EXHIBIT 10.25

 

BIOLASE TECHNOLOGY, INC.

 

AMENDED AND RESTATED 2002 STOCK INCENTIVE PLAN

 

(As amended by the Board of Directors on April 28, 2004 and the stockholders on
May 26, 2004)

 

ARTICLE ONE

 

GENERAL PROVISIONS

 

I. PURPOSE OF THE PLAN

 

The Plan is intended to promote the interests of the Corporation by providing
eligible persons who are employed by or serve the Corporation or any Parent or
Subsidiary with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in such service.

 

Capitalized terms shall have the meanings assigned to such terms in the attached
Appendix.

 

II. STRUCTURE OF THE PLAN

 

A. The Plan shall be divided into three separate equity incentive programs:

 

1. the Discretionary Option Grant Program under which eligible persons may, at
the discretion of the Plan Administrator, be granted options to purchase shares
of Common Stock;

 

2. the Stock Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Common Stock directly,
either through the immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary); and

 

3. the Automatic Option Grant Program under which eligible non-Employee
directors shall automatically receive option grants at designated intervals over
their period of continued Board service.

 

B. The provisions of Articles One and Five shall apply to all equity programs
under the Plan and shall govern the interests of all persons under the Plan.

 

III. ADMINISTRATION OF THE PLAN

 

A. Administration of the Automatic Option Grant Program shall be self-executing
in accordance with the terms of that program, and no Plan Administrator shall
exercise any discretionary functions with respect to any option grants made
under that program.

 

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B. The Primary Committee and the Board shall have concurrent authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. (However, grants made to Section 16 Insiders by
the entire Board will not be exempt from the million-dollar compensation
deduction limitation of Code Section 162(m).) Administration of the
Discretionary Option Grant and Stock Issuance Programs with respect to all other
persons eligible to participate in those programs may, at the Board’s
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer those programs with respect to all such
persons. However, any discretionary option grants or stock issuances for members
of the Primary Committee should be authorized by a disinterested majority of the
Board.

 

C. Members of the Primary Committee or any Secondary Committee shall serve for
such period of time as the Board may determine and may be removed by the Board
at any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously delegated
to such committee.

 

D. Service on the Primary Committee or the Secondary Committee shall constitute
service as a director, and members of each such committee shall accordingly be
entitled to full indemnification and reimbursement as directors for their
service on such committee. No member of the Primary Committee or the Secondary
Committee shall be liable for any act or omission made in good faith with
respect to the Plan or any option grants or stock issuances under the Plan.

 

E. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and procedures as it may deem
appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.

 

IV. ELIGIBILITY

 

A. The persons eligible to participate in the Discretionary Option Grant and
Stock Issuance Programs are as follows:

 

1. Employees,

 

2. non-Employee members of the Board or the board of directors of any Parent or
Subsidiary, and

 

3. independent contractors who provide services to the Corporation (or any
Parent or Subsidiary).

 

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B. Only non-Employee directors shall be eligible to participate in the Automatic
Option Grant Program. A non-Employee director who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an initial option grant under the Automatic Option Grant Program at the
time he or she first becomes a non-Employee director, but shall be eligible to
receive annual option grants under the Automatic Option Grant Program while he
or she continues to serve as a non-Employee director.

 

V. STOCK SUBJECT TO THE PLAN

 

A. The stock issuable under the Plan shall be shares of authorized but unissued
or reacquired Common Stock, including shares repurchased by the Corporation on
the open market. The maximum number of shares of Common Stock which may be
issued over the term of the Plan shall not exceed 4,000,000 shares. Such
authorized share reserve is comprised of (1) the initial share reserve for the
Plan of 1,000,000 shares authorized by the Board on April 16, 2002 and approved
by the stockholders on May 23, 2002, (2) the number of shares that remained
available for issuance, as of May 23, 2002, under the Predecessor Plan as last
approved by the Corporation’s stockholders, including the shares subject to
outstanding options under the Predecessor Plan and (3) an additional increase of
1,000,000 shares of Common Stock authorized by the Board on April 28, 2004 and
approved by the stockholders on May 26, 2004.

 

B. No one person participating in the Plan may receive stock options and direct
stock issuances for more than 1,500,000 shares of Common Stock pursuant to the
Plan in the aggregate per calendar year.

 

C. Shares of Common Stock subject to outstanding options (including options
transferred to this Plan from the Predecessor Plan) shall be available for
subsequent issuance under the Plan to the extent (1) those options expire or
terminate for any reason prior to exercise in full or (2) the options are
cancelled in accordance with the cancellation/regrant provisions of the Plan.
Unvested shares issued under the Plan and subsequently cancelled or repurchased
by the Corporation, at a price per share not greater than the original issue
price paid per share, pursuant to the Corporation’s repurchase rights under the
Plan shall be added back to the number of shares of Common Stock reserved for
issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent option grants or direct stock issuances under the
Plan. However, should the exercise price of an option under the Plan be paid
with shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the withholding
taxes incurred in connection with the exercise of an option or the vesting of a
stock issuance under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised or which vest under the stock issuance,
and not by the net number of shares of Common Stock issued to the holder of such
option or stock issuance.

