Document:

Employment Agreement

 Exhibit 10.1 
 EMPLOYMENT AGREEMENT 
 THIS EMPLOYMENT AGREEMENT (“Agreement”) is dated as of May 2,
2006, and made and entered into by and between The Wet Seal, Inc., a Delaware corporation (the “Company”), and Dyan M. Jozwick (the “Executive”). 
 WHEREAS, the Company desires to employ Executive as Chief Merchandise Officer, the Wet Seal division, of the Company, and Executive desires to be so employed; and 
 WHEREAS, the Company and Executive (collectively, the “Parties”) desire their employment relationship to be governed by the terms set forth
below. 
 THEREFORE, the Parties agree as follows: 
  

	 	1.	EMPLOYMENT 

 The Company hereby
employs Executive and Executive hereby accepts employment upon the terms and conditions set forth below. 
  

	 	2.	TERM 

 The term of this Agreement
shall begin on May 2, 2006 (the “Effective Date”) and end on May 2, 2009 (the “Term”). 
  

	 	3.	COMPENSATION 

 3.1 Base
Compensation. For the services to be rendered by Executive under this Agreement, Executive shall be entitled to receive, commencing as of the Effective Date, salary at the annual rate of Four Hundred Thousand Dollars ($400,000) (“Base
Compensation”) payable in twenty-six (26) substantially equal installments per year. The Base Compensation shall be reviewed annually for possible increase by the Company’s Board of Directors (“Board”). 
 3.2 Annual Bonus Compensation. Provided that Executive is employed as of the end of each of the Company’s respective bonus
periods, Executive shall be eligible to receive bonus compensation targeted at 50% of her Base Compensation. The maximum bonus opportunity shall be up to 100% of her Base Compensation. 40% of the Bonus will be based on Spring operating income
results and 60% will be based on Fall operating income results. Of these Spring and Fall results, 80% will be based on the Wet Seal division operating income results and 20% the Total Company operating income results. Executive shall not be eligible
for a bonus under this provision if she is not employed as of the end of the period for which the bonus is awarded. Any bonus under this provision shall be paid no later than the end of March for Fall bonus payment and the end of August for Spring
bonus payout. For any period, the Company reserves the right to change the operating metric(s) for purposes of measuring the bonus earned. 
 3.3 Options. Subject to the approval of the Board, pursuant to and subject to the terms of the Company’s stock option plan(s), Executive shall be granted non-qualified stock 

  

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options to purchase 90,000 shares of common stock of the Company. The options shall vest in three equal installments over 3 years, on the first, second and
third anniversaries of the Effective Date, and the exercise price shall be set in accordance with the terms of the plan under which such options are granted and shall be subject to a written option agreement in a form acceptable to the Company.

 3.4 Restricted Grant. Subject to the approval of the Board, pursuant to and subject to the terms of the
Company’s plan, Executive shall be granted restricted shares in the amount of 30,000 shares. These restricted shares will vest in three equal installments over 3 years, on the first, second and third anniversaries of the Effective Date.

 3.5 Sign-On Bonus Over the course of the first year of the Term, Executive will earn a sign-on bonus in the gross
amount of Fifty Thousand Dollars ($50,000). The entire bonus amount will be advanced to Executive in a lump sum, less applicable taxes and withholdings, at the time she receives her first paycheck. The advance of this sign-on bonus shall be forgiven
1/12th per month worked. Should Executive voluntarily resign from her employment during the first 12 months of
the Term, she shall repay any pro-rated amount not yet earned and forgiven. By signing below, Executive agrees that in the event she is required to repay any portion of the sign-on amount, the Company may deduct any amount owed from any salary,
bonus, vacation, expense reimbursement or other payments otherwise payable to her at that time. 
 3.6 Benefits.
Executive shall be entitled to participate in all pension, medical, dental, vision, life insurance, disability and other benefit or insurance plans established by the Company and made available to other executives at her level, in accordance with
the terms of such plans that are or may be in effect during the Term. 
 3.7 Vacation and Other Benefits. Executive
shall be entitled to three weeks vacation per year in accordance with the Company’s vacation policy that is or may be in effect during the Term. 
 3.8 Relocation. Executive shall receive a 90 days temporary housing allowance with a maximum of $2,500 per month and a lump sum payment of $30,000, to assist her with her relocation. This relocation payment
will be made to Executive at the time she receives her first paycheck. 
 3.9 Expense Reimbursement. Executive shall be
reimbursed for reasonable business expenses actually incurred, in accordance with the Company’s expense reimbursement policy that is or may be in effect during the Term. 
  

