Exhibit 10.7IRIDEX CORPORATION1998 STOCK PLAN(As amended June 19, 2007)     1. Purposes of the Plan. The purposes of this Stock Plan are: **•** to attract and retain the best available personnel for positions ofsubstantial responsibility,  **•** to provide additional incentive to Employees, Directors and Consultants, and  **•** to promote the success of the Company’s business.     The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, StockAppreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares and PerformanceUnits, as the Administrator may determine.     2. Definitions. As used herein, the following definitions shall apply:          (a) “Administrator” means the Board or any of its Committees as shall be administeringthe Plan, in accordance with Section 4 of the Plan.          (b) “Affiliate” means any corporation or any other entity (including, but not limitedto, partnerships and joint ventures) controlling, controlled by, or under common control with theCompany.          (c) “Applicable Laws” means the requirements relating to the administration ofequity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, theCode, any stock exchange or quotation system on which the Common Stock is listed or quoted and theapplicable laws of any foreign country or jurisdiction where Awards are, or will be, granted underthe Plan.          (d) “Award” means, individually or collectively, a grant under the Plan of Options,Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units andPerformance Shares as the Administrator may determine.          (e) “Award Agreement” means the written or electronic agreement setting forth theterms and provisions applicable to each Award granted under the Plan, which shall include an OptionAgreement. The Award Agreement is subject to the terms and conditions of the Plan.          (f) “Board” means the Board of Directors of the Company.          (g) “Cash Position” means as to any Performance Period, the Company’s level of cash,cash equivalents, available-for-sales securities, and the long term portion of available-for-salessecurities.
 

 
          (h) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to asection of the Code herein will be a reference to any successor or amended section of the Code.          (i) “Committee” means a committee of Directors or of other individuals satisfyingApplicable Laws appointed by the Board in accordance with Section 4 hereof.          (j) “Common Stock” means the common stock of the Company.          (k) “Company” means IRIDEX Corporation, a Delaware corporation, or any successorthereto.          (l) “Consultant” means any person, including an advisor, engaged by the Company or itsAffiliate to render services to such entity.          (m) “Determination Date” means the latest possible date that will not jeopardize thequalification of an Award granted under the Plan as “performance-based compensation” under Section162(m) of the Code.          (n) “Director” means a member of the Board.          (o) “Disability” means total and permanent disability as defined in Section 22(e)(3)of the Code, provided that in the case of Awards other than Incentive Stock Options, theAdministrator in its discretion may determine whether a permanent and total disability exists inaccordance with uniform and non-discriminatory standards adopted by the Administrator from time totime.          (p) “Earnings Per Share” means as to any Performance Period, the Company’s or abusiness unit’s Net Income, divided by a weighted average number of Common Stock outstanding anddilutive common equivalent Shares deemed outstanding.          (q) “Employee” means any person, including Officers and Directors, employed by theCompany or its Affiliates. Neither service as a Director nor payment of a director’s fee by theCompany will be sufficient to constitute “employment” by the Company.          (r) “Exchange Act” means the Securities Exchange Act of 1934, as amended.          (s) “Fair Market Value” means, as of any date, the value of Common Stock as theAdministrator may determine in good faith by reference to the price of such stock on anyestablished stock exchange or a national market system on the day of determination if the CommonStock is so listed on any established stock exchange or a national market system. If the CommonStock is not listed on any established stock exchange or a national market system, the value of theCommon Stock as the Administrator may determine in good faith.          (t) “Fiscal Year” means the fiscal year of the Company.          (u) “Incentive Stock Option” means an Option that by its terms qualifies and isotherwise intended to qualify as an incentive stock option within the meaning of Section 422 of theCode and the regulations promulgated thereunder.