 

D. If any change is made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration, appropriate adjustments shall be made by
the Plan Administrator to (1) the maximum number and/or class of securities
issuable under the Plan, (2) the maximum number and/or class of securities for
which any one person may be granted options and direct stock issuances under the
Plan per calendar year, (3) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the Plan
(including the options transferred to this Plan from the Predecessor Plan), and
(4) the number and/or class of securities for which grants are subsequently to
be made under the Automatic Option Grant Program. Such adjustments to the
outstanding options are to be effected in a manner that shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be binding.

 

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ARTICLE TWO

 

DISCRETIONARY OPTION GRANT PROGRAM

 

I. OPTION TERMS

 

Each option shall be evidenced by one or more documents in the form approved by
the Plan Administrator. However, each such document shall comply with the terms
specified below. Each document evidencing an Incentive Option shall, in
addition, be subject to the provisions of the Plan applicable to such options.

 

A. Exercise Price.

 

1. The exercise price per share shall be fixed by the Plan Administrator.

 

2. The exercise price shall become immediately due upon exercise of the option
and shall, subject to the provisions of Section I of Article Five and the
documents evidencing the option, be payable in one or more of the forms
specified below:

 

(a) cash or check made payable to the Corporation,

 

(b) shares of Common Stock held for the requisite period necessary to avoid a
charge to the Corporation’s earnings for financial reporting purposes and valued
at Fair Market Value on the Exercise Date, or

 

(c) to the extent the option is exercised for vested shares, through a special
sale and remittance procedure pursuant to which the Optionee shall concurrently
provide irrevocable instructions to (a) a Corporation-designated brokerage firm
to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable income and employment taxes required to be withheld
by the Corporation by reason of such exercise and (b) the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale.

 

Except to the extent such sale and remittance procedure is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.

 

B. Exercise and Term of Options. Each option shall be exercisable at such time
or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of 10 years measured
from the option grant date.

 

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C. Effect of Termination of Service.

 

1. The following provisions shall govern the exercise of any options granted
pursuant to the Discretionary Option Grant Program that are outstanding at the
time of the Optionee’s cessation of Service:

 

(a) Immediately upon the Optionee’s cessation of Service, the option shall
terminate with respect to the unvested shares subject to the option.

 

(b) Should the Optionee’s Service be terminated for Misconduct or should the
Optionee otherwise engage in Misconduct, then the option shall terminate
immediately with respect to all shares subject to the option.

 

(c) Should the Optionee’s Service terminate for reasons other than Misconduct,
then the option shall remain exercisable during such period of time after the
Optionee’s Service ceases as shall be determined by the Plan Administrator and
set forth in the documents evidencing the option, but no option shall be
exercisable after its Expiration Date. During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the date of
the Optionee’s Service ceased. Upon the expiration of the applicable exercise
period or (if earlier) upon the Expiration Date, the option shall terminate with
respect to any vested shares subject to the options.

 

2. Among its discretionary powers, the Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:

 

(a) extend the period of time for which the option is to remain exercisable
following the Optionee’s cessation of Service, but in no event beyond the
expiration of the option term, and/or

 

(b) permit the option to be exercised, during the applicable post-Service
exercise period, not only with respect to the number of vested shares of Common
Stock for which such option is exercisable at the time of the Optionee’s
cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested had the Optionee continued
in Service.

 

The Plan Administrator should consider the tax and accounting consequences
before exercising such discretion.

 

D. Stockholder Rights. The holder of an option shall have no stockholder rights
with respect to the shares subject to the option until such person shall have
exercised the option, paid the exercise price and become a holder of record of
the purchased shares.

 

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E. Repurchase Rights. The Plan Administrator shall have the discretion to grant
options that are exercisable for unvested shares of Common Stock. Should the
Optionee cease Service while such shares are unvested, the Corporation shall
have the right to repurchase any or all of those unvested shares at a price per
share equal to the lower of (1) the exercise price paid per share or (2) the
Fair Market Value per share of Common Stock at the time of the repurchase. The
terms upon which such repurchase right shall be exercisable (including the
period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set forth
in the document evidencing such repurchase right.

 

F. Limited Transferability of Options. During the lifetime of the Optionee,
Incentive Options shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or the laws of inheritance
following the Optionee’s death. Non-Statutory Options shall be subject to the
same restriction, except Non-Statutory Options may be assigned in whole or in
part during the Optionee’s lifetime to one or more members of the Optionee’s
family or to a trust established exclusively for one or more such family members
or to the Optionee’s former spouse. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.

 

II. INCENTIVE OPTIONS

 

The terms specified below shall be applicable to all Incentive Options. Except
as modified by the provisions of this Section II, all the provisions of Articles
One, Two and Five shall be applicable to Incentive Options. Options, which are
specifically designated as Non-Statutory Options when issued under the Plan,
shall not be subject to the terms of this Section II.

 

A. Eligibility. Incentive Options may only be granted to Employees.

 

B. Dollar Limitation. The aggregate Fair Market Value of the shares of Common
Stock (determined as of the respective date) for which one or more options
granted to any Employee pursuant to the Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
$100,000. To the extent that an Optionee’s options exceed that limit, they will
be treated as Non-Statutory Options (but all of the other provisions of the
option shall remain applicable), with the first options that were awarded to the
Optionee to be treated as Incentive Options.

