company to cause AX
Holding to prepare and file a registration statement for an IPO pursuant to Section 5
of the Registration Rights Agreement and to use commercially reasonable efforts
to engage one or more nationally recognized underwriters, which may be an
Affiliate of an Investor, in connection therewith.


 


8.5           Class B Member Tag Along Rights. 
In the event of a proposed Sale Transaction, no Investor shall Transfer
its Membership Interest until the Class B Members have been given the
opportunity, at their option, exercisable within fifteen Business Days after
the date of written notice by the Investors of the proposed Sale Transaction,
to sell his or her Class B Membership Interests to the proposed Transferee
at the price attributable to Class B Interests determined as if the
consideration to be received in such Sale Transaction were distributed in
accordance with Section 4.4 and otherwise upon the same terms and
conditions offered to the Investors.  In
order to be entitled to exercise their rights to sell Class B Membership
Interests pursuant to this Section 8.5, a Class B Member must
agree to make to the Transferee substantially the same representations,
warranties, covenants, indemnities and agreements as the Investors agree to
make in connection with the proposed Sale Transaction, provided that (A) such
agreements shall be customary for the kind of transactions contemplated and (B) no
Class B Member shall be required to make representations and warranties in
connection with such Sale Transaction other than customary representations and
warranties, on a several and not joint basis, regarding the power and authority
of that Member to engage in such Sale Transaction, the receipt of appropriate
corporate or similar authorization, the absence of any consents or approvals
applicable to such Class B Member (other than those which have been
obtained), and that such Class B Member has good and marketable title to
its Class B Membership Interests, free and clear of all liens, claims and
other encumbrances, and if the Members have any indemnification obligations in
connection with such Sale Transaction, the terms and conditions of each Class B
Member’s indemnification obligation, if any, shall be several, shall be
proportionate to such Class B Member’s Percentage Interest, shall not
exceed the net proceeds to such Member in connection with such Sale Transaction
and shall exclude any liability
for any breach of any representation, warranty, covenant or agreement by any other Member.


 


8.6           Investor Drag Along Rights. 
In the event of a proposed Sale Transaction, all of the Investors
unanimously may require that each Member other than the Investors Transfer his,
her or its Membership Interest in such Sale Transaction.  Each Member will receive in such Sale 


 


34

















 


Transaction in respect of
his, her or its Membership Interest his, her or its pro rata portion of the
entire consideration to be received by all the Members in or following the Sale
Transaction (with such pro rata portions determined as if such consideration
were distributed in accordance with Section 4.4).  The Investors shall notify the Members other
than the Investors at least 15 Business Days in advance of entering into a
definitive agreement in connection with a proposed Sale Transaction.  In any such agreement, the Members, other
than the Investors, will be required to make substantially the same
representations, warranties, covenants, indemnities and agreements as the
Investors agree to make in connection with the proposed Sale Transaction, provided
that (A) such agreements shall be customary for the kind of transactions
contemplated and (B) no Member shall be required to make representations
and warranties in connection with such Auction Sale other than customary
representations and warranties, on a several and not joint basis, regarding the
power and authority of that Member to engage in such Sale Transaction, the
receipt of appropriate corporate or similar authorization, the absence of any
consents or approvals applicable to such Member (other than those which have
been obtained), and that such Member has good and marketable title to its
Membership Interests, free and clear of all liens, claims and other
encumbrances, and if the Members have any indemnification obligations in
connection with such Sale Transaction, the terms and conditions of each Member’s
indemnification obligation, if any, shall be several, shall be proportionate to
such Member’s Percentage Interest, shall not exceed the net proceeds to such
Member in connection with such Sale Transaction and shall exclude any liability for any breach of any representation, warranty,
covenant or agreement by any other Member.


 


8.7           Repurchase by the Company. 
At any time within 180 days after the Termination Date of a Class B
Member or after such Class B Member commences to engage in any Competitive
Activity and the Company becomes aware thereof, the Company or its delegate
shall have the right, but not the obligation, to purchase from, and to cause
such Class B Member to sell to the Company, all or any portion of the Class B
Membership Interests of such Class B Member for cash in the amount of the
Fair Market Value of such Class B Membership Interests as of the
Termination Date.  If the Company is
prohibited from exercising such right to purchase Class B Membership
Interests by the terms of any Financing Document, the Company may purchase such
Class B Membership Interests in exchange for a promissory note from the
Company in the amount of the Fair Market Value of such Class B Membership
Interests bearing interest at the applicable federal rate (as defined in Section 1274(d) of
the Code), which note shall become due and payable at such time as the
restrictions under the Financing Documents terminate.


