STR Holdings, Inc. 2009 Equity Incentive Plan

2.7           “ Code ” means the U.S. Internal Revenue Code of 1986, as amended from time to time.

2.8           “ Committee ” means the Board, or any committee designated by the Board to administer this Plan.

2.9           “ Company ” means STR Holdings, Inc., a Delaware corporation, and any successor thereto.

2.10         “ Consultant ” means any person (other than an Employee or a Director) who is engaged by the Company, a Subsidiary or an Affiliate to render consulting or advisory services to the Company or such Subsidiary or Affiliate.

2.11         “ Director ” means a member of the Board who is not an Employee.

2.12         “ Dividend Equivalent ” means any right to a dividend equivalent granted from time to time under Article 6 of the Plan.

2.13         “ Effective Date ” means the date set forth in Section 14.14.

2.14         “ Employee ” means an officer or other employee of the Company, its Subsidiaries or an Affiliate, including a member of the Board who is such an employee.

2.15         “ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time.

2.16         “ Fair Market Value ” means, as of any date of determination (i)  if the Shares are listed on any established stock exchange or a national market system, its fair market value shall be the closing sales price for a share of such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; (ii)  if the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, its fair market value shall be the mean between the high bid and low asked prices for a Share on the last market trading day prior to the day of determination; or (iii) in the absence of an established market for the Shares, the fair market value thereof shall be determined in good faith by the Board through a reasonable application of a reasonable valuation method.

2.17         “ Incentive Stock Option ” means an Option intended to meet the requirements of an incentive stock option as defined in Section 422 of the Code and designated as an Incentive Stock Option.

2.18         “ Nonqualified Stock Option ” means an Option that is not an Incentive Stock Option.

2.19         “ Other Stock-Based Award ” means any right granted under Article 10 of the Plan.

2.20         “ Option ” means any stock option granted form time to time under Article 6 of the Plan.

2.21         “ Option Price ” means the purchase price per Share subject to an Option, as determined pursuant to Section 6.2 of the Plan.

2.22         “ Participant ” means any eligible person as set forth in Section 4.1 to whom an Award is granted.

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2.23         “ Plan ” means the STR Holdings, Inc. Equity Incentive Plan.

2.24         “ Restricted Stock ” means any Award granted under Article 8.

2.25         “ Restriction Period ” means the period during which Restricted Stock awarded under Article 8 of the Plan is subject to forfeiture.

2.26         “ Service ” means service as an Employee, Director or Consultant.

2.27         “ Share ” means a share of common stock of the Company, par value $[      ] per share, or such other class or kind of shares or other securities resulting from the application of Section 12.1 hereof.

2.28         “ Stock Appreciation Right ” means any right granted under Article 7.

2.29         “ Subsidiary ” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company (or any parent of the Company) if each of the corporations, other than the last corporation in each unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

2.30         “ Ten Percent Stockholder ” means a person who on any given date owns, either directly or indirectly (taking into account the attribution rules contained in Section 424(d) of the Code), stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or a Subsidiary or Affiliate.

Article 3.                Administration

3.1           Authority of the Committee .  The Plan shall be administered by the Committee, which shall have full power to interpret and administer the Plan and full authority to select the Directors, Employees and Consultants to whom Awards will be granted and determine the type and amount of Awards to be granted to each such Director, Employee or Consultant, the terms and conditions of Awards granted under the Plan and the terms of Award Agreements to be entered into with Participants.  Without limiting the generality of the foregoing, the Committee may, in its sole discretion, clarify, construe or resolve any ambiguity in, or interpret any provision of, any provision of the Plan or any Award Agreement, accelerate or waive vesting of Awards and exercisability of Awards, extend the term or period of exercisability of any Awards, modify the purchase price under any Award, or waive any terms or conditions applicable to any Award; provided that no action taken by the Committee shall adversely affect in any material respect the rights granted to any Participant under any outstanding Awards without the Participant’s written consent (other than pursuant to Article 11 or Article 12 hereof).  Awards may, in the discretion of the Committee, be made under the Plan in assumption of, or in substitution for, outstanding awards previously granted by the Company or its affiliates or a company acquired by the Company or with which the Company combines.  The Committee shall have full and exclusive discretionary power to adopt rules, forms, instruments, and guidelines for administering the Plan as the Committee deems necessary or proper.  All actions taken and all interpretations and determinations made by the Committee or by the Board (or any other committee or sub-committee thereof), as applicable, shall be final and binding upon the Participants, the Company, and all other interested individuals.

3.2           Delegation.   The Committee may delegate to one or more of its members, one or more officers of the Company or any of its Subsidiaries, and one or more agents or advisors such administrative duties or powers as it may deem advisable.

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Article 4.                Eligibility and Participation

4.1           Eligibility .  Participants will consist of such Employees, Consultants, and Directors as the Committee in its sole discretion determines and whom the Committee may designate from time to time to receive awards under the Plan.  Designation of a Participant in any year shall not require the Committee to designate such person to receive an award in any other year or, once designated, to receive the same type or amount of award as granted to the Participant in any other year.

