Document:

Exhibit 10.2

CARBON NATURAL GAS COMPANY

 

2011 STOCK INCENTIVE PLAN

 

Section 1                PURPOSE AND ESTABLISHMENT

 

1.1                   Purpose. The purpose of the Carbon Natural Gas Company 2011 Stock Incentive Plan (the “Plan”) is to provide a means through which Carbon Natural Gas Company, a Delaware corporation (the “Company”), and its Subsidiaries may attract able persons to serve as officers, directors or consultants or to enter the employ of the Company and its Subsidiaries and to provide a means whereby those individuals upon whom the responsibilities of the successful administration and management of the Company and its Subsidiaries rest, and whose present and potential contributions to the Company and its Subsidiaries are of importance, can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company and its Subsidiaries. A further purpose of the Plan is to provide such individuals with additional incentive and reward opportunities designed to enhance the profitable growth of the Company and its Subsidiaries. Accordingly, the Plan provides for granting Director Stock Awards to Non-Employee Directors and for granting Incentive Stock Options, Nonqualified Stock Options, Restricted Stock Awards, Performance Awards, and Phantom Stock Awards, or any combination of the foregoing, as is best suited to the circumstances of the particular employee, officer, director, or consultant as provided herein.

 

1.2                   Establishment and Term of the Plan. The Plan shall become effective upon the date of its adoption by the Board, provided the Plan is approved by the stockholders of the Company at the next meeting of the stockholders of the Company that occurs after the date of such adoption by the Board. Notwithstanding any provision in the Plan to the contrary, if the Plan is rejected by the stockholders of the Company at such meeting of the stockholders, all Awards granted prior to such meeting shall be null and void and no other Awards shall be granted until the Plan receives such stockholder approval. The Plan shall remain in effect until the earliest of: (i) the date that no additional Shares are available for issuance under the Plan, (ii) the date that the Plan has been terminated in accordance with Section 14 or (iii) the day preceding the tenth anniversary of the date of its adoption. Upon the termination or expiration of the Plan as provided in this Section 1.2, no Award shall be granted pursuant to the Plan, but any Award granted prior thereto may extend beyond such termination or expiration.

 

Section 2                DEFINITIONS

 

As used in the Plan, the following terms have the meanings set forth below:

 

2.1                   “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Performance Share, Performance Unit, or Share Award.

 

2.2                   “Award Agreement” or “Agreement” means any written or electronic agreement, contract, or other instrument or document evidencing any Award granted by the Committee hereunder and signed or otherwise authenticated by both the Company and the Participant.

 

2.3                   “Board” means the Board of Directors of the Company.

 

2.4                   “Cause” means, unless otherwise defined in the Award Agreement or a written employment agreement in effect between the Company or any of its Subsidiaries and an individual Participant, a felony conviction of a Participant or the failure of a Participant to contest prosecution for a felony, or a Participant’s willful misconduct or dishonesty, any of which is determined by the Committee to be directly and materially harmful to the business or reputation of the Company or its Subsidiaries.

 

2.5                   “Change in Control” means the occurrence of:

 

(a)          the acquisition within any 12-month period by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of the total voting power of the then outstanding stock of the Company entitled to vote

 

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generally in the election of directors, but excluding the following transactions (the “Excluded Acquisitions”):

 

(i)             any acquisition directly from the Company (other than an acquisition by virtue of the exercise of a conversion privilege of a security that was not acquired directly from the Company),

 

(ii)          any acquisition by the Company, and

 

(iii)       any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company;

 

(b)         a change in the composition of the Board such that at any time during a period of 12 months or less, individuals who at the beginning of such period constitute the Board (and any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was so approved) cease for any reason to constitute a majority thereof;

 

(c)          an acquisition (other than an Excluded Acquisition) by any Person of fifty percent (50%) or more of the voting power or value of the Company’s stock;

 

(d)         the consummation of a merger, consolidation, reorganization or similar corporate transaction, whether or not the Company is the surviving company in such transaction, other than a merger, consolidation, or reorganization that would result in the Persons who are Beneficial Owners of the Company’s stock outstanding immediately prior thereto continuing to Beneficially Own, directly or indirectly, in substantially the same proportions, at least fifty percent (50%) of the combined voting power or value of the Company’s stock (or the stock of the surviving entity) outstanding immediately after such merger, consolidation or reorganization; or

 

(e)          the sale or other disposition during any 12 month period of all or substantially all of the assets of the Company, provided that such sale is of assets having a total gross fair market value equal to or greater than forty percent (40%) of the total gross fair market value of the assets of the Company immediately prior to such sale or disposition.

 

The foregoing definition of “Change in Control” is intended to comply with the requirements of Section 409A of the Code and the guidance issued thereunder and shall be interpreted and applied by the Committee in a manner consistent therewith.

 

2.6                   “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

 

2.7                   “Committee” means either (a) the Board or (b) the Compensation Committee of the Board (or any successor committee); provided, however, that with respect to Awards made by the Compensation Committee of the Board (i) to any Eligible Individual subject to Section 16 of the Exchange Act, Committee means all of the members of the Compensation Committee who are “non-employee directors” within the meaning of Rule 16b-3 adopted under the Exchange Act, (ii) that are intended to satisfy the requirements for “performance based compensation” within the meaning of Section 162(m) of the Code, the regulations promulgated thereunder, and any successors thereto, Committee means all of the members of the Compensation Committee who are “outside directors” within the meaning of Section 162(m) of the Code, and (iii) the Compensation Committee shall be composed of “independent” directors as required under the NASDAQ listing requirements.

 

2.8                   “Company” means Carbon Natural Gas Company and any successor thereto.

 

2.9                   “Covered Employee” means a Participant who the Committee determines is or may become a “covered employee” within the meaning of Section 162(m)(3) of the Code and the regulations promulgated thereunder for the year in which the vesting or settlement of a Performance Award may result in

 

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remuneration to the Participant that would not be deductible under Section 162(m) of the Code but for the designation of the Award granted hereunder as a Performance Award.

 

2.10             “Director Stock Award” means a Restricted Stock Award under Section 8 or a Phantom Stock Award under Section 11, as applicable, granted to a Non-Employee Director.

 

2.11             “Disability” means disability as determined by the Committee in accordance with Section 22(e)(3) of the Code.

 

2.12             “Eligible Individual” means any Employee or any director or consultant of the Company, any of its Subsidiaries, joint ventures and affiliated entities.

 

2.13             “Employee” means any employee of the Company or of any of its Subsidiaries. Unless otherwise determined by the Committee in its sole discretion, for purposes of the Plan, an Employee shall be considered to have terminated employment and to have ceased to be an Employee if his or her employer ceases to be a Subsidiary of the Company, even if he or she continues to be employed by such employer.

 

2.14             “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.

 

2.15             “Fair Market Value” means, (i) with respect to Shares, either (A) the average of the highest and lowest reported sales prices of Shares in transactions reported on the established securities market (as such term is defined in Regulations Section 1.897-1(m)) on which the Shares are readily tradable on the date of determination of Fair Market Value, (B) if no sales of Shares are reported on such established securities market for that date, the comparable average sales price for the last previous day for which sales were reported on such established securities market or (C) if the Shares are not readily tradable on an established securities market, the value of a Share for such date as established by the Committee using any other reasonable method of valuation and (ii) with respect to any other property, the fair market value of such property determined by such reasonable methods or procedures as shall be established from time to time by the Committee.

 

2.16             “Incentive Stock Option” means an Option granted under Section 6 hereof that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto and designated by the Committee as an Incentive Stock Option.

 

2.17             “Non-Employee Director” means any member of the Board who qualifies as a “non-employee director” as such term is defined in Rule 16b-3 promulgated under the Exchange Act.

 

2.18             “Nonqualified Stock Option” means an Option granted under Section 6 hereof that is not an Incentive Stock Option.

 

2.19             “Option” means any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine.

 

2.20             “Parent” means any corporation which is a parent corporation within the meaning of Section 424(e) of the Code with respect to the Company.

 

2.21             “Participant” means an Eligible Individual who is selected by the Committee to receive an Award under the Plan.

 

2.22             “Performance Award” means any Award of Performance Shares or Performance Units pursuant to Section 9 hereof.

 

2.23             “Performance-Based Compensation” means an Award that is intended to constitute “performance based compensation” within the meaning of Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder.

 

2.24             “Performance Objectives” has the meaning set forth in Section 9.3(a).

 

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2.25             “Performance Period” means that period, established by the Committee during which any performance goals specified by the Committee with respect to such Award are to be measured.

 

2.26             “Performance Share” means any Shares issued or transferred to a Participant under Section 9.2.

 

2.27             “Performance Unit” means Performance Units granted to a Participant under Section 9.1.

 

2.28             “Phantom Stock Award” means an Award granted under Section 11.

 

2.29             “Plan” means the Carbon Natural Gas Company 2011 Stock Incentive Plan, as the same may be amended from time to time.

 

2.30             “Regulations” means the regulations, temporary and final, of the Treasury Department promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

2.31             “Restricted Stock” means any Share issued with the restriction that the holder may not sell, transfer, pledge, or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including, without limitation, any forfeiture provisions and any restriction on the right to vote such Share, and the right to receive any cash dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

 

2.32             “Restricted Stock Award” means an award of Restricted Stock under Section 8 hereof.

