Document:

Exhibit
10.19

 

RESTRICTED COMMON STOCK AGREEMENT

HOLDERS OF C, D AND E UNITS

 

RESTRICTED COMMON STOCK
AGREEMENT (this “Agreement”) made as of November 6, 2009 (the “Effective Date”),
by and between STR Holdings, Inc., a Delaware corporation (the “Company”),
and
[                    ]
(the “Holder”).

 

WHEREAS, STR Holdings LLC (“Old LLC”) entered into
that certain Incentive Unit Grant Agreement with the Holder dated as of [          ]
(the “Grant Agreement”), whereby Old LLC granted incentive units of Old LLC to
the Holder;

 

WHEREAS, on the date hereof, Old LLC will enter into
a corporate reorganization, whereby the unitholders of Old LLC will become
unitholders of STR Holdings (New) LLC (“New LLC”);

 

WHEREAS, pursuant to that certain Plan of Conversion
by New LLC, dated as of November 6, 2009 (the “Plan of Conversion”), New LLC
filed with the Secretary of State of the State of Delaware a certificate of
conversion converting New LLC into the Company and automatically converting the
membership interests of New LLC into shares of common stock, par value $0.01
per share (“Common Stock”), of the Company;

 

WHEREAS, due to the conversion of New LLC into the
Company, any unvested incentive units of Old LLC granted pursuant to the Grant
Agreement and converted in the corporate reorganization into unvested incentive
units of New LLC shall be converted from unvested incentive units of New LLC
into Restricted Shares (as defined below) subject to the terms and conditions
herein;

 

WHEREAS, in consideration of the mutual covenants
contained herein, the receipt and sufficiency of which are hereby acknowledged;
and

 

WHEREAS, certain capitalized terms used herein are
defined in Section 6 hereof.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                       Restricted
Shares.  Subject to the terms and
conditions of this Agreement and pursuant to the Plan of Conversion, the
Company hereby issues to the Holder
[        ] shares of Common Stock (the “Restricted
Shares”), of which [        ] shares of
Restricted Shares shall be Time Vesting Restricted Shares (as defined below)
and [        ] shares of Restricted
Shares shall be Performance Vesting Restricted Shares (as defined below).

 

2.                                       Holder
Representations and Warranties.

 

(a)                                  As an
inducement to the Company to issue the Restricted Shares to the Holder and as a
condition thereto, the Holder represents, acknowledges and agrees (as
applicable) that this Agreement constitutes the legal, valid and binding
obligation of the Holder, enforceable against the Holder in accordance with its
terms, except to the extent the enforceability thereof may be limited by
bankruptcy laws, insolvency laws, moratorium laws or other laws affecting
creditors’ rights generally or by general equitable principles, and the
execution, delivery and performance of this Agreement by the Holder does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which the Holder is a party or any judgment, order or
decree to which the Holder is subject.

 

 

(b)                                 In addition,
the Holder represents, acknowledges and agrees (as applicable) that:

 

(i)                           (x) the Restricted
Shares have not been registered under the Securities Act, (y) the
Restricted Shares are restricted securities under the Securities Act and (z) the
Restricted Shares may not be resold or transferred unless they are first
registered under the Securities Act or unless an exemption from such
registration is available;

 

(ii)                        the Holder hereby makes the
representations and warranties set forth in Exhibit A hereto; and

 

(iii)                     the Company may, but shall
not be obligated to, register or qualify the issuance, or the resale, of any of
the Restricted Shares under the Securities Act or any other applicable law.

 

3.                                       Vesting of
Shares.

 

(a)                                  All Restricted
Shares shall initially be unvested and shall be subject to forfeiture to the
Company pursuant to this Agreement.  At
such time as a Restricted Share vests in accordance with this Section 3,
it shall no longer be a Restricted Share and shall not be subject to
forfeiture.

 

(b)                                 Time Vesting.  [      ]
of the Restricted Shares shall vest based on the passage of time (“Time
Vesting Restricted Shares”).

 

(i)                           Vesting Schedule.  Subject to Section 3(b)(ii) and to
the Holder’s continued employment with the Company on each vesting date, the
Time Vesting Restricted Shares shall vest in equal 1/34 installments as of the
last day of each of the 34 calendar months following the Effective Date, which
for the sake of clarity means November 30, 2009.

 

(ii)                        Acceleration upon Change of
Control.  Upon the occurrence of a
Change of Control, all then unvested Time Vesting Restricted Shares shall
immediately vest in full, subject to Section 3(b)(iii).

 

(iii)                     Termination.

 

Upon the termination of the Holder’s employment or for any reason, all
unvested Time Vesting Restricted Shares shall be forfeited.

 

(c)                                  Performance
Vesting. 
[      ] of the Restricted Shares shall
vest based on the Company attaining the following performance criteria (“Performance
Vesting Restricted Shares”).

