Document:

Warrant dated as of March 27, 2003

Exhibit 10.2 
 
WARRANT TO PURCHASE COMMON STOCK 
 
THIS WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS. 
 
WARRANT TO PURCHASE COMMON STOCK 
 

	 Number of Shares:
	  	 117,727 shares

	
	 Warrant Price:
	  	 $2.00

	
	 Issuance Date:
	  	 March 27, 2003

	
	 Expiration Date:
	  	 No later than March 26, 2006 (see below)

 
 
THIS WARRANT CERTIFIES THAT for value received, Securities Trust Company TTEE Irvine Sensors Corporation Cash or Deferred & Stock Bonus Plan
Ret. Plan FBO: John Carson or its registered assigns (hereinafter called the “Holder”) is entitled to purchase from Irvine Sensors Corporation (hereinafter called the “Company”), the above referenced number of fully
paid and nonassessable shares (the “Shares”) of the Company’s common stock (the “Common Stock”), at the exercise price per Share of $2.00, subject to adjustment as provided for herein (the
“Warrant Price”). This Warrant is issued in connection with that certain Subscription Agreement dated as of «ISSUANCE_DATE», by and between the Company and Holder (the “Subscription
Agreement”) pursuant to which the Holder purchased units consisting of two (2) shares of Common Stock and a warrant to purchase one (1) share of Common Stock. The exercise of this Warrant shall be subject to the provisions, limitations
and restrictions contained herein. 
 
Term and Exercise. 
 
Term. This Warrant is
exercisable in whole or in part (but not as to any fractional share of Common Stock), at any time and from time to time beginning on the date hereof and expiring on the earlier of (a) three (3) years from the date of the closing of the Subscription
Agreement or (b) 1:00 p.m. Eastern Time on the 30th trading day that (1) the Common Stock of the Company has
consecutively traded over $3.00 per share as reported by the Nasdaq Stock Market (or comparable trading market) and (2) the shares issuable pursuant to this Warrant have been registered with the Securities and Exchange Commission on an effective
registration statement on Form S-3. 
 
Procedure for Exercise of
Warrant. Holder may exercise this Warrant by delivering the following to the principal office of the Company in accordance with Section 5.1 hereof: (a) a duly executed Notice of Exercise in substantially the form attached as Schedule A, (b)
payment of the Warrant Price then in effect for each of the Shares being purchased, as designated in the Notice of Exercise, and (c) this Warrant. Payment of the Warrant Price may be in 

cash, certified or official bank check payable to the order of the Company, or wire transfer of funds to the Company’s account (or any
combination of any of the foregoing) in the amount of the Warrant Price for each share being purchased. Notwithstanding any provisions herein to the contrary, if the Current Market Price (as defined below) is greater than the Warrant Price as of the
day of exercise, the Holder may elect to receive, without the payment by the Holder of any additional consideration, shares of Common Stock equal to the value of the “spread” on the Shares (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company in accordance with Section 5.1, together with the Notice of Exercise, in which event the Company shall issue to the Holder hereof a number of shares of Common Stock computed using the
following formula: 
 
X = Y x (CMP-WP) 
 
CMP 
 

	
	 Where: X =
	 	 the number of shares of Common Stock to be issued to the Holder pursuant to this net exercise

	
	 Y =
	 	 the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being
exercised, that portion of the Warrant requested to be exercised

	
	 CMP =
	 	 the Current Market Price (as of the date of such calculation) of one share of Common Stock

	
	 WP =
	 	 the Warrant Price (as adjusted as of the date of such calculation)

 
For purposes of this
Warrant, the “Current Market Price” of one share of the Company’s Common Stock as of a particular date shall be determined as follows: (a) if traded on a national securities exchange or through the Nasdaq Stock Market,
the Current Market Price shall be deemed to be the volume weighted average trading price of the Common Stock on such exchange for the five (5) business days immediately prior to the date of exercise indicated in the Notice of Exercise (or if no
reported sales took place on such day, the last date on which any such sales took place prior to the date of exercise); (b) if traded over-the-counter but not on the Nasdaq Stock Market, the Current Market Price shall be deemed to be the average of
the closing bid and asked prices for the five (5) business days immediately prior to the date of exercise indicated in the Notice of Exercise; and (c) if there is no active public market, the Current Market Price shall be the fair market value of
the Common Stock as of the date of exercise, as determined in good faith by the Board of Directors of the Company. 
 
Delivery of Certificate and New Warrant. In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for
the shares of Common Stock so purchased, registered in the name of the Holder or such other name or names as may be designated by the Holder, together with any other securities or other property which the Holder is entitled to receive upon exercise
of this Warrant, shall be delivered to the Holder hereof, at the Company’s expense, within a reasonable time, not exceeding fifteen (15) calendar days, after the rights represented by this Warrant shall have been so exercised; and, unless this
Warrant has expired, a new Warrant representing the number of Shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder hereof within such time. The
person in whose name any certificate for shares of Common Stock is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was surrendered and payment
of the Warrant Price was received by the Company, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is on a date when the stock transfer books of the Company are closed, such person
shall be deemed to have become the holder of such Shares at the close of business on the next succeeding date on which the stock transfer books are open. 

 
Restrictive Legend.
Each certificate for Shares shall bear a restrictive legend in substantially the form as follows, together with any additional legend required by (a) any applicable state securities laws and (b) any securities exchange upon which such Shares may, at
the time of such exercise, be listed: 
 
“The shares
represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold, offered for sale, transferred or pledged in the absence of such registration or an exemption therefrom under such Act.”

 
Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend shall also bear such legend unless, in the opinion of counsel for the Holder thereof (which counsel shall be reasonably satisfactory to counsel for the Company), the securities represented thereby are not, at
such time, required by law to bear such legend. 
 
Fractional
Shares. No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or
conversion of the Warrant, the Company shall eliminate such fractional share interest by paying to Holder an amount computed by multiplying the fractional interest by the Current Market Price of a full Share. 
 
Representations, Warranties and Covenants.

 
Representations and
Warranties. 
 
The Company is a corporation duly organized,
validly existing and in good standing under the laws of its state of incorporation and has all necessary power and authority to perform its obligations under this Warrant; 
 
The execution, delivery and performance of this Warrant has been duly authorized by all necessary actions on the part of the
Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms; and 
 
This Warrant does not violate and is not in conflict with any of the provisions of the Company’s Certificate of Incorporation, Bylaws and any
resolutions of the Company’s Board of Directors or stockholders, or any agreement of the Company, and no event has occurred and no condition or circumstance exists that might (with or without notice or lapse of time) constitute or result
directly or indirectly in such a violation or conflict. 
 
