Document:

Exhibit 10.1

 

(Including
amendments

through
February 2010)

 

3M 2008 LONG-TERM
INCENTIVE PLAN

 

1.             Purposes.

 

The
purposes of this plan are to help 3M attract, retain and motivate outstanding
employees to increase shareholder value by contributing to the long-term growth
and success of its business; to more closely align the financial interests of
these employees with those of 3M’s other shareholders by linking a significant
portion of their compensation to the performance of the Company and its stock
price; to encourage employees to acquire an equity stake in the Company; to
help 3M attract and retain well-qualified individuals to serve as nonemployee
members of its Board of Directors; and to promote the alignment of interests of
these nonemployee directors with those of 3M’s other shareholders by providing
all or a portion of their compensation for serving as directors in the form of
3M common stock.

 

This
plan is intended to replace and succeed the 2005 Management Stock Ownership
Program, the 3M Performance Unit Plan, and the 1992 Directors Stock Ownership
Program.

 

2.             Definitions.

 

(a)                                  “Affiliate”
means any entity that is directly or indirectly controlled by the Company or in
which the Company has a significant equity interest, as determined by the
Committee.

 

(b)                                 “Award” means
any Incentive Stock Option, Nonqualified Stock Option, Progressive Stock
Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
Performance Unit, Performance Share or other Stock Award granted to a
Participant under this Plan.

 

(c)                                  “Code” means
the Internal Revenue Code of 1986, as amended.

 

(d)                                 “Committee”
means the Compensation Committee of 3M’s Board of Directors.

 

(e)                                  “Common Stock”
means the common stock of 3M Company with a par value of $0.01 per share.

 

(f)                                    “Company” means
3M Company, a Delaware corporation.

 

(g)                                 “Disqualifying
Termination” means a termination of a Participant’s employment with the Company
or an Affiliate due to (i) a material violation of any policy of the
Company or such Affiliate, including, without limitation, any of the Company’s
Business Conduct Policies, or (ii) embezzlement from or theft of property
belonging to the Company or such Affiliate.

 

(h)                                 “Dividend
Equivalents” means, on any dividend record date, that amount of cash or shares
equal in value to the dividend payable on shares of Common Stock as declared by
3M’s Board of Directors with respect to such dividend record date.

 

 

 

(i)                                     “Fair Market
Value” means the closing price for a share of Common Stock as reported on the
New York Stock Exchange Composite Transactions.

 

(j)                                     “Full Value
Award” means any Award denominated or paid in shares of Common Stock other than
an Option or Stock Appreciation Right.

 

(k)                                  “Grant Date”
means the effective date of an Award granted to a Participant under this Plan.

 

(l)                                     “Incentive
Stock Option” means an Option granted under this Plan which satisfies the
requirements of section 422 of the Code and is so designated in the written or
electronic documents evidencing such Option.

 

(m)                               “Nonqualified
Stock Option” means an Option granted under this Plan which is not an Incentive
Stock Option.

 

(n)                                 “Option” means
a Participant’s right to purchase a specified number of shares of Common Stock
at a specified price for a specified period of time.

 

(o)                                 “Participant” means
an employee of the Company or an Affiliate whose participation in the Plan has
been approved by the Committee, or a nonemployee member of 3M’s Board of
Directors.

 

(p)                                 “Performance
Criteria” means such internal performance criteria for the Company or any
business segment thereof as determined by the Committee with respect to each
Performance Unit or Performance Share and may include any one or more of
several criteria, such as, but not limited to, return on capital employed,
return on assets or net assets, net sales, sales growth, sales or sales growth
from new products, market share, cash flow or cash flow conversion, earnings
per share, return on equity, stock price, gross margin or income, operating
margin or income, total shareholder return, stockholders’ equity, retained
earnings, economic value added, economic profit (after-tax operating income,
excluding non-recurring items, less the cost of capital), earnings before
interest and taxes, EBITDA, operating income, improvements in certain asset or
financial measures (including working capital, the ratio of sales to net
working capital and the ratio of debt to equity or to EBITDA), reductions in
certain asset or cost areas (including reductions in inventories or accounts
receivable or reductions in laboratory, engineering, sales or administrative
costs) or in debt, net income or variations of income criteria in varying time
periods, adjusted net income, employee diversity, employee engagement or
satisfaction, customer satisfaction, or general comparisons with other peer
companies or industry groups or classifications with regard to one or more of
these criteria.  The criteria may measure
performance on the basis of either the amount of a particular item during the
Performance Period or on increases or decreases in the amount of such item
during the Performance Period.  Such
criteria shall include a target for payment of the Performance Unit or
Performance Share at full face value and upper and lower limits for the measurement
of payment to Participants.

 

(q)                                 “Performance
Period” means a period of three years, unless determined otherwise by the
Committee in its discretion, during which period or any portion thereof the
Performance Criteria shall be measured for purposes of calculating the payment
with respect to each Performance Unit or Performance Share.

 

 

 

(r)                                    “Performance
Share” means the right of a Participant to receive a payment in the form of
shares of Common Stock based upon the performance of the Company during a
Performance Period as measured by the Performance Criteria approved by the
Committee.

 

(s)                                  “Performance
Unit” means the right of a Participant to receive a payment in cash or shares
of Common Stock based upon the performance of the Company during a Performance
Period as measured by the Performance Criteria approved by the Committee.

 

(t)                                    “Plan” means
this 3M 2008 Long-Term Incentive Plan.

 

(u)                                 “Predecessor
Plan” means the 1997 Management Stock Ownership Program, the 2002 Management
Stock Ownership Program, and the 2005 Management Stock Ownership Program.

 

(v)                                 “Progressive
Stock Option” means a Nonqualified Stock Option granted to a Participant under
this Plan upon the exercise of a nonqualified stock option granted under the
1997 or the 2002 Management Stock Ownership Programs where such Participant
makes payment for all or part of the purchase price and withholding taxes in
shares of Common Stock.

 

(w)                               “Restricted
Period” means that period of time determined by the Committee during which a
Participant shall not be permitted to sell or transfer shares of Restricted
Stock granted under this Plan, and during which a Participant’s interest in
Restricted Stock Units or Restricted Stock granted under this Plan remains
subject to forfeiture.  Unless otherwise
determined by the Committee, any time-based Restricted Period shall be at least
three years.

 

(x)                                   “Restricted
Stock” means shares of Common Stock granted to a Participant under the Plan
subject to certain restrictions during the Restricted Period established by the
Committee.

 

(y)                                 “Restricted Stock
Unit” means the right of a Participant to receive an amount of cash or Common
Stock based on the Fair Market Value of a specified number of shares of Common
Stock following a Restricted Stock Period, subject to such terms and conditions
as the Committee may establish.

 

(z)                                   “Retires” or “Retirement”
means the termination of a Participant’s employment with the Company or an
Affiliate after attaining age 55 with at least five years of employment
service.

 

(aa)                            “Stock
Appreciation Right” means a Participant’s right to receive an amount of cash or
shares of Common Stock equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock on the date the right is exercised
over the Fair Market Value of such number of shares of Common Stock on the
Grant Date.

 

(bb)                          “Stock Award”
means any award of Common Stock under the Plan and may include Restricted Stock
awards or other awards of Common Stock as determined appropriate by the
Committee.

 

 

 

3.             Eligibility.

 

The
Committee will have the exclusive power and authority (except as it may
delegate such power and authority as permitted herein) to select the executives
and other employees of the Company and its Affiliates who may participate in
this Plan by receiving Awards made hereunder. 
All nonemployee members of the 3M Board of Directors shall also be
eligible to participate in and receive Awards made hereunder.

 

4.             Shares Available for Awards.

 

Unless
otherwise authorized by the Company’s stockholders, the total number of shares
of Common Stock that may be issued or delivered pursuant to Awards granted
under this Plan will be 64,000,000.  Of
this total, no more than 64,000,000 may be issued or delivered upon the
exercise of Incentive Stock Options.  The
necessary shares shall be made available at the discretion of the Board of
Directors from authorized but unissued shares, treasury shares, or shares
reacquired by the Company under corporate repurchase programs.