 


8.8           Legends.  If at any time Membership
Interests are represented by certificates, then each such certificate shall
have stamped, printed or typed thereon, in addition to any other legend
required by law, the following legends:


 


THIS
CERTIFICATE AND THE MEMBERSHIP INTEREST REPRESENTED HEREBY ARE SUBJECT TO AND
SHALL BE TRANSFERABLE ONLY IN ACCORDANCE WITH THE PROVISIONS OF A CERTAIN
AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF VGG
HOLDING LLC DATED AS OF AUGUST 15, 2007, 


 


35

















 


AMONG
THE MEMBERS NAMED THEREIN, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE
COMPANY.


 


THE
MEMBERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
THEREUNDER (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE MEMBERSHIP INTEREST
UNDER THE ACT AND APPLICABLE STATE LAWS OR AN EXEMPTION THEREFROM.


 


ARTICLE
IX


 


ACCOUNTING
AND RECORDS; BOARD OBSERVER RIGHTS;


CERTAIN
TAX MATTERS


 


9.1           Records to be Maintained.


 


(a)           The Company shall maintain at its principal office separate books of
account for the Company which shall reflect a true and accurate record of all
costs and expenses incurred, all charges made, all credits made and received,
and all income derived in connection with the operation of the Company
business.  Each Member shall, at his, her
or its sole expense, have the right, at any time without notice to any other
Member, to examine, copy, and audit the Company’s books and records during
normal business hours.  Such right may be
exercised through any agent or employee of a Member designated by such Member
or by an independent public accountant designated by such Member.


 


(b)           The Company shall maintain the following records at its principal office:


 


(i)            A current list of the full name and last
known address of each Member;


 


(ii)           A copy of the Certificate of Formation and
all amendments thereto;


 


(iii)          Copies of the Company’s federal, foreign,
state and local income tax returns and reports, if any, for the six most recent
years;


 


(iv)          Copies of this Agreement, including all
amendments thereto;


 


(v)           Any financial statements of the Company and
its consolidated Subsidiaries for the six most recent Fiscal Years; and


 


(vi)          A writing or other data compilation from
which information can be obtained through retrieval devices in reasonably
usable form setting forth the following:


 


36

















 


(A)          the amount of cash and a
description and statement of the agreed value of any securities or other
property contributed by each Member and which each Member has agreed to
contribute;


 


(B)           any right of a Member to receive,
or of the Company to make, Distributions to a Member which include a return of
all or any part of Member’s Capital Contribution; and


 


(C)           any events upon the happening of
which the Company is to be dissolved and its affairs wound up.


 


9.2           Reports.


 


(a)           Prior to the IPO, the Company agrees to deliver to each Member that owns Class A
Percentage Interests in excess of one percent (1%):


 


(i)            copies of the annual budget and any reports
delivered pursuant to the Financing Documents;


 


(ii)           within twenty-five (25) days after the end of
each month, internal monthly financial and operating statements for that month
prepared by the Company and its Subsidiaries under direction of a Senior
Executive Officer of the Company;


 


(iii)          within thirty (30) days after the end of each
fiscal quarter, unaudited balance sheets and income statements as of the end of
such period, together with statements of retained earnings and cash flow for
such period and a letter or memorandum discussing the summary financial
information for such period and setting forth a comparison of such financial
information to financial information for the same period in the prior year and
an explanation of material differences;


 


(iv)          within (60) days after the end of each fiscal
year, audited balance sheets and an income statement as of the end of such
fiscal year together with statements of retained earnings and cash flow for
such period and a letter or memorandum discussing the summary financial
information for such period and setting forth a comparison of such financial
information to financial information for the same period in the prior year and
an explanation of material differences; and


 


(b)           with reasonable promptness, such other data and information as from time
to time may be reasonably requested by any Member that owns Percentage
Interests in excess of five percent (5%).


