Document:

exv10w1

 

Exhibit 10.1

BOARD COMPENSATION PACKAGE

Cash Compensation:

Effective as of May 1, 2007, non-employee directors shall receive the following cash payments for
service on the OIS Board of Directors:

	 	•	 	An annual retainer fee of $25,000 paid in cash in two equal payments, payable May 1 and
November 1 of each year
	 
	 	•	 	Directors who are members of the Audit Committee (but not the Chairperson of such
committee) will receive an additional $5,000, payable on May 1 of each year
	 
	 	•	 	Directors who are members of the Compensation Committee (but not the Chairperson of such
committee) will receive an additional $2,000 annually, payable on May 1 of each year
	 
	 	•	 	The Chairperson of the Board of Directors will each receive $15,000 annually, payable
May 1 of each year
	 
	 	•	 	The Lead Member of the Board of Directors (if different from the Chairperson) will
receive $10,000 annually, payable May 1 of each year
	 
	 	•	 	The Chair of the Audit Committee will each receive $10,000 annually, payable May 1 of
each year
	 
	 	•	 	The Chair of each other committee of the Board of Directors will receive $5,000
annually, payable May 1 of each year
	 
	 	•	 	Non-employee directors will be reimbursed for their reasonable out-of-pocket expenses
incurred in attending meetings of the Board of Directors or any of its committees that are
conducted in person.

Employee-directors will not receive cash compensation for their service as members of the Board of
Directors.

 

 

Non-cash Compensation:

Effective as of the 2007 Annual Meeting of Shareholders, non-employee directors shall receive the
following non-cash compensation:

	 	•	 	An initial grant of an option to purchase 50,000 shares of Common Stock upon election to
the Board of Directors vesting with respect to 16,667 shares after the conclusion of the first year and the
remainder vesting in equal monthly increments over a period of two years
	 
	 	•	 	An annual grant of an option to purchase 15,000 shares of Common Stock on the first
business day of the month following the Annual Meeting of Stockholders, provided that no
annual grant shall be granted to any non-employee director in the same calendar year that
such person received his or her initial grant. The annual grant will vest in equal monthly
increments over a period of one year
	 
	 	•	 	Each director shall have 12 months to exercise his or her options following termination
of Board service for any reason
	 
	 	•	 	Grants may also be made to non-employee directors on a discretionary basis, subject to
compliance with the Company’s corporate governance codes and policies

In the interest of good corporate governance and to further align the interests of members of the
Board of Directors with the Company’s stockholders, the Nominating and Corporate Governance
Committee of the Board of Directors has adopted stock ownership guidelines for directors. Pursuant
to these guidelines, if a Director exercises a stock option, it is expected that such Director
would, from such option exercise, maintain ownership of at least a number of shares equal to twenty
percent (20%) of the net value of the shares acquired (after deducting the exercise price and
taxes). In the case of shares acquired upon the exercise of a stock option, each Director is
expected to hold such shares for nine months after termination of his or her service on the Board
of Directors.exv10w2

 

Exhibit 10.2

AMENDED AND RESTATED

OCULUS INNOVATIVE SCIENCES, INC.

2006 STOCK INCENTIVE PLAN

(Adopted by the Board on August 25, 2006;

Amended and Restated on April 26, 2007)

 

 

Table of Contents

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	SECTION 1.
	 	ESTABLISHMENT AND PURPOSE.	 	 	1	 
	 
	 	 	 	 	 	 
	SECTION 2.
	 	DEFINITIONS.	 	 	1	 
	(a)
	 	“Affiliate”	 	 	1	 
	(b)
	 	“Award”	 	 	1	 
	(c)
	 	“Board of Directors”	 	 	1	 
	(d)
	 	“Change in Control”	 	 	1	 
	(e)
	 	“Code”	 	 	2	 
	(f)
	 	“Committee”	 	 	2	 
	(g)
	 	“Company”	 	 	3	 
	(h)
	 	“Consultant”	 	 	3	 
	(i)
	 	“Employee”	 	 	3	 
	(j)
	 	“Exchange Act”	 	 	3	 
	(k)
	 	“Exercise Price”	 	 	3	 
	(l)
	 	“Fair Market Value”	 	 	3	 
	(m)
	 	“ISO”	 	 	3	 
	(n)
	 	“Nonstatutory Option”
or “NSO”	 	 	4	 
	(o)
	 	“Offeree”	 	 	4	 
	(p)
	 	“Option”	 	 	4	 
	(q)
	 	“Optionee”	 	 	4	 
	(r)
	 	“Outside Director”	 	 	4	 
	(s)
	 	“Parent”	 	 	4	 
	(t)
	 	“Participant”	 	 	4	 
	(u)
	 	“Plan”	 	 	4	 
	(v)
	 	“Purchase Price”	 	 	4	 
	(w)
	 	“Restricted Share”	 	 	4	 
	(x)
	 	“Restricted Share
Agreement”	 	 	4	 
	(y)
	 	“SAR”	 	 	4	 
	(z)
	 	“SAR Agreement”	 	 	4	 
	(aa)
	 	“Service”	 	 	4	 
	(bb)
	 	“Share”	 	 	5	 
	(cc)
	 	“Stock”	 	 	5	 
	(dd)
	 	“Stock Option Agreement”	 	 	5	 
	(ee)
	 	“Stock Unit”	 	 	5	 
	(ff)
	 	“Stock Unit Agreement”	 	 	5	 

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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	(gg)
	 	“Subsidiary”	 	 	5	 
	 
	 	 	 	 	 	 
	SECTION 3.
	 	ADMINISTRATION.	 	 	5	 
	(a)
	 	Committee Composition	 	 	5	 
	(b)
	 	Committee for Non-Officer Grants	 	 	5	 
	(c)
	 	Committee Procedures	 	 	6	 
	(d)
	 	Committee Responsibilities	 	 	6	 
	 
	 	 	 	 	 	 
	SECTION 4.
	 	ELIGIBILITY.	 	 	7	 
	(a)
	 	General Rule	 	 	7	 
	(b)
	 	Automatic Grants to Outside Directors	 	 	7	 
	(c)
	 	Ten-Percent Stockholders	 	 	8	 
	(d)
	 	Attribution Rules	 	 	8	 
	(e)
	 	Outstanding Stock	 	 	8	 
	 
	 	 	 	 	 	 
	SECTION 5.
	 	STOCK SUBJECT TO PLAN.	 	 	8	 
	(a)
	 	Basic Limitation	 	 	9	 
	(b)
	 	Award Limitation	 	 	9	 
	(c)
	 	Additional Shares	 	 	9	 
	 