 

The
following rules shall apply for the purpose of determining the number of
shares of Common Stock remaining available for issuance under the Plan:

 

(a)           If an Award is
denominated in a fixed number of shares of Common Stock on the Grant Date, the
number of shares covered by such Award (as in the case of an Option or
Restricted Stock grant) or to which such Award relates (as in the case of a
Stock Appreciation Right) will be counted on the Grant Date against the total
number of shares available for issuance or delivery under the Plan.  If an Award is not denominated in a fixed
number of shares of Common Stock on the Grant Date (but is potentially payable
in such shares or the final number of shares is not determined until the
completion of a Performance Period), only the number of shares of Common Stock
actually issued or delivered as a result of such Award, if any, shall be
counted against the total number of shares available for issuance or delivery
under the Plan.

 

(b)           Notwithstanding the
provisions of Section 4(a) above, each Full Value Award with a Grant
Date on or after May 11, 2010 will be counted against the total number of
shares available for issuance or delivery under the Plan as 2.87 shares for
every one share covered by such Award (Full Value Awards with Grant Dates prior
to May 11, 2010 were counted against the total number of shares available
for issuance or delivery under the Plan as 3.38 shares for every one share
covered by such Award).

 

(c)           When an Award
granted under this Plan and denominated in shares of Common Stock (or any
portion thereof) expires, is cancelled, is forfeited or is otherwise terminated
without the issuance of such shares, or is settled in cash or consideration
other than shares of Common Stock, then the shares of Common Stock previously
counted against the total number of shares available for issuance or delivery
under the Plan on account of such Award (or portion thereof) will again be made
available for issuance hereunder.  When
an award granted under a Predecessor Plan and denominated in shares of Common
Stock (or any portion thereof) expires, is cancelled, is forfeited or is
otherwise terminated without the issuance of such shares, or is settled in cash
or consideration other than shares of Common Stock, then the shares of Common
Stock previously counted against the total number of shares available for
issuance or delivery under such Predecessor Plan on account of such Award (or
portion thereof) will be added to the total number of shares 

 

 

 

available
for issuance or delivery under this Plan. 
Notwithstanding the rest of this Section 4(c), the following shares
of Common Stock will not be added to the total number of shares available or be
made available again for issuance under this Plan: (i) shares not issued
or delivered as a result of the net settlement of an outstanding stock option
or stock appreciation right; (ii) shares delivered to or withheld by the
Company to pay the exercise price of or the withholding taxes with respect to
an award; and (iii) shares repurchased on the open market with the
proceeds from the payment of the exercise price of an option.

 

(d)           Any shares of Common
Stock related to Awards granted through the assumption of, or in substitution
for, outstanding awards previously granted by a company acquired by the Company
or an Affiliate or with which the Company or any Affiliate combines, shall not
be counted against the total number of shares available for issuance or
delivery under the Plan.

 

5.             Terms of Awards.

 

The
Committee shall determine the type or types of Awards to be granted to each
Participant, which shall be evidenced by such written or electronic documents
as the Committee shall authorize; provided, however, that nonemployee members
of the 3M Board of Directors shall not be eligible to receive Incentive Stock
Options, Progressive Stock Options, Performance Units or Performance
Shares.  The following types of Awards
may be granted under this Plan:

 

(a)           Incentive Stock
Options — Incentive Stock Options granted hereunder shall have an exercise
price equal to one hundred percent (100%) of the Fair Market Value of a share
of Common Stock on the Grant Date. 
Incentive Stock Options granted hereunder shall become exercisable at
such time as shall be established by the Committee and reflected in the
documents evidencing such Options, and unless sooner terminated shall expire on
the tenth anniversary of the Grant Date.

 

(b)           Nonqualified Stock
Options — Nonqualified Stock Options granted hereunder shall have an exercise
price equal to no less than one hundred percent (100%) of the Fair Market Value
of a share of Common Stock on the Grant Date. 
Nonqualified Stock Options granted hereunder shall become exercisable
and shall expire at such time or times as shall be established by the Committee
and reflected in the documents evidencing such Options; provided, however, that
no Nonqualified Stock Option shall expire later than ten years after the Grant
Date (except that the Committee may extend the exercise period for Nonqualified
Stock Options granted to Participants in any country or countries for an
additional period of up to one year if and to the extent necessary to prevent
adverse tax consequences to such Participants under the laws of such country).

 

(c)           Progressive Stock Options - Whenever a Participant exercises a
nonqualified stock option granted under the 1997 or 2002 Management Stock
Ownership Program and makes payment of all or part of the purchase price and
withholding taxes, if any, in Common Stock, the Committee may in its discretion
grant such Participant a Progressive Stock Option.  The number of shares subject to such Progressive
Stock Option shall be equal to the number of shares of Common Stock utilized by
the Participant to effect payment of the exercise price and withholding taxes,
if any, for such nonqualified stock option. 
Each Progressive Stock Option granted hereunder shall have an exercise
price equal to one hundred percent (100%) of the Fair Market Value of a share
of Common Stock on the date of exercise of the nonqualified stock option, which
shall be the Grant Date of such Progressive Stock Option.  Each Progressive Stock Option granted
hereunder shall be exercisable six months after the Grant Date, and shall
expire at the same time the nonqualified stock option exercised by the
Participant would have expired.

 

 

 

(d)           Stock Appreciation
Rights - The term of a Stock Appreciation Right shall be fixed by the Committee
and set forth in the documents evidencing such right, but no Stock Appreciation
Right shall be exercisable more than ten years after the Grant Date.  Each Stock Appreciation Right shall become
exercisable at the time or times determined by the Committee and set forth in
the documents evidencing such right. 
Each Stock Appreciation Right granted hereunder shall have a grant price
equal to one hundred percent (100%) of the Fair Market Value of a share of
Common Stock on the Grant Date.

 

(e)           Restricted Stock -
At the time a grant of Restricted Stock is made, the Committee, in its sole
discretion, shall establish a Restricted Period and such additional terms and
conditions as may be deemed appropriate for the incremental lapse or complete
lapse of restrictions with respect to all or any portion of the shares of
Common Stock represented by the Restricted Stock.  The Committee may also, in its sole
discretion, shorten or terminate the Restricted Period or waive any terms or
conditions for the lapse of restrictions with respect to all or any portion of
the shares of Common Stock represented by the Restricted Stock.  During the Restricted Period the Participant
shall generally have the rights and privileges of a stockholder as to such
Restricted Stock, including the right to vote such Restricted Stock and receive
dividend payments, except that the following restrictions shall apply: (i) none
of the Restricted Stock may be sold, transferred, assigned, pledged, or otherwise
encumbered or disposed of during the Restricted Period and until the
satisfaction of any other terms and conditions prescribed by the Committee, if
any; and (ii) all of the Restricted Stock shall be forfeited and all
rights of the Participant shall terminate without further obligation on the
part of the Company unless the Participant shall have remained a regular
full-time employee of the Company or an Affiliate until the expiration or
termination of the Restricted Period and the satisfaction of the other terms
and conditions prescribed by the Committee, if any.  Any Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee may determine, in its
discretion, including, without limitation, book-entry registration or issuance
of one or more stock certificates bearing an appropriate legend recognizing the
terms, conditions and restrictions applicable to such Restricted Stock.  Upon the forfeiture of any Restricted Stock,
such shares of Common Stock represented by the Restricted Stock shall be
transferred to the Company without further action by the Participant.