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          (v) “Individual Objectives” means as to a Participant for any Performance Period, theobjective and measurable goals set by a “management by objectives” process and approved by theAdministrator (in its discretion).          (w) “Net Income” means as to any Performance Period, the Company’s or a businessunit’s income after taxes.          (x) “Nonstatutory Stock Option” means an Option that by its terms does not qualify oris not intended to qualify as an Incentive Stock Option.          (y) “Officer” means a person who is an officer of the Company within the meaning ofSection 16 of the Exchange Act and the rules and regulations promulgated thereunder.          (z) “Operating Cash Flow” means as to any Performance Period, the Company’s or abusiness unit’s sum of Net Income plus depreciation and amortization plus changes in workingcapital comprised of accounts receivable, inventories, other current assets, trade accountspayable, accrued expenses, product warranty, advance payments from customers and long-term accruedexpenses.          (aa) “Operating Income” means as to any Performance Period, the Company’s or abusiness unit’s income from operations but excluding any unusual items or non-operating or non-cashrelated expenses.          (bb) “Option” means a stock option granted pursuant to the Plan.          (cc) “Option Agreement” means an agreement between the Company and a Participantevidencing the terms and conditions of an individual Option grant. The Option Agreement is subjectto the terms and conditions of the Plan.          (dd) “Optioned Stock” means the Common Stock subject to an Award          (ee) “Parent” means a “parent corporation,” whether now or hereafter existing, asdefined in Section 424(e) of the Code.          (ff) “Participant” means the holder of an outstanding Award, which shall include anOptionee.          (gg) “Performance Goals” means the goal(s) (or combined goal(s)) determined by theAdministrator (in its discretion) to be applicable to a Participant with respect to an Award. Asdetermined by the Administrator, the Performance Goals applicable to an Award may provide for atargeted level or levels of achievement using one or more of the following measures: (a) CashPosition, (b) Earnings Per Share, (c) Individual Objectives, (d) Net Income, (e) Operating CashFlow, (f) Operating Income, (g) Return on Assets, (h) Return on Equity, (i) Return on Sales, (j)Revenue, and (k) Total Stockholder Return. The Performance Goals may differ from Participant toParticipant and from Award to Award. Prior to the Determination Date, the Administrator shalldetermine whether any significant element(s) shall be included in or excluded from the calculationof any Performance Goal with respect to any Participant. For example (but not by way oflimitation), the Administrator may determine that the measures for one or more Performance Goalsshall be based upon the Company’s pro-forma results and/or results in accordance with generallyaccepted accounting principles.
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          (hh) “Performance Period” means any Fiscal Year or such other period as determined bythe Administrator in its sole discretion.          (ii) “Performance Share” means an Award denominated in Shares which may be earned inwhole or in part upon attainment of Performance Goals or other vesting criteria as theAdministrator may determine pursuant to Section 10.          (jj) “Performance Unit” means an Award which may be earned in whole or in part uponattainment of Performance Goals or other vesting criteria as the Administrator may determine andwhich may be settled for cash, Shares or other securities or a combination of the foregoingpursuant to Section 10.          (kk) “Plan” means this 1998 Stock Plan, as amended and restated.          (ll) “Restricted Stock” means Shares issued pursuant to a Restricted Stock award underSection 8 of the Plan, or issued pursuant to the early exercise of an Option.          (mm) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal tothe Fair Market Value of one Share, granted pursuant to Section 9. Each Restricted Stock Unitrepresents an unfunded and unsecured obligation of the Company.          (nn) “Return on Assets” means as to any Performance Period, the percentage equal tothe Company’s or a business unit’s Operating Income, divided by average net Company or businessunit, as applicable, assets.          (oo) “Return on Equity” means as to any Performance Period, the percentage equal tothe Company’s Net Income divided by average stockholder’s equity.          (pp) “Return on Sales” means as to any Performance Period, the percentage equal to theCompany’s or a business unit’s Operating Income, divided by the Company’s or the business unit’s,as applicable, revenue.          (qq) “Revenue” means as to any Performance Period, the Company’s or business unit’snet sales.          (rr) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,as in effect when discretion is being exercised with respect to the Plan.          (ss) “Section 16(b)” means Section 16(b) of the Exchange Act.          (tt) “Service Provider” means an Employee, Director or Consultant.          (uu) “Share” means a share of the Common Stock, as adjusted in accordance with Section13 of the Plan.          (vv) “Stock Appreciation Right” means an Award, granted alone or in connection with anOption, that pursuant to Section 7 is designated as a Stock Appreciation Right.          (ww) “Subsidiary” means a “subsidiary corporation”, whether nowor hereafter existing, as defined in Section 424(f) of the Code.