	 	 	 	 	 	 
	SECTION 6.
	 	RESTRICTED SHARES.	 	 	9	 
	(a)
	 	Restricted Stock Agreement	 	 	9	 
	(b)
	 	Payment for Awards	 	 	9	 
	(c)
	 	Vesting	 	 	9	 
	(d)
	 	Voting and Dividend Rights	 	 	10	 
	(e)
	 	Restrictions on Transfer of Shares	 	 	10	 
	 
	 	 	 	 	 	 
	SECTION 7.
	 	TERMS AND CONDITIONS OF OPTIONS.	 	 	10	 
	(a)
	 	Stock Option Agreement	 	 	10	 
	(b)
	 	Number of Shares	 	 	10	 
	(c)
	 	Exercise Price	 	 	10	 
	(d)
	 	Withholding Taxes	 	 	10	 
	(e)
	 	Exercisability and Term	 	 	10	 
	(f)
	 	Exercise of Options	 	 	11	 
	(g)
	 	Effect of Change in Control	 	 	11	 
	(h)
	 	No Rights as a Stockholder	 	 	11	 
	(i)
	 	Modification, Extension and Renewal of Options	 	 	11	 
	(j)
	 	Restrictions on Transfer of Shares	 	 	11	 
	(k)
	 	Buyout Provisions	 	 	11	 
	 
	 	 	 	 	 	 
	SECTION 8.
	 	PAYMENT FOR SHARES.	 	 	12	 
	(a)
	 	General Rule	 	 	12	 
	(b)
	 	Surrender of Stock	 	 	12	 
	(c)
	 	Services Rendered	 	 	12	 

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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	(d)
	 	Cashless Exercise	 	 	12	 
	(e)
	 	Exercise/Pledge	 	 	12	 
	(f)
	 	Promissory Note	 	 	12	 
	(g)
	 	Other Forms of Payment	 	 	12	 
	(h)
	 	Limitations under Applicable Law	 	 	12	 
	 
	 	 	 	 	 	 
	SECTION 9.
	 	STOCK APPRECIATION RIGHTS.	 	 	13	 
	(a)
	 	SAR Agreement	 	 	13	 
	(b)
	 	Number of Shares	 	 	13	 
	(c)
	 	Exercise Price	 	 	13	 
	(d)
	 	Exercisability and Term	 	 	13	 
	(e)
	 	Effect of Change in Control	 	 	13	 
	(f)
	 	Exercise of SARs	 	 	13	 
	(g)
	 	Modification or Assumption of SARs	 	 	13	 
	(h)
	 	Buyout Provisions	 	 	14	 
	 
	 	 	 	 	 	 
	SECTION 10.
	 	STOCK UNITS.	 	 	14	 
	(a)
	 	Stock Unit Agreement	 	 	14	 
	(b)
	 	Payment for Awards	 	 	14	 
	(c)
	 	Vesting Conditions	 	 	14	 
	(d)
	 	Voting and Dividend Rights	 	 	14	 
	(e)
	 	Form and Time of Settlement of Stock Units	 	 	14	 
	(f)
	 	Death of Recipient	 	 	15	 
	(g)
	 	Creditors’ Rights	 	 	15	 
	 
	 	 	 	 	 	 
	SECTION 11.
	 	ADJUSTMENT OF SHARES.	 	 	15	 
	(a)
	 	Adjustments	 	 	15	 
	(b)
	 	Dissolution or Liquidation	 	 	15	 
	(c)
	 	Reorganizations	 	 	15	 
	(d)
	 	Reservation of Rights	 	 	16	 
	 
	 	 	 	 	 	 
	SECTION 12.
	 	DEFERRAL OF AWARDS.	 	 	16	 
	(a)
	 	Committee Powers	 	 	16	 
	(b)
	 	General Rules	 	 	17	 
	 
	 	 	 	 	 	 
	SECTION 13.
	 	AWARDS UNDER OTHER PLANS.	 	 	17	 
	 
	 	 	 	 	 	 
	SECTION 14.
	 	PAYMENT OF DIRECTOR'S FEES IN
SECURITIES.	 	 	17	 
	(a)
	 	Effective Date	 	 	17	 
	(b)
	 	Elections to Receive NSOs, Restricted Shares or Stock Units	 	 	17	 
	(c)
	 	Number and Terms of NSOs, Restricted Shares or Stock Units	 	 	17	 
	 
	 	 	 	 	 	 
	SECTION 15.
	 	LEGAL AND REGULATORY REQUIREMENTS.	 	 	17	 
	 
	 	 	 	 	 	 
	SECTION 16.
	 	WITHHOLDING TAXES.	 	 	18	 

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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	(a)
	 	General	 	 	18	 
	(b)
	 	Share Withholding	 	 	18	 
	 
	 	 	 	 	 	 
	SECTION 17.
	 	OTHER PROVISIONS APPLICABLE TO
AWARDS.	 	 	18	 
	(a)
	 	Transferability	 	 	18	 
	(b)
	 	Qualifying Performance Criteria	 	 	18	 
	 
	 	 	 	 	 	 
	SECTION 18.
	 	NO EMPLOYMENT RIGHTS.	 	 	19	 
	 
	 	 	 	 	 	 
	SECTION 19.
	 	DURATION AND AMENDMENTS.	 	 	19	 
	(a)
	 	Term of the Plan	 	 	19	 
	(b)
	 	Right to Amend or Terminate the Plan	 	 	19	 
	(c)
	 	Effect of Termination	 	 	19	 
	 
	 	 	 	 	 	 
	SECTION 20.
	 	EXECUTION.	 	 	20	 

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AMENDED AND RESTATED

OCULUS INNOVATIVE SCIENCES, INC.

2006 STOCK INCENTIVE PLAN

SECTION 1. ESTABLISHMENT AND PURPOSE.

     The Plan was adopted by the Board of Directors on August 25, 2006 and became effective as of
the date of the initial offering of Stock to the public pursuant to a registration statement filed
by the Company with the Securities and Exchange Commission (the “Effective Date”). The Board
amended and restated the Plan on April 26, 2007, subject to the approval of the shareholders. The
purpose of the Plan is to promote the long-term success of the Company and the creation of
stockholder value by (a) encouraging Employees, Outside Directors and Consultants to focus on
critical long-range objectives, (b) encouraging the attraction and retention of Employees, Outside
Directors and Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased stock ownership. The
Plan seeks to achieve this purpose by providing for Awards in the form of restricted shares, stock
units, options (which may constitute incentive stock options or nonstatutory stock options) or
stock appreciation rights.

SECTION 2. DEFINITIONS.