 

C. 10% Stockholder. If any Employee to whom an Incentive Option is granted is a
10% Stockholder, then the exercise price per share shall not be less than 110%
of the Fair Market Value per share of Common Stock on the option grant date, and
the option term shall not exceed five years measured from the option grant date.

 

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III. CHANGE IN CONTROL

 

A. In the event a Change in Control occurs, the shares of Common Stock at the
time subject to each outstanding option granted pursuant to this Discretionary
Option Grant Program shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully vested
shares of Common Stock. However, an outstanding option shall not become vested
on such an accelerated basis if and to the extent: (1) such option is to be
assumed by the successor corporation (or parent thereof) or is otherwise to
continue in full force pursuant to the terms of transaction or (2) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing at the time of the Change in Control on any
shares for which the option is not otherwise at that time exercisable and
provides for subsequent payout of that spread no later than the time the
Optionee would vest in those option shares or (3) the acceleration of such
option is subject to other limitations imposed by the Plan Administrator.

 

B. All outstanding repurchase rights under the Discretionary Option Grant
Program shall automatically terminate, and the shares of Common Stock subject to
those terminated rights shall immediately vest in full, immediately prior to the
occurrence of a Change in Control, except to the extent: (1) those repurchase
rights are to be assigned to the successor corporation (or parent thereof) or
are otherwise to continue in full force pursuant to the terms of the transaction
or (2) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator.

 

C. Immediately following the consummation of the Change in Control, all
outstanding options granted pursuant to the Discretionary Option Grant Program
shall terminate, except to the extent assumed by the successor corporation (or
parent thereof) or otherwise continued in full force and effect pursuant to the
terms of the transaction.

 

D. Each option granted pursuant to the Discretionary Option Grant Program that
is assumed or otherwise continued in effect in connection with a Change in
Control shall be appropriately adjusted, immediately after such Change in
Control, to apply to the number and class of securities which would have been
issuable to the Optionee in consummation of such Change in Control had the
option been exercised immediately prior to such Change in Control. Appropriate
adjustments to reflect such Change in Control shall also be made to (1) the
exercise price payable per share under each outstanding option, provided the
aggregate exercise price payable for such securities shall remain the same, (2)
the maximum number and/or class of securities available for issuance over the
remaining term of the Plan and (3) the maximum number and/or class of securities
for which any one person may be granted options and direct stock issuances
pursuant to the Plan per calendar year. To the extent the holders of Common
Stock receive cash consideration for their Common Stock in consummation of the
Change in Control, the successor corporation may, in connection with the
assumption of the outstanding options granted pursuant to the Discretionary
Option Grant Program, substitute one or more shares of its own common stock with
a fair market value equivalent to the cash consideration paid per share of
Common Stock in such transaction.

 

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E. Among its discretionary powers, the Plan Administrator shall have the ability
to structure an option (either at the time the option is granted or at any time
while the option remains outstanding) so that the option shall become
immediately exercisable and some or all of the shares subject to that option
shall automatically become vested (and some or all of the repurchase rights of
the Corporation with respect to the unvested shares subject to that option shall
immediately terminate) upon the occurrence of a Change in Control, a Proxy
Contest or any other specified event or the Optionee’s Involuntary Termination
within a designated period of time following any of these events. In addition,
the Plan Administrator may provide that one or more of the Corporation’s
repurchase rights with respect to some or all of the shares held by the Optionee
at the time of such a Change in Control, a Proxy Contest, or any other specified
event or the Optionee’s Involuntary Termination within a designated period of
time following such an event shall immediately terminate and all of the shares
shall become vested.

 

F. The portion of any Incentive Option accelerated in connection with a Change
in Control or Proxy Contest shall remain exercisable as an Incentive Option only
to the extent the $100,000 limitation described in Section II.B. above is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
federal tax laws.

 

G. The outstanding options shall in no way affect the right of the Corporation
to undertake any corporate action.

 

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ARTICLE THREE

 

STOCK ISSUANCE PROGRAM

 

I. STOCK ISSUANCE TERMS

 

Shares of Common Stock may be issued under the Stock Issuance Program through
direct and immediate issuances without any intervening option grants. Each stock
issuance under this program shall be evidenced by a stock issuance agreement
that complies with the terms specified below. Shares of Common Stock may also be
issued under the Stock Issuance Program pursuant to awards that entitle the
recipients to receive those shares upon the attainment of designated performance
goals or the satisfaction of specified Service requirements.

 

A. Purchase Price.

 

1. The purchase price per share shall be fixed by the Plan Administrator.

 

2. Subject to the provisions of Section I of Article Five, shares of Common
Stock may be issued under the Stock Issuance Program for any of the following
items of consideration which the Plan Administrator may deem appropriate in each
individual instance:

 

(a) cash or check made payable to the Corporation, or

 

(b) past services rendered to the Corporation (or any Parent or Subsidiary).