 

(i)                           Vesting Schedule.  Subject to Section 3(c)(ii) and to
the Holder’s continued employment with the Company on each vesting date, the
Performance Vesting Restricted Shares shall vest in three (3) equal
installments following the three successive Fiscal Years, beginning with the
Fiscal Year ending on December 31, 2009 (for the 2009 Fiscal Year) if the
Equity Valuation, measured as of the end of such Fiscal Year, is no less than
the Performance Target for such Fiscal Year. 
If the Performance Target for any of the first two Fiscal Years referred
to above is not attained, the Yearly Amount for the previous unvested Fiscal
Year which is not then vested (or, if the Yearly Amount for the previous Fiscal
Year has vested, then the Yearly Amount for the prior unvested Fiscal Year)
shall become vested and exercisable at the end of the first Fiscal Year
thereafter in which the Equity Valuation for such Fiscal Year is no less than
the Performance Target for such Fiscal Year. 
For purposes of illustration of the previous sentence, if 

 

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the Performance Target is not achieved for the 2009 and 2010 Fiscal
Years but is achieved for the 2011 Fiscal Year, in 2011, the Yearly Amounts for
both 2010 and 2011 would become vested.

 

(ii)                        Acceleration upon Change of
Control.  Upon the occurrence of a
Change of Control, all then unvested Performance Vesting Restricted Shares
shall immediately vest in full, so long as the Holder is employed with the
Company on the date of the Change of Control.

 

(iii)                     Termination.  Upon the termination of employment of the
Holder for any reason, the unvested Performance Vesting Restricted Shares shall
be forfeited.

 

4.                                       Legend.

 

(a)                                  Each
certificate representing Restricted Shares shall bear each of the following
legends.

 

“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED.”

 

“THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXCHANGED UNLESS
SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OR
EXCHANGE COMPLIES WITH THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT AND
THE RESTRICTED COMMON STOCK AGREEMENT, EACH AS AMENDED FROM TIME TO TIME,
BETWEEN OR AMONG THE COMPANY AND THE INVESTORS PARTY THERETO.  IN ADDITION TO RESTRICTIONS ON TRANSFER, THE
RESTRICTED COMMON STOCK AGREEMENT PROVIDES FOR THE VESTING OF THE SHARES
ACCORDING TO THE SPECIFIC PROVISIONS OF THE RESTRICTED COMMON STOCK AGREEMENT.  COPIES OF THE REGISTRATION RIGHTS AGREEMENT
AND THE RESTRICTED COMMON STOCK AGREEMENT ARE ON FILE WITH THE COMPANY.”

 

(b)                                 The
certificates shall also bear any legend required by any applicable state
securities law.

 

(c)                                  The
certificates shall be deposited by the Holder, together with a stock power
endorsed in blank, with the Company, to be held in escrow during any
restriction period.

 

5.                                       Restrictions on
Transfer and Conversion.

 

(a)                                  The Company and
the Holder acknowledge and agree that the Restricted Shares are subject to and
restricted by this Agreement.  Once
vested, the Restricted Shares shall no longer be restricted by the terms of
this Agreement but shall be subject to the restrictions set forth in the
Registration Rights Agreement and the Securities Act.

 

(b)                                 The Restricted
Shares shall only be transferable to Permitted Transferees of the Holder.  Any attempt to Transfer any of the Restricted
Shares to Persons other than Permitted Transferees 

 

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of the Holder shall be null
and void and have no force or effect, and the Company shall not, and shall
cause any transfer agent not to, give any effect in such entity’s share records
to such attempted Transfer.

 

(c)                                  The Holder
acknowledges that the transfer restrictions contained in this Agreement are
reasonable and in the best interests of the Company.  The Holder understands that this  Agreement contains forfeiture provisions in
respect of the Restricted Shares in favor of the Company or its designee upon
the Holder’s termination of employment.

 

6.                                       Definitions.

 

The following terms shall have the meanings ascribed
below:

 

“Affiliate” of any Person means any Person that
directly, or indirectly through one or more intermediaries, Controls, is
Controlled by or is under common Control with such Person.

 

“Change of Control” means:

 

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

 

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

 

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

 

(iv)                              the sale or Transfer by the
DLJMB Stockholders to a prospective purchaser (other than a Permitted
Transferee) of fifty percent (50%) or more of their original beneficial
ownership of the Company.

 

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

 

“Consolidated EBITDA” means Consolidated EBITDA as
defined pursuant to that certain Credit Agreement, dated as of June 15,
2007, by and between the Company, STR Acquisition, Inc. the Lenders (as
defined therein) and Credit Suisse, Cayman Islands Branch, as it may be amended
or restated from time to time.

 

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

 

“DLJMB Stockholders” means DLJ Merchant Banking
Partners IV, L.P., DLJMB Offshore Partners IV, L.P., DLJ Merchant Banking
Partners IV (Pacific), L.P. and MBP IV Plan 

 

4

 

Investors, L.P., DLJ
Merchant Banking Partners IV (Co-Investments), L.P., together with any
Permitted Transferees thereof.

 

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

 

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

 

“Existing Stockholders” means each of the
Stockholders other than the Management Stockholders.

 

“Fiscal Year” means the twelve month period ending
on the last day of each calendar year.

 

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

 

“Initial Public Offering” means the underwritten
initial public offering of Common Stock of the Company pursuant to an effective
registration statement filed under the Securities Act.

 

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

 

“Other Stockholder” means each of the Stockholders
other than the DLJMB Stockholders, the Management Stockholders and the Whitney
Stockholders.

 

“Performance Target” means the Equity Valuation
target for each Fiscal Year as set forth on Schedule I hereto with respect to
Performance Vesting Restricted Shares.