 

2.33             “Section 16” means Section 16 of the Exchange Act and the rules promulgated thereunder and any successor provision thereto as in effect from time to time.

 

2.34             “Share Award” means an Award of Shares granted pursuant to Section 10.

 

2.35             “Shares” means the shares of common stock, $0.01 par value, of the Company and such other securities of the Company into which such Shares are changed or for which such shares are exchanged.

 

2.36             “Stock Appreciation Right” means any right granted to a Participant pursuant to Section 7 hereof to receive, upon exercise by the Participant, the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right on the date of grant which shall not be less than the Fair Market Value of one Share on such date of grant of the right.

 

2.37             “Subsidiary” means (i) a “subsidiary corporation” of the Company as defined in Section 424(f) of the Code, or (ii) other than for purposes of determining who is an Employee that is eligible for an Award of Incentive Stock Option, any other entity in which the Company directly or indirectly owns 50% or more of the voting interests.

 

2.38             “Substitute Award” shall have the meaning set forth in Section 4.3.

 

2.39             “Ten-Percent Stockholder” means an Eligible Individual, who, at the time an Incentive Stock Option is to be granted to him or her, owns (within the meaning of Section 422 of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, or of a Parent or a Subsidiary.

 

Section 3                ADMINISTRATION

 

3.1                   Authority of Committee. The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to such resolutions not inconsistent with the provisions of the Plan, as may from time to time be adopted by the Board, to: (i) select those Eligible Individuals to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions (including, without limitation, the restrictions and forfeiture provisions thereof), not inconsistent with the provisions of the Plan, of any Award granted

 

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hereunder; (v) accelerate the exercisability of, and accelerate or waive any restrictions and conditions applicable to an Award; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property or canceled or suspended; (vii) determine whether, to what extent and under what circumstances cash, Shares and other property and other amounts payable with respect to an Award under this Plan shall be deferred either automatically or at the election of the Participant; (viii) interpret and administer the Plan and any instrument or agreement entered into under the Plan; (ix) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (x) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan; and (xi) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable. Notwithstanding anything in this Section 3.1 to the contrary, the Committee shall not have the authority to reduce the exercise price for Options and Stock Appreciation Rights other than in connection with adjustments as provided in Section 4.

 

3.2                   Decisions Binding. Decisions of the Committee shall be final, conclusive and binding upon all persons, including the Company and its Subsidiaries, any Participant, and any Eligible Individual.

 

3.3                   Delegation. Subject to all applicable laws and the terms of the Plan, the Committee may from time to time, in its sole discretion, delegate to the chief executive officer of the Company the administration (or interpretation of any provision) of the Plan, and the right to grant Awards under the Plan, insofar as such administration (and interpretation) and power to grant Awards relates to any person who is not subject to Section 16 of the Exchange Act (including any successor section to the same or similar effect). Any such delegation may be effective only so long as the chief executive officer of the Company is a Director, and the Committee may revoke such delegation at any time. The Committee may put any conditions and restrictions on the powers that may be exercised by the chief executive officer of the Company upon such delegation as the Committee determines in its sole discretion. In the event of any conflict in a determination or interpretation under the Plan as between the Committee and the chief executive officer of the Company, the determination or interpretation, as applicable, of the Committee shall be conclusive.

 

3.4                   The terms and conditions of Awards need not be the same with respect to each recipient. The Committee shall have full and final authority to select those Eligible Individuals who will receive Awards, which shall be evidenced by an Award Agreement between the Company and the Participant.

 

Section 4                SHARES SUBJECT TO THE PLAN

 

4.1                   Number of Shares Available for Grants. Subject to adjustment as provided in Section 4.6, the aggregate number of Shares that may be granted to Participants pursuant to Awards under the Plan shall not exceed 12,600,000.

 

4.2                   Lapsed Awards. If any Award (or portion thereof) is canceled, terminates, expires, or lapses for any reason, any Shares subject to such Award shall not count against the aggregate number of Shares that may be granted under the Plan set forth in Section 4.1 above and may again be the subject of Awards hereunder. If the exercise of a Stock Appreciation Right or Option involves the issuance of fewer Shares than were subject to the Stock Appreciation Right or Option, then Shares not issued may not again become subject to Awards under the Plan.

 

4.3                   Other Items Not Included. The following items shall not count against the aggregate number of Shares that may be issued under the Plan set forth in Section 4.1 above: (i) the payment in cash of dividends or dividend equivalents under any outstanding Award; (ii) any Award that is settled in cash rather than by issuance of Shares; or (iii) Awards granted through the assumption of, or in substitution for, outstanding awards previously granted to individuals who become Employees as a result of a merger, consolidation, acquisition or other corporate transaction involving the Company or any Subsidiary (“Substitute Award”).

 

4.4                   Award Limits. Notwithstanding any provision herein to the contrary (but subject to adjustment as provided in Section 4.6 below), in no event shall more than fifty percent (50%) of the Shares authorized under the Plan be issued upon the exercise of Incentive Stock Options granted under the Plan.

 

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4.5                   Source of Shares. The Company shall reserve for purposes of the Plan unissued Shares or out of Shares held in the Company’s treasury, or partly out of each, such number of Shares as shall be determined by the Board.

 

4.6                   Adjustments.

 

(a)          Subdivision or Consolidation of Shares; Stock Dividends. The Shares with respect to which Awards may be granted are shares of the Company’s common stock as presently constituted, but if, and whenever, prior to the expiration of an Award theretofore granted, the Company shall effect a subdivision or consolidation of Shares or the payment of a stock dividend on Shares without receipt of consideration by the Company, the number of Shares with respect to which such Award may thereafter be exercised or satisfied, as applicable (i) in the event of an increase in the number of outstanding shares, shall be proportionately increased, and the purchase price per share shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares, shall be proportionately reduced, and the purchase price per share shall be proportionately increased. Any fractional share resulting from such adjustment shall be rounded up to the next whole share.

 

(b)         Other Corporate Changes. The effect, if any, of any other corporate change, including, but not limited to, a recapitalization or reclassification its capital stock, any other change in its capital structure, or a Change in Control, shall be set forth in the applicable Award Agreement.

 

(c)          Limitations on the Foregoing Adjustments. Notwithstanding the foregoing, any adjustment in the Shares subject to outstanding Incentive Stock Options (including any adjustments in the purchase price) shall be made in such a manner as not to constitute a modification as defined by Section 424 of the Code and only to the extent otherwise permitted by Sections 422 and 424 of the Code. In addition, any such adjustment to outstanding Awards (i) that are subject to Section 409A of the Code shall be made only to the extent permitted by Section 409A of the Code and (ii) that are not subject to Section 409A of the Code shall be made in a manner that will not result in the Award becoming subject to Section 409A of the Code.

 

Section 5                ELIGIBILITY

 

Any Eligible Individual shall be eligible to be selected as a Participant; provided, however, that only Employees may be granted Awards of Incentive Stock Options.

 

Section 6                STOCK OPTIONS

 

Options may be granted hereunder to Participants, either alone or in addition to other Awards granted under the Plan, the terms and conditions of which shall be set forth in an Award Agreement. If a Participant shall fail to execute the Award Agreement evidencing an Award of Options, and any other documents that the Committee may require, within the time period prescribed by the Committee at the time the Award is granted, the Award shall be null and void. Any such Option shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable:

 

6.1                   Option Price. The exercise price per Share under an Option shall be determined by the Committee in its sole discretion; provided that, except in the case of an Option pursuant to a Substitute Award, such purchase price shall not be less than the Fair Market Value of a Share on the date of the grant of the Option (110% of the Fair Market Value in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder).

 

6.2                   Option Period. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten (10) years (five (5) years in the case of an Incentive Stock Option issued to a Ten-Percent Stockholder) from the date the Option is granted except as provided under Section 13.

 

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6.3                   Exercisability. Options shall be exercisable at such time or times as determined by the Committee and set forth in the Award Agreement; provided, however, that the Committee may accelerate the time or times at which an Option shall be exercisable in its sole discretion.

 

6.4                   Method of Exercise. The exercise of an Option shall be made only by a (i) written notice delivered in person or by mail to the Secretary of the Company at the Company’s principal executive offices, specifying the number of Shares to be purchased and accompanied by payment therefor and otherwise in accordance with the Award Agreement pursuant to which the Option was granted, or (ii) such other method as the Committee may permit. The purchase price for any Shares purchased pursuant to the exercise of an Option shall be paid, as determined by the Committee in its discretion, in either: (xi) cash, (xii) the transfer of Shares previously owned by the Participant for at least six months (or such period as the Committee may deem appropriate, for accounting purposes or otherwise) to the Company upon such terms and conditions as determined by the Committee, (xiii) through an open-market, broker-assisted sales transaction pursuant to which the Company is promptly delivered the amount of proceeds necessary to satisfy the exercise price, or (xiv) by a combination of the methods described above.  Any Shares transferred to the Company as payment of the exercise price under an Option shall be valued at their Fair Market Value on the date immediately prior to the date of exercise of such Option.  No fractional Shares (or cash in lieu thereof) shall be issued upon exercise of an Option, and the number of Shares that may be purchased upon exercise shall be rounded to the nearest number of whole Shares.  In addition, the Committee may permit any Option to be exercised without payment of the purchase price, in which case the Company’s sole obligation shall be to issue to the Participant the same number of Shares as would have been issued had such Option been Stock Appreciation Rights that are being exercised at the same time in respect of an identical number of Shares in accordance with Section 7.  In addition to and at the time of payment of the exercise price (or as a condition to the delivery of any Shares without payment of the exercise price), the Participant shall pay to the Company the full amount of any and all applicable income tax, employment tax and other amounts required to be withheld in connection with such exercise, using such of the methods described above for the payment of the exercise price or such other methods as may be approved by the Committee and set forth in the Award Agreement.

