Exhibit 10.3

THERMÂGE, INC.

2006 EQUITY INCENTIVE PLAN

NOTICE OF GRANT OF STOCK OPTION

Unless otherwise defined herein, the terms defined in the 2006 Equity Incentive
Plan (the “Plan”) will have the same defined meanings in this Notice of Grant of
Stock Option (the “Notice of Grant”) and Terms and Conditions of Stock Option
Grant, attached hereto as Exhibit A (together, the “Option Agreement” or the
“Agreement”).

Participant:

Address:

Participant has been granted the right to receive an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Agreement, as follows:

 

  Grant Number  

 

    Date of Grant  

 

    Vesting Commencement Date  

 

    Number of Shares Granted  

 

    Exercise Price per Share  

$  

 

 

    Total Exercise Price  

$  

 

 

    Type of Option  

 

  Incentive Stock Option      

 

  Nonstatutory Stock Option     Term/Expiration Date  

 

 

Vesting Schedule:

Subject to accelerated vesting as set forth below or in the Plan, this Option
may be exercised, in whole or in part, in accordance with the following
schedule:

[Vesting Schedule]

Termination Period:

This Option shall be exercisable for [three (3) months] after Participant ceases
to be a Service Provider, unless such termination is due to Participant’s death
or Disability, in which case this

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Option shall be exercisable for [twelve (12) months] after Participant ceases to
be Service Provider. Notwithstanding the foregoing, in no event may this Option
be exercised after the Term/Expiration Date as provided above and may be subject
to earlier termination as provided in Section 14(c) of the Plan.

By Participant’s signature and the signature of the Company’s representative
below, Participant and the Company agree that this Option is granted under and
governed by the terms and conditions of the Plan and this Agreement. Participant
has reviewed the Plan and this Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement
and fully understands all provisions of the Plan and Agreement. Participant
hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan and
Agreement. Participant further agrees to notify the Company upon any change in
the residence address indicated below.

 

PARTICIPANT     THERMÂGE, INC.

 

   

 

Signature     By

 

   

 

Print Name     Title Address:    

 

   

 

   

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EXHIBIT A

TERMS AND CONDITIONS OF STOCK OPTION GRANT

1. Grant. The Company hereby grants to Participant an option (the “Option”) to
purchase the number of Shares, as set forth in the Notice of Grant, at the
exercise price per share set forth in the Notice of Grant (the “Exercise
Price”), subject to all of the terms and conditions in this Agreement and the
Plan, which is incorporated herein by reference. Subject to Section 19(c) of the
Plan, in the event of a conflict between the terms and conditions of the Plan
and the terms and conditions of this Agreement, the terms and conditions of the
Plan will prevail.

If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this
Option is intended to qualify as an Incentive Stock Option under Section 422 of
the Code. However, if this Option is intended to be an Incentive Stock Option,
to the extent that it exceeds the $100,000 rule of Code Section 422(d) it will
be treated as a Nonstatutory Stock Option (“NSO”).

2. Vesting Schedule. Except as provided in Section 3, the Option awarded by this
Agreement will vest in accordance with the vesting provisions set forth in the
Notice of Grant. Shares scheduled to vest on a certain date or upon the
occurrence of a certain condition will not vest in Participant in accordance
with any of the provisions of this Agreement, unless Participant will have been
continuously a Service Provider from the Date of Grant until the date such
vesting occurs.

3. Administrator Discretion. The Administrator, in its discretion, may
accelerate the vesting of the balance, or some lesser portion of the balance, of
the unvested Option at any time, subject to the terms of the Plan. If so
accelerated, such Option will be considered as having vested as of the date
specified by the Administrator.

4. Exercise of Option. This Option may be exercised only within the term set out
in the Notice of Grant, and may be exercised during such term only in accordance
with the Plan and the terms of this Agreement.

This Option is exercisable by delivery of an exercise notice, in the form
attached as Exhibit B (the “Exercise Notice”) or in such other form and manner
as determined by the Administrator, which will state the election to exercise
the Option, the number of Shares in respect of which the Option is being
exercised (the “Exercised Shares”), and such other representations and
agreements as may be required by the Company pursuant to the provisions of the
Plan. The Exercise Notice will be completed by Participant and delivered to the
Company. The Exercise Notice will be accompanied by payment of the aggregate
Exercise Price as to all Exercised Shares together with any applicable
withholding taxes. This Option will be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.

