exv10w1



 





Exhibit 10.1




IRIDEX CORPORATION




1998 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 of
substantial 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, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares and Performance
Units, 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 administering
the Plan, in accordance with Section 4 of the Plan.



          
(b) “Affiliate” means any corporation or any other entity (including, but not limited
to, partnerships and joint ventures) controlling, controlled by, or under common control with the
Company.



          
(c) “Applicable Laws” means the requirements relating to the administration of
equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under
the Plan.



          
(d) “Award” means, individually or collectively, a grant under the Plan of Options,
Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units and
Performance Shares as the Administrator may determine.



          
(e) “Award Agreement” means the written or electronic agreement setting forth the
terms and provisions applicable to each Award granted under the Plan, which shall include an Option
Agreement. 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-sales
securities.



 









 





          
(h) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a
section 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 satisfying
Applicable 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 successor
thereto.



          
(l) “Consultant” means any person, including an advisor, engaged by the Company or its
Affiliate to render services to such entity.



          
(m) “Determination Date” means the latest possible date that will not jeopardize the
qualification of an Award granted under the Plan as “performance-based compensation” under Section
162(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, the
Administrator in its discretion may determine whether a permanent and total disability exists in
accordance with uniform and non-discriminatory standards adopted by the Administrator from time to
time.



          
(p) “Earnings Per Share” means as to any Performance Period, the Company’s or a
business unit’s Net Income, divided by a weighted average number of Common Stock outstanding and
dilutive common equivalent Shares deemed outstanding.



          
(q) “Employee” means any person, including Officers and Directors, employed by the
Company or its Affiliates. Neither service as a Director nor payment of a director’s fee by the
Company 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 the
Administrator may determine in good faith by reference to the price of such stock on any
established stock exchange or a national market system on the day of determination if the Common
Stock is so listed on any established stock exchange or a national market system. If the Common
Stock is not listed on any established stock exchange or a national market system, the value of the
Common 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 is
otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.



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(v) “Individual Objectives” means as to a Participant for any Performance Period, the
objective and measurable goals set by a “management by objectives” process and approved by the
Administrator (in its discretion).



          
(w) “Net Income” means as to any Performance Period, the Company’s or a business
unit’s income after taxes.



          
(x) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or
is not intended to qualify as an Incentive Stock Option.



          
(y) “Officer” means a person who is an officer of the Company within the meaning of
Section 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 a
business unit’s sum of Net Income plus depreciation and amortization plus changes in working
capital comprised of accounts receivable, inventories, other current assets, trade accounts
payable, accrued expenses, product warranty, advance payments from customers and long-term accrued
expenses.



          
(aa) “Operating Income” means as to any Performance Period, the Company’s or a
business unit’s income from operations but excluding any unusual items or non-operating or non-cash
related expenses.



          
(bb) “Option” means a stock option granted pursuant to the Plan.



          
(cc) “Option Agreement” means an agreement between the Company and a Participant
evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject
to 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, as
defined in Section 424(e) of the Code.



          
(ff) “Participant” means the holder of an outstanding Award, which shall include an
Optionee.



          
(gg) “Performance Goals” means the goal(s) (or combined goal(s)) determined by the
Administrator (in its discretion) to be applicable to a Participant with respect to an Award. As
determined by the Administrator, the Performance Goals applicable to an Award may provide for a
targeted level or levels of achievement using one or more of the following measures: (a) Cash
Position, (b) Earnings Per Share, (c) Individual Objectives, (d) Net Income, (e) Operating Cash
Flow, (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 to
Participant and from Award to Award. Prior to the Determination Date, the Administrator shall
determine whether any significant element(s) shall be included in or excluded from the calculation
of any Performance Goal with respect to any Participant. For example (but not by way of
limitation), the Administrator may determine that the measures for one or more Performance Goals
shall be based upon the Company’s pro-forma results and/or results in accordance with generally
accepted accounting principles.



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(hh) “Performance Period” means any Fiscal Year or such other period as determined by
the Administrator in its sole discretion.



          
(ii) “Performance Share” means an Award denominated in Shares which may be earned in
whole or in part upon attainment of Performance Goals or other vesting criteria as the
Administrator may determine pursuant to Section 10.