 

6.5                   Repricing Prohibited. Subject to the anti-dilution adjustment provisions contained in Section 4.6 hereof, without the prior approval of the Company’s stockholders, given in accordance with the rules of any stock exchange on which the Shares are listed for trading and applicable law, the Committee shall not cause the cancellation, substitution or amendment of an Option that would have the effect of reducing the exercise price of such Option previously granted under the Plan, or otherwise approve any modification to such Option that would be treated as a “repricing” under the then applicable rules, regulations or listing requirements adopted by the stock exchange on which the Shares are listed for trading.

 

6.6                   Form of Settlement. In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities. Similarly, the Committee may require Shares to be held for a specific period of time.

 

6.7                   Non-Transferability. No Option shall be transferable by the Participant otherwise than by will or by the laws of descent and distribution, and an Option shall be exercisable during the lifetime of such Participant only by the Participant or his or her guardian or legal representative. Notwithstanding the foregoing, the Committee may set forth in the Award Agreement evidencing an Option (other than an Incentive Stock Option) at the time of grant or thereafter, that the Option may be transferred to members of the Participant’s immediate family, to trusts solely for the benefit of such immediate family members and to partnerships in which such family members and/or trusts are the only partners, and for purposes of this Plan, a transferee of an Option shall be deemed to be the Participant. For this purpose, immediate family means the Participant’s spouse, parents, children, stepchildren and grandchildren and the spouses of such parents, children, stepchildren and grandchildren. The terms of an Option shall be final, binding and conclusive upon the beneficiaries, executors, administrators, heirs and successors of the Participant.

 

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6.8                   Additional Rules for Incentive Stock Options.

 

(a)          Eligibility. An Incentive Stock Option may only be granted to an Employee who is considered an employee for purposes of Treasury Regulation §1.421-7(h) with respect to the Company or its Parent or Subsidiary.

 

(b)         Annual Limits. No Incentive Stock Option shall be granted to a Participant as a result of which the aggregate Fair Market Value (determined as of the date of the grant of the Incentive Stock Option) of the Shares with respect to which incentive stock options under Section 422 of the Code are exercisable for the first time in any calendar year under the Plan and any other stock option plans of the Company or any Subsidiary or Parent, would exceed $100,000, determined in accordance with Section 422(d) of the Code. This limitation shall be applied by taking stock options into account in the order in which granted.

 

(c)          Termination of Employment. An Award of an Incentive Stock Option may provide that such Option may be exercised not later than (i) 3 months following termination of employment of the Participant with the Company and all Subsidiaries, (ii) one year following a permanent and total disability within the meaning of Section 22(e)(3) of the Code, or (iii) 18 months following the death of the Participant if the Participant died while an Employee or within three months after termination of Employment, as and to the extent determined by the Committee to comply with the requirements of Section 422 of the Code.

 

(d)         Other Terms and Conditions; Nontransferability. Any Incentive Stock Option granted hereunder shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as are deemed necessary or desirable by the Committee, which terms, together with the terms of the Plan, shall be intended and interpreted to cause such Incentive Stock Option to qualify as an “incentive stock option” under Section 422 of the Code. Notwithstanding anything else in this Section 6.8 to the contrary, an Award Agreement for an Incentive Stock Option may provide that such Option shall be treated as a Non-qualified Stock Option to the extent that certain requirements applicable to “incentive stock options” under the Code shall not be satisfied. An Incentive Stock Option shall by its terms be nontransferable other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of a Participant only by such Participant.

 

(e)          Disqualifying Dispositions. If Shares acquired by exercise of an Incentive Stock Option are disposed of within two years following the date of the grant of such Incentive Stock Option or one year following the transfer of such shares to the Participant upon exercise, the Participant shall, promptly following such disposition, notify the Company in writing of the date and terms of such disposition and provide such other information regarding the disposition as the Company may reasonably require.

 

6.9                   Effect of a Change in Control. The effect of a Change in Control on an Option, if any, shall be set forth in the applicable Agreement.

 

Section 7                STOCK APPRECIATION RIGHTS

 

The Committee may in its discretion, either alone or in connection with the grant of an Option, grant Stock Appreciation Rights in accordance with the Plan, the terms and conditions of which shall be set forth in an Award Agreement. If a participant shall fail to execute the Award Agreement evidencing an Award of Stock Appreciation Rights, and any other documents that the Committee may require, within the time period prescribed by the Committee at the time the Award is granted, the Award shall be null and void. If granted in connection with an Option, a Stock Appreciation Right shall cover the same Shares covered by the Option (or such lesser number of Shares as the Committee may determine) and shall, except as provided in this Section 7, be subject to the same terms and conditions as the related Option.

 

7.1                   Time of Grant. A Stock Appreciation Right may be granted (i) at any time if unrelated to an Option, or (ii) if related to an Option, either at the time of grant or at any time thereafter during the term of the Option.

 

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7.2                   Stock Appreciation Right Related to an Option.

 

(a)          Exercise. A Stock Appreciation Right granted in connection with an Option shall be exercisable at such time or times and only to the extent that the related Options are exercisable, and will not be transferable except to the extent the related Option may be transferable.

 

(b)         Amount Payable. Upon the exercise of a Stock Appreciation Right related to an Option, the Participant shall be entitled to receive an amount determined by multiplying (i) the excess of the Fair Market Value of a Share on the date of exercise of such Stock Appreciation Right over the Fair Market Value of a Share on the date the Stock Appreciation Right was granted, by (ii) the number of Shares as to which such Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the Committee may limit in any manner the amount payable with respect to any Stock Appreciation Right by including such a limit in the Award Agreement evidencing the Stock Appreciation Right at the time it is granted.

 

(c)          Treatment of Related Options and Stock Appreciation Rights Upon Exercise. Upon the exercise of a Stock Appreciation Right granted in connection with an Option, the Option shall be canceled to the extent of the number of Shares as to which the Stock Appreciation Right is exercised, and upon the exercise of an Option granted in connection with a Stock Appreciation Right, the Stock Appreciation Right shall be canceled to the extent of the number of Shares as to which the Option is exercised or surrendered.

 

7.3                   Stock Appreciation Right Unrelated to an Option. The Committee may grant to Eligible Individuals Stock Appreciation Rights unrelated to Options. Stock Appreciation Rights unrelated to Options shall contain such terms and conditions as to exercisability, vesting and duration as the Committee shall determine, but in no event shall they have a term of greater than 10 years other than in the event of the death or Disability of the Participant as set forth in Section 13. Upon exercise of a Stock Appreciation Right unrelated to an Option, the Participant shall be entitled to receive an amount determined by multiplying (a) the excess of the Fair Market Value of a Share on the date of exercise of such Stock Appreciation Right over the Fair Market Value of a Share on the date the Stock Appreciation Right was granted, by (b) the number of Shares as to which the Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the Committee may limit in any manner the amount payable with respect to any Stock Appreciation Right by including such a limit in the Award Agreement evidencing the Stock Appreciation Right at the time it is granted.

 

7.4                   Non-Transferability. No Stock Appreciation Right shall be transferable by the Participant other than by will or by the laws of descent and distribution, and such Stock Appreciation Right shall be exercisable during the lifetime of such Participant only by the Participant or his or her guardian or legal representative. The terms of such Stock Appreciation Right shall be final, binding and conclusive upon the beneficiaries, executors, administrators, heirs and successors of the Participant.

 

7.5                   Method of Exercise. Stock Appreciation Rights shall be exercised by a Participant only by (i) a written notice delivered in person or by mail to the Secretary of the Company at the Company’s principal executive offices, specifying the number of Shares with respect to which the Stock Appreciation Right is being exercised or (ii) such other method as the Committee may permit.

 

7.6                   Form of Payment. Payment of the amount determined under Section 7.2 or 7.3 may be made in the discretion of the Committee solely in whole Shares in a number determined at their Fair Market Value on the date immediately prior to the date of exercise of the Stock Appreciation Right, or solely in cash, or in a combination of cash and Shares. If the Committee decides to make full payment in Shares and the amount payable results in a fractional Share, payment for the fractional Share will be made in cash.

 

7.7                   Effect of a Change in Control. The effect of a Change in Control on a Stock Appreciation Right, if any, shall be set forth in the applicable Agreement.

 

Section 8                RESTRICTED STOCK

 

8.1                   Grants. Restricted Stock Awards may be issued hereunder to Participants either alone or in addition to other Awards granted under the Plan. The terms and conditions of Restricted Stock Awards shall be set

 

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forth in an Award Agreement between the Company and the Participant. Each Award Agreement shall contain such restrictions, which may include such terms and conditions, including forfeiture provisions, as the Committee may, in its discretion, determine and (without limiting the generality of the foregoing) such Award Agreements may require that an appropriate legend be placed on Share certificates.