 

“Permitted Transferees” means (i) in the case
of any DLJMB Stockholder, (A) any other DLJMB Stockholder, (B), any actual
or prospective shareholder, member or general or limited partner of any DLJMB
Stockholder (a “DLJMB Partner”), and any corporation, partnership, limited
liability company, or other entity that is an Affiliate of any DLJMB Partner
(collectively, “DLJMB Affiliates”), (C) any managing director, general
partner, director, limited partner, officer or employee of any DLJMB
Stockholder or any DLJMB Affiliate, or any spouse, lineal descendant, sibling,
parent, heir, executor, administrator, testamentary trustee, legatee or
beneficiary of any of the foregoing persons described in this clause (C) (collectively,
“DLJMB Associates”) or (D) any trust the beneficiaries of which, or any
corporation, limited liability company or partnership the stockholders, members
or general or limited partners of which, include only such DLJMB Stockholders,
DLJMB Affiliates, DLJMB Associates, their spouses or other lineal descendants;

 

(ii)                                  in the case of any Other
Stockholder, (A) any entity that is an Affiliate of such Other
Stockholder, (B) any actual or prospective shareholder, member or general
or limited partner of any 

 

5

 

such Other Stockholder, and
any corporation, partnership, limited liability company, or other entity that
is an Affiliate of any such Other Stockholder, (C) any spouse, lineal
descendant, sibling, parent, heir, executor, administrator, testamentary
trustee, legatee or beneficiary of such Other Stockholder, or (D) a trust
that is for the exclusive benefit of such Other Stockholder or its Permitted
Transferees under clause (B) above;

 

(iii)                               in the case of any Whitney
Stockholders, any other Whitney Stockholder; and

 

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

 

“Person” means any individual or any general
partnership, limited partnership, limited liability company, corporation, joint
venture, trust, business trust, cooperative, association or other entity and,
where the context so permits, the legal representatives, successors in interest
and permitted assigns of such Person.

 

“Registration Rights Agreement” means the
Registration Rights Agreement, dated as of November 6, 2009, among the Company and certain stockholders of
the Company, as amended, modified or supplemented from time to time.

 

“Restricted Share Permitted Transferees” means (i) any
spouse, lineal descendant, sibling, parent, heir, executor, administrator,
testamentary trustee, legatee or beneficiary of the Holder, (ii) a trust
that is for the exclusive benefit of the Holder or its Restricted Share
Permitted Transferees under clause (i) above or (iii) a limited
liability company or corporation, all of the outstanding capital stock or
membership interests of which is of record and beneficially owned by the Holder
or any of those Persons in clause (i) above.

 

“Securities Act” means the Securities Act of 1933, as amended, or
any successor federal law then in force.

 

“Stockholder” means each Person who held Common
Stock of the Company prior to the Initial Public Offering together with any
Permitted Transferees thereof, so long as such Person or Permitted Transferee
thereof holds such Common Stock.

 

“Transfer” means the sale, transfer, assignment, pledge or other
disposal (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law) of any Restricted Shares.

 

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

 

“Yearly Amount” means the number of Performance
Vesting Restricted Shares divided by three (3).

 

7.                                       General
Provisions.

 

(a)                                  Notices.  Any notification required by the terms of
this Agreement shall be given in writing and shall be deemed effective upon
personal delivery or within three (3) days of deposit with 

 

6

 

the United States Postal
Service, by registered or certified mail, with postage and fees prepaid.  A notice shall be addressed to the Company at
its principal executive office and to the Holder at the address that he or she
most recently provided to the Company.

 

(b)                                 Survival of
Representations, Warranties and Agreements.  All representations, warranties and agreements
contained herein shall survive indefinitely, including following termination of
this Agreement or of the Holder’s employment with the Company.

 

(c)                                  Entire
Agreement.  This
Agreement and the Registration Rights Agreement shall constitute the entire contract
between the parties hereto with regard to the subject matter hereof.  They supersede any other agreements,
representations or understandings (whether oral or written and whether express
or implied) which relate to the subject matter hereof.

 

(d)                                 Waiver.  No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition whether of like or different nature.

 

(e)                                  Successors and
Assigns.  The provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Company and
its successors and assigns and upon the Holder, the Holder’s assigns and the
legal representatives, heirs and legatees of the Holder’s estate, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to be joined herein and be bound by the terms hereof.

 

(f)                                    Choice of Law;
Jurisdiction; Waiver of Jury Trial.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT
REGARD TO CONFLICTS OF LAWS.

 

SUBJECT TO THE TERMS OF THIS AGREEMENT, THE PARTIES AGREE THAT ANY AND
ALL ACTIONS ARISING UNDER OR IN RESPECT OF THIS AGREEMENT SHALL BE LITIGATED IN
THE FEDERAL OR STATE COURTS IN DELAWARE. 
BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY IRREVOCABLY
SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR ITSELF, HIMSELF, OR
HERSELF AND IN RESPECT OF ITS, HIS OR HER PROPERTY WITH RESPECT TO SUCH
ACTION.  EACH PARTY AGREES THAT VENUE WOULD
BE PROPER IN ANY OF SUCH COURTS, AND HEREBY WAIVES ANY OBJECTION THAT ANY SUCH
COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH
ACTION.

 

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT.