 

B. Vesting Provisions.

 

1. Shares of Common Stock issued under the Stock Issuance Program may, in the
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant’s period
of Service or upon attainment of specified performance objectives. The elements
of the vesting schedule applicable to any unvested shares of Common Stock issued
under the Stock Issuance Program shall be determined by the Plan Administrator
and incorporated into the stock issuance agreement. Shares of Common Stock may
also be issued under the Stock Issuance Program pursuant to awards that entitle
the recipients to receive those shares upon the attainment of designated
performance goals or the satisfaction of specified Service requirements.

 

2. Any new, substituted or additional securities or other property (including
money paid other than as a regular cash dividend) which the Participant may have
the right to receive with respect to the Participant’s unvested shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of
consideration shall be issued subject to such escrow arrangements as the Plan
Administrator shall deem appropriate and shall be vested to the same extent the
Participant’s shares of Common Stock are vested.

 

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3. The Participant shall have full stockholder rights (other than
transferability) with respect to any shares of Common Stock issued to the
Participant pursuant to the Stock Issuance Program, whether or not the
Participant’s interest in those shares is vested. Accordingly, the Participant
shall have the right to vote such shares and to receive any regular cash
dividends paid on such shares. Cash dividends constitute taxable compensation to
the Participant are deductible by the Corporation (unless the Participant has
made an election under Section 83(b) of the Code).

 

4. Should the Participant cease to remain in Service while holding one or more
unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further stockholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant’s purchase-money
indebtedness), the Corporation shall repay the Participant, without interest,
the lower of (a) the cash consideration paid for the surrendered shares or (b)
the Fair Market Value of those shares at the time of cancellation and/or shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares by the applicable clause
(a) or (b) amount.

 

5. The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock that would otherwise
occur upon the cessation of the Participant’s Service or the non-attainment of
the performance objectives applicable to those shares. Such waiver shall result
in the immediate vesting of the Participant’s interest in the shares of Common
Stock as to which the waiver applies. Such waiver may be effected at any time,
whether before or after the Participant’s cessation of Service or the attainment
or non-attainment of the applicable performance objectives.

 

6. Outstanding share right awards under the Stock Issuance Program shall
automatically terminate, and no shares of Common Stock shall actually be issued
in satisfaction of those awards, if the performance goals or Service
requirements established for such awards are not attained or satisfied. The Plan
Administrator, however, shall have the discretionary authority to issue shares
of Common Stock under one or more outstanding share right awards as to which the
designated performance goals or Service requirements have not been attained or
satisfied.

 

II. CHANGE IN CONTROL

 

A. All of the Corporation’s outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full,
immediately prior to the occurrence of a Change in Control, except to the extent
(1) those repurchase rights are to be assigned to the successor corporation (or
parent thereof) or are otherwise to continue in full force and effect pursuant
to the terms of the transaction or (2) such accelerated vesting is precluded by
other limitations imposed in the stock issuance agreement.

 

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B. The Plan Administrator shall have the discretionary authority to structure
one or more of the Corporation’s repurchase rights under the Stock Issuance
Program so that those rights shall automatically terminate in whole or in part,
and some or all of the shares of Common Stock subject to those terminated rights
shall immediately vest, upon the occurrence of a Change in Control, a Proxy
Contest or any other event, or the Participant’s Involuntary Termination within
a designated period of time following any of these events.

 

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ARTICLE FOUR

 

AUTOMATIC OPTION GRANT PROGRAM

 

I. OPTION TERMS

 

A. Automatic Grants. Option grants shall be made pursuant to the Automatic
Option Grant Program in effect under this Plan as follows:

 

1. Initial Grant: Provided the non-Employee director has not previously been in
the employ of the Corporation or any Parent or Subsidiary, each such individual
who is first elected or appointed as a non-Employee director at any time on or
after the Plan Effective Date shall automatically be granted, on the date of
such initial election or appointment, a Non-Statutory Option. The number of
shares of Common Stock subject to the option shall be equal to the product of
(a) 2,500 shares and (b) (i) 12 minus (ii) the number of whole calendar months
that have elapsed since the last Annual Stockholders’ Meeting or Special Meeting
in lieu of an Annual Stockholders’ Meeting at which directors are elected.

 

2. Annual Grants: On the date of each Annual Stockholders’ Meeting (beginning
with the 2002 Annual Stockholders’ Meeting) or Special Meeting in lieu of an
Annual Stockholders’ Meeting at which directors are elected, each individual who
is to continue to serve as a non-Employee director following an Annual
Stockholders’ Meeting, whether or not that individual is standing for
re-election to the Board at that particular Annual Stockholders’ Meeting, shall
automatically be granted a Non-Statutory Option to purchase 30,000 shares of
Common Stock. There shall be no limit on the number of such annual option grants
any one non-Employee director may receive over his or her period of Board
service, and non-Employee directors who have previously been in the employ of
the Corporation (or any Parent or Subsidiary) or who have otherwise received one
or more option grants from the Corporation shall be eligible to receive one or
more such annual option grants over their period of continued Board service.

 

B. Exercise Price. The exercise price per share for each option grant made under
the Automatic Option Grant Program shall be equal to 100% of the Fair Market
Value per share of Common Stock on the option grant date.