Issuance of Shares. The Company covenants and agrees that all shares of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable, and free from all transfer taxes, liens and charges with respect to the issue thereof. The Company further covenants and agrees that the Company will at all times have authorized and reserved, free from preemptive rights, a sufficient
number of shares of Common Stock to provide for the exercise in full of the rights represented by this Warrant. If at any time the number of authorized but unissued shares of Common Stock of the Company shall not be sufficient to effect the exercise
of the Warrant in full, subject to the limitations set forth in Section 1.2 hereto, then the Company will take all such corporate action as may, in the opinion of counsel to the Company, be necessary or advisable to increase the number of its
authorized shares of Common Stock as shall be sufficient to permit the exercise of the Warrant in full, subject to the limitations set forth in Section 1.2 hereto, including without limitation, using its best efforts to obtain any necessary
stockholder approval of such increase. The Company further covenants and agrees that if any shares of capital stock to be reserved for the purpose of the issuance of shares upon the exercise of this Warrant require registration with or approval of
any governmental authority under any federal or state law before such shares may be validly issued or delivered upon exercise, then the Company will in good faith and as expeditiously as possible endeavor to secure such 

registration or approval, as the case may be. If and so long as the Common Stock issuable upon the exercise of this Warrant is listed on any
national securities exchange or the Nasdaq Stock Market, the Company will, if permitted by the rules of such exchange or market, list and keep listed on such exchange or market, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant. 
 
Other Adjustments.

 
Subdivision or Combination of Shares. In case the
Company shall at any time subdivide its outstanding Common Stock into a greater number of shares, the Warrant Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Shares obtainable upon exercise of
this Warrant shall be proportionately increased. Conversely, in case the outstanding Common Stock of the Company shall be combined into a smaller number of shares, the Warrant Price in effect immediately prior to such combination shall be
proportionately increased and the number of Shares obtainable upon exercise of this Warrant shall be proportionately decreased. 
 
Dividends in Common Stock, Other Stock or Property. If at any time or from time to time the holders of Common Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefor: 
 
Common Stock, options or any shares or other securities which are at any time directly or indirectly convertible into or exchangeable for Common Stock, or
any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution; 
 
any cash paid or payable other than as a regular cash dividend; or 
 
Common Stock or additional shares or other securities or property (including cash) by way of spin-off, split-up,
reclassification, combination of shares or similar corporate rearrangement (other than Common Stock issued as a stock split or adjustments in respect of which shall be covered by the terms of Section 3.1 above) and additional shares, other
securities or property issued in connection with a Change (as defined below) (which shall be covered by the terms of Section 3.3 below), then and in each such case, the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive,
in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of stock and other securities and property (including cash in the cases referred to in clause (b)
above and this clause (c)) which such Holder would hold on the date of such exercise had such Holder been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such shares or
all other additional stock and other securities and property. 
 
Reorganization, Reclassification, Consolidation, Merger or Sale. If any recapitalization, reclassification or reorganization of the share capital of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its shares and/or assets or other transaction (including, without limitation, a sale of substantially all of its assets followed by a liquidation) shall be effected in such a way that holders
of Common Stock shall be entitled to receive shares, securities or other assets or property (a “Change”), then, as a condition of such Change, lawful and adequate provisions shall be made by the Company whereby the Holder
hereof shall thereafter have the right to purchase and receive (in lieu of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares, securities or other assets
or property as may be issued or payable with respect to or in exchange for the number of outstanding Common Stock which such Holder would have been entitled 

to receive had such Holder exercised this Warrant immediately prior to the consummation of such Change. The Company or its successor shall
promptly issue to Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to give effect to the adjustments provided for in this Section
3 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 3.3 shall similarly apply to successive Changes. 

 
Ownership and Transfer.

 
Ownership of This Warrant. The Company may deem and
treat the person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to
the contrary until presentation of this Warrant for registration of transfer as provided in this Section 4. 
 
Transfer and Replacement. This Warrant and all rights hereunder are transferable in whole or in part upon the books of the Company by the Holder hereof in person or by duly authorized attorney,
and a new Warrant or Warrants, of the same tenor as this Warrant but registered in the name of the transferee or transferees (and in the name of the Holder, if a partial transfer is effected) shall be made and delivered by the Company upon surrender
of this Warrant duly endorsed, at the office of the Company in accordance with Section 5.1 hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated, the Company will make and deliver a new Warrant of like tenor, in lieu of this Warrant. This Warrant shall be promptly cancelled by the Company upon the surrender hereof
in connection with any transfer or replacement. Except as otherwise provided above, in the case of the loss, theft or destruction of a Warrant, the Company shall pay all expenses, transfer taxes and other charges payable in connection with any
transfer or replacement of this Warrant, other than stock transfer taxes (if any) payable in connection with a transfer of this Warrant, which shall be payable by the Holder. Holder will not transfer this Warrant and the rights hereunder except in
compliance with federal and state securities laws and except after providing evidence of such compliance reasonably satisfactory to the Company. 
 
Miscellaneous Provisions. 
 
Notices. Any notice or other document required or permitted to be given or delivered to the Holder shall be delivered or forwarded to the Holder at
the address for Holder provide in the Subscription Agreement or to such other address or number as shall have been furnished to the Company in writing by the Holder. Any notice or other document required or permitted to be given or delivered to the
Company shall be delivered or forwarded to the Company at 3001 Redhill Ave., Costa Mesa, California 92626, Attention: Chief Financial Officer (Facsimile No. 714/444-8773, with a copy to Dorsey & Whitney LLP, 38 Technology Drive, Irvine,
California 92618, Attention: Ellen S. Bancroft, Esq. (Facsimile No. 949/790-6301), or to such other address or number as shall have been furnished to Holder in writing by the Company. 
 
All notices, requests and approvals required by this Warrant shall be in writing and shall be conclusively deemed to be given
(a) when hand-delivered to the other party, (b) when received if sent by facsimile at the address and number set forth above; provided that notices given by facsimile shall not be effective, unless either (i) a duplicate copy of such facsimile
notice is promptly given by depositing the same in the mail, postage prepaid and addressed to the party as set forth below or (ii) the receiving party delivers a written confirmation of receipt for such notice by any other method permitted under
this paragraph; and further provided that any notice given by facsimile received after 5:00 p.m. (recipient’s time) 

or on a non-business day shall be deemed received on the next business day; (c) five (5) business days after deposit in the United States
mail, certified, return receipt requested, postage prepaid, and addressed to the party as set forth below; or (d) the next business day after deposit with an international overnight delivery service, postage prepaid, addressed to the party as set
forth below with next business day delivery guaranteed; provided that the sending party receives confirmation of delivery from the delivery service provider. 
 
No Rights as Stockholder; Limitation of Liability. This Warrant shall not entitle the Holder to any of the rights of a stockholder of the Company
except upon exercise in accordance with the terms hereof. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the Warrant Price hereunder or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 
 
Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California as applied to agreements among California residents made and to be performed entirely within the State of California, without giving effect to the conflict of law principles thereof. 
 
Waiver, Amendments and Headings. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in writing signed by both parties (either generally or in a particular instance and either retroactively or prospectively). The headings in this Warrant are for purposes of
reference only and shall not affect the meaning or construction of any of the provisions hereof. 

 
IN WITNESS WHEREOF, the
Company has caused this Warrant to be signed by its duly authorized officer this 27th day of March, 2003.