 

(g)                                 Amendment.  The Board of Directors of the Company, or the
Compensation Committee thereof, may amend or alter this Agreement and the
Restricted Shares issued hereunder at any time; provided that, no such
amendment or alteration shall be made without the consent of the Holder if such
action would materially diminish any of the rights of the Holder under this
Agreement or with respect to the Restricted Shares.

 

(h)                                 Employment
Rights.  Neither this Agreement nor any
of its provisions is intended to confer or should be construed as conferring
any rights on the Holder to continued employment with the Company or any rights
of employment for a fixed term.  No
contract of employment, express or 

 

7

 

implied, is created hereby
and nothing contained herein shall be construed as creating a joint venture,
partnership, agency or other enterprise between the parties.

 

(i)                                     No Waiver;
Modifications in Writing.  No
waiver of or consent to any departure from any provision of this Agreement
shall be effective unless signed in writing by the party entitled to the
benefit thereof; provided, however, that the Company may amend, modify or
terminate the terms of the Restricted Shares in accordance with the terms in
the Company’s Certificate of Incorporation.

 

(j)                                     Severability. The provisions of this
Agreement are severable and if any one or more provisions are determined to be
illegal or otherwise unenforceable, in whole or in part, the remaining provisions
shall nevertheless be binding and enforceable.

 

(k)                                  Signature in
Counterparts.  This
Agreement may be signed in counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument.

 

[SIGNATURE PAGE
FOLLOWS]

 

8

 

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

 

 

	
   

  	
  STR HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title

  
	
   

  	
   

  	
   

  
	
   

  	
  HOLDER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [                            ]

  

 

9

 

EXHIBIT
A

 

Investment Representations
and Warranties

 

The Holder hereby represents
and warrants to the Company that:

 

1.             The Restricted Shares received by
him will be held by him for investment only for his own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof in violation of applicable U.S. federal or state or foreign securities
laws.  The Holder has no current
intention of selling, granting participation in or otherwise distributing the
Restricted Shares in violation of applicable U.S. federal or state or foreign
securities laws.  The Holder does not have
any contract, undertaking, agreement or arrangement with any person or entity
to sell, transfer or grant participation to such person or entity, or to any
third person or entity, with respect to any of the Restricted Shares, in each
case, in violation of applicable U.S. federal or state or foreign securities
laws.

 

2.             The Holder understands
that the Restricted Shares have not been registered under the Securities Act or
any applicable U.S. federal, state or foreign securities laws, and that the
Restricted Shares are being issued in reliance on an exemption from
registration, which exemption depends upon, among other things, the bona fide
nature of the investment intent and the accuracy of the Holder’s
representations as expressed herein.

 

3.             The Holder has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of his owning the Restricted Shares.  The Holder is a
sophisticated investor, has relied upon independent investigations made by the Holder and, to the
extent believed by the Holder to be appropriate, the Holder’s
representatives, including the Holder’s own
professional, tax and other advisors, and is making an independent decision to
invest in the Restricted Shares.  The Holder has been
furnished with such documents, materials and information that the Holder deems
necessary or appropriate concerning the terms and conditions of the transactions
contemplated by the Agreement and the Holder’s holding of
the Restricted Shares and for evaluating an investment in the Company, and the Holder has read
carefully such documents, materials and information and understands and has
evaluated the types of risks involved with holding the Restricted Shares.  The Holder has not relied
upon any representations or other information (whether oral or written) from
the Company or its stockholders, directors, officers or affiliates, or from any
other person or entity, in connection with his investment in the Restricted
Shares.  The Holder acknowledges
that the Company has not given any assurances with respect to the tax
consequences of the ownership and disposition of the Restricted Shares.

 

4.             The Holder understands
that no U.S. federal or state or foreign agency has passed upon the Restricted
Shares or upon the Company, or upon the accuracy, validity or completeness of
any documentation provided to the Holder in connection
with the transactions contemplated by the Agreement, nor has any such agency
made any finding or determination as to holding the Restricted Shares.

 

5.             The Holder understands
that there are substantial restrictions on the transferability of the
Restricted Shares and that on the date of the Agreement and for an indefinite
period thereafter there will be no public market for the Restricted Shares and,
accordingly, it may not be possible for the Holder to liquidate
his investment in case of emergency, if at all. 
In addition, the Holder understands that the
Agreement contains substantial restrictions on the 

 

A-1

 

transferability of the
Restricted Shares and provide that, in the event that the conditions relating
to the transfer of any Restricted Shares in such document have not been
satisfied, the holder shall not transfer any such Restricted Shares, and unless
otherwise specified the Company will not recognize the transfer of any such
Restricted Shares on its books and records or issue any share certificates
representing any such Restricted Shares, and any purported transfer not in
accordance with the terms of the Agreement shall be void.  As such, Holder understands
that: a restrictive legend or legends in a form to be set forth in the
Agreement will be placed on the certificates representing the Restricted
Shares; a notation will be made in the appropriate records of the Company
indicating that each of the Restricted Shares are subject to restrictions on
transfer and, if the Company should at some time in the future engage the
services of a securities transfer agent, appropriate stop-transfer instructions
will be issued to such transfer agent with respect to the Restricted Shares;
and the Holder will sell, transfer or otherwise dispose of the
Restricted Shares only in a manner consistent with the Holder’s
representations set forth herein and then only in accordance with the
Agreement.

