Exhibit 10.3
Execution Copy
EMPLOYMENT
AGREEMENT
This Employment Agreement (the
“ Agreement ”), dated as of July 18, 2008
(the “ Effective Date ”), is made by and between
SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation
(together with any successor thereto, the “ Company
”), and DENNIS L. JILOT (the “ Executive
”).
Recitals
A.
The Company desires to engage the Executive to perform services
under the terms hereof and the Executive desires to be employed by
the Company.
B.
The Company desires to be assured that the unique and expert
services of the Executive will be substantially available to the
Company, and that the Executive is willing and able to render such
services on the terms hereinafter set forth.
C.
The Company desires to be assured that the confidential information
and goodwill of the Company will be preserved for the exclusive
benefit of the Company.
Terms
In consideration of such employment
and the respective agreements of the parties set forth below, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1.
Certain
Definitions
(a)
“ Annual Base Salary ” shall have the meaning
set forth in Section 3(a).
(b)
“ Board ” shall mean the Board of Managers of
Parent.
(c)
“ Bonus Compensation ” shall have the meaning
set forth in Section 3(b).
(d)
The Company shall have “ Cause ” to terminate
the Executive’s employment hereunder upon: (i) the
Executive’s breach of Section 2(c) (other than any
such failure resulting from the Executive’s Disability),
which is not remedied within 30 days after receipt by the Executive
of written notice from the Company specifying such failure in
reasonable detail; (ii) the Executive’s failure or
refusal to follow the reasonable instructions of the Board or the
board of directors of any Subsidiary of the Company, which failure
or refusal is not cured within 30 days following written notice;
(iii) the Executive’s conviction of a felony or of a
misdemeanor if such misdemeanor involves moral turpitude or
misrepresentation, including a plea of guilty or nolo
contendere ; (iv) the Executive’s unlawful use
(including being under the influence) or possession of illegal
drugs on the Company’s or any of its Subsidiaries’
premises; (v) the Executive’s commission of any act of
fraud, embezzlement, misappropriation of funds, material
misrepresentation, breach of fiduciary duty or other act of
dishonesty detrimental to the Company or any of its Subsidiaries;
or (vi) the Executive’s intentional wrongful act or
gross negligence that has a material detrimental effect on the
Company or its Subsidiaries.
(e)
“ Company ” shall have the meaning set forth in
the preamble hereto.
(f)
“ Date of Termination ” shall mean (i) if
the Executive’s employment is terminated by his death, the
date of his death; (ii) if the Executive’s employment is
terminated due to his Disability, the date determined pursuant to
Section 4(a)(ii); (iii) if the Executive’s
employment is terminated pursuant to
Section 4(a)(iii)-(vi) either the date indicated in the
Notice of Termination or the date specified by the Company pursuant
to Section 4(b), whichever is earlier; or (iv) if the
Executive’s employment is terminated pursuant to
Section 4(a)(vii) the date on which the Term
expires.
(g)
“ Disability ” shall mean (x) any physical
or mental illness, injury or infirmity which prevents the Executive
from performing the Executive’s job functions for a period of
(i) one hundred twenty consecutive calendar days or
(ii) an aggregate of one hundred eighty calendar days out of
any consecutive twelve month period and (y) a disability upon
which Executive would be deemed disabled under the definitions
contained in the long-term disability insurance
policy(s) maintained by the Company for the benefit of
Executive pursuant to Section 3(c) of this
Agreement. Any determination of disability shall be made by
the Board in consultation with a qualified physician or physicians
selected by the Board and reasonably acceptable to the
Executive. The failure of the Executive to submit to a
reasonable examination by such physician or physicians shall act as
an estoppel to any objection by the Executive to the determination
of disability by the Board.
(h)
“ Effective Date ” shall have the meaning set
forth in the preamble hereto.
(i)
“ Executive ” shall have the meaning set forth
in the preamble hereto.