 

(f)            Restricted Stock
Units - At the time a grant of Restricted Stock Units is made, the Committee,
in its sole discretion, shall establish a Restricted Period and such additional
terms and conditions as may be deemed appropriate for the incremental lapse or
complete lapse of restrictions with respect to all or any portion of such
Restricted Stock Units.  The Committee
may also, in its sole discretion, shorten or terminate the Restricted Period or
waive any terms or conditions for the lapse of restrictions with respect to all
or any portion of the Restricted Stock Units. 
During the Restricted Period the Participant will not have the rights
and privileges of a stockholder as to such Restricted Stock Units, including
the right to vote and receive dividend payments with respect to the shares of
Common Stock corresponding to such Restricted Stock Units; provided, however,
that at the sole discretion of the Committee, Dividend Equivalents may be
either currently paid in cash or shares or withheld by the Company for the
Participant’s account and either maintained in cash to be paid upon the
expiration of the Restricted Period or reinvested in additional Restricted
Stock Units.  Each grant of Restricted
Stock Units shall be subject to the following restrictions: (i) the
Participant shall not be entitled to the payment of cash or the delivery of the
shares of Common Stock corresponding to such Restricted Stock Units until the
expiration or termination of the Restricted Period and the satisfaction of any
other terms and conditions prescribed by the Committee, if any; (ii) none
of the Restricted Stock Units may be sold, transferred, assigned, pledged, or
otherwise

 

 

 

encumbered
or disposed of at any time; and (iii) all of the Restricted Stock Units
and any deferred Dividend Equivalents shall be forfeited and all rights of the
Participant shall terminate without further obligation on the part of the
Company upon the termination of the Participant’s employment with the Company
or an Affiliate prior to the end of the Restricted Period for any reason other
than Retirement, total disability or death; provided, however, that if the
Committee so decides and the documents evidencing an Award of Restricted Stock
Units so provide, the preceding exception allowing such Restricted Stock Units
to vest following the Participant’s Retirement shall not apply so that such
Restricted Stock Units and any deferred Dividend Equivalents will be forfeited and
all rights of the Participant shall terminate without further obligation on the
part of the Company upon the Retirement of such Participant prior to the end of
the Restricted Period.

 

(g)           Other Stock Awards -
The Committee may, in its sole discretion, grant Stock Awards other than
Restricted Stock grants or Restricted Stock Units, and such Stock Awards may be
granted singly, in combination or in tandem with, in replacement of, or as
alternatives to grants or rights under this Plan or any other employee benefit
or compensation plan of the Company, including the plan of any acquired
entity.  If the Committee shall stipulate
terms and conditions with respect to such Stock Awards, the terms and
conditions will be set forth in the documents evidencing the Award.  If the terms and conditions with respect to
any Stock Award shall require the surrender or forfeiture of other grants or
rights under this Plan or any other employee benefit or compensation plan of
the Company, then the Participant shall not have any rights under such Stock
Award until the grants or rights exchanged have been fully and effectively
surrendered or forfeited.

 

(h)           Performance Units
and Performance Shares — At the time it approves each grant of Performance
Units or Performance Shares, the Committee shall determine the number of
Performance Units or Performance Shares granted to each Participant, the
proration, if any, of such Performance Units or Performance Shares if the
Participant retires prior to the completion of the relevant Performance Period,
the commencement and expiration of the relevant Performance Period, and the
Performance Criteria by which the payment value of the Performance Units or
Performance Shares will be determined. 
Payment of each Performance Unit and Performance Share shall occur no
later than the March 15 of the year immediately following the completion
of the respective Performance Period, unless a Participant shall have made an
effective election to defer the receipt of such payment pursuant to the terms
of an applicable deferred compensation plan and all applicable laws.  The amount payable with respect to each
Performance Unit and Performance Share shall be contingent upon the attainment
of the Performance Criteria selected by the Committee during the respective Performance
Period, and upon the continued employment of the Participant throughout such
Performance Period (or upon the Participant’s Retirement prior to the end of
such Performance Period).

 

6.             Payment of Awards.

 

Payment
of Awards may be in the form of cash, shares of Common Stock or combinations
thereof as the Committee shall determine, and with such other restrictions as
it may impose.  The Committee may permit
or require the deferral of any Award payment, subject to such terms, rules and
conditions as the Committee may establish, which may include provisions for the
payment or crediting of interest or Dividend Equivalents; provided, however,
that the Committee shall not have any authority to permit or require the
deferral of any Award payment to the extent that the exercise of such authority
would cause any excise tax to become due under section 409A of the Code.

 

 

 

No
shares of Common Stock shall be issued to any Participant upon the exercise of
an Option granted under this Plan until full payment of the exercise price has
been made to the Company and the Participant has remitted to the Company the
required withholding taxes, if any. 
Payment of the exercise price and withholding taxes, if any, may be made
in whole or in part in shares of Common Stock, pursuant to such terms and
conditions as may be established from time to time by the Committee.  If payment is made in shares of Common Stock,
such shares shall be valued at their Fair Market Value on the day the Participant
exercises the Option or, as regards a withholding tax, on the date when the tax
obligation becomes due.  A Participant
need not surrender shares of already owned Common Stock as payment, and the
Company may, upon the giving of satisfactory evidence of ownership of such
shares by the Participant, deliver the appropriate number of additional shares
of Common Stock reduced by the number of shares required to pay the exercise
price and any required withholding taxes. 
Such form of evidence shall be determined by the Committee in its
discretion.

 

In
no event will the Company be required to deliver any fractional share of Common
Stock in connection with any Award.  In
the event that a Participant shall be entitled to receive a fraction of a share
of Common Stock in connection with an Award granted under the Plan, the Company
shall pay in cash, in lieu thereof, the Fair Market Value of such fractional
share.

 

7.             Termination of Awards.

 

If
a Participant’s employment with the Company or an Affiliate is terminated for
any reason other than (i) a Disqualifying Termination, (ii) Retirement,
(iii) a termination in connection with which the Participant executes a
written release of employment-related claims in favor of the Company that
provides (with the approval of the Company) for the nonforfeiture of Options
and Stock Appreciation Rights, (iv) a physical or mental disability as
recognized under a benefit plan maintained by the Participant’s employer, or (v) death,
and prior to the date of termination the Participant has not fully exercised an
Option or Stock Appreciation Right granted under this Plan, such Participant
may exercise the Option or Stock Appreciation Right within ninety (90) days
following the date of termination (but not beyond the expiration date of such
Option or Right) for the number of shares which the Participant could have
purchased or received a payment on the date of termination.  At the conclusion of such ninety-day period
(with respect to the Participant’s Options and Stock Appreciation Rights, and
at the time of termination with respect to any other Awards), participation
hereunder shall cease and all of the Participant’s Awards granted under this
Plan shall be automatically forfeited unless the documents evidencing such
Awards provide otherwise.

 

If
a Participant Retires, terminates employment with the Company or an Affiliate
and in connection with such termination the Participant executes a written
release of employment-related claims in favor of the Company that provides
(with the approval of the Company) for the nonforfeiture of Options and Stock
Appreciation Rights, or changes employment status as a result of a physical or
mental disability as recognized under a benefit plan maintained by the
Participant’s employer, without having fully exercised an Option or Stock
Appreciation Right, the Participant shall be entitled, within the remaining
term of the Option or Stock Appreciation Right (but not beyond the expiration
date of such Option or Right), to exercise such Option or Stock Appreciation
Right (provided, however, that in the event of a termination in connection with
which the Participant executes a written release of employment-related claims
in favor of the Company that provides (with the approval of the Company) for
the nonforfeiture of Options and Stock Appreciation Rights, the additional time
to exercise Options and Stock Appreciation Rights shall apply only to those 

 

 

 

Options
and Stock Appreciation Rights which have vested prior to the date of
termination of employment).  If a
Participant who has thus Retired dies, without having fully exercised an Option
or Stock Appreciation Right, the Option or Stock Appreciation Right (including
any portion thereof not already exercisable at the time of the Participant’s
death) may be exercised within two years after the date of his or her death
(but not beyond the expiration date of such Option or Right) by the Participant’s
estate or by a person who acquired the right to exercise such Option or Stock
Appreciation Right by bequest or inheritance or by reason of the death of the
Participant.

 

If
a Participant, prior to Retirement, dies without having fully exercised an
Option or Stock Appreciation Right, the Option or Stock Appreciation Right
(including any portion thereof not already exercisable at the time of the
Participant’s death) may be exercised within two years following his or her
death (but not beyond the expiration date of such Option or Right) by the
Participant’s estate or by a person who acquired the right to exercise such
Option or Stock Appreciation Right by bequest or inheritance or by reason of
the death of the Participant.

 

Notwithstanding
the rest of this Section 7, if a Participant’s employment with the Company
or an Affiliate is terminated before he or she has fully exercised an Option or
Stock Appreciation Right under circumstances which the Committee believes to
warrant special consideration and the Committee has determined that the
Participant’s rights should not be forfeited at the time or times specified
above, the Option or Stock Appreciation Right (including any portion thereof
not already exercisable at the time of termination) may be exercised within two
years following his or her termination of employment (but not beyond the
expiration date of such Option or Right).