          
(jj) “Performance Unit” means an Award which may be earned in whole or in part upon
attainment of Performance Goals or other vesting criteria as the Administrator may determine and
which may be settled for cash, Shares or other securities or a combination of the foregoing
pursuant 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 under
Section 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 to
the Fair Market Value of one Share, granted pursuant to Section 9. Each Restricted Stock Unit
represents an unfunded and unsecured obligation of the Company.



          
(nn) “Return on Assets” means as to any Performance Period, the percentage equal to
the Company’s or a business unit’s Operating Income, divided by average net Company or business
unit, as applicable, assets.



          
(oo) “Return on Equity” means as to any Performance Period, the percentage equal to
the Company’s Net Income divided by average stockholder’s equity.



          
(pp) “Return on Sales” means as to any Performance Period, the percentage equal to the
Company’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’s
net 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 Section
13 of the Plan.



          
(vv) “Stock Appreciation Right” means an Award, granted alone or in connection with an
Option, that pursuant to Section 7 is designated as a Stock Appreciation Right.



          
(ww) “Subsidiary” means a “subsidiary corporation”, whether now
or 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 million
one hundred and fifty thousand (2,150,000) Shares. The Shares may be authorized, but unissued, or
reacquired Common Stock.



          
(b) Full Value Awards. Any Shares subject to Options or Stock Appreciation Rights
will be counted against the numerical limits of this Section 3 as one Share for every Share subject
thereto. Any Shares subject to Awards of Restricted Stock, Restricted Stock Units, Performance
Shares or Performance Units with a per share or unit purchase price lower than 100% of Fair Market
Value 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 an
Award that counted as two (2) Shares against the Plan reserve pursuant to the preceding sentence is
recycled back into the Plan under the next paragraph of this Section 3, the Plan will be credited
with two (2) Shares.



          
(c) Lapsed Awards. If an Award expires or becomes unexercisable without having been
exercised in full, or, with respect to Restricted Stock, Restricted Stock Units, Performance Shares
or Performance Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for
Awards other than Options and Stock Appreciation Rights, the forfeited or repurchased shares) which
were subject thereto will become available for future grant or sale under the Plan (unless the Plan
has terminated). With respect to Stock Appreciation Rights, Shares actually issued pursuant to a
Stock Appreciation Right as well as the Shares that represent payment of the exercise price will
cease to be available under the Plan. Shares that have actually been issued under the Plan under
any Award will not be returned to the Plan and will not become available for future distribution
under the Plan; provided, however, that if Shares subject to Awards of Restricted Stock, Restricted
Stock Units, Performance Shares or Performance Units are repurchased by the Company or are
forfeited 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 or
sale under the Plan. Shares used to satisfy tax withholding obligations will not become available
for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash
rather than Shares, such cash payment will not reduce the number of Shares available for issuance
under 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 will
equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable under
Section 422 of the Code, any Shares that become available for issuance under the Plan under this
Section 3(c).



          
(d) Share Reserve. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as will be sufficient to satisfy the requirements
of the Plan.



     4. Administration of the Plan.



          
(a) Procedure.



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(i) Multiple Administrative Bodies. The Plan may be administered by different
Committees with respect to different groups of Service Providers.



               
(ii) Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Options granted hereunder as “performance-based compensation” within the
meaning 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 exempt
under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3.



               
(iv) Other Administration. Other than as provided above, the Plan shall be
administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy
Applicable Laws.



          
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the Board to such Committee, the
Administrator 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, of
any 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, including
rules and regulations relating to sub-plans established for the purpose of satisfying applicable
foreign laws;



               
(v) to modify or amend each Award (subject to Section 21(c) of the Plan) including, without
limitation, the discretionary authority to extend the post-termination exercisability period of
Awards 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 the
exercise price of such Option or Stock Appreciation Right after it has been granted (except for
adjustments made pursuant to Section 16) nor may the Administrator cancel any outstanding Option or
Stock Appreciation Right and replace it with a new Option or Stock Appreciation Right with a lower
exercise 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 to
effect 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 of
Shares that would otherwise be due to such Participant under an Award pursuant to such procedures
as the Administrator may determine; and



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(viii) to make all other determinations deemed necessary or advisable for administering the
Plan.



          
(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations
and interpretations shall be final and binding on all Participants and any other holders of Awards.



     5. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Shares and Performance Units as the Administrator
determines may be granted to Service Providers. Incentive Stock Options may be granted only to
Employees 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 Option
or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be
taken into account in the order in which they were granted. The Fair Market Value of the Shares
shall 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 than
200,000 Shares.



