EXHIBIT 10.1

TVIA, INC

INCENTIVE STOCK OPTION GRANT NOTICE

(GRANT OUTSIDE OF A PLAN)

Tvia, Inc., a Delaware corporation (the “Company”), hereby grants an option (the
“Option”) to purchase shares of its common stock, par value $.001 per share
(“Common Stock”), to the individual named below (the “Optionee”). The terms and
conditions of the Option are set forth in this Grant Notice, and in the
attachments, the terms of which are incorporated herein by this reference. The
Option is granted outside of any plan of the Company and is made as an
inducement to the Optionee to accept and continue employment with the Company.

 

Date of Grant:   

November 2, 2006

Name of Optionee:   

Keith Yee

Number of Shares Covered by Option:   

162,000

Exercise Price (Per Share):   

$1.18

Vesting Start Date:   

10/18/2006

Expiration Date:   

One Day Prior to Tenth Anniversary of Date of Grant

Permissible Forms of Payment:    Payment of the exercise price may be made in
cash, check or any other method provided in the Stock Option Agreement.

Vesting Schedule: The total number of shares subject to this Option shall vest
according to the following schedule, subject to the Optionee’s Continuous
Service and satisfaction of all applicable conditions to vesting and
exercisability set forth in the Stock Option Agreement.

By signing below, you acknowledge and agree to all of the terms and conditions
set forth herein and in the attached Stock Option Agreement and Notice of
Exercise.

 

Optionee:  

/s/ Keith Yee

  (Signature)

    Company:  

/s/ Eli Porat

  (Signature)   Title:  

Chief Executive Officer

Attachments

Attachment I:     

StockOption Agreement

      Attachment II:     

Noticeof Exercise

     

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ATTACHMENT I

STOCK OPTION AGREEMENT

TVIA, INC.

STOCK OPTION AGREEMENT

Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock
Option Agreement, TVIA, INC., a Delaware corporation (the “Company”), has
granted you an option (the “Option”) to purchase the number of shares of the
Company’s common stock, par value $0.001 per share (“Common Stock”), indicated
in the Grant Notice at the exercise price indicated in such Grant Notice,
subject to the terms set forth herein.

This option is granted in order to induce you to accept employment with the
Company. This option is not intended to qualify as an “incentive stock option”
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”). This option is granted outside of, and is not subject to,
the Company’s 2003 Stock Incentive Plan or any other stock plan of the Company.

The terms of the Option are as follows:

1. Vesting. Subject to the limitations contained herein, the Option will vest as
provided in your Grant Notice, provided that, except to the extent expressly set
forth herein, vesting will cease upon the termination of your Continuous Service
(as defined in Section 6 below).

2. Number Of Shares And Exercise Price. The number of shares of Common Stock
subject to the Option and your exercise price per share are set forth in your
Grant Notice and shall be adjusted for Capitalization Adjustments, if any, as
provided in Section 9 below.

3. Method Of Payment. Payment of the applicable exercise price is due in full
upon exercise of all or any part of the Option. You may elect to make payment of
the exercise price in cash or by check or pursuant to one of the following
methods:

(a) In the Company’s sole discretion at the time you exercise the Option and
provided that at the time of exercise the Common Stock is publicly traded and
quoted regularly in The Wall Street Journal, payment may be made pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to pay
the aggregate exercise price to the Company from the sales proceeds of the
shares of Common Stock underlying the Option (a “cashless exercise”).

(b) Provided that at the time of exercise the Common Stock is publicly traded
and quoted regularly in The Wall Street Journal, payment may be made by delivery
of already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company’s reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
“Delivery” for these purposes, in the sole discretion of the Company at the time
you exercise the Option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company’s stock.

 

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“Fair Market Value” means, as of any date, the value of the Common Stock
determined as follows: (i) if the Common Stock is listed on any established
stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable, or (ii) in the absence of such markets for
the Common Stock the Fair Market Value shall be determined in good faith by the
Board of Directors of the Company.