	 	4.	POSITION AND DUTIES 

 4.1
Position. Executive shall serve as Chief Merchandise Officer of the Wet Seal division of the Company and report to the Company’s Chief Executive Officer. This position is considered a 16(b) officer of the Company and subject to all
insider trading, blackout periods and fiduciary responsibilities associated with such. 
  

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 4.2 Devotion of Time and Effort. Executive shall use Executive’s good faith
best efforts and judgment (a) in performing Executive’s duties required hereunder and (b) to act in the best interests of the Company. Executive shall work exclusively for the Company during the Term and shall devote such time,
attention and energies to the business of the Company as are reasonably necessary to satisfy Executive’s required responsibilities and duties hereunder. 
 4.3 Compliance With Policies. Executive shall observe all Company policies and all reasonable rules and regulations adopted by
Company in connection with the conduct of its business, and shall render services in a competent, conscientious and professional manner and as instructed by Company in all matters, including those involving artistic taste and judgment. 

 

	 	5.	TERMINATION 

 5.1 Due to Death or
Disability. If Executive dies during the Term, Executive’s employment and this Agreement shall terminate as of the date of her death. The Company also may terminate Executive if she becomes “disabled,” as defined below, upon
written notice to Executive, unless prohibited by law. For purposes of this Agreement, the term “Disabled” shall mean having a physical or mental incapacity as a result of which Executive becomes unable to continue the proper performance
of Executive’s duties hereunder for six (6) consecutive calendar months or for shorter periods aggregating one hundred eighty (180) business days in any twelve (12) month period, or, if this provision is inconsistent with any
applicable law, for such period or periods as permitted by law. 
 5.2 By the Company Without “Cause”. The
Company may terminate Executive’s employment without “cause” (as hereinafter defined) at any time following the Effective Date, subject only to compliance by the Company with the provisions of Section 5.5 hereof. 
 5.3 By the Company for Cause. The Company may terminate Executive’s employment for “Cause” at any time. For purposes
of this Agreement, “Cause” shall mean: 
 (a) Executive’s conviction of, or plea of nolo contendere to, any
felony or any crime or crime involving the Company; 
 (b) Executive’s commission of any act of theft, embezzlement or
misappropriation against the Company; 
 (c) The gross neglect, malfeasance or nonfeasance of Executive in the performance of
the services contemplated hereunder, when such conduct causes or has the likelihood of causing material economic harm to the Company; 
 (d) A material breach of this Agreement by Executive; 
 (e) Any willful misconduct or
unethical behavior related to Executive’s duties hereunder or insubordination by Executive; 
 (f) The sexual, or other
harassment by Executive of any employee, independent contractor or customer of the Company; and/or 
  