 

If
a Participant dies, either prior to or following Retirement, or becomes “disabled”
within the meaning of section 409A(a)(2)(C) of the Code, and has not yet
received the stock certificate for the shares of Common Stock represented by a
grant of Restricted Stock, Restricted Stock Units or other Stock Award, then
all restrictions imposed during the Restricted Period and any other terms and
conditions prescribed by the Committee, if any, shall automatically lapse and a
stock certificate shall be delivered to the Participant or the Participant’s beneficiary,
representative, or estate, as the case may be upon the Participant’s
demonstration to the satisfaction of the Committee that such Participant is
considered “disabled” for purposes of section 409A(a)(2)(C) of the Code.

 

If
a Participant Retires or changes employment status as a result of a physical or
mental disability as recognized under a benefit plan maintained by the
Participant’s employer prior to the payment date for an Award of Performance
Shares or Performance Units, such Retirement or change in status shall not
affect any rights of the Participant with respect to such Performance Shares or
Performance Units; provided, however, that the Committee may provide for the
proration of the Performance Shares or Performance Units granted to a Participant
who Retires prior to the completion of the Performance Period for such
Performance Shares or Performance Units.

 

If
a Participant dies without having received payment of any Performance Shares or
Performance Units granted under this Plan, payment of such Shares or Units
shall be made no later than March 15 of the year following the year in
which the Participant died to such Participant’s surviving beneficiary or
beneficiaries or, if there shall be no such surviving beneficiaries, to such
Participant’s estate in the following manner:

 

(i)  If the Participant dies after the expiration of a Performance
Period for such Performance Shares or Performance Units, the payment shall be
at the same rate as that paid to other Participants who survive until the payment
date; and

 

 

 

(ii)  If the Participant dies before the expiration of a
Performance Period for such Performance Shares or Performance Units, the amount
of payment shall be at the lesser of:

 

•                                        the face or
target value of each outstanding Performance Share or Performance Unit for
which payment has not been made; or

 

•                                        any other
amount approved, in its discretion, by the Committee.

 

If
a Participant’s employment with the Company or an Affiliate is terminated due
to a Disqualifying Termination, participation hereunder shall cease and all of
the Participant’s Awards granted under this Plan shall be automatically
forfeited.

 

Participation
hereunder shall cease and all rights under the Plan with respect to Restricted
Stock or other Stock Awards granted to a Participant who has been participating
in this Plan as a nonemployee member of the 3M Board of Directors are
automatically forfeited by the Participant upon the date of termination of his
or her membership on the 3M Board of Directors for any reason other than: (i) retirement,
(ii) physical or mental disability as determined by the Committee, or (iii) death.

 

8.             Limits on Awards.

 

No
Participant shall be granted Options and Stock Appreciation Rights under this
Plan with respect to more than 1,000,000 shares of Common Stock in any calendar
year.  No Participant shall receive cash,
vested shares of Common Stock or other property as a result of Awards granted
under this Plan, other than Options and Stock Appreciation Rights, having a
value exceeding $30,000,000 in any calendar year.

 

9.             Plan Administration.

 

This
Plan will be administered by the Committee, which shall have full power and
authority to select the Participants, interpret the Plan, continue, accelerate
or suspend the exercisability or vesting of an Award, and adopt such rules and
procedures for operating the Plan as it may deem necessary or appropriate.  Its power and authority shall include, but
not be limited to, making any amendments to or modifications of the Plan which
may be required or necessary to make such Plan comply with the provisions of
any laws or regulations of any country or unit thereof in which the Company or
any Affiliate operates.  To do so, the
Committee may establish different terms and conditions for Awards made to
Participants who live in or are subject to taxation in one or more countries
other than the United States in order to accommodate the tax or other relevant
laws of such countries.  The Committee
may adopt one or more supplements or sub-plans under the Plan to implement
these different terms and conditions. 
Except for adjustments made in accordance with Section 11, no
Option or Stock Appreciation Right granted under this Plan may be repriced to
reduce the exercise or grant price of any outstanding Option or Stock Appreciation
Right, nor may any outstanding Option or Stock Appreciation Right granted under
this Plan be cancelled in exchange for cash, another Award, or an Option or
Stock Appreciation Right with an exercise or grant price that is less than the
exercise or grant price of the cancelled Option or Stock Appreciation Right,
without the prior approval of the Company’s stockholders.

 

 

 

10.           Delegation of Authority.

 

To the extent permitted by Delaware law, the Committee may delegate to
officers of the Company any or all of its duties, power and authority under
this Plan subject to such conditions or limitations as the Committee may
establish; provided, however, that no officer shall have or obtain the
authority to grant Awards to (i) himself or herself, (ii) nonemployee
members of the 3M Board of Directors, or (iii) any person subject to
section 16 of the Securities Exchange Act of 1934.

 

11.           Adjustments.

 

In
the event of any change in the outstanding Common Stock of the Company by
reason of a stock split, stock dividend, combination or reclassification of
shares, recapitalization, merger or similar event, the Committee shall adjust
proportionately: (a) the number of shares of Common Stock (i) available
for issuance or delivery under this Plan in accordance with Section 4, (ii) for
which Awards may be granted to a single Participant in accordance with Section 8,
and (iii) subject to outstanding Awards granted under this Plan; (b) the
exercise prices of outstanding Awards; and (c) the appropriate Fair Market
Value and other price determinations for such Awards.  In the event of any other change affecting
the Common Stock or any distribution (other than normal cash dividends) to
holders of Common Stock, such adjustments in the number or kind of shares and
the exercise prices, Fair Market Value and other price determinations of the
affected Awards as the Committee shall, in its sole discretion, determine are
equitable, shall be made and shall be effective and binding for all purposes of
such outstanding Awards.  In the event of
a corporate merger, consolidation, acquisition of assets or stock, separation,
reorganization or liquidation, the Committee shall be authorized to cause the
Company to assume outstanding employee awards or issue replacement Awards to
affected employees, whether or not in a transaction to which section 424(a) of
the Code applies, and to make such adjustments in the terms of such awards as
it shall deem appropriate in order to maintain reasonable comparability or
equitable treatment between the assumed awards and the Awards granted under
this Plan as so adjusted.

 

12.           Withholding.

 

Prior
to the payment or settlement of any Award, the Participant must pay, or make
arrangements satisfactory to the Company for the payment of, any and all tax
withholding that in the opinion of the Company is required by law.  The Company or any Affiliate shall have the
right to deduct applicable taxes from any Award payment, to withhold from the
shares of Common Stock being issued or delivered in connection with an Award an
appropriate number of shares for the payment of taxes required by law, or to
take such other action as may be necessary in the opinion of the Company or
such Affiliate to satisfy all obligations for the withholding of such taxes.

 

13.           Transferability.

 

Except
as permitted in this Section 13, no Award granted under this Plan may be
assigned, transferred (other than a transfer by will or the laws of descent and
distribution as provided in Section 7), pledged, or hypothecated (whether
by operation of law or otherwise). 
Awards granted under this Plan shall not be subject to execution,
attachment, or similar process.  The
Committee may, in its sole discretion, permit individual Participants to
transfer the ownership of all or any of their Nonqualified Options granted
under this Plan to (i) the spouse, children or grandchildren of such
Participant (“Immediate Family Members”), (ii) a trust or trusts for the
exclusive benefit of 

 

 

 

such
Immediate Family Members, or (iii) a partnership in which such Immediate
Family Members are the only partners, provided that (x) there may be no
consideration for any such transfer, and (y) subsequent transfers of
transferred Nonqualified Options shall be prohibited except those in accordance
with Section 7 (by will or the laws of descent and distribution).  The Committee may, in its sole discretion,
create further conditions and requirements for the transfer of Nonqualified
Options.  Following transfer, any such
Nonqualified Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer.  The events causing termination of Awards in
accordance with Section 7 hereof shall continue to be applied with respect
to the original Participant, following which the Nonqualified Options shall be
exercisable by the transferee only to the extent, and for the periods specified
in Section 7.

 

14.           Validity.

 

In
the event any provision of this Plan should be determined to be illegal or
invalid for any reason, it shall not affect the remaining provisions of the
Plan which shall remain in effect as if the illegal or invalid provision had
never been included herein.

 

15.           Governing Law.

 

The
provisions of this Plan shall be governed by, and interpreted and construed in
accordance with, the laws of the State of Delaware.

