Exhibit 10.3


 


Execution Copy


 


EMPLOYMENT
AGREEMENT


 


This Employment Agreement (the
“Agreement”), dated as of July 18, 2008 (the “Effective Date”),
is made by and between SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware
corporation (together with any successor thereto, the “Company”), and
DENNIS L. JILOT (the “Executive”).


 


Recitals


 


A.            The Company desires to engage the Executive to perform
services under the terms hereof and the Executive desires to be employed by the
Company.


 


B.            The Company desires to be assured that the unique and
expert services of the Executive will be substantially available to the
Company, and that the Executive is willing and able to render such services on
the terms hereinafter set forth.


 


C.            The Company desires to be assured that the confidential
information and goodwill of the Company will be preserved for the exclusive
benefit of the Company.


 


Terms


 


In consideration of such
employment and the respective agreements of the parties set forth below, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:


 


1.             Certain Definitions


 


(a)           “Annual Base Salary” shall
have the meaning set forth in Section 3(a).


 


(b)           “Board” shall mean the Board
of Managers of Parent.


 


(c)           “Bonus Compensation” shall
have the meaning set forth in Section 3(b).


 


(d)           The Company shall have “Cause”
to terminate the Executive’s employment hereunder upon:  (i) the Executive’s breach of Section 2(c) (other
than any such failure resulting from the Executive’s Disability), which is not
remedied within 30 days after receipt by the Executive of written notice from
the Company specifying such failure in reasonable detail; (ii) the
Executive’s failure or refusal to follow the reasonable instructions of the
Board or the board of directors of any Subsidiary of the Company, which failure
or refusal is not cured within 30 days following written notice; (iii) the
Executive’s conviction of a felony or of a misdemeanor if such misdemeanor involves
moral turpitude or misrepresentation, including a plea of guilty or nolo
contendere; (iv) the Executive’s unlawful use (including being
under the influence) or possession of illegal drugs on the Company’s or any of
its Subsidiaries’ premises; (v) the Executive’s commission of any act of
fraud, embezzlement, misappropriation of funds, material misrepresentation,
breach of fiduciary duty or other act of dishonesty detrimental to the Company
or any of its Subsidiaries; or (vi) the Executive’s intentional wrongful
act or gross negligence that has a material detrimental effect on the Company
or its Subsidiaries.


 


(e)           “Company” shall have the
meaning set forth in the preamble hereto.


 

















 


(f)            “Date of Termination” shall
mean (i) if the Executive’s employment is terminated by his death, the
date of his death; (ii) if the Executive’s employment is terminated due to
his Disability, the date determined pursuant to Section 4(a)(ii); (iii) if
the Executive’s employment is terminated pursuant to Section 4(a)(iii)-(vi) either
the date indicated in the Notice of Termination or the date specified by the
Company pursuant to Section 4(b), whichever is earlier; or (iv) if
the Executive’s employment is terminated pursuant to Section 4(a)(vii) the
date on which the Term expires.


 


(g)           “Disability” shall mean (x) any
physical or mental illness, injury or infirmity which prevents the Executive
from performing the Executive’s job functions for a period of (i) one
hundred twenty consecutive calendar days or (ii) an aggregate of one hundred
eighty calendar days out of any consecutive twelve month period and (y) a
disability upon which Executive would be deemed disabled under the definitions
contained in the long-term disability insurance policy(s) maintained by
the Company for the benefit of Executive pursuant to Section 3(c) of
this Agreement.  Any determination of
disability shall be made by the Board in consultation with a qualified
physician or physicians selected by the Board and reasonably acceptable to the
Executive.  The failure of the Executive
to submit to a reasonable examination by such physician or physicians shall act
as an estoppel to any objection by the Executive to the determination of
disability by the Board.


 


(h)           “Effective Date” shall have
the meaning set forth in the preamble hereto.


 


(i)            “Executive” shall have the
meaning set forth in the preamble hereto.


 


(j)            The Executive shall have “Good
Reason” to resign his employment upon the occurrence (without the Executive’s
prior written consent) of any of the following:  (A) a material diminution in the nature
or scope of the Executive’s responsibilities, duties or authority in his
capacity as Chairman, President and Chief Executive Officer, without regard to
any other responsibilities, duties or authority the Executive may have had or
performed for the Company at any time; (B) the Company’s material breach
of this Agreement; (C) any change in the Executive’s reporting
relationship so that he no longer reports to the Board; (D) any decrease
in the Executive’s Annual Base Salary, target bonus percentage as set forth in Section 3(a),
or benefit plans, programs and arrangements as in effect from time to time
(other than a general reduction in base salary, target bonus percentages or
benefit plans, programs and arrangements that affects all members of senior
management equally); or (E) Executive is removed from the Board of
Directors of the Company; provided, however,
that the Executive may not resign his employment for Good Reason unless:  (x) the Executive provided the Company
with at least 30 days prior written notice of his intent to resign for Good
Reason (which notice must be provided within 180 days following (i) the
occurrence of the event(s) purported to constitute Good Reason, or (ii) if
the Executive could not reasonably have known of the occurrence of any of such
events, the date on which the Executive had actual knowledge of the occurrence
of any of such events); and (y) the Company has not remedied the alleged
occurrence(s) within the 30-day period following its receipt of such
notice from the Executive.


 


(k)           “Notice of Termination” shall
have the meaning set forth in Section 4(b).


 


(l)            “Parent” means STR Holdings
LLC, or any successor thereto, a Delaware limited liability company.


 


(m)          “Restricted Shares” shall have the meaning set forth
in Section 6.