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 (g) Executive’s use of illegal drugs or her abuse of alcohol or legally prescribed
drugs. 
 5.4 By Executive For Good Reason. Executive may terminate her employment only for Good Reason as defined
below. In the event Executive seeks to terminate her employment for Good Reason, Executive shall provide thirty (30) days written notice to the Company describing the claimed event or circumstance and setting forth Executive’s intention to
terminate her employment with the Company. In all cases, the Company shall have the opportunity to cure any “Good Reason” identified by Executive within thirty (30) days of the Company’s receipt of the written notice from
Executive. For purposes of this Agreement, “Good Reason” shall mean: 
 (a) The Company’s material beach of any
of its obligations hereunder; 
 (b) Relocating Executive’s place of work, or the executive offices of the Company, to a
location other than in the County of Orange or the County of Los Angeles, State of California, without Executive’s written consent; or 
 (c) A material reduction, without cause, in Executive’s title, responsibilities or duties. 
 5.5 Termination Payments and Benefits: 
 (a) Earnings and Benefits Upon Termination. In the event that
Executive’s employment is terminated pursuant to Sections 5.1 through 5.4, Executive shall continue to render services to the Company pursuant to this Agreement until her date of death or the date of termination (“Termination Date”)
and shall continue to receive compensation and payment for any unreimbursed expenses incurred and other accrued employee benefits as provided in this Agreement, through the Termination Date. In addition, as of the Termination Date, Executive shall
be eligible to continue her group medical benefits, at her sole expense, in accordance with and subject to applicable law (“COBRA”). 
 (b) Severance. Only in the event that Executive’s employment is terminated by the Company without “Cause” pursuant to Section 5.2 or there is a “Change of Control” as defined
below, and subject to subpart (c) below, Executive shall receive severance pay in an amount equal to six months base compensation. Severance payments for the six (6) month period (the “Severance Period”) shall be made in
bi-weekly installments with the first payment commencing on the latter of the first regular pay date after the Termination Date or the tenth (10th) day after execution of the release described in subpart (c) below. Except as provided in
this Section 5.5, Executive shall not be entitled to severance or any other payments in connection with her employment and/or the termination thereof, and shall have no further right to receive compensation or other consideration from the
Company or have any other remedy whatsoever against the Company, as a result of the termination of this Agreement or the termination of her employment. 
 For purposes of this Agreement, “Change of Control” means the sale of all or substantially all of the assets of the Company, or the sale or other transfer of a majority of the 

  

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equity ownership interests of the Company, as a result of which either (a) there is a substantial change in your duties or (b) your employment is
terminated. 
 (c) Separation Agreement and General Release. To be eligible to receive severance pay under this
Section 5.5, Executive must execute and deliver (and not revoke, if a revocation period is required by law) a separation agreement, in a form acceptable to the Company and containing all provisions required by the Company, including but not
limited to (i) a general release by Executive of any and all claims against the Company and any of its parents, subsidiaries, affiliates, shareholders, members, partners, investors, officers, directors, agents and employees (ii) a
provision reducing Executive’s severance pay by any income earned by Executive, whether as an employee, independent contractor or otherwise, for services performed by Executive, during the Severance Period; (iii) a confidentiality
provision prohibiting disclosure by Executive; (v) an arbitration provision; (vi) a provision prohibiting disparagement of the Company by Executive; and (vii) a non admission of liability by the Company provision. 
  

	 	6.	NON-SOLICITATION, NON-COMPETITION 

 Executive acknowledges that by virtue of Executive’s position as Chief Merchandise Officer, Wet Seal division of the Company, and Executive’s employment hereunder, she will have advantageous familiarity with and knowledge about
the Company and will be instrumental in establishing and maintaining goodwill between the Company and its customers, which goodwill is the property of the Company. Therefore, Executive agrees as follows: 
 (a) During the Term of this Agreement, Executive will not engage (either directly or indirectly, as shareholder, partner, officer,
director, consultant, employee or otherwise) in any enterprise, nor perform any services of any kind whatsoever for or provide any financial assistance to any enterprise, in the specialty retail clothing business other than through the Company or
its subsidiaries and their successors; provided, however, that this restriction shall not apply following the termination of Executive’s employment prior to the end of the Term pursuant to, and in accordance with, Sections 5.1 through 5.4;

 (b) During the Term of this Agreement, and for a period of one year following the end of the Term, Executive will not,
either for herself or for any other person or entity, directly or indirectly (i) solicit, induce, recruit or encourage any of the Company’s employees to terminate their relationship with the Company, and/or (ii) attempt to solicit,
induce, recruit or encourage any of the Company’s employees to terminate their relationship with the Company; provided, however, that this restriction shall apply for one year following the termination of Executive’s employment, in the
event Executive’s employment is terminated prior to the end of the Term pursuant to, and in accordance with, Sections 5.1 through 5.4; 
 (c) During the Term of this Agreement, except within the final one hundred twenty (120) days of the Term, Executive shall not seek, or negotiate for, employment other than with the Company; provided, however,
that this restriction shall not apply following the termination of Executive’s employment prior to the end of the Term pursuant to, and in accordance with, Sections 5.1 through 5.4. 
  