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          (xx) “Total Stockholder Return” means as to any Performance Period, the total return(change in Share price plus reinvestment of any dividends) of a Share.     3. Stock Subject to the Plan.          (a) Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan,the maximum aggregate number of Shares which may be optioned and sold under the Plan is two millionone hundred and fifty thousand (2,150,000) Shares. The Shares may be authorized, but unissued, orreacquired Common Stock.          (b) Full Value Awards. Any Shares subject to Options or Stock Appreciation Rightswill be counted against the numerical limits of this Section 3 as one Share for every Share subjectthereto. Any Shares subject to Awards of Restricted Stock, Restricted Stock Units, PerformanceShares or Performance Units with a per share or unit purchase price lower than 100% of Fair MarketValue on the date of grant will be counted against the numerical limits of this Section 3 as two(2) Shares for every one Share subject thereto. To the extent that a Share that was subject to anAward that counted as two (2) Shares against the Plan reserve pursuant to the preceding sentence isrecycled back into the Plan under the next paragraph of this Section 3, the Plan will be creditedwith two (2) Shares.          (c) Lapsed Awards. If an Award expires or becomes unexercisable without having beenexercised in full, or, with respect to Restricted Stock, Restricted Stock Units, Performance Sharesor Performance Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or forAwards other than Options and Stock Appreciation Rights, the forfeited or repurchased shares) whichwere subject thereto will become available for future grant or sale under the Plan (unless the Planhas terminated). With respect to Stock Appreciation Rights, Shares actually issued pursuant to aStock Appreciation Right as well as the Shares that represent payment of the exercise price willcease to be available under the Plan. Shares that have actually been issued under the Plan underany Award will not be returned to the Plan and will not become available for future distributionunder the Plan; provided, however, that if Shares subject to Awards of Restricted Stock, RestrictedStock Units, Performance Shares or Performance Units are repurchased by the Company or areforfeited to the Company, such Shares will become available for future grant under the Plan.Shares used to pay the exercise price of an Option will not become available for future grant orsale under the Plan. Shares used to satisfy tax withholding obligations will not become availablefor future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cashrather than Shares, such cash payment will not reduce the number of Shares available for issuanceunder the Plan. Notwithstanding the foregoing and, subject to adjustment provided in Section 13,the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options willequal the aggregate Share number stated in Section 3(a), plus, to the extent allowable underSection 422 of the Code, any Shares that become available for issuance under the Plan under thisSection 3(c).          (d) Share Reserve. The Company, during the term of this Plan, will at all timesreserve and keep available such number of Shares as will be sufficient to satisfy the requirementsof the Plan.     4. Administration of the Plan.          (a) Procedure.
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               (i) Multiple Administrative Bodies. The Plan may be administered by differentCommittees with respect to different groups of Service Providers.               (ii) Section 162(m). To the extent that the Administrator determines it to bedesirable to qualify Options granted hereunder as “performance-based compensation” within themeaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more“outside directors” within the meaning of Section 162(m) of the Code.               (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exemptunder Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy therequirements for exemption under Rule 16b-3.               (iv) Other Administration. Other than as provided above, the Plan shall beadministered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfyApplicable Laws.          (b) Powers of the Administrator. Subject to the provisions of the Plan, and in thecase of a Committee, subject to the specific duties delegated by the Board to such Committee, theAdministrator shall have the authority, in its discretion:               (i) to select the Service Providers to whom Awards may be granted hereunder;               (ii) to determine the terms and conditions, not inconsistent with the terms of the Plan, ofany Award granted hereunder;               (iii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;               (iv) to prescribe, amend and rescind rules and regulations relating to the Plan, includingrules and regulations relating to sub-plans established for the purpose of satisfying applicableforeign laws;               (v) to modify or amend each Award (subject to Section 21(c) of the Plan) including, withoutlimitation, the discretionary authority to extend the post-termination exercisability period ofAwards longer than is otherwise provided for in the Plan. Notwithstanding the previous sentence,the Administrator may not modify or amend an Option or Stock Appreciation Right to reduce theexercise price of such Option or Stock Appreciation Right after it has been granted (except foradjustments made pursuant to Section 16) nor may the Administrator cancel any outstanding Option orStock Appreciation Right and replace it with a new Option or Stock Appreciation Right with a lowerexercise price, unless, in either case, such action is approved by the Company’s stockholders;               (vi) to authorize any person to execute on behalf of the Company any instrument required toeffect the grant of an Award previously granted by the Administrator;               (vii) to allow a Participant to defer the receipt of the payment of cash or the delivery ofShares that would otherwise be due to such Participant under an Award pursuant to such proceduresas the Administrator may determine; and
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               (viii) to make all other determinations deemed necessary or advisable for administering thePlan.          (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinationsand interpretations shall be final and binding on all Participants and any other holders of Awards.     5. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, RestrictedStock, Restricted Stock Units, Performance Shares and Performance Units as the Administratordetermines may be granted to Service Providers. Incentive Stock Options may be granted only toEmployees of the Company or any Parent or Subsidiary of the Company.     6. Options.          (a) Limitations.               (i) Each Option shall be designated in the Award Agreement as either an Incentive Stock Optionor a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that theaggregate Fair Market Value of the Shares with respect to which Incentive Stock Options areexercisable for the first time by the Participant during any calendar year (under all plans of theCompany and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated asNonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall betaken into account in the order in which they were granted. The Fair Market Value of the Sharesshall be determined as of the time the Option with respect to such Shares is granted.               (ii) The following limitations shall apply to grants of Options:                    (1) No Service Provider shall be granted, in any Fiscal Year, Options to purchase more than200,000 Shares.                    (2) In connection with his or her initial service, a Service Provider may be granted Optionsto purchase up to an additional 400,000 Shares which shall not count against the limit set forth insubsection (1) above.                    (3) The foregoing limitations shall be adjusted proportionately in connection with any changein the Company’s capitalization as described in Section 13.                    (4) If an Option is cancelled in the same fiscal year of the Company in which it was granted(other than in connection with a transaction described in Section 13), the cancelled Option will becounted against the limits set forth in subsections (1) and (2) above. For this purpose, if theexercise price of an Option is reduced, the transaction will be treated as a cancellation of theOption and the grant of a new Option.          (b) Term of Option. The term of each Option shall be stated in the Award Agreement andshall be seven (7) years from the date of grant or such shorter term as may be provided by theAdministrator; provided, however, that in the case of an Incentive Stock Option granted to aParticipant who, at the time the Incentive Stock Option is granted, owns stock representing morethan ten percent (10%) of the total combined voting power of all classes of stock of the Company orany Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from thedate of grant or such shorter term as may be provided by the Administrator.