 

6.             The Holder understands
that (i) the Restricted Shares may not be sold, transferred or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom, (ii) the Restricted Shares have not been registered under the
Securities Act; (iii) the Restricted Shares must be held indefinitely and
he must continue to bear the economic risk of holding the Restricted Shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (iv) the Holder is prepared to
bear the economic risk of holding the Restricted Shares for an indefinite
period of time; (v) it is not anticipated that there will be any public
market for the Restricted Shares; (vi) the Restricted Shares are
characterized as “restricted securities” under the U.S. federal securities
laws; and (vii) the Restricted Shares may not be sold, transferred or
otherwise disposed of except in compliance with federal, state and local law.

 

7.             The Holder understands
that an investment in the Restricted Shares is not recommended for investors
who have any need for a current return on this investment or who cannot bear
the risk of losing their entire investment. 
In that regard, the Holder understands that his
holding the Restricted Shares involves a high degree of risk of loss.  The Holder acknowledges
that: (i) he has adequate means of providing for his current needs and
possible personal contingencies and has no need for liquidity in this
investment; (ii) his commitment to investments which are not readily
marketable is not disproportionate to his net worth; and (iii) his holding
the Restricted Shares will not cause his overall financial commitments to
become excessive.

 

8.             The Holder is/is not
(circle one) an “accredited investor,” as such term is defined in Rule 501
of the Securities Act.

 

 

SCHEDULE
I

 

Restricted
Stock Performance Target Calculation

 

	
   

  	
   

  	
  2009

  	
   

  	
  2010

  	
   

  	
  2011

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjusted
  EBITDA

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EV
  / EBITDA Multiple

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Enterprise
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  Less:
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  Value
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  Performance
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  Performance TargetExhibit 10.20

 

UNIT GRANT AGREEMENT

 

THIS UNIT GRANT AGREEMENT is made as of November 6, 2009
(the “Agreement”), by
and between STR
Holdings (New) LLC, a Delaware limited liability company (the “Company”),
and Dennis L. Jilot (the “Grantee”).

 

W I T N E S S E T H :

 

WHEREAS, the Grantee has entered into that certain
Employment Agreement with Specialized Technology Resources, Inc. (“STR”)
dated as of July 18, 2008 (as amended, the “Employment Agreement”) whereby
the Grantee has agreed to render services to STR and its affiliates, including
the Company.

 

WHEREAS, in exchange for the services to be rendered
to or for the benefit of the Company by the Grantee and pursuant to the
provisions of the Employment Agreement, the Company desires to issue and grant
to the Grantee Units (as hereinafter defined), on the terms and conditions set
forth in this Agreement and in the Second Amended and Restated Limited
Liability Company Agreement of the Company, dated as of November 6, 2009 (as
the same may be amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof, the “LLC Agreement”), a
copy of which has been furnished to the Grantee.

 

NOW, THEREFORE, in order to implement the foregoing
and in consideration of the mutual representations, warranties, covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:

 

1.             Issuance
and Grant.  Pursuant to the terms and
subject to the conditions set forth in this Agreement, the Employment Agreement
and the LLC Agreement, the Company
hereby agrees to issue and grant to the Grantee 22,346 unrestricted Class A Units of the Company (the “Unrestricted
Units”) and 201,118 restricted Class A Units of the Company (the “Restricted
Units” and together with the Unrestricted Units, the “Units”).  For the avoidance of doubt, the Unrestricted
Units shall not be subject to vesting.  The
Company agrees the Grantee’s provision of services to or for the benefit of the
Company constitutes sufficient consideration for the Units.  Capitalized terms used in this Agreement and
not otherwise defined in this Agreement shall have the meanings assigned to them
in the LLC Agreement.

 

2.             Vesting.  The
grant of the Units shall occur on the date hereof (the “Grant Date”).  The Restricted Units shall vest in equal 1/54 installments as of the last day of
each of the 54 successive calendar months after the date hereof, which, for the
sake of clarity, means that the first vesting date for such Restricted Units
will be November 30, 2009; provided, however, if the Grantee is still
actively employed in his current capacity
as Chairman, President and Chief Executive Officer of STR as of July 18,
2012, the remaining unvested Restricted Units shall become immediately vested;
provided, further that if the Grantee’s employment is terminated by STR for
Cause (as defined in the Employment Agreement) or by the Grantee without Good
Reason (as defined in the Employment Agreement), the Grantee shall immediately
forfeit any Restricted Units that remain unvested as of the date of such
termination.  In the event of a Change of Control (as defined
in the Employment Agreement) or in the event the Grantee’s employment is
terminated by the Company without Cause or by the Grantee for Good Reason
(including by reason of the Grantee’s death or Disability (as defined in the
Employment Agreement) whether prior to or after the issuance date of the
Restricted Units, the Restricted 

 

 

Units to
the extent they then remain unvested, shall become immediately and fully vested
and payable in accordance with the terms of this Section 2.

 

3.             Section 83(b) Election.  The Grantee shall have the option to make an
election under Section 83(b) of the Internal Revenue Code of 1986, as
amended (“Code” and such an election, an “83(b) Election”),
to include the fair market value of the Restricted Units in his current taxable
income as of the date of issuance, and the Company agrees to reasonably
cooperate with the Grantee if he chooses to make this election.

 

4.             Representations and Warranties of the Company.  The Company hereby represents and warrants to
the Grantee as follows:

 

(a)           The Company is a limited liability company, duly
organized, existing and in good standing, under the laws of its state of
formation.