 

C. Option Term. Each option grant under the Automatic Option Grant Program shall
have a term of 10 years measured from the option grant date.

 

D. Exercise and Vesting of Options.

 

1. Each option under the Automatic Option Grant Program shall be immediately
exercisable for any or all of the option shares. However, any unvested shares
purchased under the option shall be subject to repurchase by the Corporation, at
the lower of (a) the exercise price paid per share or (b) the Fair Market Value
per share of Common Stock at the

 

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time of repurchase, should the Optionee cease such Board service prior to
vesting in those shares.

 

2. The shares subject to each initial option grant shall vest, and the
Corporation’s repurchase right shall lapse, in monthly installments upon the
Optionee’s completion of each month of service as a non-Employee director
measured from the option grant date.

 

3. The shares subject to each annual option grant shall vest, and the
Corporation’s repurchase right shall lapse, in four successive quarterly
installments upon the Optionee’s completion of the each quarter of service as a
non-Employee director measured from the grant date.

 

E. Termination of Service. The following provisions shall govern the exercise of
any options granted to the Optionee pursuant to the Automatic Option Grant
Program that are outstanding at the time the Optionee ceases to serve as a
director:

 

1. The option shall be exercisable until the earlier to occur of (a) the
Expiration Date or (b) the one-year anniversary of the date the Optionee’s Board
service terminated.

 

2. During the post-Service exercise period, the option may not be exercised in
the aggregate for more than the number of vested shares of Common Stock for
which the option is exercisable at the time of the Optionee’s cessation of Board
service.

 

3. Should the Optionee’s Board service cease due to death or Permanent
Disability, then all shares at the time subject to the option shall immediately
vest so that such option may be exercised for any or all of those shares as
fully vested shares of Common Stock.

 

4. Upon the expiration of the one year exercise period or (if earlier) upon the
Expiration Date, the option shall terminate for any vested shares for which the
option has not been exercised. However, the option shall, immediately upon the
Optionee’s cessation of Board service for any reason other than death or
Permanent Disability, terminate to the extent the option is not otherwise at
that time exercisable for vested shares.

 

F. Election to Decline Equity Incentive Grants. Notwithstanding anything to the
contrary set forth in the Plan, each non-Employee director may elect to decline
one or more of the option grants to which he or she may otherwise be entitled
under the Automatic Option Grant Program, provided that any non-Employee
director who elects to decline any such option grant shall not receive any other
compensation in lieu of that option grant. Such election shall be made pursuant
to written notice to the Corporation in which the non-Employee director
specifically declines one or more such option grants and acknowledges that such
director will not receive any other compensation from the Corporation in lieu of
those option grants.

 

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II. CHANGE IN CONTROL/PROXY CONTEST

 

A. In the event a Change in Control occurs while the Optionee remains a
director, the shares of Common Stock at the time subject to each outstanding
option that was granted pursuant to this Automatic Option Grant Program shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become exercisable for all the
shares subject to the option at that time as fully vested shares of Common Stock
and may be exercised for any or all of those vested shares. Immediately
following the consummation of the Change in Control, each automatic option grant
shall terminate, except to the extent assumed by the successor corporation (or
parent thereof) or otherwise continued in effect pursuant to the terms of the
Change in Control transaction.

 

B. In the event a Proxy Contest occurs while the Optionee remains a director,
the shares of Common Stock at the time subject to each outstanding option
granted pursuant to this Automatic Option Grant Program shall automatically vest
in full so that each such option shall, immediately prior to the effective date
of the Proxy Contest, become exercisable for all the option shares as fully
vested shares of Common Stock and may be exercised for any or all of those
vested shares. Such option shall remain exercisable until the earliest to occur
of (1) the Expiration Date, (2) the expiration of the one-year period measured
from the date of the Optionee’s cessation of Board service, or (3) the
termination of the option in connection with a Change in Control transaction.

 

C. All outstanding repurchase rights under this Automatic Option Grant Program
shall automatically terminate, and the shares of Common Stock subject to those
terminated rights shall vest in full, immediately prior to the occurrence of a
Change in Control or a Proxy Contest that occurs while the Optionee remains a
director.

 

D. Each option which is assumed or otherwise continued in effect in connection
with a Change in Control shall be appropriately adjusted, immediately after such
Change in Control, to apply to the number and class of securities which would
have been issuable to the Optionee in consummation of such Change in Control had
the option been exercised immediately prior to such Change in Control.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same. To the extent the holders of
Common Stock receive cash consideration for their Common Stock in consummation
of the Change in Control, the successor corporation may, in connection with the
assumption of the outstanding options granted pursuant to the Automatic Option
Grant Program, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such transaction.

 

E. The grant of options under the Automatic Option Grant Program shall in no way
affect the right of the Corporation to undertake any corporate action.

 

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III. REMAINING TERMS

 

The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for option grants made under
the Discretionary Option Grant Program.