5. Method of Payment. Payment of the aggregate Exercise Price will be by any of
the following, or a combination thereof, at the election of Participant:

(a) cash;

(b) check;

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(c) consideration received by the Company under a formal cashless exercise
program adopted by the Company in connection with the Plan; or

(d) surrender of other Shares which, (i) in the case of Shares acquired from the
Company, either directly or indirectly, have been owned by Participant and not
subject to a substantial risk of forfeiture for more than six (6) months on the
date of surrender, and (ii) have a Fair Market Value on the date of surrender
equal to the aggregate Exercise Price of the Exercised Shares.

6. Tax Obligations.

(a) Withholding of Taxes. Notwithstanding any contrary provision of this
Agreement, no certificate representing the Shares will be issued to Participant,
unless and until satisfactory arrangements (as determined by the Administrator)
will have been made by Participant with respect to the payment of income,
employment and other taxes which the Company determines must be withheld with
respect to such Shares. To the extent determined appropriate by the Company in
its discretion, it shall have the right (but not the obligation) to satisfy any
tax withholding obligations by reducing the number of Shares otherwise
deliverable to Participant. If Participant fails to make satisfactory
arrangements for the payment of any required tax withholding obligations
hereunder at the time of the Option exercise, Participant acknowledges and
agrees that the Company may refuse to honor the exercise and refuse to deliver
Shares if such withholding amounts are not delivered at the time of exercise.

(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to
Participant herein is an ISO, and if Participant sells or otherwise disposes of
any of the Shares acquired pursuant to the ISO on or before the later of (i) the
date two (2) years after the Grant Date, or (ii) the date one (1) year after the
date of exercise, Participant will immediately notify the Company in writing of
such disposition. Participant agrees that Participant may be subject to income
tax withholding by the Company on the compensation income recognized by
Participant.

(c) Code Section 409A. Under Code Section 409A, an option that vests after
December 31, 2004 that was granted with a per share exercise price that is
determined by the Internal Revenue Service (the “IRS”) to be less than the fair
market value of a Share of Common Stock on the date of grant (a “Discount
Option”) may be considered “deferred compensation.” A Discount Option may result
in (a) income recognition by Participant prior to the exercise of the option,
(b) an additional twenty percent (20%) tax, and (c) potential penalty and
interest charges. Participant acknowledges that the Company cannot and has not
guaranteed that the IRS will agree that the per Share exercise price of this
Option equals or exceeds the fair market value of a Share of Common Stock on the
Date of Grant in a later examination. Participant agrees that if the IRS
determines that the Option was granted with a per Share exercise price that was
less than the Fair Market Value of a Share on the date of grant, Participant
will be solely responsible for Participant’s costs related to such a
determination.

7. Rights as Stockholder. Neither Participant nor any person claiming under or
through Participant will have any of the rights or privileges of a stockholder
of the Company in respect of any Shares deliverable hereunder unless and until
certificates representing such Shares will have

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been issued, recorded on the records of the Company or its transfer agents or
registrars, and delivered to Participant. After such issuance, recordation and
delivery, Participant will have all the rights of a stockholder of the Company
with respect to voting such Shares and receipt of dividends and distributions on
such Shares.

8. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT
THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR
SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING
HIRED, BEING GRANTED AN OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT
INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR
THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE
PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.

9. Address for Notices. Any notice to be given to the Company under the terms of
this Agreement will be addressed to the Company at Thermâge, Inc., 25881
Industrial Road, Hayward, CA 94545-2991, or at such other address as the Company
may hereafter designate in writing.

10. Grant is Not Transferable. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be
exercised during the lifetime of Participant only by Participant.

11. Binding Agreement. Subject to the limitation on the transferability of this
grant contained herein, this Agreement will be binding upon and inure to the
benefit of the heirs, legatees, legal representatives, successors and assigns of
the parties hereto.

12. Additional Conditions to Issuance of Stock. If at any time the Company will
determine, in its discretion, that the listing, registration or qualification of
the Shares upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory authority is necessary or
desirable as a condition to the issuance of Shares to Participant (or his or her
estate), such issuance will not occur unless and until such listing,
registration, qualification, consent or approval will have been effected or
obtained free of any conditions not acceptable to the Company. The Company will
make all reasonable efforts to meet the requirements of any such state or
federal law or securities exchange and to obtain any such consent or approval of
any such governmental authority. Assuming such compliance, for income tax
purposes the Exercised Shares will be considered transferred to Participant on
the date the Option is exercised with respect to such Exercised Shares.