 

16.           Effective Date, Term, Amendment and
Termination of the Plan.

 

This
Plan will become effective on the date it is approved by the requisite vote of
the stockholders of 3M Company, and shall expire (unless it is terminated
before then) on the tenth anniversary of such effective date.  Such expiration shall not adversely affect
Awards granted under this Plan prior to such expiration date.  The Board of Directors may at any time amend
or terminate this Plan, except that no amendment or termination shall adversely
affect Awards granted under this Plan prior to the effective date of such
amendment or termination; provided, however, that no amendment shall be made
without the prior approval of the holders of a majority of the issued and outstanding
shares of Common Stock represented and entitled to vote on such amendment which
would (i) increase the aggregate number of shares of Common Stock
available for issuance or delivery under this Plan in accordance with Section 4
(except for adjustments made in accordance with Section 11), (ii) permit
the granting of Awards with purchase prices lower than those specified in Section 5,
or (iii) be a material amendment for which stockholder approval is
required by applicable law, regulation or stock exchange rule.

 

17.           Change in Control.

 

For
purposes of this Section 17, the following words and phrases shall have
the meanings indicated below, unless the context clearly indicates otherwise:

 

(a)           “Person” shall have
the meaning associated with that term as it is used in Sections 13(d) and
14(d) of the Act.

 

(b)           “Affiliates and
Associates” shall have the meanings assigned to such terms in Rule 12b-2
promulgated under Section 12 of the Act.

 

 

 

(c)           “Act” means the
Securities Exchange Act of 1934.

 

(d)           “Continuing
Directors” shall have the meaning assigned to such term in Article Thirteenth
of the Restated Certificate of Incorporation of 3M Company.

 

(e)           “Cause” means (i) a
material violation of any policy of the Company or the Affiliate employing the
Participant, including, without limitation, any of the Company’s Business
Conduct Policies, or (ii) embezzlement from or theft of property belonging
to the Company or the Affiliate employing the Participant.

 

(f)            “Good Reason” means
(i) a material diminution in the Participant’s position, authority, duties
or responsibilities as in effect immediately prior to the Change in Control, (ii) a
material diminution in the Participant’s base salary or annual planned cash
compensation, or (iii) a material change in the geographic location at
which the Participant is required to perform services for the Company or the
Affiliate employing such Participant.

 

Notwithstanding
any other provision of this Plan to the contrary, all outstanding Options and
Stock Appreciation Rights with a Grant Date prior to February 9, 2010
shall (i) become immediately exercisable in full for the remainder of
their respective terms upon the occurrence of a Change in Control of the
Company, and (ii) remain exercisable in full for a minimum period of six
months following the Change in Control; provided, however, that in no event
shall any Option or Stock Appreciation Right be exercisable beyond the original
expiration date.  Similarly, all
restrictions regarding the Restricted Period or the satisfaction of other terms
and conditions prescribed by the Committee, if any, with respect to grants of
Restricted Stock, Restricted Stock Units or other Stock Awards with a Grant
Date prior to February 9, 2010, shall automatically lapse, expire, and
terminate and the Participant shall be immediately entitled to receive a stock
certificate for the number of shares of Common Stock represented by the
Restricted Stock, Restricted Stock Units or Stock Awards upon the occurrence of
a Change in Control.

 

Notwithstanding
any other provision of this Plan to the contrary, if a Participant’s employment
with the Company or an Affiliate is terminated without Cause or if the
Participant resigns for a Good Reason within eighteen months following a Change
in Control of the Company, then all of such Participant’s outstanding Options
and Stock Appreciation Rights with a Grant Date of February 9, 2010 or
later shall become immediately exercisable in full for the remainder of their
respective terms and shall remain exercisable in full for a minimum of six
months following the date of such termination or resignation; provided,
however, that in no event shall any Option or Stock Appreciation Right be
exercisable beyond the original expiration date.  Similarly, all restrictions regarding the Restricted
Period or the satisfaction of other terms and conditions prescribed by the
Committee, if any, with respect to grants of Restricted Stock, Restricted Stock
Units or other Stock Awards with a Grant Date of February 9, 2010 or
later, shall automatically lapse, expire and terminate and the Participant
shall be immediately entitled to receive a stock certificate for the number of
shares of Common Stock represented by the Restricted Stock, Restricted Stock
Units or Stock Awards upon the termination without Cause of the Participant’s
employment with the Company or an Affiliate or the Participant’s resignation
for Good Reason within eighteen months following a Change in Control of the
Company.

 

Notwithstanding
any other provision of this Plan to the contrary, all outstanding Options and
Stock Appreciation Rights shall become immediately exercisable in full and
remain exercisable in full for a minimum period of six months following a
Change in Control in which the individuals or entities 

 

 

 

acquiring
control of the Company do not assume or otherwise provide for the continuation
of such Options and Rights for at least such six-month period; provided,
however, that in no event shall any Option or Stock Appreciation Right be
exercisable beyond the original expiration date.  Similarly, all restrictions regarding the
Restricted Period or the satisfaction of other terms and conditions prescribed
by the Committee, if any, with respect to grants of Restricted Stock, Restricted
Stock Units or other Stock Awards shall automatically lapse, expire, and
terminate and the Participant shall be immediately entitled to receive a stock
certificate for the number of shares of Common Stock represented by the
Restricted Stock, Restricted Stock Units or Stock Awards upon the occurrence of
a Change in Control in which the individuals or entities acquiring control of
the Company do not assume or otherwise provide for the continuation of such
Restricted Stock, Restricted Stock Units and other Stock Awards.

 

Notwithstanding
any other provision of this Plan to the contrary, upon the occurrence of a
Change in Control of the Company each Performance Period shall end and the
Company shall immediately distribute in cash or shares of Common Stock, as
appropriate, to the respective Participants the value of all outstanding
Performance Shares and Performance Units granted under this Plan with a Grant
Date prior to February 9, 2010, as determined in accordance with the
following rules:

 

(w)  With respect to those Performance Shares or Performance Units
for which the Performance Period had not been completed prior to the Change in
Control of the Company, the value of such Shares or Units for purposes of this Section 17
shall be equal to the product of a fraction, where the numerator of such fraction
is the number of full calendar months completed during the respective
Performance Period and prior to the Change in Control and the denominator of
such fraction is the total number of months in such Performance Period,
multiplied by the largest of:

 

•                                        the value of
such Performance Shares or Performance Units computed as if the Company’s
performance during the remainder of the Performance Period following the Change
in Control equaled its performance during those full calendar quarters
completed during the respective Performance Period and prior to the date of the
Change in Control;

 

•                                        the value of
such Performance Shares or Performance Units computed as if the Performance
Period for such Shares or Units was the three consecutive calendar year period
ending immediately prior to the year in which the Change in Control occurs; or

 

•                                        any other
amount approved, in its discretion, by the Committee.

 

(x)  With respect to those Performance Shares or Performance Units
for which the Performance Period has been completed at the time of a Change in
Control of the Company, the value of such Shares or Units for purposes of this Section 17
shall be the actual value as adjusted to reflect the actual Company performance
during the Performance Period.

 

Notwithstanding
any other provision of this Plan to the contrary, if a Participant’s employment
with the Company or an Affiliate is terminated without Cause or if the
Participant resigns for a Good Reason within eighteen months following a Change
in Control of the Company, then with respect to such Participant each
Performance Period shall end and the Company shall immediately distribute in
cash or shares of Common Stock, as appropriate, to such Participant the value
of all outstanding 

 

 

 

Performance
Shares and Performance Units granted under this Plan with a Grant Date of February 9,
2010 or later, as determined in accordance with the following rules:

 

(y)  With respect to those Performance Shares or Performance Units
for which the Performance Period had not been completed prior to the
Participant’s termination or resignation, the value of such Shares or Units for
purposes of this Section 17 shall be equal to the product of a fraction,
where the numerator of such fraction is the number of full calendar months
completed during the respective Performance Period and prior to the termination
or resignation and the denominator of such fraction is the total number of
months in such Performance Period, multiplied by the largest of:

 

•                                        the value of
such Performance Shares or Performance Units computed as if the Company’s
performance during the remainder of the Performance Period following the
termination or resignation equaled its performance during those full calendar
quarters completed during the respective Performance Period and prior to the
date of the termination or resignation;

 

•                                        the value of
such Performance Shares or Performance Units computed as if the Performance
Period for such Shares or Units was the three consecutive calendar year period
ending immediately prior to the year in which the termination or resignation
occurs; or

 

•             any other
amount approved, in its discretion, by the Committee.

