Document:

Exhibit
10.31

 

 

RESTRICTED COMMON STOCK AGREEMENT

HOLDERS OF C, D AND E UNITS

 

RESTRICTED COMMON STOCK
AGREEMENT (this “Agreement”) made as of
[                              ]
(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
[            ] (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/[   ] installments as of the last day of each of
the [   ] calendar months following the
Effective Date, which for the sake of clarity means [         ].

 

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

 

(iii)                     Termination.

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

4.                                       Legend.

 

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

 

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

 

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

 

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

 

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

 

5.                                       Restrictions on
Transfer and Conversion.

 

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

 

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

 

3

 

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

 

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

 

6.                                       Definitions.

 

The following terms shall have the meanings ascribed
below:

 

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

 

“Change of Control” means:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

“Registration Rights Agreement” means the
Registration Rights Agreement, dated as of [                    ],
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

  	
   

  	
  $

  	
  66.6

  	
   

  	
  $

  	
  82.3

  	
   

  	
  $

  	
  103.5

  	
   

  
	
  EV
  / EBITDA Multiple

  	
   

  	
  10.0

  	
  x

  	
  10.0

  	
  x

  	
  10.0

  	
  x

  
	
  Enterprise
  Value

  	
   

  	
  $

  	
  665.6

  	
   

  	
  $

  	
  823.1

  	
   

  	
  $

  	
  1,034.5

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less:
  Net Debt on Balance Sheet

  	
   

  	
  (235.9

  	
  )

  	
  (225.9

  	
  )

  	
  (206.4

  	
  )

  
	
  Value
  of Common Equity

  	
   

  	
  $

  	
  429.8

  	
   

  	
  $

  	
  597.3

  	
   

  	
  $

  	
  828.1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Performance
  Threshold

  	
   

  	
  85.0

  	
  %

  	
  85.0

  	
  %

  	
  85.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Performance Target

  	
   

  	
  $

  	
  365.3

  	
   

  	
  $

  	
  507.7

  	
   

  	
  $

  	
  703.8Exhibit 10.32

 

SUPPLEMENT NO. 1 (this “Supplement”)
dated as of November [•], 2009 to the First Lien Guarantee and
Collateral Agreement dated as of June 15, 2007 (the “Guarantee and Collateral Agreement”), among SPECIALIZED TECHNOLOGY
RESOURCES, INC. (successor by merger to STR Acquisition, Inc.), a Delaware
corporation (the “Borrower”), STR HOLDINGS LLC,
a Delaware limited liability company (“Existing
Holdings”), each Subsidiary of the Borrower
from time to time party thereto (each such Subsidiary individually a “Subsidiary Guarantor”
and collectively, the “Subsidiary Guarantors”; the Subsidiary Guarantors, the
Borrower and Holdings are referred to collectively herein as the “Grantors”) and CREDIT SUISSE (together with
its affiliates, “Credit
Suisse”), as collateral
agent (in such capacity, the “Collateral
Agent”) for the
Secured Parties (as defined therein).

 

A. 
Reference is made to the First Lien Credit Agreement dated as of June 15,
2007 as amended on October 5, 2009, (and amended, supplemented or otherwise
modified from time to time, the “Credit
Agreement”),
among the Borrower, Existing Holdings, the lenders from time to time party
thereto (the “Lenders”) and Credit Suisse, as
administrative agent for the Lenders and as Collateral Agent.

 

B. 
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement or the
Guarantee and Collateral Agreement referred to therein, as applicable.

 

C.  The
Grantors have entered into the Guarantee and Collateral Agreement in order to
induce the Lenders to make Loans and the Issuing Banks to issue Letters of
Credit.  The undersigned STR Holdings
(New) LLC, a Delaware limited liability company (“New
LLC” and, together with STR Holdings, Inc., a Delaware corporation,
the corporate successor of New LLC by way of a conversion to be consummated on
or around the date hereof, “New
Holdings”) is executing this Supplement to confirm
that it is becoming a Guarantor and a Grantor under the Guarantee and
Collateral Agreement as successor in interest to Existing Holdings.

 

D. 
Existing Holdings and New Holdings have executed and delivered to the
Collateral Agent the Assignment and Assumption Agreement dated as of November [•],
2009 (the “Assignment and Assumption
Agreement”), attached hereto as Exhibit A, pursuant
to which Existing Holdings assigned to New Holdings and New Holdings assumed
from Existing Holdings any and all Obligations of Existing Holdings arising
under the Loan Documents.