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          (c) Option Exercise Price and Consideration.               (i) Exercise Price. The per share exercise price for the Shares to be issued pursuantto exercise of an Option shall be determined by the Administrator, subject to the following:                    (1) In the case of an Incentive Stock Option                         a) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stockrepresenting more than ten percent (10%) of the voting power of all classes of stock of the Companyor any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the FairMarket Value per Share on the date of grant.                         b) granted to any Employee other than an Employee described in paragraph (A) immediatelyabove, the per Share exercise price shall be no less than 100% of the Fair Market Value per Shareon the date of grant.                    (2) In the case of a Nonstatutory Stock Option, the per Share exercise price will bedetermined by the Administrator, but will be no less than 100% of the Fair Market Value per Shareon the date of grant.                    (3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price ofless than 100% of the Fair Market Value per Share on the date of grant pursuant to a transactiondescribed in, and in a manner consistent with, Section 424(a) of the Code.               (ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administratorshall fix the period within which the Option may be exercised and shall determine any conditionswhich must be satisfied before the Option may be exercised.               (iii) Form of Consideration. The Administrator will determine the acceptable form(s) ofconsideration for exercising an Option, including the method of payment, to the extent permitted byApplicable Laws.          (d) Exercise of Option.               (i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereundershall be exercisable according to the terms of the Plan and at such times and under such conditionsas determined by the Administrator and set forth in the Award Agreement. An Option may not beexercised for a fraction of a Share.               An Option shall be deemed exercised when the Company receives: (i) written or electronicnotice of exercise (in accordance with the Award Agreement) from the person entitled to exercisethe Option, and (ii) full payment for the Shares with respect to which the Option is exercisedtogether with any applicable withholding taxes. Full payment may consist of any consideration andmethod of payment authorized by the Administrator and permitted by the Award Agreement and thePlan. Shares issued upon exercise of an Option shall be issued in the name of the Participant or,if requested by the Participant, in the name of the Participant and his or her spouse. Until theShares are issued (as evidenced by the appropriate entry on the books of the Company or of a dulyauthorized transfer agent of the Company), no right to vote or receive dividends or any otherrights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding theexercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly afterthe Option
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is exercised. No adjustment will be made for a dividend or other right for which the recorddate is prior to the date the Shares are issued, except as provided in Section 13 of the Plan.               Exercising an Option in any manner shall decrease the number of Shares thereafter available,both for purposes of the Plan and for sale under the Option, by the number of Shares as to whichthe Option is exercised.               (ii) Termination of Relationship as a Service Provider. If an Participant ceases to bea Service Provider, other than upon the Participant’s death or Disability, the Participant mayexercise his or her Option within such period of time as is specified in the Award Agreement to theextent that the Option is vested on the date of termination (but in no event later than theexpiration of the term of such Option as set forth in the Award Agreement). In the absence of aspecified time in the Award Agreement, the Option shall remain exercisable for three (3) monthsfollowing the Participant’s termination. If, on the date of termination, the Participant is notvested as to his or her entire Option, the Shares covered by the unvested portion of the Optionshall revert to the Plan. If, after termination, the Participant does not exercise his or herOption within the time specified by the Administrator, the Option shall terminate, and the Sharescovered by such Option shall revert to the Plan.               (iii) Disability of Participant. If an Participant ceases to be a Service Provider asa result of the Participant’s Disability, the Participant may exercise his or her Option withinsuch period of time as is specified in the Award Agreement to the extent the Option is vested onthe date of termination (but in no event later than the expiration of the term of such Option asset forth in the Award Agreement). In the absence of a specified time in the Award Agreement, theOption shall remain exercisable for twelve (12) months following the Participant’s termination. If,on the date of termination, the Participant is not vested as to his or her entire Option, theShares covered by the unvested portion of the Option shall revert to the Plan. If, aftertermination, the Participant does not exercise his or her Option within the time specified herein,the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.               (iv) Death of Participant. If an Participant dies while a Service Provider, the Optionmay be exercised within such period of time as is specified in the Award Agreement (but in no eventlater than the expiration of the term of such Option as set forth in the Award Agreement), by theParticipant’s estate or by a person who acquires the right to exercise the Option by bequest orinheritance, but only to the extent that the Option is vested on the date of death. In the absenceof a specified time in the Award Agreement, the Option shall remain exercisable for twelve (12)months following the Participant’s termination. If, at the time of death, the Participant is notvested as to his or her entire Option, the Shares covered by the unvested portion of the Optionshall immediately revert to the Plan. The Option may be exercised by the executor or administratorof the Participant’s estate or, if none, by the person(s) entitled to exercise the Option under theParticipant’s will or the laws of descent or distribution. If the Option is not so exercised withinthe time specified herein, the Option shall terminate, and the Shares covered by such Option shallrevert to the Plan.