 

(z)  With respect to those Performance Shares or Performance Units
for which the Performance Period has been completed by the time of the
Participant’s termination or resignation, the value of such Shares or Units for
purposes of this Section 17 shall be the actual value as adjusted to
reflect the actual Company performance during the Performance Period.

 

For
purposes of this Section 17, a Change in Control of the Company shall be
deemed to have occurred only if a “change in the ownership” or a “change in
effective control” and/or a “change in the ownership of a substantial portion
of the assets” of the Company has taken place (as those terms are defined in
Treasury Regulations §1.409A-3(i)(5) or such other regulation or guidance
issued under section 409A of the Code.

 

The
Company shall pay to each Participant the amount of all reasonable legal and
accounting fees and expenses incurred by such Participant in seeking to obtain
or enforce his or her rights under this Section 17, or in connection with
any income tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to the payments made pursuant to this Section 17,
unless a lawsuit commenced by the Participant for such purposes is dismissed by
the court as being frivolous or otherwise improper under applicable court
rules.  The Company shall also pay to
each Participant the amount of all reasonable tax and financial planning fees
and expenses incurred by such Participant in connection with such Participant’s
receipt of payments pursuant to this Section 17.  Payment of these legal and accounting fees
and expenses, as well as these tax and financial planning fees and expenses,
shall be made as soon as administratively feasible, but no later than two and
one-half months following the end of the Participant’s taxable year in which
these fees and expenses have been incurred.

 

 

 

18.           Miscellaneous.

 

(a)           Nothing in this Plan
or the fact that a person has received or become eligible to receive Awards
hereunder shall be deemed to give such person any right to be retained in the
employ of the Company or any Affiliate or to interfere with the right of the
Company or any Affiliate to discipline or terminate the employment of such
person at any time for any reason whatsoever. 
No person shall have any claim or right to receive Awards under this
Plan, except as provided in accordance with the provisions of this Plan and as
approved by the Committee.  Unless
otherwise specifically determined by the Committee, neither the Awards
themselves nor the payments received with respect to such Awards granted under
this Plan will be deemed a part of any Participant’s compensation for purposes
of determining such Participant’s payments or benefits under any benefit plan
or severance program of the Company or any Affiliate or under the severance pay
law of any country.

 

(b)           This Plan will be
unfunded.  The Company does not intend to
create any trust or separate fund in connection with the Plan.  The Company shall not have any obligation to
set aside funds or segregate assets to ensure the payment of any Award.  The Plan shall not establish any fiduciary
relationship between the Company and any Participant or other person.  To the extent any person holds any rights by
virtue of an Award under this Plan, such right (unless otherwise determined by
the Committee) shall be no greater than the right of an unsecured general
creditor of the Company.

 

(c)             Prior
to the payment or settlement of any Award, the Participant must pay or make
arrangements satisfactory to the Company and its Affiliates for the payment of
any and all tax withholding that in the opinion of the Company and its
Affiliates is required by law.  The
Company and its Affiliates shall have the right to deduct from any Award or any
payment due on account of any Award granted under this Plan the federal, state,
local or foreign income or other taxes required by law to be withheld with
respect to such Award or payment, to withhold from the shares of Common Stock
being issued or delivered in connection with an Award an appropriate number of
shares for the payment of taxes required by law, and to take such other action
as may be necessary in the opinion of the Company and its Affiliates to satisfy
all obligations for the withholding and payment of such taxes.

 

(d)             The
provisions of this Plan and the documents evidencing Awards granted under this
Plan shall be construed and interpreted according to the laws of the State of
Delaware.

 

(e)           In case any
provision of this Plan shall be ruled or declared invalid for any reason, said
illegality or invalidity shall not affect the remaining provisions, and the
remainder of the Plan shall be construed and enforced as if such illegal or
invalid provision had never been included herein.

 

(f)            To the extent
permitted by the Committee, each Participant shall have the right at any time
to designate any person, persons or entity as the beneficiary or beneficiaries
to whom payment of the Participant’s outstanding Awards shall be made in the
event of the Participant’s death.  Any
designation filed under the Plan may be revoked or changed by written
instrument so signed and filed prior to the Participant’s death.  If a Participant designates more than one
beneficiary to receive such Participant’s outstanding Awards and any
beneficiary shall predecease the Participant, the Company shall pay the
deceased beneficiary’s share to the surviving beneficiary

 

 

 

or
beneficiaries proportionately, as the portion designated by the Participant for
each bears to the total portion designated for all surviving beneficiaries.

 

(g)           This Plan is
intended to comply and shall be administered in a manner that is intended to
comply with the requirements of Section 409A of the Code (including the
Treasury Department guidance and regulations issued thereunder), and shall be
construed and interpreted in accordance with such intent.  If the Committee determines that an Award,
Award document, payment, transaction or any other action or arrangement
contemplated by the provisions of this Plan would, if undertaken, cause a
Participant to become subject to any additional taxes or other penalties under Section 409A
of the Code, then unless the Committee specifically provides otherwise, such
Award, Award document, payment, transaction or other action or arrangement
shall not be given effect to the extent it causes such result and the related
provisions of the Plan and/or Award documents will be deemed modified or, if
necessary, suspended in order to comply with the requirements of Section 409A
of the Code to the extent determined appropriate by the Committee, in each case
without the consent of or notice to the Participant.

 

(h)           Although the Company
and its Affiliates may endeavor to structure an Award or payment hereunder so
that it (i) qualifies for favorable U.S. or foreign tax treatment, or (ii) avoids
adverse tax treatment, neither the Company nor any Affiliate makes any
representation to that effect and expressly disavows any commitment or
obligation to maintain favorable or avoid unfavorable tax treatment for any
Participant.EXHIBIT
10.1

 

EXECUTION COPY

 

EMPLOYMENT
AGREEMENT

 

This Employment Agreement
(the “Agreement”), dated as of April 12, 2010, is made by and
between SPECIALIZED TECHNOLOGY RESOURCES, INC., a Delaware corporation
(together with any successor thereto, the “Company”), and ALAN N.
FORMAN, of New Rochelle, New York (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)                                 “Annual Bonus” shall have the meaning
set forth in Section 3(b).

 

(c)                                  “Board” shall mean the Board of
Directors of Parent.

 

(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 or the Executive’s breach of Section 21; (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 any earlier date specified
by the

 

 

Company pursuant to Section 4(b);
or (iv) if the Executive’s employment is terminated pursuant to Section 4(a)(vii) the
date on which the Term expires.

 

(g)                                 “Disability” shall mean any
physical or mental illness, injury or infirmity which prevents the Executive
from performing the Executive’s job functions for a period of (i) one
hundred twenty consecutive calendar days or (ii) an aggregate of one
hundred eighty calendar days out of any consecutive twelve month period. 
Any determination of disability shall be made by the Board in consultation with
a qualified physician or physicians selected by the Board and reasonably acceptable
to the Executive.  The failure of the Executive to submit to a reasonable
examination by such physician or physicians shall act as an estoppel to any
objection by the Executive to the determination of disability by the Board.

 

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

 

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

 

(j)                                     The Executive shall have “Good Reason”
to resign his employment upon the occurrence (without the Executive’s prior
written consent) of any of the following:  (A) a material diminution
in the nature or scope of the Executive’s responsibilities, duties or authority
in his capacity as Vice President and General Counsel, without regard to any
other responsibilities, duties or authority the Executive may have had or
performed for the Company at any time; (B) the Company’s material breach
of this Agreement; (C) any change in the Executive’s reporting
relationship so that he no longer reports to the Chief Executive Officer; (D) a
relocation of the Executive’s place of employment to a location more than
thirty miles by road from Enfield, Connecticut; or (E) any decrease in the
Executive’s Annual Base Salary, target bonus percentage as set forth in Section 3(a),
or benefit plans, programs and arrangements as in effect from time to time
(other than a general reduction in base salary, target bonus percentages or
benefit plans, programs and arrangements that affects all members of senior
management equally); provided, however,
that the Executive may not resign his employment for Good Reason unless:  (x) the
Executive provided the Company with at least 30 days prior written notice of
his intent to resign for Good Reason (which notice must be provided within 45
days following (i) the occurrence of the event(s) purported to
constitute Good Reason, or (ii) if the Executive could not reasonably have
known of the occurrence of any of such events, the date on which the Executive
had actual knowledge of the occurrence of any of such events); and (y) the
Company has not remedied the alleged occurrence(s) within the 30-day
period following its receipt of such notice from the Executive.

