Exhibit 10.4


 


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 BARRY A. MORRIS, 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)           “Sale of the Company” means
either (i) a sale of more than 50% of the assets of the Company or the
Parent (ii) a sale or other transfer of more than 50% of the 


 

















 


Company’s
then outstanding stock or the Parent’s outstanding Units (as defined in the LLC
Agreement) in a single transaction to persons or entities who are not
stockholders or unitholders at the time of the sale.  For purposes of determining whether a sale of
more than 50% of the Company’s or Parent’s assets has occurred, the change of
ownership rules set forth in Treas. Reg. § 1.409A-3(i)(5)(vii) shall
apply.  For purposes of determining
whether any person or entity is a stockholder or a unitholder at the time of
sale of more than 50% of the stock of the Company or Units of the Parent, the
attribution of ownership rules set forth in Treas. Reg. § 1.409A-3(i)(5)(iii) shall
apply.  For purposes of determining
whether a sale or other transfer of more than 50% of the outstanding stock of
the Company or Units of the Parent has occurred, the change in corporate
ownership rules set forth in Treas. Reg. § 1.409A-3(i)(5)(v), shall
apply.  Notwithstanding the
foregoing, neither of the events in clauses (i) or (ii) herein shall
be deemed a “Sale of the Company” unless such event is a “change in the
ownership or event control of the corporation, or in the ownership of a
substantial portion of the assets of the corporation” as defined in and for purposes
of Section 409A of the Code and the regulations thereunder.


 


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


 


(g)           “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.


 


(h)           “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.


 


(i)            “Effective Date” shall have
the meaning set forth in Section 2(b).


 


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


 


(k)           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 Financial 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 


 


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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.


 


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


 


(m)          “Parent” means STR Holdings
LLC, a Delaware limited liability company.


 


(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 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 Financial 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.


 


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3.            Compensation and Related Matters


 


(a)           Annual Base Salary.  During the Term, the Executive shall receive
a base salary at a rate of $215,000.00 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.


 


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


 


(ii)           In accordance with Section 2.9
of the Amended and Restated Merger Agreement, dated June 15, 2007, by and
among the Company, STR Holdings LLC and STR Acquisition, Inc. (the “Merger
Agreement”) and in consideration of the Executive’s desire to “rollover”
options exercisable for 40,000 shares of the Company at an exercise price of
$3.25 per share for options of an equivalent value in the Surviving Corporation
(as defined in the Merger Agreement), which rollover could not be accommodated
due to structural restrictions, the Company shall pay the Executive a bonus
equal to the lesser of (A) an amount equal to the product of (i) 40,000
and (ii) the excess of the Per Share Merger Consideration (as defined in
the Merger Agreement) over $3.25 (the “Aggregate Spread”) and (B) and
the “fair market value” of that number of Class A Units of STR Holdings,
LLC equal to the quotient achieved by dividing the Aggregate Spread by $10.00
(the “Bonus Amount”).  For
purposes hereof “fair market value” shall mean Repurchase Fair Market Value as
set forth in the Amended and Restated Limited Liability Company Agreement of
STR Holdings, LLC, as it may be further amended and restated.  The Bonus Amount shall be calculated on the
Payment Date (as defined below).


 


(iii)          Upon the earlier to occur of December 31,
2015, a Sale of the Company or termination of the Executive’s employment for
any reason (in each case, the “Payment Date”), the Bonus Amount shall be
distributed to the Executive and paid in a lump sum, without interest, as soon
as administratively possible but not later than 60 days following such Payment
Date.


 


(iv)          The Executive may from time to time
designate one or more persons (who may be any one or more members of such
person’s family or other persons, administrators, trusts, foundations or other
entities) as his or her beneficiary under the Bonus Account.  Such designation shall be made on a form
prescribed by the Company.


 


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(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.


 


(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 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 


 


5

















 


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:


 


(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 


 


6

















 


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 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.


 


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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.


 


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, 


 


8

















 


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 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.


 


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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.


 


 


	
   

  	
   

  
	
   

  	
  Barry A. Morris

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPECIALIZED TECHNOLOGY

  RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Dennis L. Jilot

  
	
   

  	
   

  	
  Title: Chairman and Chief
  Executive Officer

  



 


SIGNATURE PAGE FOR EMPLOYMENT AGREEMENT (MORRIS)


 

















 


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 BARRY A. MORRIS, 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 Vice
President and Chief Financial 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 


 


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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.


 


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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.


 


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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 


 


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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.


 


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


 


 


	
   

  	
   

  
	
   

  	
  Barry A. Morris

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPECIALIZED TECHNOLOGY

  RESOURCES, INC.,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: Dennis L. Jilot

  
	
   

  	
  Its: Chairman and Chief
  Executive Officer

  



 


SIGNATURE
PAGE FOR NON-COMPETE AGREEMENT (MORRIS)