 


9.3           Consultation.  The Company shall keep the
Investors informed, on a current basis, of any events, discussions, notices or
changes with respect to any tax (other than ordinary course communications
which could not reasonably be expected to be material to the Company), criminal
or regulatory investigation or action involving the Company or any of its
Subsidiaries, and shall reasonably cooperate with the Investors, their members
and their respective Affiliates in an effort to avoid or mitigate any cost or
regulatory consequences to them that might arise from such investigation or
action (including by reviewing written submissions in advance, 


 


37

















 


attending meetings with
authorities and coordinating and providing assistance in meetings with
regulators).


 


9.4           Access.  Prior to the IPO, the Company
shall afford, and shall cause its Subsidiaries and its and their respective
officers, Managers, employees, auditors, counsel and agents to afford, the
Investors (and their respective employees, consultants and agents) reasonable
access during regular business hours to the Company’s and its subsidiaries’
respective officers, Managers, employees, auditors, counsel and agents and to
all of the Company’s respective properties, books and records, and shall
furnish (including the right to copy) the Investors (and their respective
employees and agents) with all financial, operating and other data and
information as the Investors may reasonably request; provided that such
access shall be conducted in such manner as not to interfere unreasonably with
the operation of the business of the Company.


 


9.5           Tax Returns; Information. 
The Company shall arrange for the preparation of all income and other
tax returns of the Company and shall cause the same to be filed in a timely
manner.  As soon as practicable following
the end of each fiscal year, the Company shall furnish to each Member a copy of
each such return, together with any schedules or other information each Member
may require in connection with such Member’s own tax affairs.  Without limiting the generality of the
foregoing, as soon as practicable, but in any event within one hundred twenty
(120) days following the end of each Fiscal Year, the Company shall deliver to
each Person who was a Member during such Fiscal Year a Schedule K-1 for such
Fiscal Year.


 


9.6           Tax Matters Member; Tax Matters.


 


(a)           The Veritas Fund is specifically authorized to act as the Tax Matters
Partner under the Code and in any similar capacity under state or local
law.  The
Tax Matters Partner shall (i) provide timely notification to the Members
of all proposed adjustments to, or administrative proceedings regarding, tax
items of the Company, (ii) not settle any audits or other tax proceedings
without the prior consent of all of the Investors, or (iii) for the
avoidance of doubt, not take any action other than those actions that a “tax
matters partner” is specifically authorized to take under the Code or applicable
Regulations. 
The Veritas Fund shall not elect to treat the Company as an association
pursuant to Treasury Regulations Section 301.7701-3.


 


(b)           The Company will use reasonable best efforts to prevent the Company from
taking any action that (i) would result in the recognition of “unrelated
business taxable income”, as that term is defined in Section 512 of the
Code, or “unrelated debt financed income” under Section 514 of the Code, (ii) would result in the
recognition of income “effectively connected with the conduct of a trade or
business within the United States,” as defined in Section 864(b) of
the Code, or income deemed to be so effectively connected under Section 897
of the Code or (iii) cause or allow AX Holding to become a “United States
real property holding corporation” within the meaning of Section 897(c) of
the Code.


 


38

















 


ARTICLE
X


 


WITHDRAWALS;
ACTION FOR PARTITION


 


10.1         Waiver of Partition.  No Member shall, either
directly or indirectly, take any action to require partition, file a bill for
Company accounting or appraisement of the Company or of any of its assets or
properties or cause the sale of any Company property; and, notwithstanding any
provisions of Applicable Law to the contrary, each Member (and each of his, her
or its legal representatives, successors, or assigns) hereby irrevocably waives
any and all rights it may have to maintain any action for partition or to
compel any sale with respect to his, her or its Membership Interest, or with respect
to any assets or properties of the Company, except as expressly provided in
this Agreement.


 


10.2         Covenant Not to Withdraw or Dissolve. 
Notwithstanding any provision of the Act, but except as otherwise
provided in this Agreement, each Member hereby covenants and agrees that the
Members have entered into this Agreement based on their mutual expectation that
all Members will continue as Members and carry out the duties and obligations
undertaken by them hereunder and that, except as otherwise expressly required
or permitted hereby, each Member hereby covenants and agrees not to (a) withdraw
or attempt to withdraw from the Company, (b) exercise any power under the
Act to dissolve the Company, (c) petition for judicial dissolution of the
Company, or (d) demand a return of such Member’s contributions or profits
(or a bond or other security for the return of such contributions or profits)
without the unanimous consent of the Members.