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 (d) Executive acknowledges that any violation of any provision of this Section 6 by
Executive will cause irreparable damage to the Company, that such damages will be incapable of precise measurement and that, as a result, the Company will not have an adequate remedy at law to redress the harm which such violations will cause.
Therefore, in the event of any violation of any provision of this Section 6 by Executive, Executive agrees that the Company will be entitled to injunctive relief including, but not limited to, temporary and/or permanent restraining orders to
restrain any violation of this Section 6 by Executive; and 
 (e) It is the desire and intent of the parties that the
provisions of this Section 6 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any portion of this Section 6 shall be
adjudicated to be invalid or unenforceable, this Section 6 shall be deemed amended either to conform to such restrictions as the court or arbitrator may allow, or to delete therefrom or reform the portion thus adjudicated to be invalid and
unenforceable, such deletion or reformation to apply only with respect to the operation of this Section 6 in the particular jurisdiction in which such adjudication is made. It is expressly agreed that the arbitrator in any arbitration hereunder
shall have the authority to modify this Section 6 if necessary to render it enforceable, in such manner as to preserve as much as possible the parties’ original intentions, as expressed herein, with respect to the scope hereof. 

 

	 	7.	TRADE SECRETS 

 7.1 Executive
specifically agrees that Executive will not at my time, whether during or subsequent to the Term, in any fashion, form or manner, except in furtherance of Executive’s duties at the Company or with the specific written consent of the Company,
either directly or indirectly use or divulge, disclose or communicate to any Person in, any manner whatsoever, any confidential information of any kind, nature or description concerning any matters affecting or relating to the business of the
Company (the “Proprietary Information”), including (i) all information, formulae, compilations, software programs (including object codes and source codes), devices, methods, techniques, drawings, plans, experimental and research
work, inventions, patterns, processes and know-how, whether or not patentable, and whether or not at a commercial stage related to the Company or any subsidiary thereof (ii) buying habits or practices of any of its customers, (iii) the
Company’s marketing methods and related data, (iv) the Company’s costs of materials, (v) the prices it obtains or has obtained or at which it sells or has sold its products or services, (vi) lists or other written records
used in the Company’s business, (vii) compensation paid to employees and other terms of employment or (viii) any other confidential information of, about or concerning the business of the Company, its manner of operation, or other
confidential data of any kind, nature or description (excluding any information that is or becomes publicly known or available for use through no fault of Executive or as directed by Court order). The parties hereto stipulate that as between them,
Proprietary Information constitutes trade secrets that derive independent economic value, actual or potential, from not being generally known to the public or to other Persons who can obtain economic value from its disclosure or use and that
Proprietary Information is the subject of efforts which are reasonable under the circumstances to maintain its secrecy and of which this Section 7.1. is an example, and that any breach of this Section 7.1 shall be a material breach of this
Agreement. All Proprietary Information shall be and remain the Company’s sole property. 
  

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 7.2 Executive agrees to keep confidential and not to use or divulge except in furtherance
of Executive’s duties at the Company any confidential or proprietary information of any customer of the Company to which Executive may obtain access during the Term. Executive acknowledges and agrees that a breach of this Section 7.2 shall
be a material breach of this Agreement. 
  