(j)
The Executive shall have “ Good Reason ” to
resign his employment upon the occurrence (without the
Executive’s prior written consent) of any of the following:
(A) a material diminution in the nature or scope of the
Executive’s responsibilities, duties or authority in his
capacity as Chairman, President and Chief Executive Officer,
without regard to any other responsibilities, duties or authority
the Executive may have had or performed for the Company at any
time; (B) the Company’s material breach of this
Agreement; (C) any change in the Executive’s reporting
relationship so that he no longer reports to the Board;
(D) any decrease in the Executive’s Annual Base Salary,
target bonus percentage as set forth in Section 3(a), or
benefit plans, programs and arrangements as in effect from time to
time (other than a general reduction in base salary, target bonus
percentages or benefit plans, programs and arrangements that
affects all members of senior management equally); or
(E) Executive is removed from the Board of Directors of the
Company; provided, however , that the Executive may not
resign his employment for Good Reason unless: (x) the
Executive provided the Company with at least 30 days prior written
notice of his intent to resign for Good Reason (which notice must
be provided within 180 days following (i) the occurrence of
the event(s) purported to constitute Good Reason, or
(ii) if the Executive could not reasonably have known of the
occurrence of any of such events, the date on which the Executive
had actual knowledge of the occurrence of any of such events); and
(y) the Company has not remedied the alleged
occurrence(s) within the 30-day period following its receipt
of such notice from the Executive.
(k)
“ Notice of Termination ” shall have the meaning
set forth in Section 4(b).
(l)
“ Parent ” means STR Holdings LLC, or any
successor thereto, a Delaware limited liability company.
(m)
“ Restricted Shares ” shall have the meaning set
forth in Section 6.
2
(n)
“ Term ” shall have the meaning set forth in
Section 2(b).
2.
Employment
(a)
In General . The Company shall employ the Executive
and the Executive shall enter the employ of the Company, for the
period set forth in Section 2(b), in the position set forth in
Section 2(c), and upon the other terms and conditions herein
provided.
(b)
Term of Employment . The initial term of employment
under this Agreement (the “ Initial Term ”)
shall be for the period beginning on July 18, 2008 and ending
on the fourth anniversary thereof, unless earlier terminated as
provided in Section 4. The employment term hereunder
shall automatically be extended for successive one-year periods
(“ Extension Terms ” and, collectively with the
Initial Term, the “ Term ”) unless either party
gives written notice of non-extension to the other no later than 90
days prior to the expiration of the then applicable
Term.
(c)
Position and Duties . The Executive shall serve as
Chairman, President and Chief Executive Officer of the Company,
with responsibilities, duties and authority customary for such
position. The Executive shall report to the Board. The
Executive shall devote substantially all his working time and
efforts to the business and affairs of the Company and its
subsidiaries. The Executive agrees to observe and comply with
the Company’s rules and policies as adopted by the
Company from time to time. During the Term, it shall not be a
violation of this Agreement for the Executive to (i) serve on
industry trade, civic or charitable boards or committees;
(ii) deliver lectures or fulfill speaking engagements; or
(iii) manage personal investments (which shall include
(x) investments by the Executive of his personal assets in any
business which does not compete directly or indirectly with the
Company, in such form or manner as will not require any services on
the part of the Executive in the operation of such business and
(y) the purchase by the Executive of a total of up to 5% of
the regularly traded securities of any entity, whether or not it
competes with the Company), as long as, in the reasonable judgment
of the Board, such activities do not and will not interfere with
the performance of the Executive’s duties and
responsibilities as an employee of the Company. The Executive
shall perform his duties hereunder primarily from his office
located in Reno, Nevada, and at such other locations as are
mutually determined by the Executive and the Board, and shall
travel as necessary or as reasonably requested by the
Board.
3.
Compensation and Related
Matters
(a)
Annual Base Salary . During the Term, and effective as
of December 31, 2007, the Executive shall receive a base
salary at a rate of $500,000 per annum, which shall be paid in
accordance with the customary payroll practices of the Company (the
“ Annual Base Salary ”). The
Executive’s Annual Base Salary will be reviewed annually by
the Board and the Board may, in its sole discretion and consistent
with past practices, increase the Annual Base Salary considering
the Executive’s performance and that of the
Company.
(b)
Bonus Compensation . In addition to the Annual Base
Salary, for each fiscal year, or portion thereof, during the Term,
the Executive shall be eligible to participate in the
Company’s management incentive plan (or any successor
incentive plan adopted by the Board) pursuant to which Executive
may be paid a target amount of 50% of his Annual Base Salary except
as the parties may have agreed otherwise in writing;
provided , however , in no event shall Executive be
paid a regular bonus in excess of 100% of his Annual Base
Salary. The
3
Executive’s bonus will be based upon
performance measured against mutually agreed upon goals to be
established as soon as practicable after the date hereof. In
the discretion of management, Executive shall be eligible to
receive incentive units pursuant to the terms of the Amended and
Restated Limited Liability Company Agreement of STR Holdings LLC
(the “ LLC Agreement ”). Any bonus shall
be paid no later than the 15th day of the third month following the
end of the calendar year in which such bonus is earned and
vested.