 

8.2                   Purchase Price. The Committee may require the payment by the Participant of a specified purchase price in connection with any Restricted Stock Award.  Awards of Restricted Stock shall be subject to the terms and provisions set forth below in this Section 8.

 

8.3                   Rights of Participant. Shares of Restricted Stock granted pursuant to an Award hereunder shall be issued in the name of the Participant as soon as reasonably practicable after the Award is granted provided that the Participant has executed an Award Agreement, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require as a condition to the issuance of such Shares. If a Participant shall fail to execute the Award Agreement evidencing a Restricted Stock Award, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require within the time period prescribed by the Committee at the time the Award is granted, the Award shall be null and void. At the discretion of the Committee, Shares issued in connection with a Restricted Stock Award shall be deposited together with the stock powers with an escrow agent (which may be the Company) designated by the Committee. Unless the Committee determines otherwise and as set forth in the Award Agreement, upon delivery of the Shares to the escrow agent, the Participant shall have all of the rights of a stockholder with respect to such Shares, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares.

 

8.4                   Non-transferability. Until all restrictions upon and forfeiture provisions applicable to the Shares of Restricted Stock awarded to a Participant shall have lapsed in the manner set forth in Section 8.5, such Shares shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated, nor shall they be delivered to the Participant.

 

8.5                   Lapse of Restrictions. Restrictions upon and forfeiture provisions applicable to Shares of Restricted Stock awarded hereunder shall lapse at such time or times and on such terms and conditions as the Committee may determine. The Award Agreement evidencing the Award shall set forth any such restrictions and conditions. The Committee may accelerate or waive any or all of the restrictions and conditions applicable to any Award, for any reason.

 

8.6                   Treatment of Dividends. Any dividends declared or paid on Shares of Restricted Stock shall be (a) deferred until the lapsing of the restrictions imposed upon and forfeiture provisions applicable to such Shares and (b) held by the Company for the account of the Participant until such time. The Committee shall determine whether such dividends are to be reinvested in Shares (which shall be held as additional Shares of Restricted Stock) or held in cash. If deferred dividends are to be held in cash, there may be credited at the end of each year (or portion thereof) interest on the amount of the account at a rate per annum as the Committee, in its discretion, may determine. Payment of deferred dividends in respect of Shares of Restricted Stock (whether held in cash or as additional Shares of Restricted Stock), together with interest accrued thereon, if any, shall be made upon the lapsing of restrictions imposed upon and forfeiture provisions applicable to the Shares in respect of which the deferred dividends were paid, and any dividends deferred (together with any interest accrued thereon) in respect of any Shares of Restricted Stock shall be forfeited upon the forfeiture of such Shares.

 

8.7                   Delivery of Shares. Upon the lapse of the restrictions and forfeiture provisions on Shares of Restricted Stock, the Committee shall cause a stock certificate or evidence of book entry Shares to be delivered to the Participant with respect to such Shares, free of all restrictions hereunder.

 

8.8                   Effect of Change in Control. The effect of a Change in Control on an Award of Restricted Stock, if any, shall be set forth in the applicable Agreement.

 

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Section 9                PERFORMANCE AWARDS

 

9.1                   Performance Units. The Committee, in its discretion, may grant Awards of Performance Units to Eligible Individuals, the terms and conditions of which shall be set forth in an Award Agreement between the Company and the Participant. Performance Units may be denominated in Shares or a specified dollar amount and, contingent upon the attainment of specified Performance Objectives within the Performance Period, represent the right to receive payment subject to Section 9.3(c) of (i) in the case of Share-denominated Performance Units, the Fair Market Value of a Share on the date the Performance Unit was granted, the date the Performance Unit becomes vested or any other date specified by the Committee; (ii) in the case of dollar-denominated Performance Units, the specified dollar amount; or (iii) a percentage (which may be more than 100%) of the amount described in clause (i) or (ii) depending on the level of Performance Objective attainment; provided, however, that the Committee may at the time a Performance Unit is granted specify a maximum amount payable in respect of a vested Performance Unit. If a participant shall fail to execute the Award Agreement evidencing an Award of Performance Units, and any other document that the Committee may require, within the time period prescribed by the Committee at the time the Award is granted, the Award shall be null and void. Each Award Agreement shall specify the number of Performance Units to which it related, the Performance Objectives which must be satisfied in order for the Performance Units to vest and the Performance Period within which such Performance Objectives must be satisfied.

 

(a)          Vesting and Forfeiture. Subject to Section 9.3(c), a Participant shall become vested with respect to the Performance Units to the extent that the Performance Objectives set forth in the Award Agreement are satisfied for the Performance Period.

 

(b)         Payment of Awards. Subject to Section 9.3(c), payment to Participants in respect of vested Performance Units shall be made as soon as practicable after the last day of the Performance Period to which such Award relates unless the Award Agreement evidencing the Award provides for the deferral of payment, in which event the terms and conditions of the deferral shall be set forth in the Award Agreement. Such payments may be made entirely in Shares valued at the Fair Market Value, entirely in cash, or in such combination of Shares and cash as the Committee in its discretion shall determine; provided, however, that if the Committee in its discretion determines to make such payment entirely or partially in Shares of Restricted Stock, the Committee must determine the extent to which such payment will be in Shares of Restricted Stock and the terms of such Restricted Stock at the time the Award is granted.

 

(c)          Non-transferability. Performance Units shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated.

 

9.2                   Performance Shares. The Committee, in its discretion, may grant Awards of Performance Shares to Eligible Individuals with such terms and conditions including forfeiture provisions as the Committee shall determine and as set forth in an Award Agreement. Each Award Agreement may require that an appropriate legend be placed on Share certificates. Awards of Performance Shares shall be subject to the following terms and provisions:

 

(a)          Rights of Participant. The Committee shall provide at the time an Award of Performance Shares is made the time or times at which the actual Shares represented by such Award shall be issued in the name of the Participant; provided, however, that no Performance Shares shall be issued until the Participant has executed an Award Agreement evidencing the Award, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require as a condition to the issuance of such Performance Shares. If a Participant shall fail to execute the Award Agreement evidencing an Award of Performance Shares, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require within the time period prescribed by the Committee at the time the Award is granted, the Award shall be null and void. At the discretion of the Committee, Shares issued in connection with an Award of Performance Shares shall be deposited together with the stock powers with an escrow agent (which may be the Company) designated by the Committee. Unless the Committee determines otherwise and as set forth in the Award Agreement,

 

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upon delivery of the Shares to the escrow agent, the Participant shall have all of the rights of a stockholder with respect to such Shares, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares.

 

(b)         Non-transferability. Until all restrictions upon and forfeiture provisions applicable to the Performance Shares awarded to a Participant shall have lapsed, such Shares shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated, nor shall they be delivered to the Participant. The Committee also may impose such other restrictions and conditions on the Performance Shares, if any, as it deems appropriate.

 

(c)          Lapse of Restrictions. Restrictions upon and forfeiture provisions applicable to Performance Shares awarded hereunder shall lapse at such time or times and on such terms and conditions as the Committee may determine. The Award Agreement evidencing the Award shall set forth any such restrictions and conditions. The Committee may accelerate or waive any or all of the restrictions and conditions applicable to any Award, for any reason.

 

(d)         Treatment of Dividends. Any dividends declared or paid on Performance Shares shall be (a) deferred until the lapsing of the restrictions imposed upon and forfeiture provisions applicable to such Shares and (b) held by the Company for the account of the Participant until such time. The Committee shall determine whether such dividends are to be reinvested in Shares (which shall be held as additional Performance Shares) or held in cash. If deferred dividends are to be held in cash, there may be credited at the end of each year (or portion thereof) interest on the amount of the account at a rate per annum as the Committee, in its discretion, may determine. Payment of deferred dividends in respect of Performance Shares (whether held in cash or as additional Performance Shares), together with interest accrued thereon, if any, shall be made upon the lapsing of restrictions imposed upon and forfeiture provisions applicable to the Shares in respect of which the deferred dividends were paid, and any dividends deferred (together with any interest accrued thereon) in respect of any Performance Shares shall be forfeited upon the forfeiture of such Shares.

 

(e)          Delivery of Shares. Upon the lapse of the restrictions on and forfeiture provisions applicable to Performance Shares awarded hereunder, the Committee shall cause a stock certificate or evidence of book entry Shares to be delivered to the Participant with respect to such Shares, free of all restrictions hereunder.

 

9.3                   Performance Objectives.

 

(a)          Establishment. Performance objectives (“Performance Objectives”) for Performance Awards may be expressed in terms of (i) earnings per share, (ii) Share price, (iii) consolidated net income, (iv) pre-tax profits, (v) earnings or net earnings, (vi) return on equity or assets, (vii) sales, (viii) cash flow from operating activities, (ix) return on invested capital, (x) other Company-specific growth or profit objectives as determined by the Committee, or (xi) any combination of the foregoing. Performance Objectives may be in respect of the performance of the Company, any of its Subsidiaries, any of its divisions or any combination thereof. Performance Objectives may be absolute or relative (to prior performance of the Company or to the performance of one or more other entities or external indices) and may be expressed in terms of a progression within a specified range. The Performance Objectives with respect to an Award that is intended to constitute Performance-Based Compensation shall be established in writing by the Committee by the earlier of (1) the date on which a quarter of the Performance Period has elapsed or (2) the date which is 90 days after the commencement of the Performance Period, and in any event while the performance relating to the Performance Objectives remains substantially uncertain.