 

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

 

(l)                                     “Parent” means STR Holdings, Inc.,
a Delaware corporation.

 

(m)                               “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 May 3, 2010 (the “Effective Date”) and ending on the
third anniversary thereof, unless earlier terminated as provided in Section 4. 
The employment term hereunder shall automatically be extended for successive
one-year periods (“Extension Terms” and, collectively with the Initial
Term, the “Term”) unless either party gives written notice of
non-extension to the other no later than 90 days prior to the expiration of the
then applicable Term.

 

(c)                                  Position and Duties.  The Executive shall serve as Vice
President and General Counsel of the Company and the Parent, with
responsibilities, duties and authority customary for such position, subject to 

 

2

 

direction by the Chief
Executive Officer.  The Executive shall report to the Chief Executive
Officer.  The Executive shall devote substantially all his working time
and efforts to the business and affairs of the Company and its
subsidiaries.  The Executive agrees to observe and comply with the Company’s
rules and policies as adopted by the Company from time to time. 
During the Term, it shall not be a violation of this Agreement for the
Executive to (i) serve on industry trade, civic or charitable boards or
committees; (ii) deliver lectures or fulfill speaking engagements; or (iii) manage
personal investments (which shall include (x) investments by the Executive
of his personal assets in any business which does not compete directly or
indirectly with the Company, in such form or manner as will not require any
services on the part of the Executive in the operation of such business and (y) the
purchase by the Executive of a total of up to 1% of the regularly traded
securities of any entity, whether or not it competes with the Company), as long
as, in the reasonable judgment of the Chief Executive Officer of the Company,
such activities do not and will not interfere with the performance of the
Executive’s duties and responsibilities as an employee of the
Company.   The Executive shall
perform his duties hereunder at the Company’s corporate headquarters in
Enfield, Connecticut, provided, however, that, for as long as the Executive
resides in New Rochelle, New York, the Executive may work from his residence
one day each week; and shall travel as necessary or as reasonably requested by
the Chief Executive Officer of the Company.

 

3.                                      Compensation and Related
Matters

 

(a)                                  Annual Base Salary.  During the Term, the Executive
shall receive a base salary at a rate of $235,000.00 per annum, which shall be
paid in accordance with the customary payroll practices of the Company, subject
to increase as determined by the Board in its sole discretion (the “Annual
Base Salary”).  The Executive’s Annual Base Salary will be reviewed
annually by the Board and the Board may, in its sole discretion, increase the
Annual Base Salary considering the Executive’s performance and that of the
Company.

 

(b)                                 Bonus Compensation; Equity Incentives.

 

(i)                                     In addition to the Annual Base Salary, for
each fiscal year, or portion thereof, during the Term, the Executive shall be
eligible to participate in the Company’s management incentive plan (or any
successor incentive plan adopted by the Board) pursuant to which Executive may
be paid a target amount of 35% of his Annual Base Salary except as the parties
may have agreed otherwise in writing (the “Annual Bonus”).  The
Annual Bonus will be based upon performance measured against goals established
by the Chief Executive Officer and the Board.  Any Annual Bonus otherwise
payable for the 2010 fiscal year, shall be pro-rated for the portion of the 2010
fiscal year in which the Executive is employed following the Effective Date.

 

(ii)                                  In the discretion of management,
Executive shall be eligible to receive awards pursuant to the terms of the STR
Holdings, Inc. 2009 Equity Incentive Plan (the “Equity Incentive Plan”).

 

(iii)                               On the Effective Date, Executive shall
receive a signing bonus in an amount equal to $100,000 (the “Signing Bonus”);
provided, however, should Executive’s employment be
terminated within one year after the Effective Date either by the Company for
Cause or by the Executive without Good Reason, Executive shall reimburse the
Company in an amount equal to the Signing Bonus.

 

(c)                                  Benefits.  The Executive shall be entitled to participate
in employee benefit plans, programs and arrangements of the Company now (or, to
the extent determined by the Board, hereafter) in effect which are applicable
to the senior management of the Company.

 

(d)                                 Vacation.  During the Term, the Executive shall be
entitled to three 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.  Travel expenses between the Executive’s 

 

3

 

residence and the Company’s
corporate headquarters in Enfield, Connecticut and Executive’s lodging,
non-business meals and other living expenses incurred while performing his
duties in Enfield, Connecticut shall be deemed personal and not business
expenses.  Membership fees for applicable
bar associations, required continuing legal education and other professional
fees or costs approved by the Chief Executive Officer shall be deemed business
expenses.

 

(f)                                    Equity Grant.        
On the Effective
Date, and pursuant to the terms and subject to the conditions set forth in the
award agreement between Parent and the Executive and the Equity Incentive Plan,
Executive shall be granted options to purchase 125,000 shares of Parent common
stock at an exercise price equal to the fair market value of a share of Parent
common stock as of the date of grant. 
These options shall vest in 48 equal monthly installments as of the last
day of each of the successive 48 months after May 2010, beginning with the
last day of June 2010, subject to the Equity Incentive Plan and the award
agreement, and shall be Incentive Stock Options as defined in, and to the
extent permitted by, the Equity Incentive Plan and Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”), and, to the extent not
so permitted, shall be Nonqualified Stock Options, as defined in the Equity
Incentive Plan.

 

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

 

(a)                                  Circumstances

 

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

 

(ii)                                  Disability.  If the Executive incurs a Disability, the
Company may give the Executive written notice of its intention to terminate the
Executive’s employment.  In that event, the Executive’s employment with
the Company shall terminate effective on the later of the 30th day after
receipt of such notice by the Executive or the date specified in such notice, provided that within the 30 days after
such receipt, the Executive shall not have returned to full-time performance of
his duties.

 

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

 

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

 

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

 

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

 

(vii)                           Non-renewal.  Either party may notify the other
of his or its intent not to renew this Agreement at least 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 30 days following the receipt 

 

4

 

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;
provided, however, that the Company may not change a Date of Termination
specified in a Notice of Termination delivered by the Executive pursuant to Section 4(a)(v) to
a date which is less than 90 days following the receipt of such notice). 
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; provided,
however, that a Notice of Termination delivered by the Company pursuant to Section 4(a)(iv) may
not provide for a Date of Termination which is less than 90 days following the
receipt of such notice.  The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Cause or Good Reason shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the Executive’s or the
Company’s rights hereunder.

 

5.                                      Company Obligations Upon
Termination of Employment

 

(a)                                  In General.  Upon a termination of the Executive’s
employment for any reason, the Executive (or the Executive’s estate) shall be
entitled to receive in a lump sum within 20 business days following the  Date of 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 receive in a lump sum any awarded but unpaid Annual Bonus for the fiscal
year of the Company prior to the fiscal year during which the Date of
Termination occurs (except in the event of a termination by the Company for
Cause) within 20 business days following the Company’s receipt of audited
financial statements for such prior fiscal year.  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 Equity Incentive Plan or award
agreements between the Executive and the Company.

 

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

 

(i)                                     Continue to pay to the Executive, in
accordance with the Company’s regular payroll practice following the Date of
Termination, the Executive’s Annual Base Salary, and continue the Executive’s
participation at active employee contribution rates in the Company’s health,
life insurance and retirement plans through nine 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.  During such nine months,
Executive shall not be required to seek or accept any other employment nor
shall any other employment income of the Executive earned during such nine
months constitute grounds for any reduction of the continued salary payment
obligation of the Company under this Section 5(b)(i).;

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

If to
the Company, to:

 

Specialized Technology
Resources, Inc.

