Members’ Equity

The LLC's limited liability agreement entered into on August 7, 2006, as amended (the "LLC Agreement") specifies that ownership interests are comprised of Class A and Class B Units for investors and a series of Class M Units as profits interests. The LLC Agreement sets forth the terms of ownership of the Company’s units and how the profits, losses and gains will be allocated to the capital accounts of its members. The timing and aggregate amount of distributions to unit holders are determined at the sole discretion of the Company’s board of directors. Class A and B Units have voting units, and Class M Units do not have voting rights. Unless specifically agreed, holders of the Company’s ownership interest have no liability for the Company’s obligations.

Units are not transferable, except in limited circumstances as set out in the LLC Agreement.

Class M Units are subject to the terms of the applicable agreement governing the award, including vesting and repurchase rights at fair market value adjustment upon separation.

Pursuant to the LLC Agreement, certain eligible employees may be granted Class M Units. These profits interests may not be resold and unvested units are subject to forfeiture if the recipient’s employment is terminated. Forfeited unvested units are not entitled to future distributions. Under the LLC Agreement, distributions would have been made to the members in the following order of priority:


•	first, to the holders of Class B Units in proportion to their respective unrecovered capital contribution until each member’s unrecovered Class B capital is reduced to zero;


•	second, to each holder of Class A and B Units in proportion to their respective relative percentage interests; and


•	third, to each holder of Class A, B and M Units in proportion to their respective relative percentage interests, subject to distribution threshold amounts, pursuant to the terms of each corresponding Class M Unit agreement.

On November 1, 2013, the Company granted 1,986 Class M Units to certain members of management subject to the terms of the LLC Agreement, which include among other things, repurchase rights and transferability. Distributions are made to each holder of the Class M Units in proportion to the holder’s ownership percentage, subject to distribution threshold amounts, pursuant to the terms of each individual Class M membership unit agreement. Under these agreements, all the Class M Units will vest either (i) on the six-month anniversary following the occurrence of a qualifying event, defined as a change in control transaction or (ii) in the event of an IPO, one-third on each of the first three anniversaries of December 31, 2013. The fair value of the Class M Units issued on November 1, 2013, was $3,189 calculated using the Probability-Weighted Expected Return Method under which the Company’s enterprise value was estimated at the date of potential future outcomes, such as an IPO, strategic sale, staying private or liquidation. In connection with such estimation, each potential outcome is weighted according to the likelihood of such potential future outcome occurring.

A detail of the Company’s outstanding restricted Class M Units for the year ended June 30, 2013 is as follows:



	Total Units June 30, 2012		Units Granted	Units Forfeited	Total Units June 30, 2013		Units Vested Through June 30, 2013		Units Unvested Through June 30, 2013
Class M Units	2,413		—	—	2,413		1,421		992
Weighted Average Grant Date Fair Value	$	0.41	—	—	$	0.41	$	0.23	$	0.68

A detail of the Company’s outstanding restricted Class M Units for the six months ended December 31, 2013 is as follows:



	Total Units June 30, 2013		Units Granted		Units Forfeited			Total Units December 31, 2013		Units Vested Through December 31, 2013		Units Unvested Through December 31, 2013
Class M Units	2,413		1,986		(43		)	4,356		1,677		2,679
Weighted Average Grant Date Fair Value	$	0.41	$	1.61	$	1.29		$	0.95	$	0.23	$	1.40

The fair value was based on the unit price at the date of grant. Stock compensation expense recognized was $32 and $64 for the three and six months ended December 31, 2013 and 2012, respectively, related to the vesting of the Class M Units. The cash flow effects resulting from restricted unit awards were reflected as noncash operating activities. As of December 31, 2013 and June 30, 2013, unrecognized compensation cost related to nonvested, share-based compensation was $3,741 and $670, respectively.