	 	8.	INVENTIONS 

 8.1 Executive agrees to
disclose promptly to the Company any and all concepts, designs, inventions, discoveries and improvements related to the Company’s business (collectively, “Inventions”) that Executive may conceive, discover or make from the beginning
of Executive’s employment with Company until the termination thereof; whether such is made solely or jointly with others, whether or not patentable, of which the conception or making involves the use of the Company’s time, facilities,
equipment or personnel. 
 8.2 Executive agrees to assign, and does hereby assign, to the Company (or its nominee)
Executive’s right, title and interest in and to any and all Inventions that Executive may conceive, discover or make, either solely or jointly with others, patentable or unpatentable, from the beginning of Executive’s employment with the
Company until the termination thereof. 
 8.3 Executive agrees to sign at the request of the Company any instrument necessary
for the filing and prosecution of patent applications in the United States and elsewhere, including divisional, continuation, revival, renewal or reissue applications, covering any Inventions and all instruments necessary to vest title to such
Inventions in the Company (or its nominee). Executive further agrees to cooperate and assist the Company in preparing, filing and prosecuting any and all such patent applications and in pursuing or defending any litigation upon inventions covered
hereby. The Company shall bear all expenses involved in the prosecution of such patent applications it desires to have filed. Executive agrees to sign at the request of the Company any and all instruments necessary to vest title in the Company (or
its nominee) to any specific patent application prepared by the Company and covering Inventions which Executive has agreed to assign to the Company (or its nominee) pursuant to Section 8.2 above. 
 8.4 The provisions of Sections 8.2 and 8.3 do not apply to any invention which qualifies fully under the provisions of Section 2870
of the California Labor Code, which provides in substance that provisions in an employment agreement providing that an employee shall assign or offer to assign rights in an invention to his or her employer do not apply to an invention for which no
equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, except for those inventions that either (a) relate, at the time of conception or reduction
to practice of the invention: (1) to the business of the employer or (2) to the employer’s actual or demonstrably anticipated research or development, or (b) result from any work performed by the employee for the employer.

  

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	 	9.	SHOP RIGHTS 

 The Company shall also
have a perpetual, royalty-free, non-exclusive right to use in its business, and to make, use, license and sell products, processes and/or services derived from any inventions, discoveries, designs, improvements, concepts, ideas, works of authorship,
whether patentable or not, including processes, methods, formulae, techniques or know-how related thereto, that are not within the scope of “Inventions” as defined above, but which are conceived or made by Executive during regular working
hours or with the use of the facilities, materials or personnel of the Company. 
  

	 	10.	COPYRIGHT 

 Executive agrees that
any work prepared for the Company that is eligible for copyright protection under any U.S. or foreign law shall be a work made for hire and ownership of all copyrights (including all renewals and extensions therein) shall vest in the Company. In the
event any such work is deemed not to be a work made for hire for any reason, Executive hereby irrevocably grants, transfers and assigns all right, title and interest in such work and all copyrights in such work and all renewals and extensions
thereof to the Company, and agrees to provide all assistance reasonably requested by the Company in the establishment, preservation and enforcement of its copyright in such work, such assistance to be provided at the Company’s expense but
without any additional compensation to Executive. Executive agrees to and does hereby irrevocably waive all moral rights with respect to the work developed or produced hereunder, including any and all rights of identification of authorship and any
and all rights of approval, restriction or limitation on use or subsequent modifications. 
  

	 	11.	EXECUTIVE’S DUTIES ON TERMINATION 

 Upon termination of her employment, Executive will return immediately to the Company all of the Company’s property in Executive’s possession or control, including, but not limited to, phone cards, credit cards, reports,
Proprietary Information, software, keys, files, data, customer lists, equipment, and all other tangible and intangible property belonging to the Company or relating to Executive’s employment with the Company. 
  

	 	12.	THE COMPANY’S REPRESENTATIONS 

 The Company hereby represents and warrants that (a) it has the right to enter into this Agreement and to incur the obligations incurred by it herein, (b) this Agreement has been duly and validly authorized by the Company, and
(c) the provisions of this Agreement do not violate any other contracts or agreements to which it is a party and that would adversely affect its ability to perform its obligation hereunder. 
  

	 	13.	EXECUTIVE’S REPRESENTATIONS 

 Executive hereby represents and warrants that (a) she has the right to enter into this Agreement and to grant the rights granted by her herein and (b) the provisions of this Agreement do not violate any other contracts or
agreements to which she is a party and that would adversely affect her ability to perform her obligation hereunder. 
  