10 Water Street

Enfield, Connecticut  06082-4899

Attn:  Barry A. Morris

Facsimile:  (860) 749-9158

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

20.                               Disputes.  All disputes between the parties
arising from or in connection with this Agreement or the Executive’s employment
hereunder, including those relating to the existence and validity of this
agreement to arbitrate, shall be submitted to full and binding arbitration in
Hartford, Connecticut, before a panel of three arbitrators and administered by
the American Arbitration Association under its National Rules for the
Resolution of Employment Disputes, and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof.  Each
party shall be responsible for its own costs and expenses of such
arbitration.  Notwithstanding the foregoing, nothing in this Section 20
shall prevent or otherwise hinder the ability of the Company to seek injunctive
relief, including temporary restraining orders, preliminary injunctions and
permanent injunctions in connection with any controversy or claim arising out
of or relating to the Agreement Not to Compete.

 

21.                               Representation by the
Executive. 
The Executive represents and warrants that his entering into this Agreement
does not, and that his performance under this Agreement will not, violate the
provisions of any agreement or instrument to which the Executive is a party or
any decree, judgment or order to which the Executive is subject, and that this
Agreement constitutes a valid and binding obligation of the Executive in
accordance with its terms.  Breach of the representation contained in this
Section 21 will render all of the Company’s obligations under this
Agreement void ab initio.

 

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

 

 

	
   

  	
   

  	
   

  	
  /s/ Alan N. Forman

  
	
   

  	
   

  	
   

  	
  Alan N. Forman

  
	
   

  	
   

  	
   

  	
  201 Barnard Road

  
	
   

  	
   

  	
   

  	
  New Rochelle, New York
  10801

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SPECIALIZED TECHNOLOGY
  RESOURCES, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Barry A. Morris

  
	
   

  	
   

  	
   

  	
   

  	
  Barry A. Morris

  
	
   

  	
   

  	
   

  	
   

  	
  Executive Vice
  President and Chief Financial Officer

  

 

SIGNATURE PAGE FOR
EMPLOYMENT AGREEMENT (FORMAN)

 

8

 

Appendix
A

 

Agreement
Not To Compete

 

EXECUTION COPY

 

AGREEMENT
NOT TO COMPETE

 

This Agreement Not To
Compete (this “Agreement”) dated as of April 12, 2010 (the “Effective
Date”), is made by and between SPECIALIZED TECHNOLOGY RESOURCES, INC., a
Delaware corporation (together with any successor thereto, the “Company”),
and ALAN N. FORMAN, of New Rochelle, New York (the “Employee”).

 

Recitals

 

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

 

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 nine (9) months
following the Employee’s Date of Termination for any reason (the “Initial
Noncompetition Period”), Employee shall not, without the prior written
consent of the Company, and whether as employee, principal, agent, shareholder,
partner, consultant, advisor, limited liability company manager or member,
director, or otherwise, directly or indirectly, compete with the Company or any
subsidiary of the Company in the business of manufacturing solar panel
encapsulent, or the business of providing consumer product quality assurance
services to third parties (collectively, the “Business”). The making or
guarantying of a loan, lease or any other financial arrangement to, with or for
any person or entity that engages in any of the activities described in the
preceding sentence shall be deemed a breach of the covenant set forth in the
preceding sentence. However, Employee may purchase or own up to 1% of the
outstanding stock of any publicly traded corporation that competes with the
Company or any Company Affiliate, but may not be employed by or otherwise
participate in the activities of such corporation. For purposes of this
agreement, “Company Affiliate” means any entity directly or indirectly
controlled by the Company, and also includes STR Holdings, Inc. and any of
its direct or indirect subsidiaries.

 

The Company shall have
the option to extend the Initial Noncompetition Period for an additional twelve
(12) months (the “Extended Noncompetition Period” and, together with the
Initial Noncompetition Period, the “Noncompetition Period”); provided,
that the Company gives the Executive written notice of such extension at least
six (6) months prior to the expiration of the Initial Noncompetition
Period, and agrees to pay to the Employee, in accordance with the Company’s
regular payroll practice, the Executive’s Annual Base Salary, and to continue
the 

 

9

 

Executive’s participation
in the Company’s health and life insurance and retirement plans through the
Extended Noncompetition Period.

 

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

 

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

 

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

 

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

 

(c)                                  If the Employee or any entity controlled
by Employee (an “Employee Affiliate”) is required by law to disclose any
Confidential Information, Employee shall promptly notify the Company in writing
so that the Company may seek a protective order or other motion to prevent or
limit the production or disclosure of such information. If such motion has been
denied, then the person required to disclose such information may disclose only
such portion of such information that, based on advice of Employee’s outside
legal counsel, is required by law to be disclosed (provided that the person
required to disclose such information shall use all reasonable efforts to
preserve the confidentiality of the remainder of such information). Employee
shall continue to be bound by his obligations pursuant to this Agreement for
any information that is not required to be disclosed, or that has been afforded
protective treatment, pursuant to such motion.

 

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

 

(e)                                  During the Noncompetition Period,
Employee agrees not to disparage in any material respect the Company or any
Company Affiliate, any of their respective products or practices, or any of
their respective directors, officers, managers, agents, representatives,
stockholders, members or affiliates, either orally or 

 

10

 

in writing. The Company
and any Company Affiliates (including without limitation any officers or
directors of the Company or any Company Affiliate) agree not to disparage in
any material respect the Employee either orally or in writing. Notwithstanding
the forgoing, nothing contained herein shall limit the ability of either party,
as applicable, to provide truthful testimony as required by law or any judicial
or administrative process.

 

(f)                                     All rights to discoveries, inventions,
improvements and innovations (including all data and records pertaining
thereto) related to the Business of the Company or any Company Affiliate,
whether or not patentable, copyrightable, registrable as a trademark, or
reduced to writing, that Employee may discover, invent or originate during the
term of Employee’s consulting arrangement or employment with the Company or any
Company Affiliate, and for a period of 12 months thereafter, either alone or
with others and whether or not during working hours or by the use of the
facilities of either the Company or any of its subsidiaries (“Inventions”),
shall be the exclusive property of the Company. Employee shall promptly disclose
all Inventions to the Company, shall execute at the request of the Company any
assignments or other documents the Company may deem necessary to protect or
perfect its rights therein, and shall assist the Company, at the Company’s
expense, in obtaining, defending and enforcing the Company’s rights therein.
Employee hereby appoints the Company as his attorney-in-fact to execute on his
behalf any assignments or other documents deemed necessary by the Company to
protect or perfect its rights to any Inventions.

 

4.                                       Remedies. The necessity of protection against the competition
of Employee and the nature and scope of such protection has been carefully
considered and agreed upon by the parties hereto. Employee and the Company
acknowledge that the duration, scope and geographic area applicable to the
restrictions set forth in this Agreement are fair, reasonable and necessary.
Employee acknowledges that the consideration provided for herein is sufficient
and adequate to compensate Employee for agreeing to the restrictions contained
in this Agreement and that such restrictions will not cause him undue hardship.
If, however, any court determines that the foregoing restrictions are
unreasonable and for that reason unenforceable, such restrictions shall be
modified, rewritten or interpreted to include as much of their nature and scope
as will render them enforceable. Employee and the Company agree that a monetary
remedy for a breach of this Agreement will be inadequate and will be
impracticable and extremely difficult to prove, and further agree that such a
breach would cause the Company irreparable harm, and that the Company and the
Company Affiliates shall be entitled to temporary and permanent injunctive
relief without the necessity of proving actual damages. Employee agrees that
the Company and the Company Affiliates shall be entitled to such injunctive
relief, including temporary restraining orders, preliminary injunctions and
permanent injunctions, without the necessity of posting bond or other
undertaking in connection therewith.

 

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

 

If to the Company, to:

 

Specialized Technology Resources, Inc.

10 Water Street

Enfield, Connecticut
06082-4899

Attn: Barry A. Morris

Facsimile: (860) 749-9158

 

If to the 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.

 

11

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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.

 

13

 

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

 

 

	
   

  	
  /s/ Alan N. Forman

  
	
   

  	
  Alan N. Forman

  
	
   

  	
  201 Barnard Road

  
	
   

  	
  New Rochelle, New York
  10801

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPECIALIZED TECHNOLOGY
  RESOURCES, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry A. Morris

  
	
   

  	
   

  	
  Barry A. Morris

  
	
   

  	
   

  	
  Executive Vice
  President and Chief Financial Officer

  

 

SIGNATURE PAGE FOR
NON-COMPETE AGREEMENT (FORMAN)

 

14

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