     (a) “Affiliate” shall mean any entity other than a Subsidiary, if the Company and/or one of more Subsidiaries
own not less than 50% of such entity.

     (b) “Award” shall mean any award of an Option, a SAR, a Restricted Share or a Stock Unit under the Plan.

     (c) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time.

     (d) “Change in Control” shall mean the occurrence of any of the following events:

     (i) A change in the composition of the Board of Directors occurs, as a result of which
fewer than one-half of the incumbent directors are directors who either:

     (A) Had been directors of the Company on the “look-back date” (as defined
below) (the “original directors”); or

     (B) Were elected, or nominated for election, to the Board of Directors with the
affirmative votes of at least a majority of the aggregate of the original directors
who were still in office at the time of the election or nomination and the directors
whose election or nomination was previously so approved (the “continuing
directors”); or

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     (ii) Any “person” (as defined below) who by the acquisition or aggregation of securities, is
or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the combined voting power of
the Company’s then outstanding securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the “Base Capital Stock”);
except that any change in the relative beneficial ownership of the Company’s securities by any
person resulting solely from a reduction in the aggregate number of outstanding shares of Base
Capital Stock, and any decrease thereafter in such person’s ownership of securities, shall be
disregarded until such person increases in any manner, directly or indirectly, such person’s
beneficial ownership of any securities of the Company; or

     (iii) The consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if persons who were not stockholders
of the Company immediately prior to such merger, consolidation or other reorganization own
immediately after such merger, consolidation or other reorganization 50% or more of the
voting power of the outstanding securities of each of (A) the continuing or surviving entity
and (B) any direct or indirect parent corporation of such continuing or surviving entity; or

     (iv) The sale, transfer or other disposition of all or substantially all of the
Company’s assets.

     For purposes of subsection (d)(i) above, the term “look-back” date shall mean the later of (1)
the Effective Date or (2) the date 24 months prior to the date of the event that may constitute a
Change in Control.

     For purposes of subsection (d)(ii)) above, the term “person” shall have the same meaning as
when used in Sections 13(d) and 14(d) of the Exchange Act but shall exclude (1) a trustee or other
fiduciary holding securities under an employee benefit plan maintained by the Company or a Parent
or Subsidiary and (2) a corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of the Stock.

     Any other provision of this Section 2(d) notwithstanding, a transaction shall not constitute a
Change in Control if its sole purpose is to change the state of the Company’s incorporation or to
create a holding company that will be owned in substantially the same proportions by the persons
who held the Company’s securities immediately before such transaction, and a Change in Control
shall not be deemed to occur if the Company files a registration statement with the United States
Securities and Exchange Commission for the initial offering of Stock to the public.

     (e) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (f) “Committee” shall mean the Compensation Committee as designated by the Board of Directors, which is
authorized to administer the Plan, as described in Section 3 hereof.

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     (g) “Company” shall mean Oculus Innovative Sciences, Inc., a Delaware corporation.

     (h) “Consultant” shall mean a consultant or advisor who provides bona fide services to the Company, a Parent, a
Subsidiary or an Affiliate as an independent contractor (not including service as a member of the
Board of Directors) or a member of the board of directors of a Parent or a Subsidiary, in each case
who is not an Employee.

     (i) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent, a Subsidiary
or an Affiliate.

     (j) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

     (k) “Exercise Price” shall mean, in the case of an Option, the amount for which one Share may be purchased upon
exercise of such Option, as specified in the applicable Stock Option Agreement. “Exercise Price,”
in the case of a SAR, shall mean an amount, as specified in the applicable SAR Agreement, which is
subtracted from the Fair Market Value of one Share in determining the amount payable upon exercise
of such SAR.

     (l) “Fair Market Value” with respect to a Share, shall mean the market price of one Share, determined by the Committee
as follows:

     (i) If the Stock was traded over-the-counter on the date in question, then the Fair
Market Value shall be equal to the last transaction price quoted for such date by the OTC
Bulletin Board or, if not so quoted, shall be equal to the mean between the last reported
representative bid and asked prices quoted for such date by the principal automated
inter-dealer quotation system on which the Stock is quoted or, if the Stock is not quoted on
any such system, by the Pink Sheets LLC;

     (ii) If the Stock was traded on The NASDAQ Stock Market, then the Fair Market Value
shall be equal to the last reported sale price quoted for such date by The NASDAQ Stock
Market;

     (iii) If the Stock was traded on a United States stock exchange other than The NASDAQ
Stock Market on the date in question, then the Fair Market Value shall be equal to the
closing price reported for such date by the applicable composite-transactions report; and

     (iv) If none of the foregoing provisions is applicable, then the Fair Market Value
shall be determined by the Committee in good faith on such basis as it deems appropriate.

In all cases, the determination of Fair Market Value by the Committee shall be conclusive and
binding on all persons.

     (m) “ISO” shall mean an employee incentive stock option described in Section 422 of the Code.

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     (n) “Nonstatutory Option” or “NSO” shall mean an employee stock option that is not an ISO.

     (o) “Offeree” shall mean an individual to whom the Committee has offered the right to acquire Shares under
the Plan (other than upon exercise of an Option).

     (p) “Option” shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to
purchase Shares.

     (q) “Optionee” shall mean an individual or estate who holds an Option or SAR.

     (r) “Outside Director” shall mean a member of the Board of Directors who is not a common-law employee of, or paid
consultant to, the Company, a Parent or a Subsidiary.

     (s) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of corporations
ending with the Company, if each of the corporations other than the Company owns 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. A corporation that attains the status of a Parent on a date after the
adoption of the Plan shall be a Parent commencing as of such date.

     (t) “Participant” shall mean an individual or estate who holds an Award.

     (u) “Plan” shall mean this 2006 Stock Incentive Plan of Oculus Innovative Sciences, Inc., as amended from
time to time.

     (v) “Purchase Price” shall mean the consideration for which one Share may be acquired under the Plan (other than
upon exercise of an Option), as specified by the Committee.

     (w) “Restricted Share” shall mean a Share awarded under the Plan.

     (x) “Restricted Share Agreement” shall mean the agreement between the Company and the recipient of a Restricted Share which
contains the terms, conditions and restrictions pertaining to such Restricted Shares.

     (y) “SAR” shall mean a stock appreciation right granted under the Plan.

     (z) “SAR Agreement” shall mean the agreement between the Company and an Optionee which contains the terms,
conditions and restrictions pertaining to his or her SAR.