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	 	14.	GENERAL PROVISIONS 

 14.1
Assignment, Binding Effect. Neither the Company nor Executive may assign, delegate or otherwise transfer this Agreement or any of their respective rights or obligations hereunder without the prior written consent of the other party, except
that the Company may assign this Agreement to its successors (through acquisition, merger, reorganization or otherwise), and affiliate, parent or subsidiary corporations. Any attempted prohibited assignment or delegation shall be void. This
Agreement shall be binding upon and inure to the benefit of any permitted successors or assigns of the parties and the heirs, executors, administrators and/or personal representatives of Executive. 
 14.2 Notices. All notices, requests, demands and other communications that are required or may be given under this Agreement shall
be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy, electronic or digital transmission method with electronic confirmation of receipt; the day after it is
sent, if sent for next-day delivery to a domestic address by recognized overnight delivery service (e.g., FedEx); and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: 

If to the Company 
 Ms. Pam O’Connor 
 Senior Vice President, Human 
 Resources 
 The Wet Seal, Inc. 

26972 Burbank 
 Foothill Ranch, CA 92610

 Facsimile No.: (949) 699 4722 
 With a copy to: 
 Her lawyer 
 If to Executive: 
 Dyan M.
Jozwick 
 3863 Eureka Dr 
 Studio City, Ca 91604 
 Any party may change its address for the purpose of this Section 15.2 by giving the
other party written notice of its new address in the manner set forth above. 
  

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 14.3 Entire Agreement. This Agreement constitutes the entire agreement of the
parties, and supersedes all prior agreements. 
 14.4 Amendments; Waivers. This Agreement may be amended or modified,
and any of the terms and covenants may be waived, only by a written instrument executed by the parties hereto, or, in the case of a waiver, by the party waiving compliance. Any waiver by any party in any one or more instances of any term or covenant
contained in this Agreement shall neither be deemed to be nor construed as a further or continuing waiver of any such term or covenant of this Agreement. 
 14.5 Provisions Severable. In case any one or more provisions of this Agreement shall be invalid, illegal or unenforceable, in any respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not, in any way, be affected or impaired thereby. If any provision hereof is determined by any court of competent jurisdiction or an arbitrator to be invalid or unenforceable by reason of such provision extending the covenants
and agreements contained herein for too great a period of time or over too great a geographical area, or being too extensive in any other respect, such provision shall be interpreted to extend only over the maximum period of time and geographical
area, and to the maximum extent in all other respects, as to which it is valid and enforceable, all as determined by such court or such arbitrator. 
 14.6 Governing Law. This Agreement shall be construed, performed and enforced in accordance with, and governed by the laws of the State of California without giving effect to the principles of conflict of laws
thereof. 
 14.7 Counterparts. This Agreement may be executed in one or more counterparts and delivered by facsimile,
each of which shall. be deemed an original, but all of which shall together constitute the same instrument. 
 14.8
Survival. Sections 6 through 16 shall survive the termination or expiration of this Agreement. 
  

	 	15.	SERVICES UNIQUE 

 The services to be
performed by Executive pursuant to this Agreement are of a special, unique, unusual, extraordinary and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated by damages in an action
at law. Company may seek, but shall not be limited to, equitable relief, by injunction or otherwise, in the event of a default by Executive. 
  

	 	16.	ARBITRATION 

 In recognition of the
fact that differences may arise between Executive and the Company relating to certain aspects of Executive’s employment or the termination of Executive’s 

  