 

(b)         Effect of Certain Events. At the time of the granting of an Award, or at any time thereafter, in either case to the extent permitted under Section 162(m) of the Code and the regulations thereunder without adversely affecting the treatment of any Award intended to constitute Performance-Based Compensation, the Committee may provide for the manner in which the performance will be measured against the Performance Objectives (or may adjust the Performance Objectives) to reflect the impact of specified events, including any one or more of the following with respect to the Performance Period

 

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(i) the gain, loss, income or expense resulting from changes in accounting principles that become effective during the Performance Period; (ii) the gain, loss, income or expense reported publicly by the Company with respect to the Performance Period that are extraordinary or unusual in nature or infrequent in occurrence; (iii) the gains or losses resulting from and the direct expenses incurred in connection with, the disposition of a business, or the sale of investments or non-core assets; (iv) the gain or loss from all or certain claims and/or litigation and all or certain insurance recoveries relating to claims or litigation; (v) the impact of impairment of tangible or intangible assets, including goodwill; (vi) the impact of restructuring or business recharacterization activities, including but not limited to reductions in force, that are reported publicly by the Company; or (vii) the impact of investments or acquisitions made during the year or, to the extent provided by the Committee, any prior year. The events may relate to the Company as a whole or to any part of the Company’s business or operations, as determined by the Committee at the time the Performance Objectives are established. Any adjustments based on the effect of certain events are to be determined in accordance with generally accepted accounting principles and standards, unless another objective method of measurement is designated by the Committee.

 

(c)          Determination of Performance. Prior to the vesting, payment, settlement or lapsing of any restrictions with respect to any Performance Award that is intended to constitute Performance-Based Compensation, the Committee shall certify that the applicable Performance Objectives have been satisfied to the extent necessary for such Award to qualify as Performance-Based compensation.

 

9.4                   Effect of Change in Control. The effect of a Change in Control on a Performance Award, if any, shall be set forth in the applicable Agreement.

 

Section 10              SHARE AWARDS

 

The Committee may grant a Share Award to any Eligible Individual on such terms and conditions as the Committee may determine in its sole discretion. Share Awards may be made as additional compensation for services rendered by the Eligible Individual or may be in lieu of cash or other compensation to which the Eligible Individual is entitled from the Company.

 

Section 11              PHANTOM STOCK AWARDS

 

11.1             Phantom Stock Awards. Phantom Stock Awards are rights to receive an amount equal to any appreciation or increase in the Fair Market Value of Shares over a specified period of time, which vest over a period of time as established by the Committee, without satisfaction of any performance criteria or objectives. The Committee may, in its discretion, require payment or other conditions of the Participant respecting any Phantom Stock Award.

 

11.2             Award Period. The Committee shall establish, with respect to and at the time of each Phantom Stock Award, a period over which the Award shall vest with respect to the Participant.

 

11.3             Awards Criteria. In determining the value of Phantom Stock Awards, the Committee shall take into account a Participant’s responsibility level, performance, potential, other Awards, and such other considerations as it deems appropriate.

 

11.4             Payment. Following the end of the vesting period for a Phantom Stock Award (or at such other time as the applicable Phantom Stock Award Agreement may provide), the holder of a Phantom Stock Award shall be entitled to receive payment of an amount, not exceeding the maximum value of the Phantom Stock Award, based on the then vested value of the Award. Payment of a Phantom Stock Award may be made in cash, Shares, or a combination thereof as determined by the Committee. Payment shall be made in a lump sum or in installments as prescribed by the Committee. Any payment to be made in cash shall be based on the Fair Market Value of the Shares on the payment date or such other date as may be specified by the Committee in the Phantom Stock Award Agreement. Cash dividend equivalents may be paid during or after the vesting period with respect to a Phantom Stock Award, as determined by the Committee.

 

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11.5             Termination of Award. A Phantom Stock Award shall terminate if the Participant does not remain continuously in the employ of the Company or its Subsidiaries or does not continue to perform services as a consultant or a director for the Company or its Subsidiaries at all times during the applicable vesting period, except as may be otherwise determined by the Committee.

 

11.6             Phantom Stock Award Agreements. At the time any Award is made under this Paragraph X, the Company and the Participant shall enter into a Phantom Stock Award Agreement setting forth each of the matters contemplated hereby and such additional matters as the Committee may determine to be appropriate. The terms and provisions of the respective Phantom Stock Award Agreements need not be identical.

 

11.7             Effect of Change in Control. The effect of a Change in Control on a Phantom Stock Award, if any, shall be set forth in the applicable Agreement.

 

Section 12              EFFECT OF CERTAIN TRANSACTIONS

 

Subject to the terms of an Agreement in connection with (a) the liquidation or dissolution of the Company or (b) a merger, consolidation or reorganization of the Company (a “Transaction”), either (i) each outstanding Option or Award shall be treated as provided for in the agreement entered into in connection with the Transaction or (ii) if not so provided in such agreement, following the Transaction each Optionee and Grantee shall be entitled to receive in respect of each Share subject to any outstanding Options or Awards, as the case may be, upon exercise of any Option or payment or transfer in respect of any Award, the same number and kind of stock, securities, cash, property or other consideration that each holder of a Share was entitled to receive in the Transaction in respect of a Share; provided, however, that, unless otherwise determined by the Committee, such stock, securities, cash, property, or other consideration shall remain subject to all of the conditions, restrictions and performance criteria which were applicable to the Options and Awards prior to such Transaction. Without limiting the generality of the foregoing, the treatment of outstanding Options and Stock Appreciation Rights pursuant to this Section 12 in connection with a Transaction may include the cancellation of outstanding Options and Stock Appreciation Rights upon consummation of the Transaction provided either (x) the holders of affected Options and Stock Appreciation Rights have been given a period of at least 15 days prior to the date of the consummation of the Transaction to exercise the Options or Stock Appreciation Rights (whether or not they were otherwise exercisable) or (y) the holders of the affected Options and Stock Appreciation Rights are paid (in cash or cash equivalents) in respect of each Share covered by the Option or Stock Appreciation Right being cancelled an amount equal to the excess, if any, of the per share price paid or distributed to stockholders in the Transaction (the value of any non-cash consideration to be determined by the Committee in its sole discretion) over the exercise price of the Option or Stock Appreciation Right. For avoidance of doubt, (1) the cancellation of Options and Stock Appreciation Rights pursuant to clause (y) of the preceding sentence may be effected notwithstanding anything to the contrary contained in this Plan or any Agreement and (2) if the amount determined pursuant to clause (y) of the preceding sentence is zero or less, the affected Option or Stock Appreciation Right may be cancelled without any payment therefor.

 

Section 13                                         TERMINATION OF EMPLOYMENT, DIRECTORSHIP OR CONSULTANCY; DEATH OR DISABILITY

 

Unless otherwise determined by the Committee:

 

(a)          If the employment, directorship or consultancy of a Participant with the Company is terminated for Cause, all the rights of such Participant under any then outstanding Award shall terminate immediately, regardless of whether or not such Award is then vested.

 

(b)         If the employment, directorship or consultancy of the Participant is terminated for any reason other than for Cause, death or Disability:

 

(i)             Any outstanding Options and Stock Appreciation Rights shall be exercisable by such Participant or a personal representative at any time prior to the expiration date of the Option or Stock Appreciation Right or within ninety (90) days after the date of such termination, whichever is the shorter period, but only to the extent the Option or Stock Appreciation Right was exercisable at the date of termination.

 

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(ii)          Any Shares of Restricted Stock or Performance Awards with respect to which restrictions shall not have lapsed shall thereupon be forfeited immediately by the Participant and returned to the Company, and the Participant shall only receive the amount, if any, paid by the Participant for such Awards; provided that the Committee may determine, in its sole discretion, in the case of a termination of employment other than for Cause, that the restrictions on some or all of such Awards then held by the Participant shall immediately lapse.

 

(c)          In the event of Disability or death of a Participant:

 

(i)             All outstanding Options and Stock Appreciation Rights of such Participant then outstanding shall become immediately exercisable in full. In the event of death of a Participant, all Options and Stock Appreciation Rights of such Participant shall be exercisable by the person or the persons to whom those rights pass by will or by the laws of descent and distribution or, if appropriate, by the legal representative of the estate of the deceased Participant at any time within two (2) years after the date of death, regardless of the expiration date of the Option or Stock Appreciation Right, except for Incentive Stock Options which may not be exercised later than provided in Section 6.8(c) hereof. In the event of Disability of any Participant, all Options and Stock Appreciation Rights of such Participant shall be exercisable by the Participant, or, if incapacitated, by a legal representative at any time within two (2) years of the date of determination of Disability regardless of the expiration date of the Option or Stock Appreciation Right, except for Incentive Stock Options which may not be exercised later than provided in Section 6.8(c) hereof.