 


ARTICLE
XI


 


DISSOLUTION
AND WINDING UP


 


11.1         Dissolution; Liquidating Events. 
The Company shall be dissolved and its affairs wound up upon the first
to occur of the following events:


 


(a)           the determination the Board of Managers (subject to Section 7.4(a)(i));
and


 


(b)           the sale of substantially all of the assets of the Company.


 


11.2         Effect of Dissolution. 
Upon dissolution, the Company shall cease carrying on business but shall
not be terminated and shall wind up current Company business.  The Company shall continue in existence until
the winding up of the affairs of the Company is completed and the certificate
of cancellation has been issued by the Secretary of State of the State of
Delaware with respect to the Certificate of Formation.


 


11.3         Distribution of Assets on Dissolution. 
Upon the winding up of the Company, the Company’s assets shall be
distributed:


 


(a)           to creditors, including Members who are creditors to the extent required
by law, in satisfaction of Company liabilities; and


 


39

















 


(b)           to Members in accordance with Section 4.4.  Such Distributions shall be in cash or
property (which shall be distributed proportionately) or partly in both, as
determined in good faith by the Board of Managers.


 


11.4         Winding Up and Certificate of Cancellation.  The winding up of the Company shall be
completed when all debts of the Company have been paid and discharged or
reasonably adequate provision therefor has been made, and all of the remaining
assets of the Company have been distributed to the Members.  Upon the completion of winding up of the
Company, a certificate of cancellation shall be delivered to the Secretary of
State of the State of Delaware for filing. 
The certificate of cancellation shall set forth the information required
by the Act.


 


ARTICLE
XII


 


AMENDMENT


 


12.1         Amendment.  This Agreement, may not be
amended without the prior written consent of (A) each Investor whose
Percentage Interest is equal to or greater than 10%, (B) each Investor
adversely affected by such amendment; provided that in no event shall the
consent of any Member be required for any amendment reflecting the issuance of Class B
Membership Interests in accordance with the terms of this Agreement, (C) each
Class B Member to the extent that any such amendment (i) adversely
affects a Class B Member’s Percentage Interest (except as otherwise
permitted pursuant to this Agreement), (ii) adversely affects any payments
to which a Class B Member or a former Class B Member has become
entitled pursuant to this Agreement or (iii) adversely affects the right
of a Class B Member under Section 4.2 or Article VIII hereof
(and related definitions) or this Article XII and (D) each Special
Member to the extent any such amendment (i) adversely affects a Special
Member’s Percentage Interest (except as otherwise permitted pursuant to this
Agreement), (ii) adversely affects any payment to which a Special Member
has become entitled pursuant to this Agreement, (iii) adversely affects
the rights of a Special Member under Article III and Article VIII
hereof (and related definitions), Section 5.1, Section 9.2 and this Article XII
or (iv) amends Section 4.4(b) hereof (and related definitions).


 


ARTICLE
XIII


 


MISCELLANEOUS
PROVISIONS


 


13.1         Confidentiality.  In furtherance of and not in
limitation of any other similar agreement such Member may have with the
Company, each Member agrees that all Confidential Information shall be kept
confidential by such Member and shall not be disclosed by such Member in any
manner whatsoever; provided, however, that (i) any of such Confidential
Information may be disclosed by a Member to its managers, officers, employees
and authorized representatives (including attorneys, accountants, consultants,
bankers and financial advisors of such Member) and each Member that is a
corporation, limited partnership or limited liability company may disclose such
Confidential Information to any former stockholders, partners or members who
retained an economic interest in such Member, and to any current or proposed
stockholders, member, partner, limited partner, general partner or management
company of such Member (or any employee, attorney, accountant, consultant,
banker or financial advisor or representative of any of the foregoing)
(collectively, for purposes of this Section 13.1, 


 


40

















 