 


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(n)           “Term” shall have the meaning
set forth in Section 2(b).


 


2.             Employment


 


(a)           In General.  The Company shall employ the Executive and
the Executive shall enter the employ of the Company, for the period set forth
in Section 2(b), in the position set forth in Section 2(c), and upon
the other terms and conditions herein provided.


 


(b)           Term of Employment.  The initial term of employment under this
Agreement (the “Initial Term”) shall be for the period beginning on July 18,
2008 and ending on the fourth anniversary thereof, unless earlier terminated as
provided in Section 4.  The
employment term hereunder shall automatically be extended for successive
one-year periods (“Extension Terms” and, collectively with the Initial
Term, the “Term”) unless either party gives written notice of
non-extension to the other no later than 90 days prior to the expiration of the
then applicable Term.


 


(c)           Position and Duties.  The Executive shall serve as Chairman,
President and Chief Executive Officer of the Company, with responsibilities,
duties and authority customary for such position.  The Executive shall report to the Board.  The Executive shall devote substantially all
his working time and efforts to the business and affairs of the Company and its
subsidiaries.  The Executive agrees to
observe and comply with the Company’s rules and policies as adopted by the
Company from time to time.  During the
Term, it shall not be a violation of this Agreement for the Executive to (i) serve
on industry trade, civic or charitable boards or committees; (ii) deliver
lectures or fulfill speaking engagements; or (iii) manage personal
investments (which shall include (x) investments by the Executive of his
personal assets in any business which does not compete directly or indirectly
with the Company, in such form or manner as will not require any services on
the part of the Executive in the operation of such business and (y) the
purchase by the Executive of a total of up to 5% of the regularly traded
securities of any entity, whether or not it competes with the Company), as long
as, in the reasonable judgment of the Board, such activities do not and will
not interfere with the performance of the Executive’s duties and
responsibilities as an employee of the Company. 
The Executive shall perform his duties hereunder primarily from his
office located in Reno, Nevada, and at such other locations as are mutually
determined by the Executive and the Board, and shall travel as necessary or as
reasonably requested by the Board.


 


3.             Compensation and Related Matters


 


(a)           Annual Base Salary.  During the Term, and effective as of December 31,
2007, the Executive shall receive a base salary at a rate of $500,000 per annum,
which shall be paid in accordance with the customary payroll practices of the
Company (the “Annual Base Salary”). 
The Executive’s Annual Base Salary will be reviewed annually by the
Board and the Board may, in its sole discretion and consistent with past
practices, increase the Annual Base Salary considering the Executive’s
performance and that of the Company.


 


(b)           Bonus Compensation.  In addition to the Annual Base Salary, for
each fiscal year, or portion thereof, during the Term, the Executive shall be
eligible to participate in the Company’s management incentive plan (or any
successor incentive plan adopted by the Board) pursuant to which Executive may
be paid a target amount of 50% of his Annual Base Salary except as the parties
may have agreed otherwise in writing; provided, however, in no event shall Executive be paid a regular bonus
in excess of 100% of his Annual Base Salary. 
The 


 


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Executive’s
bonus will be based upon performance measured against mutually agreed upon
goals to be established as soon as practicable after the date hereof.  In the discretion of management, Executive
shall be eligible to receive incentive units pursuant to the terms of the
Amended and Restated Limited Liability Company Agreement of STR Holdings LLC
(the “LLC Agreement”).  Any bonus
shall be paid no later than the 15th day of the third month following the end
of the calendar year in which such bonus is earned and vested.


 


(c)           Benefits.  The Executive shall be entitled to participate
in employee benefit plans, programs and arrangements of the Company now (or, to
the extent determined by the Board, hereafter) in effect under Executive’s
current employment agreement, dated September 1, 2003.  For the sake of clarity, Executive shall be
entitled to continue to participate in, on the same or substantially similar
terms, (i) his current long-term disability insurance policy provided by
Provident Life and Accident Insurance Company, (ii) his current life
insurance policy provided by MassMutual Financial Group, (iii) his current
long-term care insurance policy provided by CNA – Continental Casualty Company
(Executive’s wife, Linda Jilot, shall also be entitled to continue to
participate in, on the same or substantially similar terms, her current
long-term care insurance policy provided by CNA – Continental Casualty
Company).  In addition, during the Term,
Executive shall be entitled to reimbursement of the annual membership dues and
standard fees of the La Costa Club of which the Executive is currently a member
not to exceed $9,000.


 


(d)           Vacation.  During the Term, the Executive shall be
entitled to four weeks paid vacation each calendar year.  Any vacation shall be taken at the reasonable
and mutual convenience of the Company and the Executive.


 


(e)           Expenses.  The Company shall promptly reimburse the
Executive for all reasonable travel and other business expenses incurred by him
in the performance of his duties to the Company in accordance with the Company’s
applicable expense reimbursement policies and procedures.


 


(f)            Legal Expenses. 
Notwithstanding anything to the contrary above, the Company further
agrees to reimburse Executive for Executive’s legal costs up to an amount equal
to $5,000 in connection with the review of this Agreement and the proposed
terms of Employee’s employment hereunder and/or related tax preparation
services by Executive’s legal counsel and/or accountant.


 


4.             Termination.  The Executive’s employment hereunder may be
terminated by the Company or the Executive, as applicable, without any breach
of this Agreement only under the following circumstances:


 


(a)           Circumstances


 


(i)            Death.  The Executive’s employment hereunder shall
terminate upon his death.