 

(ii)          Any restriction and other conditions applicable to any Shares of Restricted Stock or Performance Awards then held by the Participant, including, but not limited to, vesting requirements, shall immediately lapse.

 

Section 14              AMENDMENTS AND TERMINATION

 

The Board may amend, alter or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made that would impair the rights of a Participant under an Award theretofore granted, without the Participant’s consent, or that without the approval of the Company’s stockholders would:

 

(a)          except as is provided in Section 4.6 of the Plan, increase the total number of Shares reserved for the purpose of the Plan; or

 

(b)         change the class of Eligible Individuals eligible to participate in the Plan.

 

Section 15              INTERPRETATION

 

15.1             Section 16 Compliance. The Plan is intended to comply with Rule 16b-3 promulgated under the Exchange Act and the Committee shall interpret and administer the provisions of the Plan or any Agreement in a manner consistent therewith. Any provisions inconsistent with such Rule shall be inoperative and shall not affect the validity of the Plan.

 

15.2             Section 162(m). Unless otherwise determined by the Committee at the time of grant, each Option, Stock Appreciation Right and Performance Award granted to an Eligible Individual that is also a Covered Employee is intended to be Performance Based Compensation. Unless otherwise determined by the Committee, if any provision of the Plan or any Agreement relating to an Option or Award that is intended to be Performance-Based Compensation does not comply or is inconsistent with Section 162(m) of the Code or the regulations promulgated thereunder (including IRS Regulation § 1.162-27), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Committee discretion to increase the amount of compensation otherwise payable in connection with any such Option or Award upon the attainment of the Performance Objectives.

 

15.3             Compliance With Section 409A. All Options and Awards granted under the Plan are intended either not to be subject to Section 409A of the Code or, if subject to Section 409A of the Code, to be administered,

 

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operated and construed in compliance with Section 409A of the Code and any guidance issued thereunder. Notwithstanding this or any other provision of the Plan to the contrary, the Committee may amend the Plan or any Option or Award granted hereunder in any manner, or take any other action that it determines, in its sole discretion, is necessary, appropriate or advisable (including replacing any Option or Award) to cause the Plan or any Option or Award granted hereunder to comply with Section 409A and any guidance issued thereunder or to not be subject to Section 409A. Any such action, once taken, shall be deemed to be effective from the earliest date necessary to avoid a violation of Section 409A and shall be final, binding and conclusive on all Eligible Individuals and other individuals having or claiming any right or interest under the Plan.

 

Section 16              GENERAL PROVISIONS

 

16.1             The term of each Award shall be for such period of months or years from the date of its grant as may be determined by the Committee; provided that, except as provided in Section 13, in no event shall the term of any Option or any Stock Appreciation Right related to any Option exceed a period of 10 years from the date of its grant.

 

16.2             No Employee or Participant shall have any claim to be granted any Award under the Plan and there is no obligation for uniformity of treatment of Employees or Participants under the Plan.

 

16.3             The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have complied with the then applicable terms and conditions of such Award.

 

16.4             All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable Federal or state securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

16.5             Except as otherwise required in any applicable Award Agreement or by the terms of the Plan, recipients of Awards under the Plan shall not be required to make any payment or provide consideration other than the rendering of services.

 

16.6             The Committee is authorized to establish procedures pursuant to which the payment of any Award may be deferred.

 

16.7             The Company is authorized to withhold from any Award granted or payment due under the Plan the amount of withholding taxes due in respect of an Award or payment hereunder and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. The Committee shall be authorized to establish procedures for election by Participants to satisfy such withholding taxes by delivery of, or directing the Company to retain Shares. The Company will not issue Shares or Awards until such tax obligations have been satisfied.

 

16.8             Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is otherwise required; and such arrangements may be either generally applicable or applicable only in specific cases.

 

16.9             The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware and applicable Federal law.

 

16.10       If any provision of this Plan is or becomes or is deemed invalid, illegal or unenforceable in any relevant jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan, it shall be stricken and the remainder of the Plan shall remain in full force and effect.

 

16Exhibit 10.1

 

Execution Copy

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”), dated as of December 7, 2011, is made by and between STR HOLDINGS, INC., a Delaware corporation (together with any successor thereto, the “Company”), and ROBERT S. YORGENSEN (the “Executive”).

 

Recitals

 

A.            The Company’s wholly owned subsidiary, Specialized Technology Resources, Inc., a Delaware corporation (“STRI”), and the Executive entered into that certain Employment Agreement dated as of June 15, 2007 (the “Existing Agreement”), which provides for, among other things, the employment of the Executive as the President of STRI’s Solar Business.

 

B.            Effective December 31, 2011, each of STRI and the Executive desire to terminate the Existing Agreement.

 

C.            The Company desires to continue to benefit from the employment of the Executive and to engage the Executive to perform services under the terms hereof, and the Executive desires to be employed by the Company under the terms hereof, effective as of the Effective Date (as hereinafter defined).

 

D.            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.

 

E.            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)                                          “Accrued Amount” shall have the meaning set forth in Section 5(a).

 

(b)                                          “Agreement Not To Compete” shall have the meaning set forth in Section 6.

 

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

 

(d)                                          “Board” shall mean the Board of Directors of the Company.

 

(e)                                  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 (other than due to Executive’s Disability), 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, intentional misrepresentation, breach of fiduciary duty or other act of dishonesty materially detrimental to the Company or any of its Subsidiaries; or (vi) the Executive’s intentional wrongful act or gross negligence that has a materially detrimental effect on the Company or its Subsidiaries.

 

(f)            “Change in Control” shall mean the occurrence of any of the following events:  (i) the replacement of a majority of members of the Board during any 12-month period by directors whose appointment or election was not endorsed by a majority of the members of the Board before the date of the appointment or election; (ii) the acquisition by any Person of beneficial ownership (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Company representing in the aggregate thirty-five percent (35%) or more of either (x) the total fair market value of the then outstanding shares of common stock of the Company or (y) the combined voting power of all then outstanding voting securities of the Company; (iii) the consummation of any merger, consolidation, share exchange or recapitalization of the Company (or, if the capital stock of the Company is affected, any subsidiary of the Company), or any sale, lease or other transfer (in one transaction or a series of transactions contemplated or arranged by any party or parties as an overall plan) of all or substantially all of the assets of the Company, STRI, or any other, significant subsidiary (each of the foregoing being an “Acquisition Transaction”) where (x) in the case of a merger, consolidation, share exchange or recapitalization, the stockholders of the Company immediately prior to such Acquisition Transaction would not immediately after such Acquisition Transaction beneficially own, directly or indirectly, shares representing in the aggregate at least fifty percent (50%) of (1) the then outstanding common stock of the corporation surviving or resulting from such merger, consolidation, share exchange or recapitalization (the “Surviving Corporation”) (or of its ultimate parent corporation, if any) in substantially the same proportions as prior to such Acquisition Transaction and (2) the combined voting power of the then outstanding voting securities of the Surviving Corporation (or of its ultimate parent corporation, if any),  (y) in the case of a sale or other disposition of assets, immediately following such Acquisition Transaction, the acquiring entity holds more than 50% of the consolidated assets of the Company immediately prior to such Acquisition Transaction, or (z) the members of the Board at the time of the initial approval of such Acquisition Transaction would not immediately after such Acquisition Transaction constitute a majority of the board of directors of the Surviving Corporation (or of its ultimate parent corporation, if any); or (iv) any other event which the Board declares to be a Change of Control.

 

(g)           “COBRA Benefits” shall have the meaning set forth in Section 5(b)(iii).

 

(h)           “Code” shall mean the Internal Revenue Code of 1986 as amended,, and any successor statute.

 

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

 

(j)            “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.

 

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(k)           “Disability” shall mean that the Executive (x) is disabled during the Term through 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 in any consecutive twelve month period and (y) is deemed disabled under the definitions contained in a long-term disability insurance policy(s) maintained by the Executive or by the Company for the benefit of Executive.  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.

 

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

 

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

 

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

 

(o)           “Health Benefits” shall have the meaning set forth in Section 5(b)(iii).

 

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

 

(q)           “Person”  shall mean any individual, entity (including, without limitation, any corporation (including, without limitation, any charitable corporation or private foundation), partnership, limited liability company, trust (including, without limitation, any private, charitable or split-interest trust), joint venture, association or governmental body) or group (as defined in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder); provided, however, that “Person” shall not include the Company, any of its subsidiaries, any employee benefit plan of the Company or any of its majority-owned subsidiaries or any entity organized, appointed or established by the Company or such subsidiary for or pursuant to the terms of any such plan.

 

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(r)            “Severance Benefits” shall have the meaning set forth in Section 5(b)(i).

 

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

 

(t)            “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 January 1, 2012 (the “Effective Date”) and ending on the second anniversary thereof, unless earlier terminated as provided in Section 4.  The employment term hereunder shall automatically be extended for successive one-year periods (“Extension Terms” and, collectively with the Initial Term, the “Term”) unless either party gives written notice of non-extension to the other no later than 90 days prior to the expiration of the then applicable Term.