     (aa) “Service” shall mean service as an Employee, Consultant or Outside Director, subject to such further
limitations as may be set forth in the Plan or the applicable Stock Option Agreement, SAR
Agreement, Restricted Share Agreement or Stock Unit Agreement. Service does not terminate when an
Employee goes on a bona fide leave of absence, that was approved by the Company in writing, if the
terms of the leave provide for continued Service crediting, or when continued Service crediting is
required by applicable law. However, for purposes of determining whether an Option is entitled to
ISO status, an Employee’s employment will be treated as terminating 90 days after such Employee
went on leave, unless such Employee’s right to return to active work is guaranteed by law or by a
contract. Service terminates in any event

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when the approved leave ends, unless such Employee immediately returns to active work. The
Company determines which leaves count toward Service, and when Service terminates for all purposes
under the Plan.

     (bb) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 (if applicable).

     (cc) “Stock” shall mean the Common Stock of the Company.

     (dd) “Stock Option Agreement” shall mean the agreement between the Company and an Optionee that contains the terms,
conditions and restrictions pertaining to his Option.

     (ee) “Stock Unit” shall mean a bookkeeping entry representing the equivalent of one Share, as awarded under the
Plan.

     (ff) “Stock Unit Agreement” shall mean the agreement between the Company and the recipient of a Stock Unit which contains
the terms, conditions and restrictions pertaining to such Stock Unit.

     (gg) “Subsidiary” shall mean any corporation, if the Company and/or one or more other Subsidiaries own not less
than 50% of the total combined voting power of all classes of outstanding stock of such
corporation. A corporation that attains the status of a Subsidiary on a date after the adoption of
the Plan shall be considered a Subsidiary commencing as of such date.

     (hh) “Total and Permanent Disability” shall mean permanent and total disability as defined by
section 22(e)(3) of the Code.

SECTION 3. ADMINISTRATION.

     (a) Committee Composition. The Plan shall be administered by the Committee. The Committee shall consist of two or more
directors of the Company, who shall be appointed by the Board. In addition, the composition of the
Committee shall satisfy (i) such requirements as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3
(or its successor) under the Exchange Act; and (ii) such requirements as the Internal Revenue
Service may establish for outside directors acting under plans intended to qualify for exemption
under Section 162(m)(4)(C) of the Code.

     (b) Committee for Non-Officer Grants. The Board may also appoint one or more separate committees of the Board, each composed of
one or more directors of the Company who need not satisfy the requirements of Section 3(a), who may
administer the Plan with respect to Employees who are not considered officers or directors of the
Company under Section 16 of the Exchange Act, may grant Awards under the Plan to such Employees and
may determine all terms of such grants. Within the limitations of the preceding sentence, any
reference in the Plan to the Committee shall include such committee or committees appointed
pursuant to the preceding sentence. The Board of Directors may also authorize one or more officers
of the Company to designate Employees, other than officers under Section 16 of the Exchange Act, to
receive Awards and/or to determine the number of such Awards to be received by such persons;

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provided, however, that the Board of Directors shall specify the total number of Awards that
such officers may so award.

     (c) Committee Procedures. The Board of Directors shall designate one of the members of the Committee as chairman. The
Committee may hold meetings at such times and places as it shall determine. The acts of a majority
of the Committee members present at meetings at which a quorum exists, or acts reduced to or
approved in writing by all Committee members, shall be valid acts of the Committee.

     (d) Committee Responsibilities. Subject to the provisions of the Plan, the Committee shall have full authority and
discretion to take the following actions:

     (i) To interpret the Plan and to apply its provisions;

     (ii) To adopt, amend or rescind rules, procedures and forms relating to the Plan;

     (iii) To adopt, amend or terminate sub-plans established for the purpose of satisfying
applicable foreign laws including qualifying for preferred tax treatment under applicable
foreign tax laws;

     (iv) To authorize any person to execute, on behalf of the Company, any instrument
required to carry out the purposes of the Plan;

     (v) To determine when Awards are to be granted under the Plan;

     (vi) To select the Offerees and Optionees;

     (vii) To determine the number of Shares to be made subject to each Award;

     (viii) To prescribe the terms and conditions of each Award, including (without
limitation) the Exercise Price and Purchase Price, and the vesting or duration of the Award
(including accelerating the vesting of Awards, either at the time of the Award or
thereafter, without the consent of the Participant), to determine whether an Option is to be
classified as an ISO or as a Nonstatutory Option, and to specify the provisions of the
agreement relating to such Award;

     (ix) To amend any outstanding Award agreement, subject to applicable legal restrictions
and to the consent of the Participant if the Participant’s rights or obligations would be
materially impaired;

     (x) To prescribe the consideration for the grant of each Award or other right under the
Plan and to determine the sufficiency of such consideration;

     (xi) To determine the disposition of each Award or other right under the Plan in the
event of a Participant’s divorce or dissolution of marriage;

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     (xii) To determine whether Awards under the Plan will be granted in replacement of
other grants under an incentive or other compensation plan of an acquired business;

     (xiii) To correct any defect, supply any omission, or reconcile any inconsistency in
the Plan or any Award agreement;

     (xiv) To establish or verify the extent of satisfaction of any performance goals or
other conditions applicable to the grant, issuance, exercisability, vesting and/or ability
to retain any Award; and

     (xv) To take any other actions deemed necessary or advisable for the administration of
the Plan.

Subject to the requirements of applicable law, the Committee may designate persons other than
members of the Committee to carry out its responsibilities and may prescribe such conditions and
limitations as it may deem appropriate, except that the Committee may not delegate its authority
with regard to the selection for participation of or the granting of Options or other rights under
the Plan to persons subject to Section 16 of the Exchange Act. All decisions, interpretations and
other actions of the Committee shall be final and binding on all Offerees, all Optionees, and all
persons deriving their rights from an Offeree or Optionee. No member of the Committee shall be
liable for any action that he has taken or has failed to take in good faith with respect to the
Plan, any Option, or any right to acquire Shares under the Plan.

SECTION 4. ELIGIBILITY.

     (a) General Rule. Only common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. Only Employees, Consultants and Outside Directors shall be eligible for the grant of
Restricted Shares, Stock Units, Nonstatutory Options or SARs.

     (b) Automatic Grants to Outside Directors.

     (i) Each Outside Director who first joins the Board of Directors on or after the
Effective Date, and who was not previously an Employee, shall receive a Nonstatutory Option,
subject to approval of the Plan by the Company’s stockholders, to purchase 50,000 Shares
(subject to adjustment under Section 11) on the date of his or her election to the Board of
Directors. One-third of the Shares subject to each Option granted under this
Section 4(b)(i) shall vest and become exercisable on the first anniversary of the date of
grant. The balance of the Shares subject to such Option (i.e. the
remaining two-thirds) shall vest and become exercisable monthly, in equal monthly installments, over a
three-year period beginning on the day which is one month after the first anniversary of the
date of grant. Notwithstanding the foregoing, each such Option shall become vested if a
Change in Control occurs with respect to the Company during the Optionee’s Service.