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     7. Stock Appreciation Rights.          (a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of thePlan, a Stock Appreciation Right may be granted to Service Providers at any time and from time totime as will be determined by the Administrator, in its sole discretion.          (b) Number of Shares. The Administrator will have complete discretion to determinethe number of Stock Appreciation Rights granted to any Participant, provided that during any FiscalYear, no Participant will be granted Stock Appreciation Rights covering more than 200,000 Shares.Notwithstanding the foregoing limitation, in connection with a Participant’s initial service as anEmployee, an Employee may be granted Stock Appreciation Rights covering up to an additional 400,000Shares.          (c) Exercise Price and Other Terms. The Administrator, subject to the provisions ofthe Plan, will have complete discretion to determine the terms and conditions of Stock AppreciationRights granted under the Plan, provided, however, that the exercise price will be not less than onehundred percent (100%) of the Fair Market Value of a Share on the date of grant.          (d) Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will beevidenced by an Award Agreement that will specify the exercise price, the term of the StockAppreciation Right, the conditions of exercise, and such other terms and conditions as theAdministrator, in its sole discretion, will determine.          (e) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted underthe Plan will expire upon the date determined by the Administrator, in its sole discretion, and setforth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) also willapply to Stock Appreciation Rights.          (f) Payment of Stock Appreciation Right Amount. Upon exercise of a Stock AppreciationRight, a Participant will be entitled to receive payment from the Company in an amount determinedby multiplying:               (i) The difference between the Fair Market Value of a Share on the date of exercise over theexercise price; times               (ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may bein cash, in Shares of equivalent value, or in some combination thereof.     8. Restricted Stock.          (a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, theAdministrator, at any time and from time to time, may grant Shares of Restricted Stock to ServiceProviders in such amounts as the Administrator, in its sole discretion, will determine.          (b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced byan Award Agreement that will specify the number of Shares granted, and such other
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terms and conditions as the Administrator, in its sole discretion, will determine.Notwithstanding the foregoing, during any Fiscal Year no Participant will receive more than anaggregate of 150,000 Shares of Restricted Stock; provided, however, that in connection with aParticipant’s initial service as an Employee, an Employee may be granted an aggregate of up to anadditional 150,000 Shares of Restricted Stock. Unless the Administrator determines otherwise,Shares of Restricted Stock will be held by the Company as escrow agent until the restrictions onsuch Shares have lapsed.          (c) Transferability. Except as provided in this Section 8, Shares of Restricted Stockmay not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until theShares have vested and are no longer subject to a substantial risk of forfeiture.          (d) Other Restrictions. The Administrator, in its sole discretion, may impose suchother restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.          (e) Removal of Restrictions. Except as otherwise provided in this Section 8, Sharesof Restricted Stock covered by each Restricted Stock grant made under the Plan will be releasedfrom escrow as soon as practicable after the last day the Shares have vested and are no longersubject to a substantial risk of forfeiture. The restrictions will lapse at a rate determined bythe Administrator. The Administrator, in its discretion, may accelerate the time at which anyrestrictions will lapse or be removed.          (f) Voting Rights. During the period during which Shares of Restricted Stock areunvested and subject to a substantial risk of forfeiture, Service Providers holding such Shares mayexercise full voting rights with respect to those Shares, unless the Administrator determinesotherwise.          (g) Dividends and Other Distributions. During the period during which Shares ofRestricted Stock are unvested and subject to substantial risk of forfeiture, Service Providersholding such Shares will be entitled to receive all dividends and other distributions paid withrespect to such Shares unless otherwise Administrator provides otherwise. If any such dividends ordistributions are paid in Shares, the Shares will be subject to the same restrictions ontransferability and forfeitability as the Shares of Restricted Stock with respect to which theywere paid.          (h) Return of Restricted Stock to Company. On the date set forth in the AwardAgreement, the Restricted Stock for which restrictions have not lapsed will revert to the Companyand again will become available for grant under the Plan.     9. Restricted Stock Units.          (a) Grant. Restricted Stock Units may be granted at any time and from time to time asdetermined by the Administrator. Each Restricted Stock Unit grant shall be evidenced by an AwardAgreement that shall specify such other terms and conditions as the Administrator, in its solediscretion, shall determine, including all terms, conditions, and restrictions related to thegrant, the number of Restricted Stock Units and the form of payout, which, subject to Section 9(d),may be left to the discretion of the Administrator. Notwithstanding the anything to the contraryin this subsection (a), during any Fiscal Year, no Participant will receive more than an aggregateof 150,000 Restricted Stock Units; provided, however, that in connection with a Participant’sinitial service as an Employee, an Employee may be granted an aggregate of up to an additional150,000 Restricted Stock Units.