 


(ii)           Disability.  If the Executive incurs a Disability, the Company
may give the Executive written notice of its intention to terminate the
Executive’s employment.  In that event,
the Executive’s employment with the Company shall terminate effective on the
later of the 30th day after receipt of such notice by the 


 


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Executive or the date specified in such notice, provided that within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of his duties.


 


(iii)          Termination for Cause.  The Company may terminate the Executive’s
employment for Cause.


 


(iv)          Termination without Cause.  The Company may terminate the Executive’s
employment without Cause.


 


(v)           Resignation for Good Reason.  The Executive may resign his employment for
Good Reason.


 


(vi)          Resignation without Good Reason.  The Executive may resign his employment
without Good Reason.


 


(vii)         Non-renewal.  Either party may notify the other of his or
its intent not to renew this Agreement at least 90 days prior to the expiration
of the Term, which shall be treated as a termination without Cause if such
notice is given by the Company and the Company does not concurrently waive the
Executive’s obligations under Section 2 of the Agreement Not to Compete,
or a resignation without Good Reason if such notice is given by the Executive.


 


(b)          Notice of Termination.  Any termination of the Executive’s employment
by the Company or by the Executive under this Section 4 (other than
termination pursuant to paragraph (a)(i)) shall be communicated by a written
notice to the other party hereto indicating (i) the specific termination
provision in this Agreement relied upon, (ii) except with respect to a
termination pursuant to Section 4(a)(iv) or 4(a)(vi), setting forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated, and
(iii) specifying a Date of Termination which, if submitted by the
Executive (or, in the case of a termination described in Section 4(a)(ii),
by the Company), shall be at least 90 days following the receipt of such notice
(a “Notice of Termination”); provided, however,
that a Notice of Termination delivered by the Company pursuant to Section 4(a)(ii) shall
not be required to specify a Date of Termination, in which case the Date of
Termination shall be determined pursuant to Section 4(a)(ii); and provided, further, that in the event that the Executive
delivers a Notice of Termination to the Company, the Company may, in its sole
discretion, change the Date of Termination to any date that occurs following
the date of Company’s receipt of such Notice of Termination (even if such date
is prior to the date specified in such Notice of Termination).  A Notice of Termination submitted by the Company
may provide for a Date of Termination on the date the Executive receives the
Notice of Termination, or any date thereafter elected by the Company in its
sole discretion.  The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Cause or Good Reason shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in enforcing
the Executive’s or the Company’s rights hereunder.


 


5.             Company Obligations Upon Termination of Employment


 


(a)           In General.  Upon a termination of the Executive’s
employment for any reason, the Executive shall be entitled to receive in a lump
sum within 20 business days following the Executive’s termination:  the sum of the Executive’s Annual Base Salary
through the Date of 


 


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Termination;
a pro rata portion of Executive’s bonus, if any, for the applicable period of
the calendar year ending on the Date of Termination (which portion of the bonus
shall be reasonably determined by the Board at the end of the year in which
termination occurs in accordance with the Board’s bonus determination policies
then in effect); and any expenses owed to the Executive under Section 3(e).  The Executive shall also be entitled to any
accrued vacation pay owed to the Executive pursuant to Section 3(d); any
amount arising from the Executive’s participation in, or benefits under, any
employee benefit plans, programs or arrangements under Section 3(c) (including
without limitation, any disability or life insurance benefit plans, programs or
arrangements), which amounts shall be payable in accordance with the terms and
conditions of such employee benefit plans, programs or arrangements; and any
benefits that may be due the Executive under the LLC Agreement or incentive
unit agreements between the Executive and the Company.


 


(b)           Termination
without Cause or for Good Reason.  If the Executive’s employment shall be
terminated by the Company without Cause or by the Executive for Good Reason
(including by reason of the Executive’s death or Disability but not by reason
of the Executive’s termination by the Company for Cause or termination by the
Executive without Good Reason), then, in addition to the payments and benefits
described in Section 5(a) (including benefits under stock option
agreements), the Company shall:


 


(i)            Continue to pay to the Executive (or
the Executive’s estate), in accordance with the Company’s regular payroll
practice following the Date of Termination, the Executive’s Annual Base Salary,
and continue the Executive’s and/or the Executive’s wife’s participation in the
Company’s health and life insurance plans through twenty seven months from the
Date of Termination; provided that each payment is intended to
constitute a separate payment within the meaning of Code Section 409A and
the regulations thereunder; provided, further that in the event
that Executive is determined by the Company to be a “specified employee” (as
defined in Code Section 409A(2)(B) and determined in accordance with Code 416(i)
(without regard to paragraph (5) thereof)) of the Company at a time when its
stock is deemed to be publicly traded on an established securities market, any
payments determined to be “nonqualified deferred compensation” payable
following termination of employment shall be made no earlier than the earlier
of (i) the last day of the sixth (6th) complete calendar month following
such termination of employment, or (ii) Executive’s death, consistent with
the provisions of Code Section 409A. 
Any payment delayed by reason of the prior sentence shall be paid out in
a single lump sum at the end of such required delay period in order to catch up
to the original payment schedule. 
Notwithstanding the foregoing provisions of this Paragraph 5(b)(i) or
anything in this Agreement to the contrary, the health and life insurance
benefits that are not non-taxable medical benefits, “disability pay” or “death
benefit” plans within the meaning of Treasury Regulation Section 1.409A-1(a)(5)
shall be provided and administered in a manner that complies with Treasury
Regulation Section 1.409A-3(i)(1)(iv), which requires that (i) the
amount of such benefits provided during one taxable year shall not affect the
amount of such benefits provided in any other taxable year, except that to the
extent such benefits consist of the reimbursement of expenses referred to in Section 105(b) of
the Code, a maximum, if provided under the terms of the plan providing such
health and life insurance benefits, may be imposed on the amount of such
reimbursements over some or all of the period in which such benefit is to be
provided to the Executive and/or the Executive’s wife, as described in Treasury
Regulation Section 1.409A-3(i)(iv)(B), (ii) to the extent that any
such benefits consist of 