 
COMPANY: 
 

	 IRVINE SENSORS CORPORATION

	
	 By:
	 	 /s/    Robert G.
Richards        

	 	 	 Robert G. Richards,
 Chief Executive Officer

 
SCHEDULE A

 
FORM OF NOTICE OF EXERCISE 
 
[To be signed only upon exercise of the Warrant] 
 
TO BE EXECUTED BY THE REGISTERED HOLDER 
 
TO EXERCISE THE WITHIN WARRANT 
 
The undersigned hereby elects to purchase
             shares of Common Stock (the “Shares”) under the Warrant to Purchase Common Stock dated
            , which the undersigned is entitled to purchase pursuant to the terms of such Warrant, and [check one]: 
 

	 ̈	 	Cash Exercise. The undersigned has delivered $            , the aggregate Warrant Price for
             Shares purchased herewith, in full in cash or by certified or official bank check or wire transfer; 

 

	 ̈	 	Net Exercise. In exchange for the issuance of              Shares, the undersigned hereby agrees
to surrender the right to purchase              shares of Common Stock pursuant to the net exercise provisions set forth in Section 1.2 of the Warrant. 

 
Please issue a certificate or certificates representing such shares of Common
Stock in the name of the undersigned or in such other name as is specified below and in the denominations as is set forth below: 
 
[Type Name of Holder as it should appear on the stock certificate] 
 
[Requested Denominations – if no denomination is specified, a single certificate will be issued] 
 
The initial address of such Holder to be entered on the books of Company shall
be: 
 
The undersigned hereby represents and warrants that the
undersigned is acquiring such shares for his own account for investment purposes only, and not for resale or with a view to distribution of such shares or any part thereof. 

 

	 By:
	 	 
	
	 Print Name:
	 	 
	
	 Title:
	 	 
	
	 Dated:2003 Stock Incentive Plan

Exhibit 10.3 
 
Irvine Sensors Corporation 
2003 Stock Incentive Plan 
 
Article 1 
 
General Provisions 
 
1.1. Purpose of the Plan. This Plan is intended to promote the interests of the Corporation by providing eligible persons, who are employed by or serving the Corporation or any Parent or Subsidiary, with the opportunity
to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to continue in such employ or service. 
 
Capitalized terms shall have the meanings assigned to such terms in the attached Appendix. 
 
1.2. Structure of the Plan. 
 
A. The Plan shall be divided into three
separate equity incentive programs: 
 
(i) the Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock; 
 
(ii) the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary); and

 
(iii) the Automatic Option
Grant Program under which eligible non-Employee Board members shall automatically receive option grants at designated intervals over their period of continued Board service. 
 
B. The provisions of Articles 1 and 5 shall apply to all equity programs under the Plan and
shall govern the interests of all persons under the Plan. 
 
1.3. Administration of the Plan. 
 
A. Administration of the Automatic Option Grant Program shall be self-executing in accordance with the terms of that program so that no Plan Administrator shall exercise any discretionary functions
with respect to any option grants or stock issuances made under that program. 
 
B. The Primary Committee and the Board shall have concurrent authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 

16 Insiders. (Options that are granted to Section 16 Insiders by the entire Board will not be exempt from the million dollar compensation
deduction limitation of Code Section 162(m).) Administration of the Discretionary Option Grant and Stock Issuance Programs with respect to all other persons eligible to participate in those programs may, at the Board’s discretion, be vested in
the Primary Committee or a Secondary Committee, or the Board may retain the power to administer those programs with respect to all such persons. However, any discretionary option grants or stock issuances for members of the Primary Committee should
be authorized by a disinterested majority of the Board. 
 
C. The Plan Administrator shall have the absolute discretion either to grant options in accordance with the Discretionary Option Grant Program or to effect stock issuances in accordance with the Stock Issuance Program.

 
D. Each Plan Administrator
shall have the authority (subject to the provisions of the Plan) to determine: 
 
(i) with respect to the option grants made pursuant to the Discretionary Option Grant Program, which eligible persons are to receive such grants, the time or times when those grants are to be made, the
number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the exercise price, the vesting schedule (if
any) applicable to the shares subject to the option and the maximum term for which the option is to remain outstanding; and 
 
(ii) with respect to stock issuances pursuant to the Stock Issuance Program, which eligible persons are to receive such
issuances, the time or times when the issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration for such shares. 
 
E. Each Plan Administrator shall have the
authority (subject to the provisions of the Plan) to establish such rules and procedures as it may deem appropriate for proper administration of the Discretionary Option Grant and Stock Issuance Programs and to make such determinations under, and
issue such interpretations of, the provisions of those programs and any outstanding options or stock issued under the Plan as it may deem necessary or advisable. Decisions of the Plan Administrator under the Plan shall be binding on all parties who
have an interest in the Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or any option granted or stock issued under the Plan. 
 
F. Members of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may
determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of the Primary Committee or any Secondary Committee and reassume all powers and authority previously delegated to such committee.

 
G. To the maximum extent permitted by law, the Corporation shall indemnify each member of the Board who acts as the Plan Administrator, as well as any other Employee of the Corporation with duties under the Plan, against expenses and
liabilities (including any amount paid in settlement) reasonably incurred by the individual in connection with any claims against the individual by reason of the performance of the individual’s duties under the Plan, unless the losses are due
to the individual’s gross negligence or lack of good faith. The Corporation will have the right to select counsel and to control the prosecution or defense of the suit. In the event that more than one person who is entitled to indemnification
is subject to the same claim, all such persons shall be represented by a single counsel, unless such counsel advises the Corporation in writing that he or she cannot represent all such persons under applicable rules of professional responsibility.
The Corporation will not be required to indemnify any person for any amount incurred through any settlement unless the Corporation consents in writing to the settlement. 
 
1.4. Eligibility. 
 
A. The persons eligible to participate in the Discretionary Option Grant and Stock Issuance
Programs are as follows: 
 
(i)
Employees, 
 
(ii) members of the
Board and the members of the board of directors of any Parent or Subsidiary, and 
 
(iii) independent contractors who provide services to the Corporation (or any Parent or Subsidiary). 
 
B. Only certain non-Employee Board members
shall be eligible to participate in the Automatic Option Grant Program. Individuals who are serving as non-Employee Board members at the close of business on the Plan Effective Date who have not previously been in the employ of the Corporation (or
any Parent or Subsidiary) shall be eligible to receive an option grant under the Automatic Option Grant Program on the Plan Effective Date. Individuals who first become non-Employee Board members after the Plan Effective Date who have not previously
been in the employ of the Corporation (or any Parent or Subsidiary) shall be eligible to receive an initial option grant under the Automatic Option Grant Program at the time he or she first becomes a non-Employee Board member. In addition, a
non-Employee Board member shall be eligible to receive an annual option grant under the Automatic Option Grant Program; provided such individual has been serving on the Board for at least six months prior to the date of grant. 
 
1.5. Stock Subject to the Plan. 
 
A. The shares of Common Stock issuable under
the Plan shall be shares of authorized but unissued or reacquired shares of Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock that 

may be issued and outstanding or subject to options outstanding under the Plan shall not exceed 1,500,000 shares. 
 