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employment, and in recognition of the fact that resolution of any differences in the courts is rarely timely or cost effective for either party, both the
Company and Executive mutually agree to arbitrate disputes under the following terms and conditions in order to establish and gain the benefits of a speedy, impartial and cost-effective dispute resolution procedure. 
 (a) Except as set forth in subparagraph (e) below, any dispute arising out of or in any way related to Executive’s employment
with the Company, will be decided exclusively by final and binding arbitration, in Orange County, California, pursuant to the procedures required by California law, including the California Arbitration Act, California Code of Civil Procedure
§§ 1281, et seq. and governing case law including Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (2000). The Claims covered include, but are not limited to, claims for wages or other compensation due; claims
for breach of any contract or covenant, express or implied; tort claims; claims for discrimination, including but not limited to discrimination based on race, sex, sexual orientation, religion, national origin, age, marital status, handicap,
disability or medical condition or harassment on any of the foregoing bases; claims for benefits, except as excluded herein; and claims for violation of any federal, state or other governmental constitution, statute, ordinance, regulation, or public
policy. This agreement to arbitrate disputes shall not be deemed to apply to a dispute if an agreement to arbitrate such a dispute is prohibited by law. 
 (b) The arbitrator may award any form of remedy or relief (including injunctive relief) that would otherwise be available in court. Any award pursuant to said arbitration shall be accompanied by a written opinion of
the arbitrator setting forth the reason for the award. The award rendered by the arbitrator shall be conclusive and binding upon the parties hereto, and judgment upon the award may be entered, and enforcement may be sought in, any court of competent
jurisdiction. To the extent not inconsistent with applicable laws, the Arbitrator will have the authority to hear and grant motions. 
 (c) Except as required under governing law, including Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (2000), each party shall pay its own expenses of arbitration and the expenses of the arbitrator (including
compensation) shall be borne equally by the parties. 
 (d) EXECUTIVE AND THE COMPANY UNDERSTAND THAT, ABSENT THIS AGREEMENT,
EXECUTIVE AND THE COMPANY WOULD HAVE THE RIGHT TO SUE EACH OTHER IN COURT, AND THE RIGHT TO A JURY TRIAL, BUT, BY THIS AGREEMENT, GIVE UP THAT RIGHT AND AGREE TO RESOLVE BY ARBITRATION ANY AND ALL GRIEVANCES DIRECTLY OR INDIRECTLY RELATED TO THIS
AGREEMENT, EXECUTIVE’S EMPLOYMENT OR THE TERMINATION THEREOF. 
 (e) Notwithstanding the above, Executive or the Company
shall be entitled to seek injunctive or other equitable, provisional relief from a court of competent jurisdiction in Orange County, California upon a showing that any potential arbitration award would be rendered ineffectual without such relief.
However, if any party seeks or obtains such injunctive relief, the merits of the dispute and/or determination of any appropriate remedy (other than equitable, provisional relief) shall be resolved in accordance with this Agreement. 
  

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 (f) In the event that any of the foregoing arbitration provisions is held to be
unenforceable, such provision shall be deemed stricken and the remainder shall be fully enforceable. 
 (g) This agreement to
arbitrate disputes shall apply to disputes involving the Company as well as the Company’s parents, affiliates, subsidiaries, successors, assigns, officers, directors, shareholders, employees and agents. Any controversy regarding whether a
particular dispute is subject to arbitration shall be decided by the arbitrator. 
 IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the date first written above. 
  

			
	 THE “COMPANY”

		
	 By:
	 	 /s/ Joel Waller

	 Title:
	 	 Chief Executive Officer

  

	
	 “EXECUTIVE”

	
	 /s/ Dyan M. Jozwick

	 Dyan M. Jozwick

  

 12Exhibit 10.9

 EXHIBIT 10.9 
 LUNA INNOVATIONS INCORPORATED 
 2006 EQUITY INCENTIVE PLAN 
 1. Purposes of the Plan. The purposes of this Plan are: 
  

	 	•	 	to attract and retain the best available personnel for positions of substantial responsibility, 

  

	 	•	 	to provide additional incentive to Employees, Directors and Consultants, and 

  

	 	•	 	to promote the success of the Company’s business. 

 The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights, Performance Units and Performance Shares. 
 2. Definitions. As used herein, the following definitions will apply: 
 (a) “Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 of the
Plan. 
 (b) “Affiliated SAR” means an SAR that is granted in connection with a related Option, and which automatically will
be deemed to be exercised at the same time that the related Option is exercised. 
 (c) “Applicable Laws” means the
requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan. 
 (d) “Award”
means, individually or collectively, a grant under the Plan of Options, SARs, Restricted Stock, Performance Units or Performance Shares. 
 (e) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.

 (f) “Board” means the Board of Directors of the Company. 
 (g) “Change in Control” means the occurrence of any of the following events: 
 (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in
Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or 

 (ii) The consummation of the sale or disposition by the Company of all or substantially all of the
Company’s assets; 
 (iii) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than
a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the effective date of the Plan, or (B) are elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company); or 
 (iv) The consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities
of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

 (h) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a
reference to any successor or amended section of the Code. 
 (i) “Committee” means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan. 
 (j) “Common Stock” means the common stock of the Company.