 


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reimbursement of eligible expenses, such
reimbursement must be made on or before the last day of the Executive’s taxable
year following the taxable year in which the expense was incurred and (iii) no
such benefit may be liquidated or exchanged for another benefit;


 


(ii)           If the Executive otherwise would have
been entitled to receive a payment pursuant to the Company’s bonus plan had he
been employed on the last day of the Company’s fiscal year, then pay to the
Executive (or the Executive’s estate) on April 30 of the year following
the year in which the Executive’s termination occurs, (and in the event that the
Company has not received its audited financial statements for the prior year by
April 30 of such year, such bonus shall be paid as soon as practicable
thereafter, consistent with the provisions of Code Section 409A, but in no
event later than the last day of such following year), the amount of such
payment, multiplied by a fraction the numerator of which is the number of days
during such fiscal year that the Executive was employed and the denominator of
which is 365; and


 


(iii)          Continue paid coverage for the
Executive and/or the Executive’s wife and any eligible dependents under all
Company group health benefit plans in which the Executive and any dependents
were entitled to participate immediately prior to the Date of Termination
through the twenty-seventh month after the Date of Termination, to the extent
permitted thereunder.  As of the date
that the Executive ceases to receive coverage under any group health plan
pursuant to this Section 5(b)(iii), the Executive shall be eligible to
elect to receive “COBRA” continuation coverage to the extent permitted by Section 601
et seq. of the Employee Retirement
Income Security Act of 1974, as amended, and if such coverage ceases prior to
twelve months from the Date of Termination, the Company shall pay for such COBRA
coverage through such twelve month period.


 


6.             Restricted Stock.  Upon the occurrence of an
initial public offering, Parent intends to issue to the Executive restricted
shares at the initial public offering price with an aggregate fair market value
equal to $6,000,000 (the “Restricted Shares”); provided, however, should
an initial public offering not occur by April 1, 2009, Parent intends to
issue to the Executive Restricted Shares at the then fair market price with an
aggregate fair market value equal to $6,000,000.  Executive shall have the option to make an
election under Section 83(b) of the Internal Revenue Code of 1986, as
amended (“Code”), to include the fair market value of the restricted shares in
his current taxable income as of the date of issuance, and Parent agrees to
reasonably cooperate with Executive if he chooses to make this election. The
Restricted Shares shall be subject to the reasonable terms and conditions of
any equity incentive plan adopted by the Board or the compensation committee of
the Board and shall vest in equal 1/60th installments as of the last day of
each of the 60 successive calendar months beginning after the date of issuance
of such Restricted Shares; provided, however, if Executive is still actively
employed in his current capacity as
Chairman, President and Chief Executive Officer of the Company as of the fourth
anniversary of the Effective Date, the remaining unvested Restricted Shares
shall become immediately vested.  In the event of a Change of Control or in the event
the Executive’s employment is terminated by the Company without Cause or by the
Executive for Good Reason (including by reason of the Executive’s death or
Disability), the Restricted Shares, to the extent they then remain unvested,
shall become immediately and fully vested. 
A “Change of Control” shall mean (i) the sale (in one transaction
or a series of transactions) of all or substantially all of the assets of the
Company to a third party; (ii) a sale or issuance (in one transaction or a
series of transactions) of any securities resulting in more than 50% of the
voting power of the Company 


 


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


 


7.            Agreement Not To Compete.  As of the date hereof the
Executive shall enter into an Agreement Not To Compete, in substantially the
form attached hereto as Appendix A, the terms and conditions of which
are incorporated herein by this reference. 
If the Executive breaches any his covenants in such Agreement Not to
Compete, then notwithstanding any other provision of this Agreement, the
Executive shall be entitled to no further payments or benefits provided for in
this Agreement.


 


8.            Assignment and Successors.  The Company may assign its
rights under this Agreement to any entity, including any successor to all or
substantially all the assets of the Company, by merger or otherwise, shall use
its best efforts to require any such successor or other assignee to assume its
obligations under this Agreement, and may assign or encumber this Agreement and
its rights hereunder as security for indebtedness of the Company and entities
controlled by the Company or under common control with the Company.  The Executive may not assign his rights or obligations
under this Agreement to any individual or entity.  This Agreement shall be binding upon and
inure to the benefit of the Company, the Executive and their respective
successors, assigns, personnel and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable.


 


9.            Governing Law.  This Agreement shall be
governed, construed, interpreted and enforced in accordance with the
substantive laws of the State of Nevada, without reference to the principles of
conflicts of law of the State of Nevada or any other jurisdiction, and where
applicable, the laws of the United States.


 


10.          Validity.  The invalidity or
unenforceability of any provision or provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.


 


11.          Notices.  Any notice, request, claim,
demand, document and other communication hereunder to any party shall be
effective upon receipt (or refusal of receipt) and shall be in writing and
delivered personally or sent by telex, telecopy, or certified or registered
mail, postage prepaid, to the following address (or at any other address as any
party shall have specified by notice in writing to the other party):


 


If to the Company, to:


 


Specialized
Technology Resources, Inc.