                    
(2) In connection with his or her initial service, a Service Provider may be granted Options
to purchase up to an additional 400,000 Shares which shall not count against the limit set forth in
subsection (1) above.



                    
(3) The foregoing limitations shall be adjusted proportionately in connection with any change
in 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 be
counted against the limits set forth in subsections (1) and (2) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.



          
(b) Term of Option. The term of each Option shall be stated in the Award Agreement and
shall be seven (7) years from the date of grant or such shorter term as may be provided by the
Administrator; provided, however, that in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock representing more
than ten percent (10%) of the total combined voting power of all classes of stock of the Company or
any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the
date 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 pursuant
to 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 stock
representing more than ten percent (10%) of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.



                         
b) granted to any Employee other than an Employee described in paragraph (A) immediately
above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share
on the date of grant.



                    
(2) In the case of a Nonstatutory Stock Option, the per Share exercise price will be
determined by the Administrator, but will be no less than 100% of the Fair Market Value per Share
on the date of grant.



                    
(3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of
less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction
described 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 Administrator
shall fix the period within which the Option may be exercised and shall determine any conditions
which must be satisfied before the Option may be exercised.



               
(iii) Form of Consideration. The Administrator will determine the acceptable form(s) of
consideration for exercising an Option, including the method of payment, to the extent permitted by
Applicable Laws.



          
(d) Exercise of Option.



               
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder
shall be exercisable according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Award Agreement. An Option may not be
exercised for a fraction of a Share.



               
An Option shall be deemed exercised when the Company receives: (i) written or electronic
notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise
the Option, and (ii) full payment for the Shares with respect to which the Option is exercised
together with any applicable withholding taxes. Full payment may consist of any consideration and
method of payment authorized by the Administrator and permitted by the Award Agreement and the
Plan. 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 the
Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after
the Option



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is exercised. No adjustment will be made for a dividend or other right for which the record
date 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 which
the Option is exercised.



               
(ii) Termination of Relationship as a Service Provider. If an Participant ceases to be
a Service Provider, other than upon the Participant’s death or Disability, the Participant may
exercise his or her Option within such period of time as is specified in the Award Agreement to the
extent that the Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement). In the absence of a
specified time in the Award Agreement, the Option shall remain exercisable for three (3) months
following the Participant’s termination. If, on the date of termination, the Participant is not
vested as to his or her entire Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan. If, after termination, the Participant does not exercise his or her
Option within the time specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.



               
(iii) Disability of Participant. If an Participant ceases to be a Service Provider as
a result of the Participant’s Disability, the Participant may exercise his or her Option within
such period of time as is specified in the Award Agreement to the extent the Option is vested on
the date of termination (but in no event later than the expiration of the term of such Option as
set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the
Option 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, the
Shares covered by the unvested portion of the Option shall revert to the Plan. If, after
termination, 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 Option
may be exercised within such period of time as is specified in the Award Agreement (but in no event
later than the expiration of the term of such Option as set forth in the Award Agreement), by the
Participant’s estate or by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of death. In the absence
of 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 not
vested as to his or her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the executor or administrator
of the Participant’s estate or, if none, by the person(s) entitled to exercise the Option under the
Participant’s will or the laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.



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     7. Stock Appreciation Rights.



          
(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the
Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to
time as will be determined by the Administrator, in its sole discretion.



          
(b) Number of Shares. The Administrator will have complete discretion to determine
the number of Stock Appreciation Rights granted to any Participant, provided that during any Fiscal
Year, 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 an
Employee, an Employee may be granted Stock Appreciation Rights covering up to an additional 400,000
Shares.



          
(c) Exercise Price and Other Terms. The Administrator, subject to the provisions of
the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation
Rights granted under the Plan, provided, however, that the exercise price will be not less than one
hundred 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 be
evidenced by an Award Agreement that will specify the exercise price, the term of the Stock
Appreciation Right, the conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.



          
(e) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under
the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set
forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) also will
apply to Stock Appreciation Rights.



          
(f) Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation
Right, a Participant will be entitled to receive payment from the Company in an amount determined
by multiplying:



               
(i) The difference between the Fair Market Value of a Share on the date of exercise over the
exercise 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 be
in 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, the
Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service
Providers in such amounts as the Administrator, in its sole discretion, will determine.