 

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ARTICLE FIVE

 

MISCELLANEOUS

 

I. FINANCING

 

The Plan Administrator may permit any Optionee or Participant to pay the option
exercise price under the Discretionary Option Grant Program or the purchase
price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest-bearing promissory note payable in one or more
installments. After considering the tax and accounting consequences, the Plan
Administrator shall establish the terms of any such promissory note (including
the interest rate and the terms of repayment). In no event may the maximum
credit available to the Optionee or Participant exceed the sum of (A) the
aggregate option exercise price or purchase price payable for the purchased
shares (less the par value of such shares) plus (B) any applicable income and
employment tax liability incurred by the Optionee or the Participant in
connection with the option exercise or share purchase. Prior to permitting the
use of promissory notes as payment under the Plan, the Plan Administrator should
consider the restrictions on doing so imposed by Regulation U.

 

II. TAX WITHHOLDING

 

A. The Corporation’s obligation to deliver shares of Common Stock upon the
exercise of options or the issuance or vesting of such shares granted pursuant
to the Plan shall be subject to the satisfaction of all applicable income and
employment tax withholding requirements.

 

B. The Plan Administrator may, in its discretion, provide any or all holders of
Non-Statutory Options or unvested shares of Common Stock issued pursuant to the
Plan (other than the options granted to non-Employee directors or independent
contractors) with the right to use shares of Common Stock in satisfaction of all
or part of the Withholding Taxes to which such holders may become subject in
connection with the exercise of their options or the vesting of their shares.
Such right may be provided to any such holder in either or both of the following
formats:

 

1. Stock Withholding: The election to have the Corporation withhold, from the
shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares.
So as to avoid adverse accounting treatment, the number of shares that may be
withheld for this purpose may not exceed the minimum number needed to satisfy
the applicable income and employment tax withholding rules.

 

2. Stock Delivery: The election to deliver to the Corporation, at the time the
Non-Statutory Option is exercised or the shares vest, one or more shares of
Common Stock

 

16

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previously acquired by such holder (other than in connection with the option
exercise or share vesting triggering the Withholding Taxes). So as to avoid
adverse accounting treatment, the number of shares that may be withheld for this
purpose may not exceed the minimum number needed to satisfy the applicable
income and employment tax withholding rules.

 

III. SHARE ESCROW/LEGENDS

 

Unvested shares of Common Stock may, in the Plan Administrator’s discretion, be
held in escrow by the Corporation until the Optionee’s or the Participant’s
interest in such shares vests or may be issued directly to the Optionee or the
Participant with restrictive legends on the certificates evidencing those
unvested shares.

 

IV. CANCELLATION AND REGRANT OF OPTIONS

 

The Plan Administrator shall have the authority to effect, at any time and from
time to time, with the consent of the affected option holders, the cancellation
of any or all outstanding options under the Plan (including outstanding options
incorporated from the Predecessor Plan) and to grant in substitution new options
covering the same or a different number of shares of Common Stock.

 

V. EFFECTIVE DATE AND TERM OF THE PLAN

 

A. The Plan shall become effective on May 23, 2002. No options may be granted or
stock issued under the Plan at any time before May 23, 2002.

 

B. The Plan shall serve as the successor to the Predecessor Plan, and no further
option grants or direct stock issuances shall be made under the Predecessor Plan
after May 23, 2002. All options outstanding under the Predecessor Plan on May
23, 2002 shall be transferred to the Plan at that time and shall be treated as
outstanding options under the Plan.

 

C. Each outstanding option so transferred shall continue to be governed by the
terms of the documents evidencing such option, and no provision of the Plan
shall be deemed to automatically affect or otherwise modify the rights or
obligations of the holders of such transferred options.

 

D. Notwithstanding the previous sentence, one or more provisions of the Plan,
including, without limitation, the acceleration provisions of the Discretionary
Option Grant Program relating to Changes in Control and Proxy Contests, may, in
the Plan Administrator’s discretion, be extended to one or more options
incorporated from the Predecessor Plans provided that such provision or
provisions do not adversely affect the Optionee’s rights and obligations.

 

E. Unless terminated by the Board prior to such time, the Plan shall terminate
upon the tenth anniversary of the Plan’s adoption by the Board. Should the Plan
terminate when any options or unvested shares are outstanding, such awards shall
continue in effect in accordance with the provisions of the documents evidencing
such grants or issuances.

 

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VI. AMENDMENT OF THE PLAN

 

The Board shall have complete and exclusive power and authority to amend the
Plan or any awards made hereunder. However, no such amendment of the Plan shall
adversely affect the rights and obligations with respect to options or unvested
stock issuances at the time outstanding under the Plan unless the Optionee or
the Participant consents to such amendment. In addition, certain amendments to
the Plan shall required approval of the Corporation’s stockholders.

 

VII. USE OF PROCEEDS

 

Any cash proceeds received by the Corporation from the sale of shares of Common
Stock under the Plan shall be used for any corporate purpose.

 

VIII. REGULATORY APPROVALS

 

A. The implementation of the Plan, the granting of any stock option under the
Plan and the issuance of any shares of Common Stock (1) upon the exercise of any
option or (2) under the Stock Issuance Program shall be subject to the
Corporation’s procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted under
it and the shares of Common Stock issued pursuant to it.