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     (ii) On the first business day of the month following the conclusion of each
regular annual meeting of the Company’s stockholders, commencing with the annual meeting of
stockholders occurring in calendar year 2007, each Outside Director who was not elected to
the Board for the first time at the annual meeting of stockholders for that year and who
will continue serving as a member of the Board of Directors thereafter shall receive an
Option to purchase 15,000 Shares (subject to adjustment under Section 11), provided that
such Outside Director has served on the Board of Directors for at least six months. Each
Option granted under this Section 4(b)(ii) shall vest and become exercisable in twelve equal
installments on the one-month anniversary of the date of grant; provided, however, that each
such Option shall become exercisable in full immediately prior to the next regular annual
meeting of the Company’s stockholders following such date of grant in the event such meeting
occurs prior to such first anniversary date. Notwithstanding the foregoing, each Option
granted under this Section 4(b)(ii) shall become vested if a Change in Control occurs with
respect to the Company during the Optionee’s Service.

     (iii) The Exercise Price of all Nonstatutory Options granted to an Outside Director
under this Section 4(b) shall be equal to 100% of the Fair Market Value of a Share on the
date of grant, payable in one of the forms described in Section 8(a), (b) or (d).

     (iv) All Nonstatutory Options granted to an Outside Director under this Section 4(b)
shall terminate on the earlier of (A) the day before the tenth anniversary of the date of
grant of such Options or (B) the date twelve months after the termination of such Outside
Director’s Service for any reason; provided, however, that any such Options that are not
vested upon the termination of the Outside Director’s Service as a member of the Board of
Directors for any reason shall terminate immediately and may not be exercised.

     (c) Ten-Percent Stockholders. An Employee who owns more than 10% of the total combined voting power of all classes of
outstanding stock of the Company, a Parent or Subsidiary shall not be eligible for the grant of an
ISO unless such grant satisfies the requirements of Section 422(c)(5) of the Code.

     (d) Attribution Rules. For purposes of Section 4(b) above, in determining stock ownership, an Employee shall be
deemed to own the stock owned, directly or indirectly, by or for such Employee’s brothers, sisters,
spouse, ancestors and lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned proportionately by or for its
stockholders, partners or beneficiaries.

     (e) Outstanding Stock. For purposes of Section 4(b) above, “outstanding stock” shall include all stock actually
issued and outstanding immediately after the grant. “Outstanding stock” shall not include shares
authorized for issuance under outstanding options held by the Employee or by any other person.

SECTION 5. STOCK SUBJECT TO PLAN.

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     (a) Basic Limitation. Shares offered under the Plan shall be authorized but unissued Shares or treasury Shares.
The aggregate number of Shares authorized for issuance as Awards under the Plan shall not exceed
one million eight hundred forty-two thousand two hundred twenty (1,842,220) Shares (which amount includes an increase over the number of Shares
originally subject to the Plan of 5% of the outstanding Shares on March 31, 2007, pursuant to (ii)
below), plus an annual increase on the first day of each fiscal year during the term of the Plan,
beginning April 1, 2007, in an amount equal to the lesser of (i) seven million (1,750,000) Shares
(ii) 5% of the outstanding Shares on the last day of the immediately preceding year or (iii) an
amount determined by the Board. The limitations of this Section 5(a) shall be subject to
adjustment pursuant to Section 11. The number of Shares that are subject to Options or other Awards
outstanding at any time under the Plan shall not exceed the number of Shares which then remain
available for issuance under the Plan. The Company, during the term of the Plan, shall at all times
reserve and keep available sufficient Shares to satisfy the requirements of the Plan.

     (b) Award Limitation. Subject to the provisions of Section 11, no Participant may receive Options, SARs,
Restricted Shares or Stock Units under the Plan in any calendar year that relate to more than one hundred eighty-seven thousand five hundred (187,500) Shares.

     (c) Additional Shares. If Restricted Shares or Shares issued upon the exercise of Options are forfeited, then such
Shares shall again become available for Awards under the Plan. If Stock Units, Options or SARs are
forfeited or terminate for any other reason before being exercised, then the corresponding Shares
shall again become available for Awards under the Plan. If Stock Units are settled, then only the
number of Shares (if any) actually issued in settlement of such Stock Units shall reduce the number
available under Section 5(a) and the balance shall again become available for Awards under the
Plan. If SARs are exercised, then only the number of Shares (if any) actually issued in settlement
of such SARs shall reduce the number available in Section 5(a) and the balance shall again become
available for Awards under the Plan.

SECTION 6. RESTRICTED SHARES.

     (a) Restricted Stock Agreement. Each grant of Restricted Shares under the Plan shall be evidenced by a Restricted Stock
Agreement between the recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not inconsistent with
the Plan. The provisions of the various Restricted Stock Agreements entered into under the Plan
need not be identical.

     (b) Payment for Awards. Subject to the following sentence, Restricted Shares may be sold or awarded under the Plan
for such consideration as the Committee may determine, including (without limitation) cash, cash
equivalents, full-recourse promissory notes, past services and future services.

     (c) Vesting. Each Award of Restricted Shares may or may not be subject to vesting. Vesting shall occur,
in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock
Agreement. A Restricted Stock Agreement may provide for accelerated vesting in the event of the
Participant’s death, disability or retirement or other events. The Committee may determine, at the
time of granting Restricted Shares of thereafter, that all or part of such

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Restricted Shares shall become vested in the event that a Change in Control occurs with
respect to the Company.

     (d) Voting and Dividend Rights. The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend
and other rights as the Company’s other stockholders. A Restricted Stock Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and
restrictions as the Award with respect to which the dividends were paid.

     (e) Restrictions on Transfer of Shares. Restricted Shares shall be subject to such rights of repurchase, rights of first refusal or
other restrictions as the Committee may determine. Such restrictions shall be set forth in the
applicable Restricted Stock Agreement and shall apply in addition to any general restrictions that
may apply to all holders of Shares.

SECTION 7. TERMS AND CONDITIONS OF OPTIONS.

     (a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement
between the Optionee and the Company. Such Option shall be subject to all applicable terms and
conditions of the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The Stock Option Agreement shall specify whether the Option is an ISO or an NSO.
The provisions of the various Stock Option Agreements entered into under the Plan need not be
identical. Options may be granted in consideration of a reduction in the Optionee’s other
compensation.

     (b) Number of Shares. Each Stock Option Agreement shall specify the number of Shares that are subject to the
Option and shall provide for the adjustment of such number in accordance with Section 11.