B. No one person participating in the Plan
may receive options and direct stock issuances pursuant to the Plan for more than 250,000 shares of Common Stock in the aggregate per calendar year. 
 
C. Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the
extent (i) the options expire or terminate for any reason prior to their being exercised in full or (ii) the options are cancelled in accordance with the cancellation-regrant provisions of the Discretionary Option Grant Program. Unvested shares
issued under the Plan and subsequently (a) cancelled or (b) repurchased by the Corporation, at a price per share not greater than the option exercise or direct issue price paid per share, pursuant to the Corporation’s repurchase rights under
the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan.
However, should the exercise price of an option granted pursuant to the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable pursuant to the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an option or the vesting of a stock issuance made pursuant to the Plan, then the number of shares of Common Stock available for issuance pursuant to the Plan shall be reduced by the gross
number of shares for which the option is exercised or which vest under the stock issuance, and not by the net number of shares of Common Stock issued to the holder of such option or stock issuance. 
 
D. Should any change be made to the Common
Stock by reason of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of
consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable pursuant to the Plan, (ii) the maximum number and/or class of securities for which any one person may be granted options and direct
stock issuances pursuant to the Plan per calendar year, (iii) the number and/or class of securities for which grants are subsequently to be made pursuant to the Automatic Option Grant Program to new and continuing non-Employee Board members, and
(iv) the number and/or class of securities and the exercise price per share in effect under each outstanding option granted pursuant to the Plan. Such adjustments to the outstanding options are to be effected in a manner that shall preclude the
enlargement or dilution of benefits under such options. The adjustments determined by the Plan Administrator shall be final. In no event shall any such adjustments be made in connection with the conversion of one or more outstanding shares of the
Corporation’s preferred stock or warrants into shares of Common Stock without the Corporation’s receipt of consideration. 

 
Article 2

 
Discretionary Option Grant Program

 
2.1. Exercise Price.

 
A. The exercise price per share
shall be fixed by the Plan Administrator. 
 
B. The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section 5.1 and the documents evidencing the option, be payable in one or more of the forms specified below:

 
(i) cash or check made payable
to the Corporation, 
 
(ii) with
shares of Common Stock held for the requisite period, if any, necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or 
 
(iii) to the extent the option is exercised
for vested shares and this procedure is not prohibited by law, through a special sale and remittance procedure pursuant to which Optionee shall concurrently provide irrevocable instructions to (1) a brokerage firm approved by the Corporation to
effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable
income and employment taxes required to be withheld by the Corporation by reason of such exercise and (2) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.

 
Except to the extent such sale
and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 
 
2.2. Exercise and Term of Options. Each option shall be exercisable at such time or times, during such period and for such
number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten years measured from the date that the option is granted. 
 
2.3. Effect of Termination of Service.

 
A. The following provisions
shall govern the exercise of any options granted to Optionee pursuant to the Discretionary Option Grant Program that are outstanding at the time Optionee’s Service ceases: 
 
(i) Immediately upon Optionee’s cessation of Service, each option shall terminate with
respect to the unvested shares subject to such option. 

 
(ii) Should Optionee’s Service be terminated for Misconduct or should Optionee otherwise engage in Misconduct, then each option shall terminate immediately with respect to all shares subject to such option. 
 
(iii) Should Optionee’s Service
terminate for reasons other than Misconduct, then each option shall remain exercisable during such period of time after Optionee’s Service ceases as shall be determined by the Plan Administrator and set forth in the documents evidencing the
option, but no option shall be exercisable after its Expiration Date. During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable
on the date Optionee’s Service ceases. Upon the expiration of the applicable exercise period or (if earlier) upon the Expiration Date, each option shall terminate with respect to any vested shares subject to the option. 
 
B. Understanding that there may be adverse
tax and accounting consequences to doing so, the Plan Administrator shall have complete discretion, exercisable either at the time an option is granted or at any time while Optionee remains in Service, to: 
 
(i) extend the period of time for which the
option is to remain exercisable following Optionee’s cessation of Service, but in no event beyond the Expiration Date, and/or 
 
(ii) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is exercisable at the time of Optionee’s cessation of Service but also with respect to one or more additional installments in which Optionee would have vested had Optionee continued
in Service. 
 
2.4. Unvested Shares.
The Plan Administrator shall have the discretion to grant options that are exercisable for unvested shares of Common Stock. Should Optionee’s Service cease while the shares issued upon the early exercise of Optionee’s option are still
unvested, the Corporation shall have the right to repurchase any or all of those unvested shares at a price per share equal to the lower of (i) the exercise price paid per share or (ii) the Fair Market Value per share at the time Optionee’s
Service ceases. Once the Corporation exercises its repurchase right, Optionee shall have no further stockholder rights with respect to those shares. The terms upon which such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. Any repurchases must be made in compliance with the relevant
provisions of Delaware law. 
 
2.5.
Limited Transferability of Options. An Incentive Option shall be exercisable only by Optionee during his or her lifetime and shall not be assignable or transferable other than by will or by the laws of inheritance following
Optionee’s death. A Non-Statutory Option may be assigned in whole or in part during Optionee’s lifetime to one or more of Optionee’s family members (as such term is defined in the instructions to Form S-8), or to Optionee’s
former 

spouse through a gift or domestic relations order. The terms applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. 
 
2.6. Incentive Options. The terms specified below shall be applicable to all Incentive Options. Except as modified by the
provisions of this Section 2.7, all the provisions of Articles 1, 2 and 5 shall be applicable to Incentive Options. Options that are specifically designated as Non-Statutory Options are not subject to the terms of this Section 2.7. 
 
A. Eligibility. Incentive Options may only be
granted to Employees. 
 
B.
Exercise Price. If an Incentive Option is granted to a 10% Stockholder, the exercise price per share shall not be less than 110% of the Fair Market Value per share of Common Stock on the date the option is granted and, if an Incentive Option is
granted to an Optionee who is not a 10% Stockholder, the exercise price per share shall not be less than 100% of the Fair Market Value per share of Common Stock on the date the option is granted. 
 
C. Dollar Limitation. The aggregate Fair
Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee pursuant to the Plan (or any other option plan of the Corporation or any Parent or Subsidiary)
may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed $100,000. To the extent that an Optionee’s options exceed that limit, they will be treated as Non-Statutory Options (but all of the
other provisions of the option shall remain applicable), with the first options that were awarded to Optionee to be treated as Incentive Options. 
 
D. Term. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the Expiration Date shall not
be more than five years from the date the option is granted. 
 
2.7. Change in Control/Proxy Contest. 
 
A. In the event a Change in Control occurs, the shares of Common Stock at the time subject to each outstanding option granted pursuant to this Discretionary Option Grant Program shall automatically
vest in full so that each such option shall, immediately prior to the effective date of the Change in Control, become exercisable for all of the shares of Common Stock at the time subject to such option. However, the shares subject to an outstanding
option shall not become vested on an accelerated basis if and to the extent: (i) the option is to be assumed or substituted with a new option by the successor corporation (or parent thereof) in accordance with Section 424(a) of the Code, (ii) the
option is to be replaced with a cash incentive program of any successor corporation (or parent thereof) which preserves the spread existing at the time of the Change in Control on any unvested shares and provides for subsequent payout of that spread
no later than the time Optionee would vest in those shares subject to the option, (iii) the option is to be continued in full force and effect pursuant to the terms of the Change in Control 

transaction, or (iv) the acceleration of the vesting of such option is subject to other limitations imposed by the Plan Administrator.