 

B. No shares of Common Stock or other assets shall be issued or delivered under
the Plan unless and until there shall have been compliance with all applicable
requirements of applicable securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of Common
Stock issuable under the Plan, and all applicable requirements of any stock
exchange or the Nasdaq Stock Market on which Common Stock is then listed for
trading or traded.

 

IX. NO EMPLOYMENT/SERVICE RIGHTS

 

Nothing in the Plan shall confer upon the Optionee or the Participant any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without cause.

 

X. CALIFORNIA BLUE SKY PROVISIONS

 

If the Corporation is not exempt from California securities laws, the following
provisions shall apply to any sale of Common Stock or any option grant to an
individual who is eligible to receive such grants pursuant to the Plan who
resides in the State of California.

 

A. Option Grant Program.

 

1. The exercise price per share shall be fixed by the Plan Administrator in
accordance with the following provisions:

 

(a) The exercise price per share applicable to each option shall not be less
than 85% of the Fair Market Value per share of Common Stock on the date the
option is granted.

 

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(b) If the person to whom the option is granted is a 10% Stockholder, then the
exercise price per share shall not be less than 110% of the Fair Market Value
per share of Common Stock on the date the option is granted.

 

2. The Plan Administrator may not impose a vesting schedule upon any option
grant or the shares of Common Stock subject to that option which is more
restrictive than 20% per year vesting, with the initial vesting to occur not
later than one year after the option grant date. However, such limitation shall
not be applicable to any option grants made to individuals who are officers of
the Corporation, non-Employee directors or independent contractors.

 

3. Unless the Optionee’s Service is terminated for Misconduct (in which case the
option shall terminate immediately), the option (to the extent it was vested and
exercisable at that the time Optionee’s Service ceased) must remain exercisable,
following Optionee’s termination of Service, for at least (a) six months if
Optionee’s Service terminates due to death or Permanent Disability or (b) thirty
days in all other cases.

 

B. Stock Issuance Program.

 

1. The purchase price per share for shares issued under the Stock Issuance
Program shall be fixed by the Plan Administrator but shall not be less than 85%
of the Fair Market Value per share of Common Stock on the issue date. However,
the purchase price per share of Common Stock issued to a 10% Stockholder shall
not be less than 100% of such Fair Market Value.

 

2. The Plan Administrator may not impose a vesting schedule upon any stock
issuance effected under the Stock Issuance Program which is more restrictive
than 20% per year vesting, with initial vesting to occur not later than one year
after the issuance date. Such limitation shall not apply to any Common Stock
issuances made to the officers of the Corporation, non-Employee directors or
independent contractors.

 

C. Repurchase Rights. To the extent specified in a stock purchase agreement or
stock issuance agreement, the Corporation and/or its stockholders shall have the
right to repurchase any or all of the unvested shares of Common Stock held by an
Optionee or Participant when such person’s Service ceases. However, except with
respect to grants to officers, directors, and consultants of the Corporation,
the repurchase right must satisfy the following conditions:

 

1. The Corporation’s right to repurchase the unvested shares of Common Stock
must lapse at the rate of at least 20% per year over five years from the date
the option was granted under the Discretionary Option Grant Program or the
shares were issued under the Stock Issuance Program.

 

19

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2. The Corporation’s repurchase right must be exercised within ninety days of
the date that Service ceased (or the date the shares were purchased, if later).

 

3. The purchase price must be paid in the form of cash or cancellation of the
purchase money indebtedness for the shares of Common Stock.

 

20

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APPENDIX

 

The following definitions shall be in effect under the Plan:

 

A. Automatic Option Grant Program shall mean the automatic option grant program
in effect under Article Four of the Plan.

 

B. Board shall mean the Corporation’s Board of Directors.

 

C. Change in Control shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:

 

(i) a merger, consolidation or other reorganization approved by the
Corporation’s stockholders, unless securities representing more than 50% of the
total combined voting power of the voting securities of the successor
corporation are immediately thereafter beneficially owned, directly or
indirectly, by the persons who beneficially owned the Corporation’s outstanding
voting securities immediately prior to such transaction, or

 

(ii) the sale, transfer or other disposition of all or substantially all of the
Corporation’s assets, or

 

(iii) the acquisition, directly or indirectly, by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation),
of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act)
of securities possessing more than 50% of the total combined voting power of the
Corporation’s outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation’s stockholders.

 

D. Code shall mean the Internal Revenue Code of 1986, as amended.

 

E. Common Stock shall mean the Corporation’s common stock.

 

F. Corporation shall mean BioLase Technology, Inc., a Delaware corporation, and
any corporate successor to all or substantially all of the assets or voting
stock of BioLase Technology, Inc. which adopts the Plan.

 

G. Discretionary Option Grant Program shall mean the discretionary option grant
program in effect under Article Two of the Plan.

 

H. Employee shall mean an individual who is in the employ of the Corporation (or
any Parent or Subsidiary), subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of
performance.

 

A-1.

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I. Exchange Act shall mean the Securities Exchange Act of 1934, as amended.

 

J. Exercise Date shall mean the date on which the option shall have been
exercised in accordance with the appropriate option documentation.