 

Accordingly, the Collateral Agent and New Holdings
agree as follows:

 

SECTION 1.  New Holdings as successor in interest to
Existing Holdings is, and by its signature below confirms that it is and shall
continue to be, a Grantor and Guarantor under the Guarantee and Collateral
Agreement with the same force and effect

 

 

as if originally named therein
as a Grantor and Guarantor and New Holdings hereby (a) agrees to all the
terms and provisions of the Guarantee and Collateral Agreement applicable to it
as a Grantor and Guarantor thereunder, (b) represents and warrants that
the representations and warranties made by it as a Grantor and Guarantor
thereunder are true and correct on and as of the date hereof, and (c) represents
and warrants that attached hereto as Exhibit A is a true and
complete copy of the Assignment and Assumption Agreement, currently in full
force and effect, which continues to be legally valid, binding and enforceable
against any and all parties thereto in accordance with its terms, and as of the
date hereof, has not been altered, amended, supplemented or revised in any
manner.  In furtherance of the foregoing,
New Holdings, as security for the payment and performance in full of the
Obligations (as defined in the Guarantee and Collateral Agreement), does hereby
create and grant to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, their successors and assigns, a
security interest in and lien on all of New Holdings’s right, title and
interest in and to the Collateral (as defined in the Guarantee and Collateral
Agreement) of New Holdings.  Each
reference to a “Grantor” or “Guarantor”
in the Guarantee and Collateral Agreement shall be deemed to include New
Holdings.  The Guarantee and Collateral
Agreement is hereby incorporated herein by reference.

 

SECTION 2.  New Holdings represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.

 

SECTION 3.  This Supplement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Supplement shall become effective when
the Collateral Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of New Holdings and the Collateral
Agent.  Delivery of an executed signature
page to this Supplement by facsimile transmission shall be as effective as
delivery of a manually signed counterpart of this Supplement.

 

SECTION 4.  New Holdings hereby represents and warrants
that (a) set forth on Schedule I
attached hereto is a true and correct schedule of (i) any and all Equity
Interests and Pledged Debt Securities now owned by New Holdings and (ii) any
and all Intellectual Property now owned by New Holdings and (b) set forth
under its signature hereto, is the true and correct legal name of New Holdings
and its jurisdiction of organization.

 

SECTION 5.  New Holdings shall be deemed to be a
successor in interest to Existing Holdings and all references in the Guarantee
and Collateral Agreement to “Holdings” shall be deemed to be references to New Holdings
and Existing Holdings.

 

SECTION 6.  Except as expressly supplemented hereby, the
Guarantee and Collateral Agreement shall remain in full force and effect.

 

A-2

 

SECTION 7.  THIS SUPPLEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.

 

SECTION 8.  In case any one or more of the provisions
contained in this Supplement should be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein and in the Guarantee and Collateral Agreement shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

 

SECTION 9.  All communications and notices hereunder
shall (except as otherwise expressly permitted by the Guarantee and Collateral
Agreement) be in writing and given as provided in Section 9.01 of the
Credit Agreement. All communications and notices hereunder to New Holdings
shall be given to it in care of the Borrower as provided in Section 9.01
of the Credit Agreement.

 

SECTION 10.  New Holdings agrees to reimburse the
Collateral Agent for its out-of-pocket expenses in connection with this
Supplement, including the fees, other charges and disbursements of counsel for
the Collateral Agent.

 

A-3

 

IN WITNESS WHEREOF, New Holdings and the
Collateral Agent have duly executed this Supplement to the Guarantee and
Collateral Agreement as of the day and year first above written.

 

 

	
   

  	
  STR
  HOLDINGS (NEW) LLC,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
  Legal
  Name:

  
	
   

  	
   

  	
  Jurisdiction
  of Formation:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CREDIT
  SUISSE, CAYMAN ISLANDS BRANCH, as Collateral Agent,

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

A-4

 

Collateral of New Holdings

 

EQUITY INTERESTS

 

	
  Issuer

  	
   

  	
  Number of

  Certificate

  	
   

  	
  Registered

  Owner

  	
   

  	
  Number and

  Class of

  Equity Interest

  	
   

  	
  Percentage

  of Equity

  Interests

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

PLEDGED DEBT SECURITIES

 

	
  Issuer

  	
   

  	
  Principal

  Amount

  	
   

  	
  Date of Note

  	
   

  	
  Maturity Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

INTELLECTUAL PROPERTY

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