“Representatives”),
who need to be provided such Confidential Information to assist such Member in
evaluating its investment, each of which Representatives shall be bound by the
provisions of this Section 13.1 and such Member shall be
responsible for any breach of this provision by any such Representative, (ii) any
disclosure of Confidential Information may be made by a Member to its
stockholders, partners or members to comply with such Member’s obligations
under its organizational documents each of which stockholders, partners or
members shall be bound by the provisions of this Section 13.1 and
such Member shall be responsible for any breach of this provision by any such
stockholder, partner or member, (iii) any disclosure of Confidential
Information may be made by a Member or its Representatives to the extent the
Company consents in writing, and (iv) Confidential Information may be
disclosed by any Member or Representative to the extent that the Member or its
Representative has received advice from its counsel that it is legally
compelled to do so, provided that, prior to making such disclosure, the Member
or Representative, as the case may be, uses commercially reasonable efforts to
preserve the confidentiality of the Confidential Information, including
consulting with the Board of Managers regarding such disclosure and, if
reasonably requested by the Board of Managers, assisting the Company, at the
Company’s expense, in seeking a protective order to prevent the requested
disclosure, and provided further that the Member or Representative, as the case
may be, discloses only that portion of the Confidential Information as is,
based on the advice of its counsel, legally required.  Notwithstanding anything to the contrary
herein, the confidentiality obligations of the Members under this Section 13.1
shall not apply to the disclosure of the fact that the disclosing Member has an
indirect investment in Aeroflex Incorporated (or its successors) in name only
(it being understood that this disclosure shall not include the investment
amount, valuation information or any other information related thereto).


 


13.2         Logo.  The Company grants each Member permission to
use the Company’s name and logo in each Member’s or their Affiliates’ marketing
materials. The Member or its Affiliate, as applicable, shall include a
trademark attribution notice giving notice of the Company’s ownership of its
trademarks in the marketing materials in which the Company’s name and logo
appear.


 


13.3         Entire Agreement.  This Agreement represents the
entire agreement among all the Members and between the Members and the Company
with respect to the subject matter hereof, and supersedes any and all prior
agreements and understandings with respect to the subject matter hereof.


 


13.4         Loans by Members, Transactions with Affiliates.  Subject to the following sentence, loans by
Members to the Company shall be made voluntarily and only upon the approval of
the Board of Managers, subject to Section 7.4(a)(vi).  The Company will not enter into any transaction
with any Member, including the purchase, sale or exchange of property or the
rendering of any service or a loan to the Company, except upon fair and
reasonable terms no less favorable to the Company than would be obtained in a
comparable arms-length transaction with a Person that is not an Affiliate.


 


13.5         No Partnership Intended for Nontax Purposes.  The Members have formed the Company under the
Act, and expressly do not intend hereby to form a partnership under any
partnership or limited partnership act. 
The Members do not intend to be partners one to another, or partners as
to any third party.  To the extent any
Member, by word or action, represents to 


 


41

















 


another person that any
other Member is a partner or that the Company is a partnership, the Member
making such wrongful representation shall be liable to any other Member who
incurs personal liability by reason of such wrongful representation.


 


13.6         Rights Of Creditors and Third Parties under Agreement.  This Agreement is entered into among the
Company and the Members for the exclusive benefit of the Company, its Members,
and their successors and assigns.  This
Agreement is expressly not intended for the benefit of any creditor of the
Company or any other Person.  Except and
only to the extent provided by applicable statute, no such creditor or third
party shall have any rights under this Agreement or any other agreement between
the Company and any Member with respect to any Capital Contribution or otherwise.


 


13.7         No Employment or Service Contract. 
Nothing in this Agreement shall confer upon any Member any right to
continue in the service of the AX Holding Group (or any Affiliate thereof) for
any period of time or restrict in any way the rights of AX Holding Group (or
any Affiliate thereof), to terminate any such Member’s employment or
directorship at any time for any reason whatsoever, with or without cause.


 


13.8         No Waiver.  The failure of the Company,
Veritas or any Member (or assignees of the Company, Veritas or any Member) in
any instance to exercise any rights granted under this Agreement shall not
constitute a waiver of any other rights that may subsequently arise under the
provisions of this Agreement or any other agreement between or among the Company,
Veritas and a Member.  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.


 


13.9         Notices.  Any notice, payment, demand,
or communication required or permitted to be given by any provision of this
Agreement shall be in writing and sent by overnight courier, or by telephone or
facsimile, if such telephone conversation or facsimile is followed by a hard
copy of the telephone conversation or facsimiled communication sent by
overnight courier, charges prepaid, addressed as reflected on Schedule A
or Schedule B or to such other address as such Person may from time to
time specify by notice to the Members. 
Any such notice shall be deemed to be delivered, given, and received as
of the date so delivered.


 


13.10       Binding Effect.  Except as otherwise provided
in this Agreement, every covenant, term and provision of this Agreement shall
be binding upon and inure to the benefit of the Members and their respective
successors, transferees and assigns.