 

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

 

(d)           Board Membership.  The Executive shall be appointed to the Board as of the Effective Date and shall be nominated by the Board for re-election so long as he serves as Chief Executive Officer and President 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 $475,000.00 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

 

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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 (i) management incentive plan (or any successor incentive plan adopted by the Board) with a target bonus amount of at least 75% of Executive’s Annual Base Salary (the “Target Bonus”) and (ii) long term incentive plan (or any successor incentive plan adopted by the Board) with a target amount of at least 100% of Executive’s Annual Base Salary, except as the parties may have agreed otherwise in writing.  The Executive’s bonus will be based upon the performance of Executive and the Company measured against mutually agreed upon goals.   The Company shall take steps to ensure that the terms and operation of the management incentive plan (or any successor incentive plan adopted by the Board) and the long term incentive plan (or any successor incentive plan adopted by the Board) either comply with the requirements of Code Section 409A or that bonuses paid by said plans qualify for an exception to the requirements of Code Section 409A.

 

(c)          Benefits.  The Executive shall be entitled to participate in employee benefit and retirement plans (e.g., 401(k) and pension plan, if any), 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.  Any expense reimbursement that would constitute deferred compensation subject to Code Section 409A, including the legal fees and expenses described in Subsection (f) below, shall be subject to the following additional rules:  (i) no reimbursement of any such expenses shall affect Executive’s right to reimbursement of any such expenses in any other taxable year; (ii) reimbursement of the expenses shall be made promptly in a lump sum payment, but not later than the end of the calendar year following the calendar year in which the expenses were incurred; and (iii) the right to reimbursement shall not be subject to liquidation or exchange for any other benefit.

 

(f)            Legal Expenses and D&O Insurance.

 

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

 

(ii)           The Company shall obtain and maintain a directors’ and officers’ liability insurance policy covering Executive in a face amount of not less than $5,000,000 or such lesser amount as shall be reasonably acceptable to Executive.

 

4.           Termination.  The Executive’s employment hereunder may be terminated by

 

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

 

(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 pursuant to Section 4(a) (vi), or by the Company pursuant to Section 4(a)(ii) or 4(a)(iv), shall be at least 90 days following the receipt of such notice (a “Notice of Termination”); provided, however, that a Notice of Termination delivered by the Company pursuant to Section 4(a)(ii) shall not be required to specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii); and provided, further, that in the event that the Executive delivers a Notice of Termination pursuant to Section 4(a)(vi) or the Company delivers a notice pursuant to Section 4(a)(iv), the Company may designate an earlier Date of Termination in its sole discretion if it continues Executive’s Annual Base Salary and benefits for at least ninety (90) days, but no longer then the end of such 90-day notice period.  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

 

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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 (including, without limitation, for Cause, a Disability or without Good 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. The aggregate amount due and payable pursuant to this Section 5(a) shall be referred to as the “Accrued Amount”.

 

(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 Accrued Amount (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 twenty four (24) months from the Date of Termination (such payments and benefits shall be collectively referred to as the “Severance Benefits”); 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 management incentive 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

 

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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 twenty fourth month after the Date of Termination, to the extent permitted thereunder (the “Health Benefits”).  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 twenty four months from the Date of Termination, the Company shall pay for such COBRA coverage through such twenty four month period (the “COBRA Benefits”).

 

(c)           Termination following a Change in Control.  Notwithstanding any other provision contained herein, if the Executive’s employment hereunder is terminated by the Executive for Good Reason or by the Company on account of its failure to renew the Agreement in accordance with Section 4(a)(vii) or without Cause, in each case within twelve (12) months following a Change in Control, the Executive shall be entitled to receive the Accrued Amount, and the Company shall:

 

(i)            Continue to pay and provide to the Executive the Severance Benefits as set forth in Section 5(b)(i) above (subject to the provisos set forth therein);

 

(ii)           Pay to the Executive an amount equal to two times Executive’s Target Bonus, one half of which shall be paid on April 30th of each of the two years following the year in which Executive’s termination occurs; and

 

(iii)          Continue to pay and provide to the Executive the Health Benefits as set forth in Section 5(b)(iii) above, including the COBRA Benefits, if applicable.

 

(d)           General Release.  Notwithstanding the foregoing, no payments will be made under Section 5(b) or 5(c) above if Executive fails to sign a release in the form provided by the Company, in the form attached to this Agreement as Appendix A, subject to any modifications to accommodate any changes in applicable law.  Such release must be executed and become effective within the sixty (60) calendar day period following the date of Executive’s “separation from service” within the meaning of Section 409A (the last day of such period being the “Release Deadline”). No payment will be made under Section 5(b) or 5(c) if Executive violates the provisions of this Agreement or the Agreement Not To Compete (as defined below) in which case all payments shall cease, and those already made shall be forfeited.

 

6.             Agreement Not To Compete.  As of the date hereof the Executive shall enter into an Agreement Not To Compete, in the form attached hereto as Appendix B (the “Agreement Not To Compete”), the terms and conditions of which are incorporated herein by this reference.  If the Executive breaches any of 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

 

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STRI or any other significant subsidiary, 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.  Any assignment or attempted assignment in violation of this Section shall be void and of no force or effect.

 

8.             Governing Law.  This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Connecticut, without reference to the principles of conflicts of law of the State of Connecticut 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:

 

STR Holdings, Inc.

1699 King Street

Enfield, Connecticut  06082-4899

Attn:  General Counsel

Facsimile:  (860) 758-7301

 

If to the Executive, to the address set forth in the books and records of the Company.

 

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 (i) to replace and supercede the Existing Agreement commencing on the Effective Date, and (ii) 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

 

9

 

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 or not to qualify for an exception to the requirements of 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

 

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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, including without limitation, the Executive’s rights under Section 5.

 

20.          Disputes.   The parties agree that any controversy, dispute or claim arising out of or relating to this Agreement or Executive’s employment with the Company or a breach of any of the terms or conditions of this Agreement, including a dispute as to the scope or applicability of this agreement to arbitrate, which cannot be resolved by the parties within thirty (30) days after written notice by either party to the other party, shall be settled by binding arbitration by a single arbitrator in Hartford, Connecticut.  The arbitration shall be administered by JAMS pursuant to its Employment Arbitration Rules & Procedures.  The cost of any arbitration proceeding under this provision shall be paid by the Company.  By agreeing to the foregoing arbitration provision, the parties expressly waive their rights to pursue any cause of action related in any way to Executive’s employment with the Company in federal or state court, including without limitation, claims of discrimination, harassment, hostile work environment, retaliation or other violations of state or federal law.  The arbitrator shall state in writing the reasons for his or her award and the legal and factual conclusions underlying the award.  The award of the arbitrator shall be final, and judgment upon the award may be entered in any state or federal court located in Connecticut.  Each party shall be responsible for its own costs and expenses of such arbitration and for one-half of all related fees and costs under such Rules and Procedures, including, without limitation, the fees and costs of the arbitrator.  The parties agree that all of the negotiations and arbitration proceedings relating to such disputes and all testimony, transcripts and other documents relating to such arbitration shall be treated as confidential and will not be disclosed or otherwise divulged to any other person except as necessary in connection with such negotiations and arbitration proceedings.  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.

 

21.          Mitigation.  Executive shall not be required to mitigate the amount of any payment or benefit provided under this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain.

 

[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.

 

 

	
 
    	
/s/ Robert S.   Yorgensen
    
	
 
    	
Robert S.   Yorgensen
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
STR   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Barry A.   Morris
    
	
 
    	
 
    	
Name:
    	
Barry A. Morris
    
	
 
    	
 
    	
Title:
    	
Executive Vice   President and
   Chief Financial Officer
    

 

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Appendix A

 

FORM OF AGREEMENT AND GENERAL RELEASE

 

This Agreement and General Release (“Release”) is entered into by and between STR HOLDINGS, INC. (“Company”) and ROBERT S. YORGENSEN (“Executive”) to resolve any and all disputes concerning his employment with Company and his separation from employment on                         . Accordingly, in exchange for the consideration and mutual promises set forth herein, the parties do hereby agree as follows:

 

1.       Effective close of business on                         , Executive’s employment with Company will terminate, and all salary continuation and benefits will cease other than those to which Executive is entitled in consideration for this Release as set forth in Executive’s Employment Agreement with Company (“Agreement”), which is incorporated by reference, and as a matter of law (e.g., COBRA benefits).

 

2.       In consideration for Executive’s executing this Release of any and all legal claims he might have against the STR Parties (as defined below), subject to the exceptions set forth herein, and the undertakings described herein, and to facilitate his transition to other employment, Company agrees to provide Executive with the consideration detailed in Section 5(b) or 5(c) of the Agreement.

 

3.       Neither Company nor Executive admits any wrongdoing of any kind, and both agree that neither they nor anyone acting on their behalf will disclose this Release, or its terms and conditions. Notwithstanding the foregoing, Executive is not barred from disclosing this Release to his legal, financial and personal advisors or to those persons essential for Executive to (a) implement or enforce his rights under this Release and the Agreement in which the Release is incorporated; (b) defend himself in a lawsuit, investigation or administrative proceeding; (c) file tax returns; or (d) advise a prospective employer, business partner or insurer of the contractual restrictions on his post-Company employment.