4. Whole Shares. You may exercise your option only for whole shares of Common
Stock.

5. Securities Law Compliance. Notwithstanding anything to the contrary contained
herein, you may not exercise the Option unless the shares of Common Stock
issuable upon such exercise are then registered under the Securities Act of
1933, as amended (the “Securities Act”), or, if such shares of Common Stock are
not then so registered, the Company has determined that such exercise and
issuance would be exempt from the registration requirements of the Securities
Act. The exercise of the Option must also comply with other applicable laws and
regulations governing the Option, and you may not exercise the Option if the
Company determines that such exercise would not be in material compliance with
such laws and regulations.

6. Term. The term of the Option commences on the Date of Grant (as specified in
your Grant Notice) and expires upon the EARLIEST of the following:

(a) three (3) months after the termination of your Continuous Service for any
reason other than your Disability or death; PROVIDED that if during any part of
such three- (3-) month period the Option is not exercisable solely because of
the condition set forth in the preceding paragraph relating to “Securities Law
Compliance,” the Option shall not expire until the earlier of the Expiration
Date indicated in your Grant Notice or until it shall have been exercisable for
an aggregate period of three (3) months after the termination of your Continuous
Service;

(b) twelve (12) months after the termination of your Continuous Service as an
Employee, Director or Consultant due to your Disability;

(c) eighteen (18) months after your death if you die either during your
Continuous Service or within three (3) months after your Continuous Service
terminates;

(d) the Expiration Date indicated in your Grant Notice.

Notwithstanding the foregoing, the terms of this Stock Option Agreement shall be
subject to acceleration of vesting pursuant to Sections 10 and 12, as
applicable.

For purposes of your option, “Continuous Service” means that your service with
the Company or an affiliate of the Company, whether as an employee, director or
consultant, is not interrupted or terminated. Your Continuous Service shall not
be deemed to have terminated merely because of a change in the capacity in which
you render service to the Company or an affiliate as an employee, consultant or
director or a change in the entity for which you render such service, provided
that there is no interruption or termination of your Continuous Service. For
example, a change in status from an employee of the Company directly to a
consultant of an affiliate or a director will not constitute an interruption of
Continuous Service. The Board of Directors of the Company (the “Board”) or the
Compensation Committee of the Board, in each body’s sole discretion, may
determine whether Continuous Service shall

 

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be considered interrupted in the case of any leave of absence, including sick
leave, military leave or any other personal leave.

For purposes of your option, “Disability” means the permanent and total
disability of a person within the meaning of Section 22(e)(3) of the Code.

7. Exercise.

(a) You may exercise all or any portion of the vested portion of the Option
during its term by delivering a Notice of Exercise (in the attached form, or
such other form as may be designated by the Company) together with the exercise
price to the Secretary of the Company, or to such other person as the Company
may designate, during regular business hours, together with such additional
documents as the Company may then require.

(b) By exercising the Option you agree that, as a condition to any exercise of
all or part of the Option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
the Option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise or (3) the
disposition of shares of Common Stock acquired upon such exercise.

8. Transferability. The Option is not transferable, except by will or by the
laws of descent and distribution, and is exercisable during your life only by
you. Notwithstanding the foregoing, by delivering written notice to the Company,
in a form satisfactory to the Company, you may designate a third party who, in
the event of your death, shall thereafter be entitled to exercise the Option,
subject to the terms and conditions otherwise applicable to such exercise, the
issuance of Common Stock pursuant to such exercise and the subsequent transfer
of such Common Stock.

9. Capitalization Adjustments. If any change is made in the Common Stock subject
to the Option without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), this Stock Option Agreement will be appropriately adjusted in the
class(es) and number of shares and price per share of stock subject to the
Option. Such adjustments shall be made by the Board, determination of which
shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a transaction “without receipt
of consideration” by the Company.)