10
Water Street


Enfield,
Connecticut  06082-4899


Attn:  Barry A. Morris


Facsimile:  (860) 749-9158


 


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with a copy to:


 


DLJ Merchant Banking Partners


Credit Suisse Alternative Investments


2121 Avenue of the Stars


Suite 3300


Los Angeles, CA 90067

Attn:  Susan C. Schnabel

Facsimile:  (310) 282-7798


 


12.          Counterparts.  This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.


 


13.          Entire Agreement.  The terms of this Agreement
(together with any other agreements and instruments contemplated hereby or
referred to herein) is intended by the parties to be the final expression of
their agreement with respect to the employment of the Executive by the Company
and may not be contradicted by evidence of any prior or contemporaneous
agreement.  The parties further intend
that this Agreement shall constitute the complete and exclusive statement of
its terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding to vary the terms of this
Agreement.


 


14.          Amendments; Waivers.  This Agreement may not be
modified, amended, or terminated except by an instrument in writing, signed by
the Executive and a duly authorized officer of Company.  By an instrument in writing similarly
executed, the Executive or a duly authorized officer of the Company may waive
compliance by the other party or parties with any provision of this Agreement
that such other party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a
waiver of, or estoppel with respect to, any other or subsequent failure.  No failure to exercise and no delay in
exercising any right, remedy, or power hereunder preclude any other or further
exercise of any other right, remedy, or power provided herein or by law or in
equity.  Notwithstanding anything herein
to the contrary, no amendment may be made to this Agreement if it would cause
the Agreement or any payment hereunder not to be in compliance with Code Section 409A.


 


15.          No Inconsistent Actions.  The parties hereto shall not
voluntarily undertake or fail to undertake any action or course of action
inconsistent with the provisions or essential intent of this Agreement.  Furthermore, it is the intent of the parties
hereto to act in a fair and reasonable manner with respect to the interpretation
and application of the provisions of this Agreement.


 


16.          Construction.  This Agreement shall be deemed
drafted equally by both the parties.  Its
language shall be construed as a whole and according to its fair meaning.  Any presumption or principle that the
language is to be construed against any party shall not apply.  The headings in this Agreement are only for
convenience and are not intended to affect construction or interpretation.  Any references to paragraphs, subparagraphs,
sections or subsections are to those parts of this Agreement, unless the
context clearly indicates to the contrary. 
Also, unless the context clearly indicates to the contrary, (a) the
plural includes the singular and the singular includes the plural; (b) “or”
is used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or
“every” means “any and all,” and “each and every”; (d) “includes” and “including”
are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and
other similar compounds of the word “here” refer to the entire Agreement and
not to any particular paragraph, subparagraph, section or subsection; and (f) all
pronouns and any variations thereof shall be 


 


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deemed
to refer to the masculine, feminine, neuter, singular or plural as the identity
of the entities or persons referred to may require.


 


17.          Enforcement.  If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term of this Agreement, such provision shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a portion of
this Agreement; and the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.  Furthermore, in lieu of such illegal, invalid
or unenforceable provision there shall be added automatically as part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.


 


18.          Withholding.  The Company shall be entitled to
withhold from any amounts payable under this Agreement any federal, state,
local or foreign withholding or other taxes or charges that the Company is
required to withhold.  The Company shall
be entitled to rely on an opinion of counsel if any questions as to the amount
or requirement of withholding shall arise.


 


19.          Employee Acknowledgement.  The Executive acknowledges that he has read
and understands this Agreement, is fully aware of its legal effect and has
consulted with legal counsel as to its legal effect, has not acted in reliance
upon any representations or promises made by the Company other than those
contained in writing herein, and has entered into this Agreement freely based
on his judgment.


 


20.          Survival.  The expiration or termination of the Term
shall not impair the rights or obligations of any party hereto, which shall
have accrued prior to such expiration or termination.


 


21.          Disputes.  All disputes between the parties
arising from or in connection with this Agreement or the Executive’s employment
hereunder, including those relating to the existence and validity of this
agreement to arbitrate, shall be submitted to full and binding arbitration in
Reno, Nevada, before a panel of three arbitrators and administered by the
American Arbitration Association under its National Rules for the
Resolution of Employment Disputes, and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof.  Each party shall be responsible for its own
costs and expenses of such arbitration. 
Notwithstanding the foregoing, nothing in this Section 21 shall
prevent or otherwise hinder the ability of the Company to seek injunctive
relief, including temporary restraining orders, preliminary injunctions and
permanent injunctions in connection with any controversy or claim arising out
of or relating to the Agreement Not to Compete.


 


 [signature page follows]


 


10

















 


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


 


	
   

  	
  /s/ Dennis L. Jilot

  
	
   

  	
  Dennis L. Jilot

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPECIALIZED TECHNOLOGY 

  
	
   

  	
  RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry A. Morris

  
	
   

  	
   

  	
  Name: Barry A. Morris

  
	
   

  	
   

  	
  Title: Vice President and
  Chief Financial 

    Officer

  



 


 


SIGNATURE PAGE FOR EMPLOYMENT AGREEMENT (JILOT)


 

















 


Appendix A


 


Agreement
Not To Compete


 


[Please see attached]


 


2














 


Execution Copy


 


AGREEMENT NOT TO COMPETE


 


This
Agreement Not To Compete (this “Agreement”) dated as of July 18,
2008 (the “Effective Date”), is made by and between SPECIALIZED
TECHNOLOGY RESOURCES, INC., a Delaware corporation (together with any successor
thereto, the “Company”), and DENNIS L. JILOT (the “Employee”).