 

K. Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

 

(i) If the Common Stock is at the time traded on the Nasdaq Stock Market, then
the Fair Market Value shall be the closing selling price per share of Common
Stock on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq Stock Market and published in
The Wall Street Journal. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.

 

(ii) If the Common Stock is at the time listed on any stock exchange, then the
Fair Market Value shall be the closing selling price per share of Common Stock
on the date in question on the stock exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange and
published in The Wall Street Journal. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such quotation
exists.

 

(iii) If the Common Stock is at the time neither listed on any stock exchange or
the Nasdaq Stock Market, then the Fair Market Value shall be determined by the
Plan Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.

 

L. Incentive Option shall mean an option that satisfies the requirements of Code
Section 422.

 

M. Involuntary Termination shall mean the termination of the Service of any
individual which occurs by reason of:

 

(i) such individual’s involuntary dismissal or discharge by the Corporation (or
its Parent or Subsidiary) for reasons other than Misconduct, or

 

(ii) such individual’s voluntary resignation following (a) a change in his or
her position with the Corporation (or any Parent or Subsidiary) which materially
reduces his or her duties and responsibilities, (b) a reduction in his or her
base salary by more than 15%, unless the base salaries of all similarly situated
individuals are reduced by the Corporation (or any Parent or Subsidiary)
employing the individual or (c) a relocation of such individual’s place of

 

A-2.

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employment by more than fifty miles, provided and only if such change, reduction
or relocation is effected by the Corporation (or any Parent or Subsidiary)
without the individual’s consent.

 

N. Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not in any way
preclude or restrict the right of the Corporation (or any Parent or Subsidiary)
to discharge or dismiss any Optionee, Participant or other person in the Service
of the Corporation (or any Parent or Subsidiary) for any other acts or
omissions, but such other acts or omissions shall not be deemed, for purposes of
the Plan, to constitute grounds for termination for Misconduct.

 

O. Non-Statutory Option shall mean an option not intended to be an Incentive
Option.

 

P. Optionee shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.

 

Q. Parent shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

R. Participant shall mean any person who is issued shares of Common Stock under
the Stock Issuance Program.

 

S. Permanent Disability or Permanently Disabled shall mean the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or has lasted or can be expected to last for a
continuous period of 12 months or more. However, solely for purposes of the
Automatic Option Grant Program, Permanent Disability or Permanently Disabled
shall mean the inability of the non-Employee director to perform his or her
usual duties as a director by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous duration of
12 months or more.

 

T. Plan shall mean the BioLase Technology, Inc. Amended and Restated 2002 Stock
Incentive Plan.

 

U. Plan Administrator shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of

 

A-3.

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eligible persons, to the extent such entity is carrying out its administrative
functions under those programs with respect to the persons under its
jurisdiction.

 

V. Plan Effective Date shall mean the date the Plan becomes effective and shall
be coincidental with the date the Plan is approved by the Corporation’s
stockholders. The Plan Effective Date is May 23, 2002.

 

W. Predecessor Plan shall mean the BioLase Technology, Inc. 1998 Stock Option
Plan, as amended.

 

X. Primary Committee shall mean the committee comprised of one or more directors
designated by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to Section 16 Insiders. To obtain the benefits of
Rule 16b-3, there must be at least two members on the Primary Committee and all
of the members must be “non-employee” directors as that term is defined in the
Rule or the entire Board must approve the grant(s). Similarly, to be exempt from
the million dollar compensation deduction limitation of Code Section 162(m),
there must be at least two members on the Primary Committee and all of the
members must be “outside directors” as that term is defined in Code Section
162(m).

 

Y. Proxy Contest shall mean a change in ownership or control of the Corporation
effected through a change in the composition of the Board over a period of 36
consecutive months or less such that a majority of the directors ceases, by
reason of one or more contested elections for directorship, to be comprised of
individuals who either (i) have been directors continuously since the beginning
of such period or (ii) have been elected or nominated for election as directors
during such period by at least a majority of the directors described in clause
(i) who were still in office at the time the Board approved such election or
nomination.

 

Z. Secondary Committee shall mean a committee of one or more directors appointed
by the Board to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to eligible persons other than Section 16 Insiders.

 

AA. Section 16 Insider shall mean an executive officer or director of the
Corporation or the holder of more than 10% of a registered class of the
Corporation’s equity securities, in each case subject to the short-swing profit
liabilities of Section 16 of the Exchange Act.

 

BB. Service shall mean the performance of services for the Corporation (or any
Parent or Subsidiary) by a person in the capacity of an Employee, a non-Employee
member of the board of directors or independent contractor, except to the extent
otherwise specifically provided in the documents evidencing the option grant or
stock issuance.

 

CC. Stock Issuance Program shall mean the stock issuance program in effect under
Article Three of the Plan.

 

DD. Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other

 

A-4.

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than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

EE. 10% Stockholder shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than 10% of the total combined voting power of
all classes of stock of the Corporation (or any Parent or Subsidiary).

 

FF. Withholding Taxes shall mean the applicable income and employment
withholding taxes to which the holder of a Non-Statutory Option or unvested
shares of Common Stock under the Plan may become subject in connection with the
exercise of those options or the vesting of those shares.

 

A-5.