 
B. All outstanding repurchase
rights under the Discretionary Option Grant Program shall terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, immediately prior to the consummation of a Change in Control, except
to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) or are otherwise to continue in full force and effect pursuant to the terms of the Change in Control transaction, (ii) any property
(including cash payments) issued with respect to any unvested shares of Common Stock is to be held in escrow and released no later than as provided by the vesting schedule in effect for the unvested shares or (iii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator. 
 
C. Immediately following the consummation of the Change in Control, all outstanding options granted pursuant to the Discretionary Option Grant Program shall terminate, except to the extent assumed or
substituted by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction. 
 
D. Each option granted pursuant to the Discretionary Option Grant Program that is assumed,
substituted or otherwise continued in effect in connection with a Change in Control shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to Optionee
in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control. Appropriate adjustments to reflect such Change in Control shall also be made to (i) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such securities shall remain the same, (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan, and (iii) the maximum number
and/or class of securities for which any one person may be granted options and direct stock issuances pursuant to the Plan per calendar year. To the extent the holders of Common Stock receive cash consideration in whole or part for their Common
Stock in consummation of the Change in Control, the successor corporation may, in connection with the assumption of the outstanding options granted pursuant to the Discretionary Option Grant Program, substitute one or more shares of its own common
stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control transaction. 
 
E. Among its discretionary powers, the Plan Administrator shall have the ability to structure an option (either at the
time the option is granted or at any time while the option remains outstanding) so that some or all of the shares subject to that option shall automatically become vested (and the option shall become exercisable for such shares) upon (i) the
occurrence of a Change in Control, (ii) the consummation of a Proxy Contest, (iii) the occurrence of any other specified event and/or (iv) the Involuntary Termination of Optionee’s Service within a designated period of time following a
specified event. In addition, the Plan 

Administrator may provide that one or more of the Corporation’s repurchase rights with respect to some or all of the unvested shares
held by Optionee upon (a) the occurrence of a Change in Control, (b) the consummation of a Proxy Contest, (c) upon the occurrence of any other specified event and/or (d) the Involuntary Termination of Optionee’s Service within a designated
period of time following a specified event shall immediately terminate and all of the shares shall become vested. 
 
F. The portion of any Incentive Option accelerated in connection with a Change in Control or Proxy Contest shall remain
exercisable as an Incentive Option only to the extent the $100,000 limitation set forth in Section 2.6(C) is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option. 

 
Article 3

 
Stock Issuance Program

 
3.1. Purchase Price.

 
A. The purchase price per share
shall be fixed by the Plan Administrator. 
 
B. Shares of Common Stock may be issued pursuant to the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance: 
 
(i) cash or check made payable to the
Corporation, 
 
(ii) past services
rendered to the Corporation (or any Parent or Subsidiary), or 
 
(iii) a promissory note to the extent permitted by Section 5.1. 
 
3.2. Vesting Provisions. 
 
A. Shares of Common Stock issued pursuant to the Stock Issuance Program may, in the discretion of the Plan Administrator,
be fully and immediately vested upon issuance or may vest in one or more installments over Participant’s period of Service or upon attainment of specified performance objectives. Shares of Common Stock may also be issued pursuant to the Stock
Issuance Program pursuant to awards that entitle the recipients to receive those shares upon the attainment of designated performance goals or the satisfaction of specified Service requirements. 
 
B. Any new, substituted or additional
securities or other property (including money paid other than as a regular cash dividend) which Participant may have the right to receive with respect to Participant’s unvested shares of Common Stock by reason of any stock dividend, stock
split, reverse stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to Participant’s unvested shares of Common Stock and shall be treated as if they had been acquired on the same date as such shares and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate. 
 
C. Should
Participant cease to remain in Service while one or more shares of Common Stock issued pursuant to the Stock Issuance Program are unvested or should the performance objectives not be attained with respect to one or more such unvested shares of
Common Stock, then the Corporation shall have the right to repurchase those shares at a price per share equal to the lower of (i) the purchase price paid per share or (ii) the Fair Market Value 

per share on the date Participant’s Service ceases. The terms upon which such repurchase right shall be exercisable shall be established
by the Plan Administrator and set forth in the document evidencing such repurchase right. Any repurchases must be done in compliance with applicable state corporate law. 
 
D. The Plan Administrator may in its discretion waive the surrender and cancellation of one
or more unvested shares of Common Stock (or other assets attributable thereto) that would otherwise occur upon the cessation of Participant’s Service or the non-attainment of the performance objectives applicable to those shares. Such waiver
may be effected at any time and shall result in the immediate vesting of Participant’s interest in the shares of Common Stock to which the waiver applies. 
 
E. Outstanding share right awards granted pursuant to the Stock Issuance Program shall
automatically terminate, and no shares of Common Stock shall actually be issued in satisfaction of those awards, if the performance goals or Service requirements established for such awards are not attained or satisfied. The Plan Administrator,
however, shall have the discretionary authority to issue shares of Common Stock under one or more outstanding share right awards as to which the designated performance goals or Service requirements have not been attained or satisfied. 
 
3.3. Stockholder Rights. Subject to the terms of
the Stock Issuance Agreement, Participant shall have full stockholder rights with respect to any shares of Common Stock issued to Participant pursuant to the Stock Issuance Program, whether or not Participant’s interest in those shares is
vested. Accordingly, Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. Cash dividends constitute taxable compensation to Participant and are deductible by the Corporation (unless
Participant has made an election under Section 83(b) of the Code). 
 
3.4. Change in Control/Proxy Contest. 
 
A. Upon the occurrence of a Change in Control, all outstanding repurchase rights under the Stock Issuance Program shall terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) or are otherwise continue in full force and effect pursuant to the terms of the
transaction, (ii) the property (including cash payments) issued with respect to the unvested shares is held in escrow and released no later than as provided by the vesting schedule in effect for the unvested shares of Common Stock issued to Optionee
pursuant to the terms of the Change in Control transaction, or (iii) such accelerated vesting is precluded by limitations imposed by the Plan Administrator. 
 
B. The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are
issued or at any time while the Corporation’s repurchase rights are outstanding, to provide that those rights shall automatically terminate in whole or in part on an accelerated basis, and some or all of the shares of Common Stock subject to
those terminated rights shall immediately vest, upon the occurrence of a Change in Control, a 

Proxy Contest or another event, or in the event Participant’s Service is Involuntary Terminated within a designated period of time
following a specified event. 

 
Article 4

 
Automatic Option Grant Program

 
4.1. Grant Dates. Option
grants shall be made on the dates specified below: 
 
A. Each individual who is serving as a non-Employee Board member at the close of business on the Plan Effective Date shall be automatically granted at the close of business on the Plan Effective Date a Non-Statutory Option
to purchase 25,000 shares of Common Stock (an “Inception Grant”) if such individual has never been employed by the Corporation. 
 