13. Plan Governs. This Agreement is subject to all terms and provisions of the
Plan. In the event of a conflict between one or more provisions of this
Agreement and one or more provisions of the Plan, the provisions of the Plan
will govern. Capitalized terms used and not defined in this Agreement will have
the meaning set forth in the Plan.

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14. Administrator Authority. The Administrator will have the power to interpret
the Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules (including, but not limited to, the
determination of whether or not any Shares subject to the Option have vested).
All actions taken and all interpretations and determinations made by the
Administrator in good faith will be final and binding upon Participant, the
Company and all other interested persons. No member of the Administrator will be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or this Agreement.

15. Electronic Delivery. The Company may, in its sole discretion, decide to
deliver any documents related to Options awarded under the Plan or future
Options that may be awarded under the Plan by electronic means or request
Participant’s consent to participate in the Plan by electronic means.
Participant hereby consents to receive such documents by electronic delivery and
agrees to participate in the Plan through any on-line or electronic system
established and maintained by the Company or another third party designated by
the Company.

16. Captions. Captions provided herein are for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.

17. Agreement Severable. In the event that any provision in this Agreement will
be held invalid or unenforceable, such provision will be severable from, and
such invalidity or unenforceability will not be construed to have any effect on,
the remaining provisions of this Agreement.

18. Modifications to the Agreement. This Agreement constitutes the entire
understanding of the parties on the subjects covered. Participant expressly
warrants that he or she is not accepting this Agreement in reliance on any
promises, representations, or inducements other than those contained herein.
Modifications to this Agreement or the Plan can be made only in an express
written contract executed by a duly authorized officer of the Company.

19. Amendment, Suspension or Termination of the Plan. By accepting this Award,
Participant expressly warrants that he or she has received an Option under the
Plan, and has received, read and understood a description of the Plan.
Participant understands that the Plan is discretionary in nature and may be
amended, suspended or terminated by the Company at any time.

20. Governing Law. This Agreement shall be governed by the laws of the State of
California, without giving effect to the conflict of law principles thereof. For
purposes of litigating any dispute that arises under this Option or this
Agreement, the parties hereby submit to and consent to the jurisdiction of the
State of California, and agree that such litigation shall be conducted in the
courts of Alameda County, California, or the federal courts for the United
States for the Northern District of California, and no other courts, where this
Option is made and/or to be performed.

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EXHIBIT B

THERMÂGE, INC.

2006 EQUITY INCENTIVE PLAN

EXERCISE NOTICE

Thermâge, Inc.

25881 Industrial Road

Hayward, CA 94545-2991

Attention:                     

1. Exercise of Option. Effective as of today,                     ,
            , the undersigned (“Purchaser”) hereby elects to purchase
                     shares (the “Shares”) of the Common Stock of Thermâge, Inc.
(the “Company”) under and pursuant to the 2006 Equity Incentive Plan (the
“Plan”) and the Stock Option Agreement dated                      (the
“Agreement”). The purchase price for the Shares will be $                    ,
as required by the Agreement.

2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price for the Shares and any required withholding taxes to be paid in
connection with the exercise of the Option.

3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Agreement and agrees to abide by
and be bound by their terms and conditions.

4. Rights as Stockholder. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the Shares, no right to vote or receive dividends or any other
rights as a stockholder will exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares so acquired will be
issued to Participant as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date of issuance, except as provided in Section 14 of the Plan.

5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser’s purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted with any tax consultants
Purchaser deems advisable in connection with the purchase or disposition of the
Shares and that Purchaser is not relying on the Company for any tax advice.

6. Entire Agreement; Governing Law. The Plan and Agreement are incorporated
herein by reference. This Exercise Notice, the Plan and the Agreement constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the
Company and Purchaser with respect to the subject matter hereof, and may not be
modified adversely to the Purchaser’s interest except by means of a writing
signed by the Company and Purchaser. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.

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Submitted by:       Accepted by: PURCHASER       THERMÂGE, INC.

 

     

 

Signature       By

 

     

 

Print Name       Its Address:      

 

     

 

           

 

      Date Received