          
(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by
an 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 an
aggregate of 150,000 Shares of Restricted Stock; provided, however, that in connection with a
Participant’s initial service as an Employee, an Employee may be granted an aggregate of up to an
additional 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 on
such Shares have lapsed.



          
(c) Transferability. Except as provided in this Section 8, Shares of Restricted Stock
may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the
Shares have vested and are no longer subject to a substantial risk of forfeiture.



          
(d) Other Restrictions. The Administrator, in its sole discretion, may impose such
other 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, Shares
of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released
from escrow as soon as practicable after the last day the Shares have vested and are no longer
subject to a substantial risk of forfeiture. The restrictions will lapse at a rate determined by
the Administrator. The Administrator, in its discretion, may accelerate the time at which any
restrictions will lapse or be removed.



          
(f) Voting Rights. During the period during which Shares of Restricted Stock are
unvested and subject to a substantial risk of forfeiture, Service Providers holding such Shares may
exercise full voting rights with respect to those Shares, unless the Administrator determines
otherwise.



          
(g) Dividends and Other Distributions. During the period during which Shares of
Restricted Stock are unvested and subject to substantial risk of forfeiture, Service Providers
holding such Shares will be entitled to receive all dividends and other distributions paid with
respect to such Shares unless otherwise Administrator provides otherwise. If any such dividends or
distributions are paid in Shares, the Shares will be subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted Stock with respect to which they
were paid.



          
(h) Return of Restricted Stock to Company. On the date set forth in the Award
Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company
and 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 as
determined by the Administrator. Each Restricted Stock Unit grant shall be evidenced by an Award
Agreement that shall specify such other terms and conditions as the Administrator, in its sole
discretion, shall determine, including all terms, conditions, and restrictions related to the
grant, 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 contrary
in this subsection (a), during any Fiscal Year, no Participant will receive more than an aggregate
of 150,000 Restricted Stock Units; provided, however, that in connection with a Participant’s
initial service as an Employee, an Employee may be granted an aggregate of up to an additional
150,000 Restricted Stock Units.



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(b) Vesting Criteria and Other Terms. The Administrator shall set vesting criteria in
its discretion, which, depending on the extent to which the criteria are met, will determine the
number of Restricted Stock Units that will be paid out to the Participant. The Administrator may
set 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 by
the Administrator in its discretion.



          
(c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the
Participant shall be entitled to receive a payout as specified in the Restricted Stock Unit Award
Agreement. 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 be
met to receive a payout.



          
(d) Form and Timing of Payment. Payment of earned Restricted Stock Units shall be
made 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 combination
thereof. Shares represented by Restricted Stock Units that are fully paid in cash again shall be
available for grant under the Plan.



          
(e) Cancellation. On the date set forth in the Award Agreement, all unearned
Restricted 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 may
be granted to Service Providers at any time and from time to time, as will be determined by the
Administrator, in its sole discretion. The Administrator will have complete discretion in
determining the number of Performance Units/Shares granted to each Participant provided that during
any Fiscal Year, (a) no Participant will receive Performance Units having an initial value greater
than $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 an
Employee, 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 initial
value that is established by the Administrator on or before the date of grant. Each Performance
Share 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 performance
objectives or other vesting provisions (including, without limitation, continued status as a
Service Provider) in its discretion which, depending on the extent to which they are met, will
determine 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 specify
the Performance Period, and such other terms and conditions as the Administrator, in its sole
discretion, will determine.



          
(d) Earning of Performance Units/Shares. After the applicable Performance Period has
ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of
Performance 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 or
other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the
Administrator, in its sole discretion, may reduce or waive any performance objectives or other
vesting provisions for such Performance Unit/Share.



          
(e) Form and Timing of Payment of Performance Units/Shares. Payment of earned
Performance Units/Shares will be made as soon as practicable after the expiration of the applicable
Performance Period. The Administrator, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the
value of the earned Performance Units/Shares at the close of the applicable Performance Period) or
in a combination thereof.



          
(f) Cancellation of Performance Units/Shares. On the date set forth in the Award
Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and
again will be available for grant under the Plan.



     11. Leaves of Absence. Unless the Administrator provides otherwise, vesting of Awards
granted hereunder will be suspended during any unpaid leave of absence. A Service Provider will
not 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, unless
reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment
upon 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 will
cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option.



     12. Transferability of Awards. Unless determined otherwise by the Administrator, an
Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant. If the Administrator makes an Award
transferable, such Award will contain such additional terms and conditions as the Administrator
deems appropriate.