B. Each individual who is first elected or appointed as a non-Employee Board member at any time after the Plan Effective
Date shall automatically be granted, on the date of such initial election or appointment, a Non-Statutory Option to purchase 25,000 shares of Common Stock (an “Initial Grant”) if such individual has never been employed by the Corporation.

 
C. On the date of each Annual
Stockholders’ Meeting (beginning with the 2004 Annual Stockholders’ Meeting), each individual who is to continue to serve as a non-Employee Board member shall automatically be granted a Non-Statutory Option to purchase 10,000 shares of
Common Stock (an “Annual Grant”), if such individual has served as a non-Employee Board member for at least six months. There shall be no limit on the number of such annual option grants any one non-Employee Board member may receive over
his or her period of Board service, and non-Employee Board members who have previously been employees of the Corporation (or any Parent or Subsidiary) or who have otherwise received one or more option grants from the Corporation shall be eligible to
receive one or more such annual option grants over their period of continued Board service. 
 
4.2. Exercise Price. The exercise price per share shall be equal to 100% of the Fair Market Value per share of Common Stock on the date the option is granted under the Automatic Option
Grant Program. 
 
4.3. Option Term.
Each option granted under the Automatic Option Grant Program shall have a term of ten years measured from the date the option is granted. 
 
4.4. Exercise and Vesting of Options. Each option granted under the Automatic Option Grant Program shall be
immediately exercisable for any or all of the shares subject to the option. However, any unvested shares purchased under the option shall be subject to repurchase by the Corporation, at a price per share equal to the lower of (i) the exercise price
paid per share or (ii) the Fair Market Value per share at the time Optionee’s Board service ceases. The shares subject to each Initial Grant and Inception Grant shall vest, and the Corporation’s repurchase right shall lapse, in a series of
two successive equal annual installments upon Optionee’s 

completion of each year of service as a Board member over the two-year period measured from the date the option is granted. The shares
subject to each Annual Grant shall vest in one installment upon Optionee’s completion of the one-year period of service measured from the date the option was granted. 
 
4.5. Termination of Board Service. The following provisions shall govern the exercise of any
options granted to Optionee pursuant to the Automatic Option Grant Program that are outstanding at the time Optionee ceases to serve as a Board member: 
 
A. Should Optionee’s service as a Board member cease for any reason other than death or Permanent Disability while
one or more options granted pursuant to this Automatic Option Grant Program are outstanding, then each such option shall remain exercisable, for any or all of the vested shares for which the option is exercisable at the time of such cessation of
Board service, until the earlier of (i) the Expiration Date or (ii) the expiration of the one-year period measured from the date Optionee’s Board service ceases. 
 
B. Should Optionee’s service as a Board member cease by reason of death or Permanent
Disability, then the unvested shares subject to any outstanding option granted pursuant to this Automatic Option Grant Program shall immediately vest in full and each such option shall remain exercisable for all the shares of Common Stock at the
time subject to that option, and the option may be exercised for any or all of those shares until the earlier of (i) the Expiration Date or (ii) the expiration of the one-year period measured from the date Optionee’s Board service ceases.

 
C. Each option granted pursuant
to this Automatic Option Grant Program that is outstanding at the time of Optionee’s cessation of Board service shall immediately terminate and cease to remain outstanding with respect to any and all unvested shares of Common Stock for which
the option is not otherwise at that time exercisable. Upon the expiration of the post-termination exercise period or (if earlier) upon the Expiration Date, the option shall terminate with respect to any vested shares for which the option has not
been exercised. 
 
4.6. Change in
Control/Proxy Contest. 
 
A. In the event a Change in Control occurs while Optionee remains a Board member, the shares of Common Stock at the time subject to each outstanding option that was granted pursuant to this Automatic Option Grant Program shall
automatically vest in full so that each such option shall, immediately prior to the consummation of the Change in Control, become exercisable for all the shares subject to the option at that time as fully vested shares of Common Stock and may be
exercised for any or all of those vested shares. Upon the consummation of the Change in Control, each automatic option grant shall terminate, except to the extent assumed or substituted by the successor corporation (or parent thereof) or otherwise
continued in effect pursuant to the terms of the Change in Control transaction. 

 
B. In the event a Proxy Contest occurs while Optionee remains a Board member, the shares of Common Stock at the time subject to each outstanding option granted pursuant to this Automatic Option Grant Program shall automatically vest
in full so that each such option shall, immediately prior to the consummation of the Proxy Contest, become exercisable for all the shares subject to the option as fully vested shares of Common Stock. Such option shall remain exercisable until the
earliest to occur of (i) the Expiration Date or (ii) the expiration of the three-year period measured from the date Optionee’s Board service ceases. 
 
C. All outstanding repurchase rights under this Automatic Option Grant Program shall automatically terminate, and the
shares of Common Stock subject to those terminated rights shall vest in full, immediately prior to the consummation of a Change in Control or a Proxy Contest that occurs while Optionee remains a Board member. 
 
D. Each option granted pursuant to this
Automatic Option Grant Program that is assumed, substituted or otherwise continued in effect in connection with a Change in Control shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of
securities which would have been issuable to Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control. Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same. To the extent the holders of Common Stock receive cash consideration in whole or part for their Common Stock in
consummation of the Change in Control, the successor corporation may, in connection with the assumption of the outstanding options granted pursuant to the Automatic Option Grant Program, substitute one or more shares of its own common stock with a
fair market value equivalent to the cash consideration paid per share of Common Stock in such transaction. 
 
4.7. Remaining Terms. The remaining terms of each option granted pursuant to the Automatic Option Grant Program shall be the
same as the terms in effect for option grants made pursuant to the Discretionary Option Grant Program. 

 
Article 5

 
Miscellaneous Matters

 
5.1. Financing. Unless doing
so would not comply with applicable law, the Plan Administrator may permit any Optionee or Participant to pay the exercise price for shares subject to an option granted under the Discretionary Option Grant Program or the purchase price of shares
issued under the Stock Issuance Program by delivering a full-recourse, interest-bearing promissory note secured by the purchased shares and payable in one or more installments. The Plan Administrator, after considering the potential adverse tax and
accounting consequences, shall set the remaining terms of the note. In no event may the maximum credit available to Optionee or Participant exceed the sum of (A) the aggregate option exercise price or purchase price payable for the purchased shares
(less the par value of those shares) plus (B) any applicable income and employment withholding tax liability incurred by Optionee or Participant in connection with the option exercise or share purchase. Prior to permitting the use of promissory
notes as payment under the Plan, the Plan Administrator should consider the restrictions on doing so imposed by Regulation U. 
 
5.2. Tax Withholding. 
 
A. The Corporation’s obligation to deliver shares of Common Stock upon the exercise of options or the issuance or
vesting of such shares granted pursuant to the Plan shall be subject to the satisfaction of all applicable income and employment tax withholding requirements. 
 