     (c) Exercise Price. Each Stock Option Agreement shall specify the Exercise Price. The Exercise Price of an ISO
shall not be less than 100% of the Fair Market Value of a Share on the date of grant, except as
otherwise provided in 4(b), and the Exercise Price of an NSO shall not be less 85% of the Fair
Market Value of a Share on the date of grant. Subject to the foregoing in this Section 7(c), the
Exercise Price under any Option shall be determined by the Committee at its sole discretion. The
Exercise Price shall be payable in one of the forms described in Section 8.

     (d) Withholding Taxes. As a condition to the exercise of an Option, the Optionee shall make such arrangements as
the Committee may require for the satisfaction of any federal, state, local or foreign withholding
tax obligations that may arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal, state, local or
foreign withholding tax obligations that may arise in connection with the disposition of Shares
acquired by exercising an Option.

     (e) Exercisability and Term. Each Stock Option Agreement shall specify the date when all or any installment of the Option
is to become exercisable. The Stock Option Agreement

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shall also specify the term of the Option;
provided that the term of an ISO shall in no event exceed 10 years from the date of grant (five
years for Employees described in Section 4(b)). A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee’s death, disability, or retirement or other
events and may provide for expiration prior to the end of its term in the event of the termination
of the Optionee’s Service. Options may be awarded in combination with SARs, and such an Award may
provide that the Options will not be exercisable unless the related SARs are forfeited. Subject to
the foregoing in this Section 7(e), the Committee at its sole discretion shall determine when all
or any installment of an Option is to become exercisable and when an Option is to expire.

     (f) Exercise of Options. Each Stock Option Agreement shall set forth the extent to which the Optionee shall have the
right to exercise the Option following termination of the Optionee’s Service with the Company and
its Subsidiaries, and the right to exercise the Option of any executors or administrators of the
Optionee’s estate or any person who has acquired such Option(s) directly from the Optionee by
bequest or inheritance. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all Options issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of Service.

     (g) Effect of Change in Control. The Committee may determine, at the time of granting an Option or thereafter, that such
Option shall become exercisable as to all or part of the Shares subject to such Option in the event
that a Change in Control occurs with respect to the Company.

     (h) No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with
respect to any Shares covered by his Option until the date of the issuance of a stock certificate
for such Shares. No adjustments shall be made, except as provided in Section 11.

     (i) Modification, Extension and Renewal of Options. Within the limitations of the Plan, the Committee may modify, extend or renew outstanding
options or may accept the cancellation of outstanding options (to the extent not previously
exercised), whether or not granted hereunder, in return for the grant of new Options
for the same or a different number of Shares and at the same or a different exercise price, or
in return for the grant of the same or a different number of Shares. The foregoing notwithstanding,
no modification of an Option shall, without the consent of the Optionee, materially impair his or
her rights or obligations under such Option.

     (j) Restrictions on Transfer of Shares. Any Shares issued upon exercise of an Option shall be subject to such special forfeiture
conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable Stock Option
Agreement and shall apply in addition to any general restrictions that may apply to all holders of
Shares.

     (k) Buyout Provisions. The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents
an Option previously granted or (b) authorize an Optionee to

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elect to cash out an Option previously
granted, in either case at such time and based upon such terms and conditions as the Committee
shall establish.

SECTION 8. PAYMENT FOR SHARES.

     (a) General Rule. The entire Exercise Price or Purchase Price of Shares issued under the Plan shall be payable
in lawful money of the United States of America at the time when such Shares are purchased, except
as provided in Section 8(b) through Section 8(g) below.

     (b) Surrender of Stock. To the extent that a Stock Option Agreement so provides, payment may be made all or in part
by surrendering, or attesting to the ownership of, Shares which have already been owned by the
Optionee or his representative. Such Shares shall be valued at their Fair Market Value on the date
when the new Shares are purchased under the Plan. The Optionee shall not surrender, or attest to
the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to
recognize compensation expense (or additional compensation expense) with respect to the Option for
financial reporting purposes.

     (c) Services Rendered. At the discretion of the Committee, Shares may be awarded under the Plan in consideration of
services rendered to the Company or a Subsidiary prior to the award. If Shares are awarded without
the payment of a Purchase Price in cash, the Committee shall make a determination (at the time of
the award) of the value of the services rendered by the Offeree and the sufficiency of the
consideration to meet the requirements of Section 6(b).

     (d) Cashless Exercise. To the extent that a Stock Option Agreement so provides, payment may be made all or in part
by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities
broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of
the aggregate Exercise Price.

     (e) Exercise/Pledge. To the extent that a Stock Option Agreement so provides, payment may be made all or in part
by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities
broker or lender to pledge Shares, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of the aggregate Exercise Price.

     (f) Promissory Note. To the extent that a Stock Option Agreement or Restricted Stock Agreement so provides,
payment may be made all or in part by delivering (on a form prescribed by the Company) a
full-recourse promissory note.

     (g) Other Forms of Payment. To the extent that a Stock Option Agreement or Restricted Stock Agreement so provides,
payment may be made in any other form that is consistent with applicable laws, regulations and
rules.

     (h) Limitations under Applicable Law. Notwithstanding anything herein or in a Stock Option Agreement or Restricted Stock Agreement
to the contrary, payment may not be made in any form that is unlawful, as determined by the
Committee in its sole discretion.

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SECTION 9. STOCK APPRECIATION RIGHTS.

     (a) SAR Agreement. Each grant of a SAR under the Plan shall be evidenced by a SAR Agreement between the
Optionee and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The provisions of the various
SAR Agreements entered into under the Plan need not be identical. SARs may be granted in
consideration of a reduction in the Optionee’s other compensation.

     (b) Number of Shares. Each SAR Agreement shall specify the number of Shares to which the SAR pertains and shall
provide for the adjustment of such number in accordance with Section 11.

     (c) Exercise Price. Each SAR Agreement shall specify the Exercise Price. A SAR Agreement may specify an Exercise
Price that varies in accordance with a predetermined formula while the SAR is outstanding.

     (d) Exercisability and Term. Each SAR Agreement shall specify the date when all or any installment of the SAR is to
become exercisable. The SAR Agreement shall also specify the term of the SAR. A SAR Agreement may
provide for accelerated exercisability in the event of the Optionee’s death, disability or
retirement or other events and may provide for expiration prior to the end of its term in the event
of the termination of the Optionee’s service. SARs may be awarded in combination with Options, and
such an Award may provide that the SARs will not be exercisable unless the related Options are
forfeited. A SAR may be included in an ISO only at the time of grant but may be included in an NSO
at the time of grant or thereafter. A SAR granted under the Plan may provide that it will be
exercisable only in the event of a Change in Control.

