Exhibit 10.5


 


EXECUTION COPY


 


EMPLOYMENT AGREEMENT


 


This Employment Agreement (the “Agreement”),
dated as of June 15, 2007, is made by and between SPECIALIZED TECHNOLOGY
RESOURCES, INC., a Delaware corporation (together with any successor thereto,
the “Company”), and JOHN F. GUAL, of Enfield, Connecticut (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 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.  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 Section 2(b).


 


(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 Vice President and Chief Operating 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 Chief Executive Officer; (D) a
relocation of the Executive’s place of employment to a location more than
thirty miles by road from Enfield, Connecticut; or (E) 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); 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 45 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, a Delaware limited liability company.


 


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


 


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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 June 15,
2007 (the “Effective Date”) and ending on the third 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 60 days prior
to the expiration of the then applicable Term.


 


(c)           Position and Duties.  The Executive shall serve as Vice President
and Chief Operating Officer of the Company, with responsibilities, duties and
authority customary for such position, subject to direction by the Chief
Executive Officer.  The Executive shall report
to the Chief Executive Officer.  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 1% 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 Chief Executive Officer of the Company,
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 at the Company’s corporate headquarters in Enfield, Connecticut, and
shall travel as necessary or as reasonably requested by the Chief Executive
Officer of the Company.


 


3.             Compensation
and Related Matters


 


(a)           Annual Base Salary.  During the Term, the Executive shall receive
a base salary at a rate of $235,000.00 per annum, which shall be paid in
accordance with the customary payroll practices of the Company, subject to
increase as determined by the Board in its sole discretion (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, 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 40% of his Annual Base Salary except as the parties
may have agreed otherwise in writing. 
The 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 


 


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receive
incentive units pursuant to the terms of the Amended and Restated Limited
Liability Company Agreement of STR Holdings LLC (the “LLC Agreement”).


 


(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 which are
applicable to the senior management of the Company.  During the Term, the Executive shall be
entitled to reimbursement of the annual membership dues and standard fees of
the country club of which the Executive is currently a member not to exceed
$25,000.


 


(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.


 


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 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 60 days prior to the expiration
of the Term, which shall be treated as a termination without Cause if such
notice is given by the 


 


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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 30 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 (or the Executive’s estate) 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 Termination; 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 (but not by reason of the Executive’s death,
Disability, 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:


 


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(i)            Continue to pay to the
Executive, 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 participation in the Company’s health, life insurance and
retirement plans through twelve 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;


 


(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 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 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 twelfth
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.             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.


 


7.             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 


 


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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.


 


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


 


9.             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.


 


10.          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


 


with
a copy to:


 


DLJ Merchant Banking


Eleven Madison Avenue, 16th
Floor


New York, New York  10010


Attn:  Susan C. Schnabel


Facsimile:  (310) 712-2734


 


11.          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.


 


12.          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.


 


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13.          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.


 


14.          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.


 


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


 


16.          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.


 


17.          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.


 


18.          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 


8

















 


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.


 


19.          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.


 


20.          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 Hartford, Connecticut, 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 20 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]


 


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


 


	
   

  	
   

  
	
   

  	
  John F. Gual

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPECIALIZED TECHNOLOGY

  
	
   

  	
  RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Barry A. Morris

  
	
   

  	
   

  	
  Title: Vice President and
  Chief Financial 

  Officer

  



 


 


signature page for
employment agreement (GUAL)


 





















 


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 June 15,
2007 (the “Effective Date”), is made by and between SPECIALIZED
TECHNOLOGY RESOURCES, INC., a Delaware corporation (together with any successor
thereto, the “Company”), and JOHN F. GUAL, of Enfield, Connecticut, (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 Vice President and Chief
Operating 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 twelve (12) months
following the Employee’s Date of Termination for any reason (the “Initial
Noncompetition Period”), 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 1% of the outstanding stock of any publicly traded
corporation that competes with the Company or any Company Affiliate, 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.


 


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 Base Salary,
and to continue the Executive’s participation in the Company’s health and life
insurance and retirement plans through the Extended Noncompetition Period.


 

















 


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, 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 person required to disclose such information shall use all reasonable
efforts to preserve the confidentiality of the remainder of such 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 


 


2

















 


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 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, and for a period of 12
months thereafter, 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 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.


 


3

















 


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.


 


f 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


Eleven Madison Avenue, 16th
Floor


New York, New York  10010


Attn:  Susan C. Schnabel


Facsimile:  (310) 712-2734


 


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.


 


10.           Governing
Law.  This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, 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.


 


4

















 


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 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 


 


5

















 


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.


 


	
   

  	
   

  
	
   

  	
  John F. Gual

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPECIALIZED TECHNOLOGY

  
	
   

  	
  RESOURCES, INC.,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: Barry A. Morris

  
	
   

  	
  Its: Vice President and Chief Financial Officer

  



 


 


SIGNATURE PAGE FOR NON-COMPETE AGREEMENT (GUAL)