4.2           Types of Award.   Awards under the Plan may be granted in any one or a combination of:  (a) Options, (b) Stock Appreciation Rights, (c) Restricted Stock, (d) Dividend Equivalents and (e) Other Stock-Based Awards.  Awards granted under the Plan shall be evidenced by Award Agreements (which need not be identical) that provide additional terms and conditions associated with such Awards, as determined by the Committee in its sole discretion; provided , however , that in the event of any conflict between the provisions of the Plan and any such Award Agreement, the provisions of the Plan shall prevail.

Article 5.                Shares Subject to the Plan and Maximum Awards

5.1           Number of Shares Available for Awards.

(a)            General.  Subject to adjustment as provided in Section 5.1(b) and Article 12, the maximum number of Shares available for issuance to Participants pursuant to Awards under the Plan shall be [          ] Shares.  The Shares available for issuance under the Plan may consist, in whole or in part, of authorized and unissued Shares or treasury Shares. The number of Shares available for granting Incentive Stock Options under the Plan shall not exceed [          ] Shares, subject to adjustments provided in Article 12 hereof and subject to the provisions of Sections 422 or 424 of the Code or any successor provisions.  Any Shares delivered to the Company as part or full payment for the purchase price of an Award granted under this Plan or, to the extent the Committee determines that the availability of Incentive Stock Options under the Plan will not be compromised, to satisfy the Company’s withholding obligation with respect to an Award granted under this Plan, shall again be available for Awards under the Plan.  The maximum number of Shares that can be granted to any one Participant, in any calendar year, shall not exceed [          ] Shares.

(b)            Additional Shares.   In the event that any outstanding Award expires, is forfeited, cancelled or otherwise terminated without consideration (i.e., Shares or cash) therefor, the Shares subject to such Award, to the extent of any such forfeiture, cancellation, expiration, termination or settlement for cash, shall again be available for Awards under the Plan. If the Committee authorizes the assumption under this Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, of awards granted under another plan, such assumption shall not reduce the maximum number of Shares available for issuance under this Plan.

Article 6.                Stock Options

6.1           Grant of Options .  The Committee is hereby authorized to grant Options to Participants.  Each Option shall permit a Participant to purchase from the Company a stated number of Shares at an Option Price established by the Committee, subject to the terms and conditions described in this Article 6

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and to such additional terms and conditions, as established by the Committee, in its sole discretion, that are consistent with the provisions of the Plan.  Options shall be designated as either Incentive Stock Options or Nonqualified Stock Options, provided that Options granted to Directors and Consultants shall be Nonqualified Stock Options.  An Option granted as an Incentive Stock Option shall, to the extent it fails to qualify as an Incentive Stock Option, be treated as a Nonqualified Stock Option.  Neither the Committee nor the Company or any of its Affiliates shall be liable to any Participant or to any other person if it is determined that an Option intended to be an Incentive Stock Option does not qualify as an Incentive Stock Option.  Options shall be evidenced by Award Agreements which shall state the number of Shares covered by such Option.  Such agreements shall conform to the requirements of the Plan, and may contain such other provisions, as the Committee shall deem advisable.

6.2           Terms of Option Grant.  The Option Price shall be determined by the Committee at the time of grant, but shall not be less than 100% of the Fair Market Value of a Share on the date of grant.  In the case of any Incentive Stock Option granted to a Ten Percent Stockholder, the Option Price shall not be less than 110% of the Fair Market Value of a Share on the date of grant.

6.3           Option Term.  The term of each Option shall be determined by the Committee at the time of grant and shall be stated in the Award Agreement, but in no event shall such term be greater than ten years (or, in the case on an Incentive Stock Option granted to a Ten Percent Stockholder, five years).

6.4           Time of Exercise .  Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant.

6.5           Method of Exercise .  Except as otherwise provided in the Plan or in an Award Agreement, an Option may be exercised for all, or from time to time any part, of the Shares for which it is then exercisable.  For purposes of this Article 6, the exercise date of an Option shall be the later of the date a notice of exercise is received by the Company and, if applicable, the date payment is received by the Company pursuant to clauses (i), (ii), (iii), (iv), or (v) in the following sentence. The aggregate Option Price for the Shares as to which an Option is exercised shall be paid to the Company in full at the time of exercise at the election of the Participant (i) in cash or its equivalent (e.g., by cashier’s check), (ii) to the extent permitted by the Committee, in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee, (iii) partly in cash and, to the extent permitted by the Committee, partly in such Shares, (iv) by reducing the number of Shares otherwise deliverable upon the exercise of the Option by the number of Shares having a Fair Market Value equal to the Option Price, or (v) if there is a public market for the Shares at such time, subject to such requirements as may be imposed by the Committee, through the delivery of irrevocable instructions to a broker to sell Shares obtained upon the exercise of the Option and to deliver promptly to the Company an amount out of the proceeds of such sale equal to the aggregate Option Price for the Shares being purchased.  The Committee may prescribe any other method of payment that it determines to be consistent with applicable law and the purpose of the Plan.

6.6           Limitations on Incentive Stock Options .  Incentive Stock Options may be granted only to employees of the Company or of a “parent corporation” or “subsidiary corporation” (as such terms are defined in Section 424 of the Code) at the date of grant.  The aggregate Fair Market Value (generally determined as of the time the Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under all plans of the Company and of any parent corporation or subsidiary corporation) shall not exceed one hundred thousand dollars ($100,000).  For purposes of the preceding sentence, Incentive Stock Options will be ta