10. Corporate Sale, Merger, Consolidation Or Reverse Merger. In the event of
(i) a sale of all of the securities of the Company or a consolidation or merger
of the Company with or into any other corporation or other entity or person, or
any other corporate reorganization, in which the stockholders of the Company
immediately prior to such sale, consolidation, merger or reorganization, own
less than 50% of the outstanding voting power of the surviving entity (or its
parent) following the consolidation, merger or reorganization or (ii) any
transaction (or series of related transactions involving a person or entity, or
a group of affiliated persons or entities) in which in excess of fifty percent
(50%) of the Company’s outstanding voting power is transferred, then any
surviving corporation or acquiring corporation shall continue or assume the
Option under this Agreement or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the stockholders of the
Company in the transaction described in this Section 10) for the Option under
this Agreement. In the event any surviving corporation or acquiring corporation
in such transaction refuses to assume the Option under this Agreement or to
substitute similar stock awards for the Option under this Agreement, then
(i) the Company shall give

 

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written notice to you within a reasonable period of time of not less than ten
(10) days prior to the effectiveness of the transaction that the surviving
corporation or acquiring corporation has refused to assume the Option or to
substitute similar stock awards for the Option under this Agreement, and
(ii) the vesting and exercisability of the Option under this Agreement (and, if
applicable, the time during which the Option under this Agreement may be
exercised) shall be accelerated in full immediately prior to such transaction
provided that the transaction occurs (so that you will have the opportunity to
exercise the Option under this Agreement prior to the transaction), and the
Option under this Agreement shall terminate if not exercised (if applicable)
upon the effectiveness of such transaction.

11. Option Not A Service Contract. The Option is not an employment or service
contract, and nothing herein shall be deemed to create in any way whatsoever any
obligation on your part to continue in the employ of the Company or an
affiliate, or of the Company or an affiliate to continue your employment. In
addition, nothing herein shall obligate the Company or an affiliate, their
respective stockholders, Boards of Directors, officers or employees to continue
any relationship that you might have as a director or consultant for the Company
or an affiliate.

12. Acceleration Of Exercisability And Vesting. The Board shall have the power
to accelerate the time at which the Option may first be exercised or the time
during which the Option or any part thereof will vest, notwithstanding the
provisions in the Grant Notice or this Stock Option Agreement stating the time
at which it may first be exercised or the time during which it will vest.

13. Stockholder Rights. You shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares of Common Stock
subject to the Option unless and until you have satisfied all requirements for
exercise of the Option pursuant to its terms.

14. Withholding Obligations.

(a) At the time you exercise the Option, in whole or in part, or at any time
thereafter as requested by the Company, you hereby authorize withholding from
payroll and any other amounts payable to you, and otherwise agree to make
adequate provision for (including by means of a “cashless exercise” pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board to the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company or
an affiliate of the Company, if any, which arise in connection with the exercise
of the Option.

(b) Upon your request and subject to approval by the Company, in its sole
discretion, and compliance with any applicable conditions or restrictions of
law, the Company may withhold from fully vested shares of Common Stock otherwise
issuable to you upon the exercise the Option a number of whole shares of Common
Stock having a fair market value, determined by the Company as of the date of
exercise, not in excess of the minimum amount of tax required to be withheld by
law. If the date of determination of any tax withholding obligation is deferred
to a date later than the date of exercise of the Option, share withholding
pursuant to the preceding sentence shall not be permitted unless you make a
proper and timely election under Section 83(b) of the Code, covering the
aggregate number of shares of Common Stock acquired upon such exercise with
respect to which such determination is otherwise deferred, to accelerate the
determination of such tax withholding obligation to the date of exercise of the
Option.

Notwithstanding the filing of such election, shares of Common Stock shall be
withheld solely from fully vested shares of Common Stock determined as of the
date of exercise of the Option that are otherwise issuable to you upon such
exercise. Any adverse consequences to you arising in connection with such share
withholding procedure shall be your sole responsibility.

 

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Notwithstanding the foregoing, the Company shall not be authorized to withhold
shares of Common Stock in excess of the minimum statutory withholding
requirements for federal and state tax purposes, including payroll taxes.