 


Recitals


 


A.            Contemporaneously with the execution hereof, the Company
and Employee are executing an Employment Agreement (the “Employment
Agreement”) pursuant to which the Company will employ Employee as its
Chairman, President and Chief Executive Officer.


 


B.            Pursuant to the Employment Agreement, Employee has agreed
to enter into this Agreement as a condition of his employment.


 


Terms


 


In
consideration of the Employment Agreement, the respective agreements of the
parties herein and other good and valuable consideration received by each party
from the other, the parties agree as follows:


 


1.             Defined
Terms.  Any capitalized term used
herein but not defined shall have the meaning ascribed to such term in the
Employment Agreement.


 


2.             Agreement
Not to Compete.  For a period equal
to the term of Employee’s employment with the Company and through the date
which is twenty-seven (27) months following the Employee’s Date of Termination
for any reason (the “Initial Noncompetition Period”), provided Company
is not in material default under this Agreement or the Employment Agreement,
Employee shall not, without the prior written consent of the Company, and
whether as employee, principal, agent, shareholder, partner, consultant,
advisor, limited liability company manager or member, director, or otherwise,
directly or indirectly, compete with the Company or any subsidiary of the
Company in the business of manufacturing solar panel encapsulent, or the
business of providing consumer product quality assurance services to third
parties (collectively, the “Business”).  The making or guarantying of a
loan, lease or any other financial arrangement to, with or for any person or
entity that engages in any of the activities described in the preceding
sentence shall be deemed a breach of the covenant set forth in the preceding
sentence.  However, Employee may purchase
or own up to 5% of the outstanding stock of any publicly traded corporation
that competes with the Company or any Company Affiliate in the Business, but
may not be employed by or otherwise participate in the activities of such
corporation.  For purposes of this
agreement, “Company Affiliate” means any entity directly or indirectly
controlled by the Company, and also includes STR Holdings, Inc. and any of
its direct or indirect subsidiaries.


 


Provided Company is not in
material default under this Agreement or the Employment Agreement, the Company
shall have the option to extend the Initial Noncompetition Period for an
additional twelve (12) months (the “Extended Noncompetition Period” and,
together with the Initial Noncompetition Period, the “Noncompetition Period”);
provided, that the Company gives the Executive written notice of such extension
at least six (6) months prior to the 


 

















 


expiration
of the Initial Noncompetition Period, and agrees to pay to the Employee, in
accordance with the Company’s regular payroll practice, the Executive’s Annual
Salary, and to continue the Executive’s participation in the Company’s health
and life insurance and retirement plans through the Extended Noncompetition
Period.  For all purposes of this
Agreement and the Employment Agreement (including article 3. below), the
Noncompetition Period shall not apply or restrict Employee’s activities, nor
shall the term of the Noncompetition Period be extended, during any time
Company is in material default under this Agreement or the Employment
Agreement.


 


Employee represents and
warrants that he does not own, directly, indirectly, in whole or in part,
beneficially or otherwise, any company or enterprise that competes with or
participates in the Business, or otherwise engage in any activity that would
violate this Section 1.


 


3.             Confidential
Information; Non-Solicitation; Non-Disparagement; Inventions.


 


(a)           Employee acknowledges that he will occupy a position of
trust and confidence with the Company and may become familiar with the
following, any and all of which constitute confidential information of the
Company or Company Affiliates (collectively, the “Confidential Information”):  (i) all information related to vendors,
suppliers and customers, including, without limitation, customer lists, the
identities of existing, past or prospective customers and acquisition targets,
prices charged or proposed to be charged to customers, customer contacts,
special customer requirements and all related information; (ii) all
marketing plans, materials and techniques; (iii) all methods of business
operation and related procedures of the Company or Company Affiliates; and (iv) all
patterns, devices, compilations of information, copyrightable material and
technical information, if any, in each case that relates in any way to the
Business of the Company or any Company Affiliate.


 


(b)           Employee acknowledges and agrees that all Confidential
Information learned or obtained by him is the property of the Company or a
Company Affiliate.  Therefore, Employee
shall not at any time disclose to any unauthorized persons or use for his own
account or for the benefit of any third party any Confidential Information,
whether Employee has such information in his memory or embodied in writing or
other physical form, without the Company’s prior written consent (which it may
grant or withhold in its sole discretion), unless and to the extent that the
Confidential Information is or becomes generally known to and available for use
by the public other than as a result of Employee’s fault or, to Employee’s
knowledge, the fault of any other person bound by a duty of confidentiality to
the Company or any Company Affiliate. 
Employee agrees to deliver to the Company at any time the Company may
request, all documents, memoranda, notes, plans, records, reports, and other
documentation, models, components, devices, or computer software, whether
embodied in a disk or in other form (and all copies of all of the foregoing),
relating to the businesses, operations, or affairs of the Company or any
Company Affiliate and any other Confidential Information that Employee may then
possess or have under Employee’s control.


 


(c)           If the Employee or any entity controlled by Employee (an “Employee
Affiliate”) is required by law to disclose any Confidential Information,
Employee shall promptly notify the Company in writing so that the Company may
seek a protective order or other motion to prevent or limit the production or
disclosure of such information.  If such
motion has been denied, or if Company does not seek a protective order or other
motion, then the person required to disclose such information may disclose only
such portion of such information that, based on advice of Employee’s outside
legal counsel, is required by law to be disclosed (provided that the 


 


2

















 


person
required to disclose such information shall use all reasonable efforts to
preserve the confidentiality of the remainder of such information).  Company shall reimburse Employee for the
reasonable expenses (including legal fees and costs) he incurs in responding to
or opposing a request for him to disclose Confidential Information.  Employee shall continue to be bound by his
obligations pursuant to this Agreement for any information that is not required
to be disclosed, or that has been afforded protective treatment, pursuant to
such motion.