     (e) Effect of Change in Control. The Committee may determine, at the time of granting a SAR or thereafter, that such SAR
shall become fully exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company.

     (f) Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person having the right to exercise the SAR
after his or her death) shall receive from the Company (a) Shares, (b) cash or (c) a combination of
Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value
of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which
the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds the
Exercise Price.

     (g) Modification or Assumption of SARs. Within the limitations of the Plan, the Committee may modify, extend or assume outstanding
SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different number of shares
and at the same or a different exercise price. The foregoing notwithstanding, no modification of a
SAR shall, without the consent of the holder, materially impair his or her rights or obligations
under such SAR.

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     (h) Buyout Provisions. The Committee may at any time (a) offer to buy out for a payment in cash or cash
equivalents a SAR previously granted, or (b) authorize an Optionee to elect to cash out a SAR
previously granted, in either case at such time and based upon such terms and conditions as the
Committee shall establish.

SECTION 10. STOCK UNITS.

     (a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement
between the recipient and the Company. Such Stock Units shall be subject to all applicable terms of
the Plan and may be subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Unit Agreements entered into under the Plan need not be identical.
Stock Units may be granted in consideration of a reduction in the recipient’s other compensation.

     (b) Payment for Awards. To the extent that an Award is granted in the form of Stock Units, no cash consideration
shall be required of the Award recipients.

     (c) Vesting Conditions. Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full
or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement. A
Stock Unit Agreement may provide for accelerated vesting in the event of the Participant’s death,
disability or retirement or other events. The Committee may determine, at the time of granting
Stock Units or thereafter, that all or part of such Stock Units shall become vested in the event
that a Change in Control occurs with respect to the Company.

     (d) Voting and Dividend Rights. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture,
any Stock Unit awarded under the Plan may, at the Committee’s discretion, carry with it a right to
dividend equivalents. Such right entitles the holder to be credited with an amount equal to all
cash dividends paid on one Share while the Stock Unit is outstanding. Dividend equivalents may be
converted into additional Stock Units. Settlement of dividend equivalents may be made in the form
of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividend
equivalents which are not paid shall be subject to the same conditions and restrictions (including
without limitation, any forfeiture conditions) as the Stock Units to which they attach.

     (e) Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be made in the form of (a) cash, (b) Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock Units eligible for
settlement may be larger or smaller than the number included in the original Award, based on
predetermined performance factors. Methods of converting Stock Units into cash may include (without
limitation) a method based on the average Fair Market Value of Shares over a series of trading
days. Vested Stock Units may be settled in a lump sum or in installments. The distribution may
occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or
have lapsed, or it may be deferred to any later date. The amount of a deferred distribution may be
increased by an interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 11.

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     (f) Death of Recipient. Any Stock Units Award that becomes payable after the recipient’s death shall be distributed
to the recipient’s beneficiary or beneficiaries. Each recipient of a Stock Units Award under the
Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with
the Company. A beneficiary designation may be changed by filing the prescribed form with the
Company at any time before the Award recipient’s death. If no beneficiary was designated or if no
designated beneficiary survives the Award recipient, then any Stock Units Award that becomes
payable after the recipient’s death shall be distributed to the recipient’s estate.

     (g) Creditors’ Rights. A holder of Stock Units shall have no rights other than those of a general creditor of the
Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the
terms and conditions of the applicable Stock Unit Agreement.

SECTION 11. ADJUSTMENT OF SHARES.

     (a) Adjustments. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable
in Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a
material effect on the price of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a recapitalization, a spin-off or a
similar occurrence, the Committee shall make equitable adjustments in one or more of:

     (i) The number of Options, SARs, Restricted Shares and Stock Units available for future
Awards under Section 5;

     (ii) The limitations set forth in Sections 5(a) and (b);

     (iii) The number of Shares covered by each outstanding Option and SAR;

     (iv) The Exercise Price under each outstanding Option and SAR; or

     (v) The number of Stock Units included in any prior Award which has not yet been
settled.

Except as provided in this Section 11, a Participant shall have no rights by reason of any issue by
the Company of stock of any class or securities convertible into stock of any class, any
subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or
any other increase or decrease in the number of shares of stock of any class.

     (b) Dissolution or Liquidation. To the extent not previously exercised or settled, Options, SARs and Stock Units shall
terminate immediately prior to the dissolution or liquidation of the Company.

     (c) Reorganizations. In the event that the Company is a party to a merger or other reorganization, outstanding
Awards shall be subject to the agreement of merger or reorganization. Such agreement shall provide
for:

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     (i) The continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation;

     (ii) The assumption of the outstanding Awards by the surviving corporation or its
parent or subsidiary;

     (iii) The substitution by the surviving corporation or its parent or subsidiary of its
own awards for the outstanding Awards;

     (iv) Full exercisability or vesting and accelerated expiration of the outstanding
Awards; or

     (v) Settlement of the full value of the outstanding Awards in cash or cash equivalents
followed by cancellation of such Awards.

     (d) Reservation of Rights. Except as provided in this Section 11, an Optionee or Offeree shall have no rights by reason
of any subdivision or consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class. Any issue by the
Company of shares of stock of any class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the
number or Exercise Price of Shares subject to an Option. The grant of an Option pursuant to the
Plan shall not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

SECTION 12. DEFERRAL OF AWARDS.

     (a) Committee Powers. The Committee (in its sole discretion) may permit or require a Participant to:

     (i) Have cash that otherwise would be paid to such Participant as a result of the
exercise of a SAR or the settlement of Stock Units credited to a deferred compensation
account established for such Participant by the Committee as an entry on the Company’s
books;

     (ii) Have Shares that otherwise would be delivered to such Participant as a result of
the exercise of an Option or SAR converted into an equal number of Stock Units; or

     (iii) Have Shares that otherwise would be delivered to such Participant as a result of
the exercise of an Option or SAR or the settlement of Stock Units converted into amounts
credited to a deferred compensation account established for such Participant by the
Committee as an entry on the Company’s books. Such amounts shall be determined by reference
to the Fair Market Value of such Shares as of the date when they otherwise would have been
delivered to such Participant.

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     (b) General Rules. A deferred compensation account established under this Section 12 may be credited with
interest or other forms of investment return, as determined by the Committee. A Participant for
whom such an account is established shall have no rights other than those of a general creditor of
the Company. Such an account shall represent an unfunded and unsecured obligation of the Company
and shall be subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is permitted or required, the
Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such
Awards, including (without limitation) the settlement of deferred compensation accounts established
under this Section 12.