 

(b)           The Company has full limited liability company power and
authority to enter into and perform this Agreement.  The execution, delivery and performance of
this Agreement by the Company has been duly and validly approved by the
Company.  This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and
binding agreement of the Company, enforceable against Company in accordance
with its terms.

 

(c)           When issued and delivered in accordance with this
Agreement, the Units will be duly authorized, validly issued, fully paid and
nonassessable and will be free of all preemptive rights and any other liens,
claims, charges and other encumbrances other than restrictions on transfer
under the LLC Agreement and applicable federal and state securities laws.

 

5.             Representations and Warranties of the Grantee.  The Grantee hereby represents and warrants to
the Company that:

 

(a)           The Grantee has the power and authority to enter into and
perform this Agreement and this Agreement constitutes a valid and legally
binding obligation of the Grantee.

 

(b)           The Grantee is in a financial position to hold the Units
for an indefinite period of time and is able to bear the economic risk and
withstand a complete loss of the Grantee’s investment in the Units.

 

(c)           The Grantee believes the Grantee, either alone or with the
assistance of the Grantee’s own professional advisor, has such knowledge and
experience in financial and business matters that the Grantee is capable of
reading and interpreting financial statements and evaluating the merits and
risks of the prospective investment in the Units and has the net worth to
undertake such risks.

 

(d)           The Grantee has obtained, to the extent the Grantee deems
necessary, the Grantee’s own personal professional advice with respect to the
tax consequences of receiving, and the risks inherent in, the investment in the
Units, and the suitability of an investment in the Units in light of the
Grantee’s financial condition and investment needs.

 

 

(e)           The Grantee believes that the investment in the Units is
suitable for the Grantee based upon the Grantee’s investment objectives and
financial needs, and the Grantee has adequate means for providing for the
Grantee’s current financial needs and personal contingencies and has no need
for liquidity of investment with respect to the Units.

 

(f)            The Grantee has had, prior to the issuance of the Units,
been furnished with, and has carefully read, the LLC Agreement, and the Grantee
has been given access to full and complete information regarding the Company
and has utilized such access to the Grantee’s satisfaction for the purpose of
obtaining information the Grantee believes to be relevant in making its
investment decision and, particularly, the Grantee has either attended or been
given reasonable opportunity to attend a meeting with representatives of the
Company for the purpose of asking questions of, and receiving answers from, such
representatives concerning the Company and to obtain any additional
information, to the extent reasonably available, the Grantee believes to be
relevant in making its investment decision.

 

(g)           The Grantee recognizes that an investment in the Units
involves a high degree of risk, including, but not limited to, the risk of
economic losses from operations of the Company.

 

(h)           The Grantee realizes that (i) the acquisition of the
Units is a long-term investment; (ii) the Grantee must bear the economic
risk of investment for an indefinite period of time because the Units have not
been registered under the Securities Act of 1933, as amended (the “Securities
Act”), or under the securities laws of any state and, therefore, none of
such Units can be sold unless they are subsequently registered under said laws
or exemptions from such registrations are available, and there can be no
assurance that any such registration will be effected at any time in the
future; (iii) the Grantee may not be able to liquidate the Grantee’s
investment in the event of an emergency or pledge any of such Units as
collateral for loans; and (iv) the transferability of the Units is
restricted in accordance with the LLC Agreement.

 

(i)            The Grantee is a bona fide resident of, is domiciled in
and received the offer and made the decision to invest in the Units in the
state set forth on the signature page below under “Address,” and the Units
are being accepted by the Grantee in the Grantee’s name solely for the Grantee’s
own beneficial interest and not as nominee for, or on behalf of, or for the
beneficial interest of, or with the intention to transfer to, any other person,
trust or organization.

 

(j)            The Grantee has not retained any finder, broker, agent,
financial advisor, “Purchaser Representative” (as defined in Rule 501(h) of
Regulation D of the Securities Act) or other intermediary in connection with
the transactions contemplated by this Agreement and agrees to indemnify and
hold harmless the Company from any liability for any compensation to any such
intermediary retained by the Grantee and the fees and expenses of defending
against such liability or alleged liability.

 

(k)           The Grantee has completed Schedule A to this
Agreement as to his/her status as an “Accredited Grantee” (as defined
therein) and such information is true and complete.

 

(l)            The Grantee agrees promptly to notify the Company should
the Grantee become aware of any change in the information set forth in this Section 5.

 

 

6.               Conditions to Obligations of
the Company.  The obligations
of the Company to grant the Units are subject to the Grantee having
entered into the LLC Agreement.

 

7.               Authority of the Board of Managers.  All decisions, interpretations and other
actions of the Board of Managers and/or any committee designated by the Board
of Managers, shall be final and binding on the Grantee and other persons
deriving their rights from the Grantee.  Without limiting the generality of the foregoing,
the Board of Managers and/or any committee designated by the Board of
Managers may, in its sole discretion,
clarify, construe or resolve any ambiguity in any provision of this Agreement,
accelerate vesting, or waive any terms or conditions applicable to any Units.

 

8.               Counterparts. 
This Agreement may be executed in one or more counterparts, each of
which shall be considered an original, but all of which taken together shall
constitute one and the same Agreement.