 


(d)           During the Noncompetition Period, Employee will not, and
will not permit any Employee Affiliate to, directly or indirectly, (a) recruit
or otherwise solicit or induce any employee, customer, subscriber or supplier
of the Company or any Company Affiliate to terminate its employment or
arrangement with the Company or any Company Affiliate, otherwise change its
relationship with the Company or any Company Affiliate, or establish any
relationship with Employee or any Employee Affiliate to compete in the Business
or (b) without the Company’s prior written consent, hire any employee of
the Company or any Company Affiliate, including any person whose employment
with the Company or any Company Affiliate is terminated by such employee
without Good Reason.


 


(e)           During the Noncompetition Period, Employee agrees not to
disparage in any material respect the Company or any Company Affiliate, any of
their respective products or practices, or any of their respective directors,
officers, managers, agents, representatives, stockholders, members or
affiliates, either orally or in writing. 
The Company and any Company Affiliates (including without limitation any
officers or directors of the Company or any Company Affiliate) agree not to disparage
in any material respect the Employee or an Employee Affiliate either orally or
in writing.  Notwithstanding the
forgoing, nothing contained herein shall limit the ability of either party, as
applicable, to provide truthful testimony as required by law or any judicial or
administrative process.


 


(f)            All rights to discoveries, inventions, improvements and
innovations (including all data and records pertaining thereto) related to the
Business of the Company or any Company Affiliate, whether or not patentable,
copyrightable, registrable as a trademark, or reduced to writing, that Employee
may discover, invent or originate during the term of Employee’s consulting
arrangement or employment with the Company or any Company Affiliate,  either alone or with others and whether or
not during working hours or by the use of the facilities of either the Company
or any of its subsidiaries (“Inventions”), shall be the exclusive
property of the Company.  Employee shall
promptly disclose all Inventions to the Company, shall execute at the request
of the Company any assignments or other documents the Company may deem
necessary to protect or perfect its rights therein, and shall assist the
Company, at the Company’s expense, in obtaining, defending and enforcing the
Company’s rights therein.  Employee
hereby appoints the Company as his attorney-in-fact to execute on his behalf
any assignments or other documents deemed necessary by the Company to protect
or perfect its rights to any Inventions.


 


4.             Remedies.  The necessity of protection against the
competition of Employee and the nature and scope of such protection has been
carefully considered and agreed upon by the parties hereto.  Employee and the Company acknowledge that the
duration, scope and geographic area applicable to the restrictions set forth in
this Agreement are fair, reasonable and necessary.  Employee acknowledges that the consideration
provided for herein is sufficient and adequate to compensate Employee for
agreeing to the restrictions contained in this Agreement and that such
restrictions will not cause him undue hardship. 
If, however, any court determines that the foregoing restrictions are
unreasonable and for that reason unenforceable, such restrictions shall be
modified, rewritten or interpreted to include as much of their nature and 


 


3

















 


scope
as will render them enforceable. 
Employee and the Company agree that a monetary remedy for a breach of
this Agreement will be inadequate and will be impracticable and extremely
difficult to prove, and further agree that such a breach would cause the
Company irreparable harm, and that the Company and the Company Affiliates shall
be entitled to temporary and permanent injunctive relief without the necessity
of proving actual damages.  Employee
agrees that the Company and the Company Affiliates shall be entitled to such
injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, without the necessity of posting bond or
other undertaking in connection therewith.


 


5.                                      Notices.  Notices sent by the Company or
Employee hereunder shall be made in writing to such party at the below
addresses or as the Company and Employee may otherwise agree in writing.


 


If to the Company, to:


 


Specialized Technology
Resources, Inc.

10 Water Street

Enfield, Connecticut  06082-4899

Attn:  Barry A. Morris

Facsimile:  (860) 749-9158


 


with a copy to:


 


DLJ Merchant Banking
Partners


Credit Suisse Alternative
Investments


2121 Avenue of the Stars


Suite 3300


Los Angeles, CA 90067

Attn:  Susan C. Schnabel

Facsimile:  (310) 282-7798


 


If to Employee, at the address
set forth on the signature page hereto.


 


6.                                      Counterparts.  This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.


 


7.                                      Headings.  The headings herein are for
convenience only, do not constitute part of this Agreement, and shall not be
deemed to limit or affect any of the provisions hereof.


 


8.                                      Entire
Understanding.  This Agreement and the other agreements and
instruments incorporated herein constitute the entire agreement and
understanding between the parties, and supersede all prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof.


 


9.                                      Amendments.  This Agreement may not be
modified or changed except by written instrument signed by each of the parties
hereto that expressly states the intention of the parties to modify or change
this Agreement.


 


4

















 


10.           Governing
Law.  This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Nevada, without regard to principles of conflicts of laws.


 


11.           Construction.  Whenever in this Agreement the context so
requires, references to the masculine shall be deemed to include feminine and
the neuter, references to the neuter shall be deemed to include the masculine
and feminine, and references to the plural shall be deemed to include the
singular and the singular to include the plural.


 


12.           Cooperation.  Each party hereto shall cooperate with the
other party and shall take such further action and shall execute and deliver
such further documents as may be necessary or desirable in order to carry out
the provisions and purposes of this Agreement.