SECTION 13. AWARDS UNDER OTHER PLANS.

     The Company may grant awards under other plans or programs. Such awards may be settled in the
form of Shares issued under this Plan. Such Shares shall be treated for all purposes under the Plan
like Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Shares
available under Section 5.

SECTION 14. PAYMENT OF DIRECTOR’S FEES IN SECURITIES.

     (a) Effective Date. No provision of this Section 14 shall be effective unless and until the Board has determined
to implement such provision.

     (b) Elections to Receive NSOs, Restricted Shares or Stock Units. An Outside Director may elect to receive his or her annual retainer payments and/or meeting
fees from the Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination
thereof, as determined by the Board. Such NSOs, Restricted Shares and Stock Units shall be issued
under the Plan. An election under this Section 14 shall be filed with the Company on the prescribed
form.

     (c) Number and Terms of NSOs, Restricted Shares or Stock Units. The number of NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in
lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated
in a manner determined by the Board. The terms of such NSOs, Restricted Shares or Stock Units shall
also be determined by the Board.

SECTION 15. LEGAL AND REGULATORY REQUIREMENTS.

     Shares shall not be issued under the Plan unless the issuance and delivery of such Shares
complies with (or is exempt from) all applicable requirements of law, including (without
limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, state securities laws and regulations and the regulations of any stock exchange on
which the Company’s securities may then be listed, and the Company has obtained the approval or
favorable ruling from any governmental agency which the Company determines is necessary or
advisable. The Company shall not be liable to a Participant or other persons as to: (a) the
non-issuance or sale of Shares as to which the Company has been unable to obtain from any
regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary
to the lawful issuance and sale of any Shares under the Plan; and (b) any tax

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consequences
expected, but not realized, by any Participant or other person due to the receipt, exercise or
settlement of any Award granted under the Plan.

SECTION 16. WITHHOLDING TAXES.

     (a) General. To the extent required by applicable federal, state, local or foreign law, a Participant or
his or her successor shall make arrangements satisfactory to the Company for the satisfaction of
any withholding tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such obligations are
satisfied.

     (b) Share Withholding. The Committee may permit a Participant to satisfy all or part of his or her withholding or
income tax obligations by having the Company withhold all or a portion of any Shares that otherwise
would be issued to him or her or by surrendering all or a portion of any Shares that he or she
previously acquired. Such Shares shall be valued at their Fair Market Value on the date when taxes
otherwise would be withheld in cash. In no event may a Participant have Shares withheld that would
otherwise be issued to him or her in excess of the number necessary to satisfy the legally required
minimum tax withholding.

SECTION 17. OTHER PROVISIONS APPLICABLE TO AWARDS.

     (a) Transferability. Unless the agreement evidencing an Award (or an amendment thereto authorized by the
Committee) expressly provides otherwise, no Award granted under this Plan, nor any interest in such
Award, may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred in
any manner (prior to the vesting and lapse of any and all restrictions applicable to
Shares issued under such Award), other than by will or the laws of descent and distribution;
provided, however, that an ISO may be transferred or assigned only to the extent consistent with
Section 422 of the Code. Any purported assignment, transfer or encumbrance in violation of this
Section 17(a) shall be void and unenforceable against the Company.

     (b) Qualifying Performance Criteria. The number of Shares or other benefits granted, issued, retainable and/or vested under an
Award may be made subject to the attainment of performance goals for a specified period of time
relating to one or more of the following performance criteria, either individually, alternatively
or in any combination, applied to either the Company as a whole or to a business unit or
Subsidiary, either individually, alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative to a pre-established
target, to previous years’ results or to a designated comparison group or index, in each case as
specified by the Committee in the Award: (a) cash flow, (b) earnings per share, (c) earnings before
interest, taxes and amortization, (d) return on equity, (e) total stockholder return, (f) share
price performance, (g) return on capital, (h) return on assets or net assets, (i) revenue, (j)
income or net income, (k) operating income or net operating income, (l) operating profit or net
operating profit, (m) operating margin or profit margin, (n) return on operating revenue, (o)
return on invested capital, or (p) market segment shares (“Qualifying Performance Criteria”). The
Committee may appropriately adjust any evaluation of performance under a Qualifying Performance
Criteria to exclude any of the following events that occurs during a performance period: (i) asset
write-downs, (ii) litigation or

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2006 Stock Incentive Plan

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claim judgments or settlements, (iii) the effect of changes in tax
law, accounting principles or other such laws or provisions affecting reported results, (iv)
accruals for reorganization and restructuring programs and (v) any extraordinary nonrecurring items
as described in Accounting Principles Board Opinion No. 30 and/or in managements’ discussion and
analysis of financial condition and results of operations appearing in the Company’s annual report
to stockholders for the applicable year. If applicable, the Committee shall determine the
Qualifying Performance Criteria not later than the 90th day of the performance period,
and shall determine and certify, for each Participant, the extent to which the Qualifying
Performance Criteria have been met. The Committee may not in any event increase the amount of
compensation payable under the Plan upon the attainment of a Qualifying Performance Goal to a
Participant who is a “covered employee” within the meaning of Section 162(m) of the Code.

SECTION 18. NO EMPLOYMENT RIGHTS.

     No provision of the Plan, nor any right or Option granted under the Plan, shall be construed
to give any person any right to become, to be treated as, or to remain an Employee. The Company and
its Subsidiaries reserve the right to terminate any person’s Service at any time and for any
reason, with or without notice.

SECTION 19. DURATION AND AMENDMENTS.

     (a) Term of the Plan. The Plan, as set forth herein, shall terminate automatically on August 25, 2016 and may be
terminated on any earlier date pursuant to Subsection (b) below.

     (b) Right to Amend or Terminate the Plan. The Board of Directors may amend or terminate the Plan at any time and from time to time.
Rights and obligations under any Award granted before amendment of the Plan shall not be materially
impaired by such amendment, except with consent of the Participant. An amendment of the Plan shall
be subject to the approval of the Company’s stockholders only to the extent required by applicable
laws, regulations or rules.

     (c) Effect of Termination. No Awards shall be granted under the Plan after the termination thereof. The termination of
the Plan shall not affect Awards previously granted under the Plan.

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SECTION 20. EXECUTION.

     To record the adoption of the Plan by the Board of Directors, the Company has caused its
authorized officer to execute the same.

	 	 	 	 	 
	 	OCULUS INNOVATIVE SCIENCES, INC.

 	 
	 	By:  	/s/ Robert Miller
 	 
	 	 	Name:  	Robert Miller 	 
	 	 	Title:  	Chief Financial Officer 	 

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2006 Stock Incentive Plan

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