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          (b) Vesting Criteria and Other Terms. The Administrator shall set vesting criteria inits discretion, which, depending on the extent to which the criteria are met, will determine thenumber of Restricted Stock Units that will be paid out to the Participant. The Administrator mayset vesting criteria based upon the achievement of Company-wide, business unit, or individual goals(including, but not limited to, continued employment or service), or any other basis determined bythe Administrator in its discretion.          (c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, theParticipant shall be entitled to receive a payout as specified in the Restricted Stock Unit AwardAgreement. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units,the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must bemet to receive a payout.          (d) Form and Timing of Payment. Payment of earned Restricted Stock Units shall bemade as soon as practicable after the date(s) set forth in the Award Agreement. The Administrator,in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combinationthereof. Shares represented by Restricted Stock Units that are fully paid in cash again shall beavailable for grant under the Plan.          (e) Cancellation. On the date set forth in the Award Agreement, all unearnedRestricted Stock Units shall be forfeited to the Company.     10. Performance Units and Performance Shares.          (a) Grant of Performance Units/Shares. Performance Units and Performance Shares maybe granted to Service Providers at any time and from time to time, as will be determined by theAdministrator, in its sole discretion. The Administrator will have complete discretion indetermining the number of Performance Units/Shares granted to each Participant provided that duringany Fiscal Year, (a) no Participant will receive Performance Units having an initial value greaterthan $1,000,000, and (b) no Participant will receive more than 150,000 Performance Shares.Notwithstanding the foregoing limitation, in connection with a Participant’s initial service as anEmployee, an Employee may be granted up to an additional 150,000 Performance Shares.          (b) Value of Performance Units/Shares. Each Performance Unit will have an initialvalue that is established by the Administrator on or before the date of grant. Each PerformanceShare will have an initial value equal to the Fair Market Value of a Share on the date of grant.          (c) Performance Objectives and Other Terms. The Administrator will set performanceobjectives or other vesting provisions (including, without limitation, continued status as aService Provider) in its discretion which, depending on the extent to which they are met, willdetermine the number or value of Performance Units/Shares that will be paid out to the Participant        . Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specifythe Performance Period, and such other terms and conditions as the Administrator, in its solediscretion, will determine.          (d) Earning of Performance Units/Shares. After the applicable Performance Period hasended, the holder of Performance Units/Shares will be entitled to receive a payout of the number ofPerformance Units/Shares earned by the Participant over the Performance Period, to be
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determined as a function of the extent to which the corresponding performance objectives orother vesting provisions have been achieved. After the grant of a Performance Unit/Share, theAdministrator, in its sole discretion, may reduce or waive any performance objectives or othervesting provisions for such Performance Unit/Share.          (e) Form and Timing of Payment of Performance Units/Shares. Payment of earnedPerformance Units/Shares will be made as soon as practicable after the expiration of the applicablePerformance Period. The Administrator, in its sole discretion, may pay earned PerformanceUnits/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to thevalue of the earned Performance Units/Shares at the close of the applicable Performance Period) orin a combination thereof.          (f) Cancellation of Performance Units/Shares. On the date set forth in the AwardAgreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, andagain will be available for grant under the Plan.     11. Leaves of Absence. Unless the Administrator provides otherwise, vesting of Awardsgranted hereunder will be suspended during any unpaid leave of absence. A Service Provider willnot cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii)transfers between locations of the Company or between the Company, its Parent, or any Subsidiary.For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unlessreemployment upon expiration of such leave is guaranteed by statute or contract. If reemploymentupon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3)months following the 91st day of such leave any Incentive Stock Option held by the Participant willcease to be treated as an Incentive Stock Option and will be treated for tax purposes as aNonstatutory Stock Option.     12. Transferability of Awards. Unless determined otherwise by the Administrator, anAward may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any mannerother than by will or by the laws of descent or distribution and may be exercised, during thelifetime of the Participant, only by the Participant. If the Administrator makes an Awardtransferable, such Award will contain such additional terms and conditions as the Administratordeems appropriate.     