 

4.       In exchange for the undertakings by Company described in the above paragraphs:

 

a.                  Executive, for himself, his heirs, executors, administrators and assigns, does hereby release, acquit and forever discharge Company, its subsidiaries, affiliates and related entities, as well as all of their respective officers, shareholders, shareholder representatives, directors, members, partners, trustees, employees, attorneys, representatives and agents (collectively, the “STR Parties”), from any and all claims, demands, actions, causes of action, liabilities, obligations, covenants, contracts, promises, agreements, controversies, costs, expenses, debts, dues, or attorneys’ fees of every name and nature, whether known or unknown, without limitation, at law, in equity or administrative, against the STR Parties that he may have had, now has or may have against the STR Parties by reason of any matter or thing arising from the beginning of the world to the day and date of this Release, including any claim relating to the termination of his employment with any STR Party. Those claims, demands, liabilities and obligations from which Executive releases the STR Parties include, but are not limited to, any claim, demand or action, known or unknown, arising out of any transaction, act or omission related to Executive’s employment by any STR Party and Executive’s separation from such employment, sounding in tort or contract and/or any cause of action arising under federal, state or local statute or ordinance or common law, including, but not limited to, the federal Age Discrimination In Employment Act of 1967, Title VII of the Civil Rights Act of 1964, as amended, the Americans With Disabilities Act, the Family and Medical Leave Act, the Equal Pay

 

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Act, the Worker Adjustment and Retraining Notification Act, the Fair Labor Standards Act, the Connecticut Civil Rights Law, as well as any similar state or local statute(s), in each case as any such law may be amended from time to time and any claims to have been or to be considered as a “whistleblower” or other protected person under Federal or state law, including Section 806 of the Corporate and Criminal Fraud Accountability Act. The foregoing shall, in accordance with applicable law, not prohibit or prevent Executive from filing a charge with the United States Equal Employment Opportunity Commission (“EEOC”) and/or any state or local agency equivalent, and/or prohibit or prevent Executive from participating in any investigation of any charge filed by others, albeit that he understands and agrees that he shall not be entitled to seek monetary compensation for himself from the filing and/or participation in any such charge.  This Release does not apply to:  (i) any exculpatory provision or right to indemnification or contribution under the Company’s Certificate of Incorporation or Bylaws or under any federal or state law, or under any Indemnification Agreement with the Company or related to any directors’ and officers’ insurance policy maintained by the Company for the benefit of its officers and directors; (ii) any rights to the receipt of employee benefits which vested on or prior to the date of this Release; (iii) the right to receive severance benefits under Section 5 of the Agreement, the right to reimbursement of expenses under Section 3(e) of the Agreement, and any other rights of Executive under the Agreement which expressly survive termination; (iv) the right to continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act; or (v) any rights of Executive as a stockholder of the Company or attendant to Executive’s ownership of any stock options or other equity securities in the Company or its successors or assigns and any options or warrants related thereto or under any stock option plan or other equity incentive plan of the Company and any award agreements related thereto.

 

b.                  Executive expressly acknowledges that his attorney has advised him regarding, and he is familiar with the fact that certain state statutes provide that general releases do not extend to claims that the releasor does not know or suspect to exist in his favor at the time he executes such a release, which if known to him may have materially affected his execution of the release. Being aware of such statutes, Executive hereby expressly waives and relinquishes any rights or benefits he may have under such statutes, as well as any other state or federal statutes or common law principles of similar effect, and hereby acknowledges that no claim or cause of action against any STR Party shall be deemed to be outside the scope of this Release whether mentioned herein or not.

 

c.                  Executive hereby acknowledges that he is executing this Release pursuant to the Agreement, and that the consideration to be provided to Executive pursuant to Section 5(b) or 5(c)  of the Agreement is in addition to what he would have been entitled to receive in the absence of this Release. Executive hereby acknowledges that he is executing this Release voluntarily and with full knowledge of all relevant information and any and all rights he may have. Executive hereby acknowledges that he has been advised to consult with an independent attorney of his own choosing in connection with this Release to explain to him the legal effect of the terms and conditions of this Release and that Executive has consulted such an attorney for such purpose. Executive acknowledges that he has read this Release in its entirety. Executive further states that he fully understands the terms of this Release and that the only promises made to him in return for signing this Release are stated herein and in the Agreement in which this Release is incorporated.  Executive hereby acknowledges that he is voluntarily and knowingly agreeing to the terms and conditions of this Release without any threats, coercion or duress, whether economic or otherwise, and that Executive agrees to be bound by the terms of this Release. Executive acknowledges that he has been given at least twenty-one (21) days to consider this

 

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Release, and that if Executive is age forty (40) or over, Executive understands that he has seven (7) days following his execution of this Release in which to revoke his agreement to comply with this Release by providing written notice of revocation to the Vice President of Human Resources of the Company.

 

d.                  Executive further hereby covenants and agrees that this General Release shall be binding in all respects upon himself, his heirs, executors, administrators, assigns and transferees and all persons claiming under them, and shall inure to the benefit of all of the officers, directors, agents, employees, stockholders, members and partners and successors in interest of Company, as well as all parents, subsidiaries, affiliates, related entities and representatives of any of the foregoing persons and entities.

 

e.                  Executive agrees that he will not disparage any STR Parties or make or publish any communication that reflects adversely upon any of them, including communications concerning the Company itself and its current or former directors, officers, employees or agents.

 

5.       If any provision of this Release is found to be invalid, unenforceable or void for any reason, such provision shall be severed from the Release and shall not affect the validity or enforceability of the remaining provisions.  This Release shall be interpreted, enforced and governed by the laws of the State of Connecticut, without regard to the choice of law principles thereof.

 

IN WITNESS WHEREOF, I have signed this General Release this      day of                                                   , 201    .

 

	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    	
 
    
				

 

 

Subscribed and sworn to before me this      day of                     , 201    .

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notary Public
    
	
 
    	
 
    	
My Commission Expires
    	
 
    

 

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Appendix B

 

AGREEMENT NOT TO COMPETE

 

This Agreement Not To Compete (this “Agreement”) dated as of December       , 2011, is made by and between STR HOLDINGS, INC., a Delaware corporation (together with any successor thereto, the “Company”), and ROBERT S. YORGENSEN (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 Chief Executive Officer and President of the Company.

 

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

 

Terms

 

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

 

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

 

2.             Agreement Not to Compete.  For a period equal to the term of Employee’s employment with the Company and through the date which is twenty four (24) 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 or selling solar panel encapsulant or other products (a) sold by the Company or any subsidiary to third parties during the term of Employee’s employment with the Company or (b) under development by the Company or any subsidiary at the time of the termination of Employee’s employment with the Company, provided that at such time of termination, commercial sales of such product under development by the Company or any subsidiary could be reasonably expected to occur within twelve (12) months (collectively, the “Business”); provided, however, Employee shall not be deemed to be competing with the Company solely by reason of the fact that he is employed by or providing services to a company that competes with the Company if Employee is not involved, directly or in directly, with the competing Business of such company.   The making or guarantying of a loan, lease or any other financial arrangement to, with or for any person or entity that engages in any of the activities described in the preceding sentence shall be deemed a breach of the covenant set forth in the preceding sentence.  However, Employee may purchase or own up to 5% of the outstanding stock of any publicly traded corporation that competes with the Company or any Company Affiliate, but may not be employed

 

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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 any of its direct or indirect subsidiaries.

 

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

 

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

 

(d)           During the Noncompetition Period, Employee will not, and will not permit any Employee Affiliate to, directly or indirectly, (a) recruit or otherwise solicit or induce any employee, customer, subscriber or supplier of the Company or any Company Affiliate to terminate its employment or arrangement with the Company or any Company Affiliate, otherwise change its relationship with the Company or any Company Affiliate, or establish any relationship with Employee or any Employee Affiliate to compete in the Business or (b) without the Company’s prior written consent, hire any employee of the Company or any Company Affiliate.  General advertising or posting of a position in any medium or on the Internet shall not be considered a violation of the restrictive covenants contained in this Section.  In addition, Employee shall not be deemed to be in violation of this Section if a subsequent employer of Employee engages in a direct mass mailing to persons that may include customers or prospects of the Company or any Company Affiliate if Employee does not participate, directly or indirectly, in identifying customers or prospects of the Company or any Company Affiliate to be included in such direct mass mailing and Employee has no subsequent contact with any customers or prospects of the Company or any Company Affiliate that respond to such direct mass mailing.

 

(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

 

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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.

 

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

 

If to the Company, to:

 

STR Holdings, Inc.

1699 King Street

Enfield, Connecticut  06082

Attn:  General Counsel

Facsimile:  (860) 758-7301

 

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.

 

19

 

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.          Consent to Jurisdiction.  Employee agrees that any action or proceeding arising out of or relating to this Agreement shall be commenced in the Superior Court Judicial District of Hartford, Connecticut, or United States District Court for the District of Connecticut and agrees that a summons and complaint commencing an action or proceeding in either of such courts shall be properly served and shall confer personal jurisdiction if served personally or by certified mail upon Employee at the address designated pursuant hereto, or as otherwise provided under the laws of the State of Connecticut.

 

12.          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.

 

13.          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

 

20

 

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 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.

 

[signature page follows]

 

21

 

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

 

 

	
 
    	
 
    
	
 
    	
Robert S.   Yorgensen
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
STR   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:  
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

22

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