(c)
Benefits . The Executive shall be entitled to
participate in employee benefit plans, programs and arrangements of
the Company now (or, to the extent determined by the Board,
hereafter) in effect under Executive’s current employment
agreement, dated September 1, 2003. For the sake of
clarity, Executive shall be entitled to continue to participate in,
on the same or substantially similar terms, (i) his current
long-term disability insurance policy provided by Provident Life
and Accident Insurance Company, (ii) his current life
insurance policy provided by MassMutual Financial Group,
(iii) his current long-term care insurance policy provided by
CNA – Continental Casualty Company (Executive’s wife,
Linda Jilot, shall also be entitled to continue to participate in,
on the same or substantially similar terms, her current long-term
care insurance policy provided by CNA – Continental Casualty
Company). In addition, during the Term, Executive shall be
entitled to reimbursement of the annual membership dues and
standard fees of the La Costa Club of which the Executive is
currently a member not to exceed $9,000.
(d)
Vacation . During the Term, the Executive shall be
entitled to four weeks paid vacation each calendar year. Any
vacation shall be taken at the reasonable and mutual convenience of
the Company and the Executive.
(e)
Expenses . The Company shall promptly reimburse the
Executive for all reasonable travel and other business expenses
incurred by him in the performance of his duties to the Company in
accordance with the Company’s applicable expense
reimbursement policies and procedures.
(f)
Legal Expenses . Notwithstanding anything to the
contrary above, the Company further agrees to reimburse Executive
for Executive’s legal costs up to an amount equal to $5,000
in connection with the review of this Agreement and the proposed
terms of Employee’s employment hereunder and/or related tax
preparation services by Executive’s legal counsel and/or
accountant.
4.
Termination
. The Executive’s
employment hereunder may be terminated by the Company or the
Executive, as applicable, without any breach of this Agreement only
under the following circumstances:
(a)
Circumstances
(i)
Death . The Executive’s employment hereunder
shall terminate upon his death.
(ii)
Disability . If the Executive incurs a Disability, the
Company may give the Executive written notice of its intention to
terminate the Executive’s employment. In that event,
the Executive’s employment with the Company shall terminate
effective on the later of the 30th day after receipt of such notice
by the
4
Executive or the date specified in
such notice, provided that within the 30 days after such
receipt, the Executive shall not have returned to full-time
performance of his duties.
(iii)
Termination for Cause . The Company may terminate the
Executive’s employment for Cause.
(iv)
Termination without Cause . The Company may terminate
the Executive’s employment without Cause.
(v)
Resignation for Good Reason . The Executive may resign
his employment for Good Reason.
(vi)
Resignation without Good Reason . The Executive may
resign his employment without Good Reason.
(vii)
Non-renewal . Either party may notify the other of his
or its intent not to renew this Agreement at least 90 days prior to
the expiration of the Term, which shall be treated as a termination
without Cause if such notice is given by the Company and the
Company does not concurrently waive the Executive’s
obligations under Section 2 of the Agreement Not to Compete,
or a resignation without Good Reason if such notice is given by the
Executive.
(b)
Notice of Termination . Any termination of the
Executive’s employment by the Company or by the Executive
under this Section 4 (other than termination pursuant to
paragraph (a)(i)) shall be communicated by a written notice to the
other party hereto indicating (i) the specific termination
provision in this Agreement relied upon, (ii) except with
respect to a termination pursuant to Section 4(a)(iv) or
4(a)(vi), setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated, and
(iii) specifying a Date of Termination which, if submitted by
the Executive (or, in the case of a termination described in
Section 4(a)(ii), by the Company), shall be at least 90 days
following the receipt of such notice (a “ Notice of
Termination ”); provided, however , that a Notice
of Termination delivered by the Company pursuant to
Section 4(a)(ii) shall not be required to specify a Date
of Termination, in which case the Date of Termination shall be
determined pursuant to Section 4(a)(ii); and provided,
further , that in the event that the Executive delivers a
Notice of Termination to the Company, the Company may, in its sole
discretion, change the Date of Termination to any date that occurs
following the date of Company’s receipt of such Notice of
Termination (even if such date is prior to the date specified in
such Notice of Termination). A Notice of Termination
submitted by the Company may provide for a Date of Termination on
the date the Executive receives the Notice of Termination, or any
date thereafter elected by the Company in its sole
discretion. The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Cause or Good Reason shall not
waive any right of the Executive or the Company hereunder or
preclude the Executive or the Company from asserting such fact or
circumstance in enforcing the Executive’s or the
Company’s rights hereunder.
5.