B. The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options or unvested shares
of Common Stock issued pursuant to the Plan (other than the options granted to non-Employee Board member or independent contractors) with the right to use shares of Common Stock in satisfaction of all or part of the withholding taxes to which such
holders may become subject in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in either or both of the following formats: 
 
(i) Stock Withholding: The election to have
the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares. 
 
(ii) Stock Delivery: The election to deliver to the Corporation, at the time the
Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise or share vesting triggering the withholding taxes). 
 
So as to avoid adverse accounting treatment, the number of
shares of Common Stock that may be withheld for this purpose shall not exceed the minimum number needed to satisfy the 

applicable income and employment tax withholding rules. Shares of Common Stock used to satisfy withholding tax obligations must have been
held for the requisite period, if any, necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes. 
 
5.3. Share Escrow/Legends. Unvested shares of Common Stock may, in the Plan Administrator’s discretion, be held in
escrow by the Corporation until Participant’s or Optionee’s interest in such shares vest or may be issued directly to Participant or Optionee with restrictive legends on the certificates evidencing the fact that Participant or Optionee
does not have a vested right to them. 
 
5.4.
Stockholder Rights. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become the holder of record of
the purchased shares. 
 
5.5. Cancellation
and Regrant of Options. The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding options granted pursuant to the
Plan and to grant in substitution new options covering the same or a different number of shares of Common Stock. 
 
5.6. Effective Date and Term of the Plan. 
 
A. The Plan shall become effective immediately on the Plan Effective Date. Options may be
granted pursuant to the Discretionary Option Grant at any time on or after the Plan Effective Date, and the initial option grants made pursuant to the Automatic Option Grant Program may also be made on the Plan Effective Date to any non-Employee
Board members eligible for such grants at that time. However, no options granted under the Plan may be exercised, and no shares shall be issued under the Plan, until the Corporation’s stockholders approve the Plan. If such stockholder approval
is not obtained within twelve months after the Plan Effective Date, then all options previously granted under this Plan shall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued under the
Plan. 
 
B. The Plan shall
terminate upon the earlier of (i) the expiration of the ten year period measured from the date the Plan is adopted by the Board or (ii) the termination of the Plan by the Board. All options and unvested stock issuances outstanding at the time of the
termination of the Plan shall continue in effect in accordance with the provisions of the documents evidencing those options or issuances. 
 
5.7. Amendment or Termination. The Board shall have complete and exclusive power and authority to amend or terminate the
Plan or any awards made hereunder. However, no such amendment or termination of the Plan shall adversely affect the rights and obligations with respect to options or unvested stock issuances at the time outstanding under the Plan unless Optionee or
Participant consents to such amendment or termination. In addition, certain amendments may require approval of the Corporation’s stockholders. 

 
5.8.
Regulatory Approvals. 
 
A. The implementation of the Plan, the granting of any options pursuant to the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any option or (ii) pursuant to the Stock Issuance Program shall be subject to
the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted, and the shares of Common Stock issued, pursuant to it. 
 
B. No shares of Common Stock or other assets
shall be issued or delivered pursuant to the Plan unless and until there shall have been compliance with all applicable requirements of applicable securities laws, including the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable pursuant to the Plan, and all applicable listing requirements of any stock exchange or trading system, including the Nasdaq Stock Market, on which Common Stock is then traded. No shares of Common Stock shall be issued
or delivered pursuant to the Plan if doing so would violate any internal policies of the Corporation. 
 
5.9. No Employment or Service Rights. Nothing in the Plan shall confer upon Optionee or Participant any right to continue in
Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of Optionee or Participant, which rights are hereby
expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause. 
 
5.10. No Restraint. Neither the grant of options nor the issuance of Common Stock under the Plan shall affect the right of
the Corporation to undertake any corporate action. 
 
5.11. Use of Proceeds. Any cash proceeds received by the Corporation from the sale of shares of Common Stock pursuant to the Plan shall be used for any corporate purpose. 
 
5.12. California Blue Sky Provisions. If the
Common Stock is not exempt from California securities laws, the following provisions shall apply to any sale of Common Stock or any option granted to an individual who is eligible to receive such grant pursuant to the Plan who resides in the State
of California. 
 
A. Option Grant
Program. 
 
(i) The exercise price
per share shall be fixed by the Plan Administrator in accordance with the following provisions: 
 
(a) The exercise price per share applicable to each option shall not be less than 85% of the Fair Market Value per share
of Common Stock on the date the option is granted. 

 
(b) If the person to whom the option is granted is a 10% Stockholder, then the exercise price per share shall not be less than 110% of the Fair Market Value per share of Common Stock on the date the option is granted. 
 
(ii) The Plan Administrator may not impose a
vesting schedule upon any option grant or the shares of Common Stock subject to that option which is more restrictive than 20% per year vesting, with the initial vesting to occur not later than one year after the option grant date. However, such
limitation shall not apply to any option grants made to individuals who are officers, directors or independent contractors of the Corporation. 
 
(iii) Unless Optionee’s Service is terminated for Misconduct (in which case the option shall terminate immediately),
the option (to the extent it is vested and exercisable at that the time Optionee’s Service ceases) must remain exercisable, following Optionee’s termination of Service, for at least (a) six months if Optionee’s Service terminates due
to death or Permanent Disability or (b) thirty days in all other cases. 
 
B. Stock Issuance Program. 
 
(i) The Plan Administrator may not impose a vesting schedule upon any stock issuance effected under the Stock Issuance Program which is more restrictive than 20% per year vesting, with initial vesting
to occur not later than one year after the issuance date. Such limitation shall not apply to any Common Stock issuances made to the officers, directors or independent contractors of the Corporation. 
 
(ii) The purchase price per share for shares
issued under the Stock Issuance Program shall be fixed by the Plan Administrator but shall not be less than 85% of the Fair Market Value per share of Common Stock on the issue date. However, the purchase price per share of Common Stock issued to a
10% Stockholder shall not be less than 100% of such Fair Market Value. 
 
C. Repurchase Rights. To the extent specified in a stock purchase agreement or stock issuance agreement, the Corporation and/or its stockholders shall have the right to repurchase any or all of the
unvested shares of Common Stock held by an Optionee or Participant when such person’s Service ceases. However, except with respect to grants to officers, directors, and independent contractors of the Corporation, the repurchase right must
satisfy the following conditions: 
 
(i) The Corporation’s right to repurchase the unvested shares of Common Stock must lapse at the rate of at least 20% per year over five years from the date the option was granted pursuant to the Discretionary Option Grant
Program or the shares were issued pursuant to the Stock Issuance Program. 
 
(ii) The Corporation’s repurchase right must be exercised within ninety days of the date that Service ceased (or the date the shares were purchased, if later). 

 
(iii) The purchase price must be paid in the form of cash or cancellation of the purchase money indebtedness for the shares of Common Stock. 
 