 


13.           Waiver.  Employee or the Company may, by express
written notice to the other:  (i) waive
any inaccuracies in the representations or warranties of the other party
contained in this Agreement or in any document delivered pursuant to this
Agreement; (ii) waive compliance with any of the covenants of the other
party contained in this Agreement; or (iii) waive or modify performance of
any of the obligations of the other party. 
No action taken pursuant to this Agreement shall be deemed to constitute
a waiver by the party taking such action, possessing such knowledge or
performing such investigation of compliance with the representations,
warranties, covenants and agreements contained herein.  The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be constituted as a waiver
of any subsequent breach.  The failure of
any party to insist, in any one or more instances, upon performance of any of
the terms, covenants or conditions of this Agreement shall not be construed as
a waiver or relinquishment of any rights granted hereunder or any such term,
covenant or condition.


 


14.           Knowledge and
Skill.  THE EMPLOYEE REPRESENTS AND
WARRANTS THAT THE KNOWLEDGE, SKILLS AND ABILITIES HE OR SHE POSSESSES AT THE
TIME OF COMMENCEMENT OF EMPLOYMENT HEREUNDER ARE SUFFICIENT TO PERMIT HIM OR
HER, IN THE EVENT OF TERMINATION OF HIS OR HER EMPLOYMENT HEREUNDER, TO EARN A
LIVELIHOOD SATISFACTORY TO HIMSELF WITHOUT VIOLATING ANY PROVISION HEREOF, FOR
EXAMPLE, BY USING SUCH KNOWLEDGE, SKILLS AND ABILITIES, OR SOME OF THEM, IN THE
SERVICE OF A NON-COMPETITOR.


 


15.           Interpretation
of Agreement.  Each party hereto
cooperated in the drafting and preparation of this Agreement and the documents
referred to herein, and any and all drafts relating thereto shall be deemed the
work product of the parties and may not be construed against any party by
reason of its preparation.  Accordingly,
any rule of law, or any legal decision that would require interpretation
of any ambiguities in this Agreement against the party that drafted it, is of
no application and is hereby expressly waived. 
The provisions of this Agreement shall be interpreted in a reasonable
manner to effect the intentions of the parties regarding this Agreement.


 


16.           Parties
in Interest; Assignment.  This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective permitted successors, assigns, heirs and/or personal
representatives, except that neither this Agreement nor any interest herein
shall be assigned or assignable by operation of law or otherwise by Employee
without the prior written consent of the Company.  Nothing in this Agreement, expressed or implied,
is 


 


5

















 


intended
to confer on any person other than the parties and their respective successors
and permitted assigns any rights or remedies under or by reason of this
Agreement.


 


17.           Severability.  If, notwithstanding the express, carefully
considered agreement of the Company and Employee set forth herein, any
provision of this Agreement shall be deemed invalid, unenforceable or illegal,
or if the period during which this Agreement is to remain effective is found to
exceed the legally permissible period or the territory with respect to which
this Agreement is to be effective is found to exceed the legally permissible
territory, then notwithstanding such invalidity, unenforceability or illegality
the remainder of this Agreement shall continue in full force and effect during
the maximum period and for the maximum territory legally permissible.


 


18.           Waiver
of Jury Trial.  Consistent with the
intention of Section 10, the Company and Employee each further waives its
or his respective right to a jury trial of any claim or cause of action arising
out of this Agreement or any dealings between them relating to the subject
matter of this Agreement.  The scope of
this waiver is intended to be all-encompassing of any and all disputes that may
be filed in any court and that relate to the subject matter of this Agreement,
including, without limitation, contract claims, tort claims, and all other
common law and statutory claims.  This
waiver is irrevocable, meaning that it may not be modified either orally or in
writing, and this waiver shall apply to any subsequent amendments, supplements
or other modifications to this Agreement or to any other document or agreement
relating to the transactions contemplated by this Agreement.


 


19.           Specific
Performance and Other Equitable Relief. 
Without in any way limiting the provisions of Section 4, Employee
acknowledges that the remedies at law of the Company and Company Affiliates for
failure of Employee to perform any act required to be performed by Employee
under this Agreement are inadequate and, therefore, that the Company and
Company Affiliates shall be entitled to specific performance of this Agreement
by Employee and to such other equitable relief as a court may deem appropriate
to prevent any further violation of this Agreement by Employee, and to exercise
such remedies cumulatively or in conjunction with all other rights and remedies
provided by law or under this Agreement.


 


20.           Full Understanding.  Employee represents that he fully understands
his right to discuss all aspects of this Agreement with his private attorney,
and that to the extent, if any, Employee desired, Employee availed himself of
this right.  Employee further represents
that he has carefully read and fully understands all of the provisions of this Agreement,
that Employee is competent to execute this Agreement, that Employee’s agreement
to execute and deliver this Agreement has not been obtained by any duress and
that Employee freely and voluntarily enters into it, and that Employee has read
this Agreement in its entirety and fully understands the meaning, intent and
consequences of this Agreement.


 


6

















 


IN
WITNESS WHEREOF, the parties hereto have executed this Agreement Not to Compete
as of the date first written above.


 


	
   

  	
   

  
	
   

  	
  Dennis L. Jilot

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPECIALIZED TECHNOLOGY

  RESOURCES, INC.,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: Barry A. Morris

  
	
   

  	
  Its: Vice President and
  Chief Financial Officer

  



 


 


SIGNATURE PAGE FOR
NON-COMPETE AGREEMENT (JILOT)