Company Obligations Upon
Termination of Employment
(a)
In General . Upon a termination of the
Executive’s employment for any reason, the Executive shall be
entitled to receive in a lump sum within 20 business days following
the Executive’s termination: the sum of the
Executive’s Annual Base Salary through the Date of
5
Termination; a pro rata portion of
Executive’s bonus, if any, for the applicable period of the
calendar year ending on the Date of Termination (which portion of
the bonus shall be reasonably determined by the Board at the end of
the year in which termination occurs in accordance with the
Board’s bonus determination policies then in effect); and any
expenses owed to the Executive under Section 3(e). The
Executive shall also be entitled to any accrued vacation pay owed
to the Executive pursuant to Section 3(d); any amount arising
from the Executive’s participation in, or benefits under, any
employee benefit plans, programs or arrangements under
Section 3(c) (including without limitation, any
disability or life insurance benefit plans, programs or
arrangements), which amounts shall be payable in accordance with
the terms and conditions of such employee benefit plans, programs
or arrangements; and any benefits that may be due the Executive
under the LLC Agreement or incentive unit agreements between the
Executive and the Company.
(b)
Termination without Cause or for
Good Reason . If
the Executive’s employment shall be terminated by the Company
without Cause or by the Executive for Good Reason (including by
reason of the Executive’s death or Disability but not by
reason of the Executive’s termination by the Company for
Cause or termination by the Executive without Good Reason), then,
in addition to the payments and benefits described in
Section 5(a) (including benefits under stock option
agreements), the Company shall:
(i)
Continue to pay to the Executive (or the Executive’s estate),
in accordance with the Company’s regular payroll practice
following the Date of Termination, the Executive’s Annual
Base Salary, and continue the Executive’s and/or the
Executive’s wife’s participation in the Company’s
health and life insurance plans through twenty seven months from
the Date of Termination; provided that each payment is
intended to constitute a separate payment within the meaning of
Code Section 409A and the regulations thereunder;
provided , further that in the event that Executive
is determined by the Company to be a “specified
employee” (as defined in Code Section 409A(2)(B) and
determined in accordance with Code 416(i) (without regard to
paragraph (5) thereof)) of the Company at a time when its stock is
deemed to be publicly traded on an established securities market,
any payments determined to be “nonqualified deferred
compensation” payable following termination of employment
shall be made no earlier than the earlier of (i) the last day
of the sixth (6th) complete calendar month following such
termination of employment, or (ii) Executive’s death,
consistent with the provisions of Code Section 409A. Any
payment delayed by reason of the prior sentence shall be paid out
in a single lump sum at the end of such required delay period in
order to catch up to the original payment schedule.
Notwithstanding the foregoing provisions of this Paragraph
5(b)(i) or anything in this Agreement to the contrary, the
health and life insurance benefits that are not non-taxable medical
benefits, “disability pay” or “death
benefit” plans within the meaning of Treasury Regulation
Section 1.409A-1(a)(5) shall be provided and administered in a
manner that complies with Treasury Regulation
Section 1.409A-3(i)(1)(iv), which requires that (i) the
amount of such benefits provided during one taxable year shall not
affect the amount of such benefits provided in any other taxable
year, except that to the extent such benefits consist of the
reimbursement of expenses referred to in
Section 105(b) of the Code, a maximum, if provided under
the terms of the plan providing such health and life insurance
benefits, may be imposed on the amount of such reimbursements over
some or all of the period in which such benefit is to be provided
to the Executive and/or the Executive’s wife, as described in
Treasury Regulation Section 1.409A-3(i)(iv)(B), (ii) to
the extent that any such benefits consist of
6
reimbursement of eligible expenses,
such reimbursement must be made on or before the last day of the
Executive’s taxable year following the taxable year in which
the expense was incurred and (iii) no such benefit may be
liquidated or exchanged for another benefit;
(ii)
If the Executive otherwise would have been entitled to receive a
payment pursuant to the Company’s bonus plan had he been
employed on the last day of the Company’s fiscal year, then
pay to the Executive (or the Executive’s estate) on
April 30 of the year following the year in which the
Executive’s termination occurs, (and in the event that the
Company has not received its audited financial statements for the
prior year by April 30 of such year, such bonus shall be paid
as soon as practicable thereafter, consistent with the provisions
of Code Section 409A, but in no event later than the last day
of such following year), the amount of such payment, multiplied by
a fraction the numerator of which is the number of days during such
fiscal year that the Executive was employed and the denominator of
which is 365; and
(iii)
Continue paid coverage for the Executive and/or the
Executive’s wife and any eligible dependents under
all