(c) You may not exercise the Option unless the tax withholding obligations of
the Company and/or any affiliate are satisfied. Accordingly, you may not be able
to exercise the Option when desired even though your option is vested, and the
Company shall have no obligation to issue such shares of Common Stock.

15. Notices. Any notices provided for or required in connection with the Option
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by mail by the Company to you, five calendar
(5) days after deposit in the United States mail, postage prepaid, addressed to
you at the last address you provided to the Company.

16. Choice Of Law. This option shall be governed by, and construed in accordance
with the laws of the State of Delaware, as such laws are applied to contracts
entered into and performed in such State.

17. Governing Authority. This Option is subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted by the Company. This authority shall be exercised by the Board, or by a
committee of one or more members of the Board in the event that the Board
delegates its authority to a committee. The Board, in the exercise of this
authority, may correct any defect, omission or inconsistency in this Option in a
manner and to the extent the Board shall deem necessary or desirable to make
this Option fully effective. References to the Board also include any committee
appointed by the Board to administer and interpret this option. Any
interpretations, amendments, rules and regulations promulgated by the Board
shall be final and binding upon the Company and its successors in interest as
well as you and your heirs, assigns, and other successors in interest.

18. Amendment Of Option. The Board at any time, and from time to time, may amend
the terms of this Option; provided, however, that the rights under this Option
shall not be impaired by any such amendment unless (i) the Company requests your
consent and (ii) you consent in writing.

 

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ATTACHMENT II

FORM OF NOTICE OF EXERCISE

NOTICE OF EXERCISE

 

TVIA, INC. (the “Company”)

  

4001 Burton Drive

  

Santa Clara, CA 95054

   Date of Exercise: _______________

Ladies and Gentlemen:

This constitutes notice under my nonstatutory stock option that I elect to
purchase the number of whole shares of common stock of the Company for the price
set forth below.

 

Stock option dated:

   __________________________

Number of shares as to which option is exercised:

  

__________________________(the “Shares”)

Certificates to be issued in name of:

  

__________________________

Total exercise price:

  

$_________________________

Cash payment delivered herewith:

  

$_________________________

I hereby make the following certifications and representations with respect to
the number of shares of Common Stock of the Company listed above (the “Shares”),
which are being acquired by me for my own account upon exercise of the Option as
set forth above:

1. I acknowledge that the Shares have not been registered under the Securities
Act of 1933, as amended (the “Securities Act”), and are deemed to constitute
“restricted securities” under Rule 701 and “control securities” under Rule 144
promulgated under the Securities Act. I warrant and represent to the Company
that I have no present intention of distributing or selling said Shares, except
as permitted under the Securities Act and any applicable state securities laws.

2. I further acknowledge that I will not be able to resell the Shares for at
least ninety days (90) after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934) under Rule 701 and that more restrictive
conditions apply to affiliates of the Company under Rule 144.

3. I further acknowledge that all certificates representing any of the Shares
subject to the provisions of the Option shall have endorsed thereon appropriate
legends reflecting the foregoing limitations, as well as any legends reflecting
restrictions pursuant to the Company’s Certificate of Incorporation, Bylaws
and/or applicable securities laws.

 

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I further agree that, if required by the Company (or a representative of the
underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, I will not
sell, dispose of, transfer, make any short sale of, grant any option for the
purchase of, or enter into any hedging or similar transaction with the same
economic effect as a sale, any Shares or other securities of the Company held by
me, for a period of time specified by the underwriter(s) (not to exceed one
hundred eighty (180) days) following the effective date of the registration
statement of the Company filed under the Securities Act.

I further agree to execute and deliver such other agreements as may be
reasonably requested by the Company and/or the underwriter(s) that are
consistent with the foregoing or that are necessary to give further effect
thereto. In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to my Shares until the end of such
period. In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to my Shares whiles such covenants are
applicable.

 

Very truly yours,

 

Keith Yee

 

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