D. Information Requirements. Annually, the Corporation shall deliver or cause to be delivered to each Optionee or
Participant, no later than such information is delivered to the Corporation’s security holders, one of the following: 
 
(i) The Corporation’s annual report to security holders containing the information required by Rule 14a-3(b) under
the Exchange Act for its latest fiscal year; 
 
(ii) The Corporation’s annual report on Form 10-K for its latest fiscal year; 
 
(iii) The Corporation’s latest prospectus filed pursuant to 424(b) under the 1933 Act that contains audited financial
statements for the latest fiscal year, provided that the financial statements are not incorporated by reference from another filing, and provided further that such prospectus contains substantially the information required by Rule 14a-3(b); or

 
(iv) The Corporation’s
effective Exchange Act registration statement containing audited financial statements for the latest fiscal year. 

 
Appendix

 
The following definitions shall be in effect
under the Plan: 
 
A. Automatic
Option Grant Program shall mean the automatic option grant program in effect under Article 4 of the Plan. 
 
B. Board shall mean the Corporation’s Board of Directors. 
 
C. Change in Control shall mean a
change in ownership or control of the Corporation effected through any of the following transactions: 
 
(i) a merger, consolidation or other reorganization unless securities representing more than 50% of the total combined
voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Corporation’s
outstanding voting securities immediately prior to such transaction; 
 
(ii) a sale, transfer or other disposition of all or substantially all of the Corporation’s assets; or 
 
(iii) the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than 50% of the total
combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders. 
 
D. Code shall mean the Internal Revenue Code of 1986, as amended. 
 
E. Common Stock shall mean the
Corporation’s common stock. 
 
F. Corporation shall mean Irvine Sensors Corporation, a Delaware corporation, or the successor to all or substantially all of the assets or voting stock of Irvine Sensors Corporation which has assumed the Plan. 
 
G. Discretionary Option Grant Program
shall mean the discretionary option grant program in effect under Article 2 of the Plan. 
 
H. Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject
to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. 
 
I. Exchange Act shall mean the Securities Exchange Act of 1934, as amended. 

 
J. Exercise Date shall mean the date on which the option shall have been exercised in accordance with the applicable option documentation. 
 
K. Expiration Date shall mean the close of business at the Corporation’s
headquarters on the date the option expires as set forth in Optionee’s Notice of Stock Option Grant. 
 
L. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the
following provisions: 
 
(i) If
the Common Stock is at the time traded on the Nasdaq Stock Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities
Dealers on the Nasdaq Stock Market and published in The Wall Street Journal. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date
for which such quotation exists. 
 
(ii) If the Common Stock is at the time listed on any stock exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the stock exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange and published in The Wall Street Journal. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 
 
(iii) If the Common Stock is at the time neither listed on any stock exchange or the Nasdaq Stock Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate but shall be determined without regard to any restrictions other than a restriction which, by its
term, will never lapse. 
 
(iv)
For purposes of same day sales, the Fair Market Value shall be deemed to be the amount per share for which the shares of Common Stock were sold. 
 
M. Incentive Option shall mean an option that satisfies the requirements of Code Section 422. 
 
N. Involuntary Termination shall mean:

 
(i) such individual’s
involuntary dismissal or discharge by the Corporation (or any Parent or Subsidiary) for reasons other than Misconduct, or 
 
(ii) such individual’s voluntary resignation within 60 days following (a) a change in his or her position with the
Corporation (or any Parent or Subsidiary) which materially reduces his or her duties and responsibilities, (b) a reduction in his or her base salary by more than 15%, unless the base salaries of all similarly situated individuals are reduced by the

Corporation (or any Parent or Subsidiary) employing the individual or (c) a relocation of such individual’s place of employment by more
than fifty miles if such change, reduction or relocation is effected without the individual’s written consent. 
 
O. Misconduct shall mean (i) the commission of any act of fraud, embezzlement or dishonesty by Optionee or
Participant, (ii) any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or of any Parent or Subsidiary), or (iii) any other intentional misconduct by such person adversely affecting the
business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. However, if the term or concept has been defined in an employment agreement between the Corporation and Optionee or Participant, then Misconduct shall have
the definition set forth in such employment agreement. The foregoing definition shall not in any way preclude or restrict the right of the Corporation (or any Parent or Subsidiary) to discharge or dismiss any Optionee, Participant or other person in
the Service of the Corporation (or any Parent or Subsidiary) for any other acts or omissions but such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct. 
 
P. Non-Statutory Option shall mean an
option that does not qualify as an Incentive Option. 
 
Q. Optionee shall mean any person to whom an option is granted pursuant to the Plan. 
 
R. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with
the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other
corporations in such chain. 
 
S.
Participant shall mean any person who is issued shares of Common Stock under the Stock Issuance Program. 
 
T. Permanent Disability or Permanently Disabled shall mean the inability of Optionee or Participant to engage in
any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or has lasted or can be expected to last for a continuous period of twelve months or more. However,
solely for purposes of the Automatic Option Grant Program, Permanent Disability or Permanently Disabled shall mean the inability of the non-Employee Board member to perform his or her usual duties as a director by reason of any medically
determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve months or more. 
 
U. Plan shall mean this Irvine Sensors Corporation 2003 Stock Incentive Plan. 

 
V. Plan Administrator shall mean the particular entity, whether the Primary Committee, the Board or the Secondary Committee, which is authorized to administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons under its jurisdiction. 
 
W. Plan Effective Date shall mean the
date the Corporation’s stockholders approve the Plan at the 2003 Annual Meeting of Stockholders. 
 
X. Primary Committee shall mean the committee comprised of one or more Board members designated by the Board to
administer the Discretionary Option Grant and Stock Issuance Programs. To obtain the benefits of Rule 16b-3, there must be at least two members on the Primary Committee and all of the members must be “non-employee” directors as that term
is defined in the Rule or the entire Board must approve the grant(s). Similarly, to be exempt from the million dollar compensation deduction limitation of Code Section 162(m), there must be at least two members on the Primary Committee and all of
the members must be “outside directors” as that term is defined in Code Section 162(m). 
 
Y. Proxy Contest shall mean a change in ownership or control of the Corporation effected through a change in the
composition of the Board over a period of 36 consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (i) have been
Board members continuously since the beginning of such period or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (i) who were still in office at the
time the Board approved such election or nomination. 
 
Z. Secondary Committee shall mean a committee of one or more Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders. 
 
AA.
Section 16 Insider shall mean an executive officer or director of the Corporation or the holder of more than 10% of a registered class of the Corporation’s equity securities, in each case subject to the short-swing profit liabilities of
Section 16 of the Exchange Act. 
 
BB. Service shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a member of the board of directors or an independent contractor, except to the
extent otherwise specifically provided in the documents evidencing the option grant or stock issuance. 
 
CC. Stock Issuance Agreement shall mean the agreement entered into by the Corporation and Participant at the time
of issuance of shares of Common Stock under the Stock Issuance Program. 

 
DD. Stock Issuance Program shall mean the stock issuance program in effect under Article 3 of the Plan. 
 
EE. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations
beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. 
 
FF. 10% Stockholder shall mean the owner of stock (after taking into account the constructive ownership rules of Section 424(d) of the Code) possessing more than 10% of the total combined voting power of all classes of stock
of the Corporation (or any Parent or Subsidiary).

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