13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.          (a) Changes in Capitalization. Subject to any required action by the stockholders ofthe Company, the number of shares of Common Stock that have been authorized for issuance under thePlan but as to which no Awards have yet been granted or which have been returned to the Plan uponcancellation or expiration of an Award, the number of shares of Common Stock as well as the priceper share of Common Stock covered by each such outstanding Award, and the numerical Share limits inSections 6, 7, 8, 9 and 10, shall be proportionately adjusted for any change in, or increase ordecrease in the number of issued shares of Common Stock resulting from a stock split, reverse stocksplit, stock dividend, spin-off, combination or reclassification of the Common Stock, or any otherchange in, or increase or decrease in the number of issued shares of Common Stock effected withoutreceipt of consideration by the Company; provided, however, that conversion of any convertiblesecurities of the Company shall not be deemed to have been “effected without receipt ofconsideration.” Such adjustment shall be made by the Board, whose determination in that respectshall be final, binding and conclusive. Except as expressly provided herein, no issuance by theCompany of shares of stock of any class, or securities convertible into shares of stock of any
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class, shall affect, and no adjustment by reason thereof shall be made with respect to, thenumber or price of shares of Common Stock subject to an Award.          (b) Dissolution or Liquidation. In the event of the proposed dissolution orliquidation of the Company, the Administrator shall notify each Participant as soon as practicableprior to the effective date of such proposed transaction. The Administrator in its discretion mayprovide for a Participant to have the right to exercise his or her Award until ten (10) days priorto such transaction as to all of the Optioned Stock covered thereby, including Shares as to whichthe Award would not otherwise be exercisable. In addition, the Administrator may provide that anyCompany repurchase option or reacquisition right applicable to any Restricted Stock shall lapse asto all such Shares, provided the proposed dissolution or liquidation takes place at the time and inthe manner contemplated. To the extent it has not been previously exercised, an Award willterminate immediately prior to the consummation of such proposed action.          (c) Merger or Asset Sale. In the event of a merger of the Company with or into anothercorporation or the sale of all or substantially all of the Company’s assets, each outstanding Awardwill be assumed or an equivalent award substituted by the successor corporation or a Parent orSubsidiary of the successor corporation. In the event that the successor corporation refuses toassume or substitute for the Award, the Participant will fully vest in and have the right toexercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares asto which such Awards would not otherwise be vested or exercisable, all restrictions on RestrictedStock and Restricted Stock Units will lapse, and, with respect to Performance Shares andPerformance Units, all Performance Goals or other vesting criteria will be deemed achieved attarget levels and all other terms and conditions met. In addition, if an Option or StockAppreciation Right becomes fully vested and exercisable in lieu of assumption or substitution inthe event of a merger or sale of assets, the Administrator will notify the Participant in writingor electronically that the Option or Stock Appreciation Right will be fully vested and exercisablefor a period of time determined by the Administrator in its sole discretion, and the Option orStock Appreciation Right will terminate upon the expiration of such period.          For the purposes of this subsection (c), an Award will be considered assumed if, following themerger or sale of assets, the Award confers the right to purchase or receive, for each Sharesubject to the Award immediately prior to the merger or sale of assets, the consideration (whetherstock, cash, or other securities or property) or, in the case of a Stock Appreciation Right uponthe exercise of which the Administrator determines to pay cash or a Restricted Stock Unit,Performance Share or Performance Unit which the Administrator can determine to pay in cash, thefair market value of the consideration received in the merger or merger or sale of assets byholders of Common Stock for each Share held on the effective date of the transaction (and ifholders were offered a choice of consideration, the type of consideration chosen by the holders ofa majority of the outstanding Shares); provided, however, that if such consideration received inthe merger or sale of assets is not solely common stock of the successor corporation or its Parent,the Administrator may, with the consent of the successor corporation, provide for the considerationto be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of aRestricted Stock Unit, Performance Share or Performance Unit, for each Share subject to such Award(or in the case of Restricted Stock Units or Performance Units, the number of implied sharesdetermined by dividing the value of the Restricted Stock Units or Performance Units, as applicable,by the per share consideration received by holders of Common Stock in the merger or sale ofassets), to be solely common stock of the successor corporation or its Parent equal in fair marketvalue to the per share consideration received by holders of Common Stock in the merger or sale ofassets.