     13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.



          
(a) Changes in Capitalization. Subject to any required action by the stockholders of
the Company, the number of shares of Common Stock that have been authorized for issuance under the
Plan but as to which no Awards have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Award, the number of shares of Common Stock as well as the price
per share of Common Stock covered by each such outstanding Award, and the numerical Share limits in
Sections 6, 7, 8, 9 and 10, shall be proportionately adjusted for any change in, or increase or
decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, spin-off, combination or reclassification of the Common Stock, or any other
change in, or increase or decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been “effected without receipt of
consideration.” Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the
Company 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, the
number or price of shares of Common Stock subject to an Award.



          
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as soon as practicable
prior to the effective date of such proposed transaction. The Administrator in its discretion may
provide for a Participant to have the right to exercise his or her Award until ten (10) days prior
to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which
the Award would not otherwise be exercisable. In addition, the Administrator may provide that any
Company repurchase option or reacquisition right applicable to any Restricted Stock shall lapse as
to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an Award will
terminate 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 another
corporation or the sale of all or substantially all of the Company’s assets, each outstanding Award
will be assumed or an equivalent award substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Award, the Participant will fully vest in and have the right to
exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as
to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted
Stock and Restricted Stock Units will lapse, and, with respect to Performance Shares and
Performance Units, all Performance Goals or other vesting criteria will be deemed achieved at
target levels and all other terms and conditions met. In addition, if an Option or Stock
Appreciation Right becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator will notify the Participant in writing
or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable
for a period of time determined by the Administrator in its sole discretion, and the Option or
Stock 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 the
merger or sale of assets, the Award confers the right to purchase or receive, for each Share
subject to the Award immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon
the 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, the
fair market value of the consideration received in the merger or merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen by the holders of
a majority of the outstanding Shares); provided, however, that if such consideration received in
the 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 consideration
to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a
Restricted 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 shares
determined 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 of
assets), to be solely common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the merger or sale of
assets.



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Notwithstanding anything in this Section 13(c) to the contrary, an Award that vests, is earned
or paid-out upon the satisfaction of one or more Performance Goals will not be considered assumed
if the Company or its successor modifies any of such Performance Goals without the Participant’s
consent; provided, however, a modification to such Performance Goals only to reflect the successor
corporation’s post-transaction corporate structure will not be deemed to invalidate an otherwise
valid Award assumption.



     14. Tax Withholding




          
(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to
an Award (or exercise thereof), the Company will have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy
federal, 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 pursuant
to such procedures as it may specify from time to time, may permit a Participant to satisfy such
tax 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 Market
Value equal to the amount required to be withheld, (c) delivering to the Company already-owned
Shares having a Fair Market Value equal to the amount required to be withheld, or (d) selling a
sufficient number of Shares otherwise deliverable to the Participant through such means as the
Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to
the amount required to be withheld. The amount of the withholding requirement will be deemed to
include 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 income
tax rates applicable to the Participant with respect to the Award on the date that the amount of
tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or
delivered 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 confer
upon a Participant any right with respect to continuing the Participant’s relationship as a Service
Provider with the Company, nor will they interfere in any way with the Participant’s right or the
Company’s right to terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.



     16. Date of Grant. The date of grant of an Award will be, for all purposes, the date
on which the Administrator makes the determination granting such Award, or such other later date as
is determined by the Administrator. Notice of the determination will be provided to each
Participant 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 effective
upon its original adoption by the Board. It shall continue in effect for a term of ten (10) years
unless 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 Plan
amendment to the extent necessary and desirable to comply with Applicable Laws.



          
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise
between the Participant and the Administrator, which agreement must be in writing and signed by the
Participant and the Company. Termination of the Plan will not affect the Administrator’s ability
to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior
to 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 Award
unless the exercise of such Award and the issuance and delivery of such Shares will comply with
Applicable Laws and will be further subject to the approval of counsel for the Company with respect
to such compliance.



          
(b) Investment Representations. As a condition to the exercise of an Award, the
Company may require the person exercising such Award to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.



     20. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.



     21. Stockholder Approval. The Plan shall be subject to approval by the stockholders of
the Company within twelve (12) months after the date the Plan is adopted. Such stockholder
approval shall be obtained in the manner and to the degree required under Applicable Laws.




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