 

9.               Employment Rights.  Neither this Agreement nor any of its
provisions is intended to confer or should be construed as conferring any
rights on the Grantee to continued employment with the Company or any rights of
employment for a fixed term.  No contract
of employment, express or implied, is created hereby and nothing contained
herein shall be construed as creating a joint venture, partnership, agency or
other enterprise between the parties.

 

10.             No Waiver; Modifications in Writing.  This Agreement, together with the LLC
Agreement and the other agreements referred to herein and therein and any
exhibits, schedules or other documents referred to herein or therein, sets
forth the entire understanding of the parties, and supersedes all prior
agreements, arrangements, term sheets, presentations and communications,
whether oral or written, with respect to the specific subject matter hereof.  No waiver of or consent to any departure from
any provision of this Agreement shall be effective unless signed in writing by
the party entitled to the benefit thereof; provided, however, that the Company
may amend, modify or terminate the Units accordance with the terms in the LLC
Agreement.

 

11.             Indemnification. 
The Grantee will, to the fullest extent permitted by applicable law,
indemnify the Company and each member, manager, officer and employee (each an “Indemnitee”)
against any losses, claims, damages or liabilities to which any of them may
become subject in any capacity in any action, proceeding or investigation
arising out of or based upon any false representation or warranty, or breach or
failure by the Grantee to comply with any covenant or agreement made by the Grantee
herein.  The Grantee will reimburse each
Indemnitee for reasonable legal and other expenses (including the cost of any
investigation and preparation) as they are incurred in connection with any such
action, proceeding or investigation (whether incurred between any Indemnitee
and the Grantee, or between any Indemnitee and any third party).  The reimbursement and indemnity obligations
of the Grantee under this Section 11 will survive the Grant Date and will
be in addition to any liability which the Grantee may otherwise have
(including, without limitation, liabilities under the LLC Agreement), and will
be binding upon and inure to the benefit of any successors, assigns, heirs,
estates, executors, administrators and personal representatives of any
Indemnitee.

 

12.             Binding Effect;
Assignment.  The rights
and obligations of each party under this Agreement may not be assigned to any
other person or entity.  Except as
expressly provided in this Agreement, this Agreement shall not be construed so
as to confer any right or benefit upon any person or entity other than the
parties to this Agreement, and their respective 

 

 

successors and assigns.  This Agreement shall be binding upon the
Company, the Grantee and their respective heirs, successors, legal
representatives and permitted assigns.

 

13.             Severability of
Provisions.  Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

 

14.             Conflict with Other Agreements.  For so long as the LLC Agreement is in full
force and effect, this Agreement shall be subject to the provisions of the LLC
Agreement.  To the extent any of the
provisions of this Agreement conflict or are inconsistent with any of the
provisions of the LLC Agreement, the LLC Agreement shall control.  Upon the conversion of the Company to a
corporation (the “Conversion”), this Agreement shall be subject to the
provisions of the restricted stock agreement between the Grantee and the
successor corporation to the Company (the “Restricted Stock Agreement”).  Following the Conversion, to the extent any
of the provisions of this Agreement conflict or are inconsistent with any of
the provisions of the Restricted Stock Agreement, the Restricted Stock
Agreement shall control.

 

15.             Schedules and Descriptive Headings.  All Schedules to this Agreement shall be
deemed to be a part of this Agreement. 
The descriptive headings of this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.

 

16.             Governing Law. 
This Agreement, and all disputes, claims or causes of action that arise
from or are in connection with this Agreement, shall be governed by and
construed in accordance with the domestic substantive laws of the State of New
York without giving effect to any choice or conflict of law provision or rule that
would cause the application of the domestic substantive laws of any other
jurisdiction.

 

[The remainder of this page has been
intentionally left blank.]

 

 

IN WITNESS WHEREOF, the Grantee has executed this
Agreement as of the date first written above.

 

	
   

  	
  GRANTEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Dennis L. Jilot

  
	
   

  	
  Dennis L. Jilot

  

 

 

ACCEPTED AND AGREED,

as of the date first written above:

 

 

STR HOLDINGS (NEW) LLC

 

 

	
  By:

  	
  /s/
  Barry A. Morris

  	
   

  
	
   

  	
  Name:

  	
  Barry
  A. Morris

  	
   

  
	
   

  	
  Title:

  	
  Executive
  Vice President and

  	
   

  
	
   

  	
   

  	
  Chief Financial Officer

  	
   

  

 

[SIGNATURE PAGE TO UNIT
GRANT AGREEMENT]

 

 

Exhibit A

 

ELECTION
TO INCLUDE CERTAIN CLASS A UNITS

 

IN
GROSS INCOME PURSUANT TO

 

SECTION 83(b) OF
THE INTERNAL REVENUE CODE

 

On                   ,
2009 the undersigned was granted certain Class A Units (the “Units”)
in STR Holdings (New) LLC (the “Company”).  The Units are subject to certain restrictions
pursuant to the Second Amended and Restated Limited Liability Company Agreement
of the Company, dated as of                 ,
2009 (the “Agreement”).

 

Pursuant to §83(b) of the Internal Revenue Code of 1986, as
amended, and Treasury Regulation §1.83-2 promulgated thereunder, the
undersigned hereby makes an election, with respect to the Units, to report as
taxable income for the calendar year 2009 the excess (if any) of the value of
the Units on               
2009 over the purchase price thereof.