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          Notwithstanding anything in this Section 13(c) to the contrary, an Award that vests, is earnedor paid-out upon the satisfaction of one or more Performance Goals will not be considered assumedif the Company or its successor modifies any of such Performance Goals without the Participant’sconsent; provided, however, a modification to such Performance Goals only to reflect the successorcorporation’s post-transaction corporate structure will not be deemed to invalidate an otherwisevalid Award assumption.14. Tax Withholding          (a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant toan Award (or exercise thereof), the Company will have the power and the right to deduct orwithhold, or require a Participant to remit to the Company, an amount sufficient to satisfyfederal, state, local, foreign or other taxes (including the Participant’s FICA obligation)required to be withheld with respect to such Award (or exercise thereof).          (b) Withholding Arrangements. The Administrator, in its sole discretion and pursuantto such procedures as it may specify from time to time, may permit a Participant to satisfy suchtax withholding obligation, in whole or in part by (without limitation) (a) paying cash, (b)electing to have the Company withhold otherwise deliverable cash or Shares having a Fair MarketValue equal to the amount required to be withheld, (c) delivering to the Company already-ownedShares having a Fair Market Value equal to the amount required to be withheld, or (d) selling asufficient number of Shares otherwise deliverable to the Participant through such means as theAdministrator may determine in its sole discretion (whether through a broker or otherwise) equal tothe amount required to be withheld. The amount of the withholding requirement will be deemed toinclude any amount which the Administrator agrees may be withheld at the time the election is made,not to exceed the amount determined by using the maximum federal, state or local marginal incometax rates applicable to the Participant with respect to the Award on the date that the amount oftax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld ordelivered will be determined as of the date that the taxes are required to be withheld.     15. No Effect on Employment or Service. Neither the Plan nor any Award will conferupon a Participant any right with respect to continuing the Participant’s relationship as a ServiceProvider with the Company, nor will they interfere in any way with the Participant’s right or theCompany’s right to terminate such relationship at any time, with or without cause, to the extentpermitted by Applicable Laws.     16. Date of Grant. The date of grant of an Award will be, for all purposes, the dateon which the Administrator makes the determination granting such Award, or such other later date asis determined by the Administrator. Notice of the determination will be provided to eachParticipant within a reasonable time after the date of such grant.     17. Term of Plan. Subject to Section 21 of the Plan, the Plan shall become effectiveupon its original adoption by the Board. It shall continue in effect for a term of ten (10) yearsunless terminated earlier under Section 18 of the Plan.     18. Amendment and Termination of the Plan.          (a) Amendment and Termination. The Administrator may at any time amend, alter,suspend or terminate the Plan.
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          (b) Stockholder Approval. The Company will obtain stockholder approval of any Planamendment to the extent necessary and desirable to comply with Applicable Laws.          (c) Effect of Amendment or Termination. No amendment, alteration, suspension ortermination of the Plan will impair the rights of any Participant, unless mutually agreed otherwisebetween the Participant and the Administrator, which agreement must be in writing and signed by theParticipant and the Company. Termination of the Plan will not affect the Administrator’s abilityto exercise the powers granted to it hereunder with respect to Awards granted under the Plan priorto the date of such termination.     19. Conditions Upon Issuance of Shares.          (a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Awardunless the exercise of such Award and the issuance and delivery of such Shares will comply withApplicable Laws and will be further subject to the approval of counsel for the Company with respectto such compliance.          (b) Investment Representations. As a condition to the exercise of an Award, theCompany may require the person exercising such Award to represent and warrant at the time of anysuch exercise that the Shares are being purchased only for investment and without any presentintention to sell or distribute such Shares if, in the opinion of counsel for the Company, such arepresentation is required.     20. Inability to Obtain Authority. The inability of the Company to obtain authorityfrom any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel tobe necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company ofany liability in respect of the failure to issue or sell such Shares as to which such requisiteauthority shall not have been obtained.     21. Stockholder Approval. The Plan shall be subject to approval by the stockholders ofthe Company within twelve (12) months after the date the Plan is adopted. Such stockholderapproval shall be obtained in the manner and to the degree required under Applicable Laws.
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