 


13.11       Construction.  Every covenant, term, and
provision of this Agreement shall be construed simply according to its fair
meaning and not strictly for or against any Member.


 


13.12       Headings.  Section and other
headings contained in this Agreement are for reference purposes only and are
not intended to describe, interpret, define, or limit the scope, extent, or
intent of this Agreement or any provision hereof.


 


13.13       Severability.  Every provision of this
Agreement is intended to be severable. 
If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement.


 


42














 


13.14       Incorporation by Reference. 
Each Schedule attached to this Agreement and referred to herein is
incorporated in this Agreement by reference and made a part hereof as if fully
set forth herein.


 


13.15       Further Action.  Each Member agrees to perform
all further acts and execute, acknowledge, and deliver any documents which may
be reasonably necessary, appropriate, or desirable to carry out the provisions
of this Agreement.


 


13.16       Variation of Pronouns. 
All pronouns and any variations thereof shall be deemed to refer to
masculine, feminine, or neuter, singular or plural, as the identity of the
person or persons may require.


 


13.17       Remedies.  Each Member agrees and
acknowledges that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that the Company and each Member will have
the right to seek injunctive relief or a decree of specific performance, in
addition to all of its rights and remedies at law or in equity, to enforce the
provisions of this Agreement.


 


13.18       Governing Law.  The laws of the State of
Delaware (without reference to its choice of laws principles) shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Members.


 


13.19       Counterpart Execution. 
This Agreement may be executed in any number of counterparts with the
same effect as if all of the Members had signed the same document.  All counterparts shall be construed together
and shall constitute one agreement.


 


13.20       Consent to Jurisdiction. 
Each Member hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of New York or the United
States of America located in New York City for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby and agrees not to commence any action, suit or proceeding
relating hereto except in such courts, and further agrees that service of any
process, summons, notice or document by United States registered or certified
mail shall be effective service of process for any action, suit or proceeding
brought in any court.  Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
personal jurisdiction and the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby, in the
courts of the State of New York or the United States of America located in New
York City, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.


 


[The remainder of this page is
intentionally left blank.]


 


43

















 


IN WITNESS WHEREOF, the parties hereto have
duly executed this Agreement as of the date first above written.


 


	
   

  	
  CLASS A
  MEMBERS:

  
	
   

  	
   

  
	
   

  	
  THE
  VERITAS CAPITAL FUND III, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  ROBERT B. MCKEON

  
	
   

  	
   

  	
  Name:
  ROBERT B. MCKEON

  
	
   

  	
   

  	
  Title:
  AUTHORIZED SIGNATORY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AX
  HOLDING LLC

  
	
   

  	
  By:
  Veritas Capital Fund Management, L.L.C., its manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ROBERT
  B. MCKEON

  
	
   

  	
   

  	
  Name:
  ROBERT B. MCKEON

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLDEN GATE CAPITAL INVESTMENT FUND II, L.P.

  
	
   

  	
  GOLDEN
  GATE CAPITAL INVESTMENT ANNEX FUND II, L.P.

  
	
   

  	
  GOLDEN
  GATE CAPITAL INVESTMENT FUND II (AI), L.P.

  
	
   

  	
  GOLDEN
  GATE CAPITAL INVESTMENT ANNEX FUND II (AI), L.P.

  
	
   

  	
  GOLDEN
  GATE CAPITAL ASSOCIATES II-QP, LLC

  
	
   

  	
  GOLDEN
  GATE CAPITAL ASSOCIATES II-AI, LLC

  
	
   

  	
   

  
	
   

  	
  By:
  Golden Gate Capital Management II, LLC

  
	
   

  	
  Its:
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  PRESCOTT ASHE

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


	
   

  	
  CCG
  AV, LLC- SERIES A

  
	
   

  	
  CCG
  AV, LLC-SERIES C

  
	
   

  	
  CCG
  AV, LLC-SERIES I

  
	
   

  	
   

  
	
   

  	
  By:
  Golden Gate Capital Management, LLC

  
	
   

  	
  Its:
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  PRESCOTT ASHE

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


	
   

  	
  GS
  DIRECT, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  PHILIP W. GROVIT

  
	
   

  	
   

  	
  Name:

  	
  Philip
  W. Grovit

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Director