 

The following information is supplied in accordance with Treasury
Regulation §1.83-2(e):

 

1.                                       The name,
address and social security number of the undersigned:

 

Name:

Address:

SSN:

 

2.                                       A description
of the property with respect to which the election is being made:  restricted units in the Company known as Class A
Units which entitle the holder thereof to a share of the Company’s capital and
profits.

 

3.                                       (a)           The date on which the Units were
transferred:                  ,
2009 (the “Grant Date”).

 

(b)           The
taxable year for which such election is made: 
calendar        year 2009.

 

4.                                       The
restrictions to which the property is subject: 
The Units shall vest in equal
installments of [        ] Units as of
the last day of each of the [    ] successive calendar
months after the date hereof, which, for the sake of clarity, means that the
first vesting date for such Units will be November 30, 2009; provided,
however, if the Grantee is still actively employed in his current capacity as Chairman, President and Chief Executive
Officer

 

 

of Specialized Technology Resources, Inc. (“STR”)
as of July 18, 2012, the remaining unvested Units shall become immediately
vested; provided, further that if the Grantee’s employment is terminated by STR
for Cause (as defined in the Employment Agreement with STR dated as of July 18,
2008 (as amended, the “Employment Agreement”)) or by the Grantee without Good Reason (as defined in the Employment
Agreement), the Grantee shall immediately forfeit any Units that remain
unvested as of the date of such termination.  In the
event of a Change of Control (as defined in the Employment Agreement) or in the
event the Grantee’s employment is terminated by the Company without Cause or by
the Grantee for Good Reason (including by reason of the Grantee’s death or
Disability (as defined in the Employment Agreement)) whether prior to or after
the issuance date of the Units, the Units to the extent they then remain
unvested, shall become immediately and fully vested and payable in accordance
with the terms of the Agreement.

 

5.                                       The fair market
value on               
2009 of the property with respect to which the election is being made,
determined without regard to any lapse restrictions:  [$    ].

 

6.                                       The amount paid
for such property:  $0.

 

A copy of this election is being furnished to the Company pursuant to
Treasury Regulation §1.83-2(e)(7).  A
copy of this election will be submitted with the 2009 U.S. federal income tax
return of the undersigned pursuant to Treasury Regulation §1.83-2(c).

 

Dated:                      ,
2009

 

	
   

  	
   

  
	
   

  	
   

  

 

 

SCHEDULE A

 

ACCREDITED INVESTOR STATUS

 

The Grantee represents and
warrants that he is an “accredited investor” as defined in Rule 501(a) promulgated
under Regulation D of the Securities Act, because he meets at least one of the
following criteria (please initial each applicable item):

 

	
  o

  	
   

  	
  The Grantee is a
  natural person whose individual net worth, or joint net worth with his or her
  spouse, exceeds $1,000,000 at the time of the subscriber’s purchase; or

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  The Grantee is a
  natural person who had an individual income in excess of $200,000 in each of
  the two most recent years (2007 and 2008) or joint income with the Grantee’s
  spouse in excess of $300,000 in each of those years and who reasonably
  expects to reach the same income level in the current year (2009); or

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  The Grantee is a
  corporation, or similar business trust, partnership or an organization
  described in Section 501(c)(3) of the Internal Revenue Code, not
  formed for the specific purpose of acquiring the Issuer Common Stock, with
  total assets in excess of $5,000,000; or

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  The Grantee is either
  (i) a bank as defined in Section 3(a)(2) of the Securities
  Act, or any savings and loan association or other institution as defined in
  Section 3(a)(5)(A) of the Securities Act whether acting in its
  individual or fiduciary capacity, (ii) a broker or dealer registered
  pursuant to Section 15 of the Securities Exchange Act of 1934, as
  amended, (iii) an insurance company as defined in Section 2(13) of
  the Securities Act, (iv) an investment company registered under the
  Investment Company Act of 1940, as amended, or a business development company
  as defined in Section 2(a)(48) of such Act, (v) a Small Business
  Investment Company licensed by the U.S. Small Business Administration under
  Section 301(c) or (d) of the Small Business Investment Act of
  1958, (vi) a plan established or maintained by a state, its political
  subdivisions, or any agency or instrumentality of a state or its political
  subdivisions, for the benefit of its employees, if such plan has total assets
  in excess of $5,000,000 or (vii) an employee benefit plan within in the
  meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
  if the investment decision is made by a plan fiduciary, as defined in
  Section 3(21) of ERISA, which plan fiduciary is either a bank, savings
  and loan association, insurance company or registered investment adviser, or
  if the employee benefit plan has total assets in excess of $5,000,000 or, if
  a self-directed plan, with investment decisions made solely by persons who
  are accredited investors; or

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  The Grantee is a
  private business development company as defined in Section 202(a)(22) of
  the Investment Advisers Act of 1940, as amended; or

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  The Grantee is a
  director or executive officer of the Company; or

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  The Grantee is a trust,
  with total assets in excess of $5,000,000, not formed for the specific purpose
  of acquiring the Securities, the purchase of which is directed by a
  sophisticated person as described in Rule 506(b)(2)(ii) of
  Regulation D promulgated under the Securities Act; or

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  The Grantee is any
  entity in which all of the equity owners are accredited investors. (Please
  submit a copy of this page countersigned by each such equity owner if
  relying on this item).

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