 (k) “Company” means Luna Innovations Incorporated, a Delaware corporation, or any successor thereto. 
 (l) “Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such
entity. 
 (m) “Director” means a member of the Board. 
 (n) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of
Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

 (o) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of
the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company. 
 (p) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  

 -2- 

 (q) “Exchange Program” means a program under which (i) outstanding Awards are
surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, and/or (ii) the exercise price of an outstanding Award is reduced. The
Administrator will determine the terms and conditions of any Exchange Program in its sole discretion. 
 (r) “Fair Market
Value” means, as of any date, the value of Common Stock determined as follows: 
 (i) If the Common Stock is listed on any
established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; 
 (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of
Common Stock will be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; 
 (iii) For purposes of any Awards granted on the Registration Date, the Fair Market Value will be the initial price to the public as set forth in the
final prospectus included within the registration statement in Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Company’s Common Stock; or 
 (iv) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator.

 (s) “Fiscal Year” means the fiscal year of the Company. 
 (t) “Freestanding SAR” means a SAR that is granted independently of any Option. 
 (u) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of
the Code and the regulations promulgated thereunder. 
 (v) “Inside Director” means a Director who is an Employee.

 (w) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an
Incentive Stock Option. 
 (x) “Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. 
 (y) “Option” means a stock
option granted pursuant to the Plan. 
  

 -3- 

 (z) “Optioned Stock” means the Common Stock subject to an Award. 
 (aa) “Outside Director” means a Director who is not an Employee. 
 (bb) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

 (cc) “Participant” means the holder of an outstanding Award. 
 (dd) “Performance Share” means an Award granted to a Participant pursuant to Section 9. 
 (ee) “Performance Unit” means an Award granted to a Participant pursuant to Section 9. 
 (ff) “Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to restrictions and
therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.

 (gg) “Plan” means this 2006 Equity Incentive Plan. 
 (hh) “Registration Date” means the effective date of the first registration statement that is filed by the Company and declared
effective pursuant to Section 12(g) of the Exchange Act, with respect to any class of the Company’s securities. 
 (ii)
“Restricted Stock” means shares of Common Stock issued pursuant to a Restricted Stock award under Section 7 of the Plan, or issued pursuant to the early exercise of an Option. 
 (jj) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan. 
 (kk) “Section 16(b)” means Section 16(b) of the Exchange Act. 
 (ll) “Service Provider” means an Employee, Director or Consultant. 
 (mm) “Share” means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan. 
 (nn) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with an Option, that pursuant
to Section 8 is designated as a SAR. 
 (oo) “Subsidiary” means a “subsidiary corporation”, whether now or
hereafter existing, as defined in Section 424(f) of the Code. 
 (pp) “Tandem SAR” means a SAR that is granted in
connection with a related Option, the exercise of which will require forfeiture of the right to purchase an equal number of Shares under the related Option (and when a Share is purchased under the Option, the SAR will be canceled to the same
extent). 
  

 -4- 

 (qq) “Unvested Awards” will mean Options or Restricted Stock that (i) were granted
to an individual in connection with such individual’s position as an Employee and (ii) are still subject to vesting or lapsing of Company repurchase rights or similar restrictions. 
 3. Stock Subject to the Plan. 
 (a) Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares pursuant to which Awards may be made under the Plan is 3,000,000 Shares plus
(i) the number of Shares which have been reserved but not issued under the Company’s 2003 Stock Plan (the “2003 Plan”) and with respect to which awards are not outstanding under the 2003 Plan as of the Registration Date,
(ii) any Shares returned to the 2003 Plan as a result of termination of options or repurchase of Shares issued under such plan, and (iii) an annual increase to be added on the first day of the Company’s fiscal year beginning in 2007,
equal to the lesser of (A) 3,000,000 Shares, (B) 10% of the outstanding Shares on such date or (C) an amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock. Shares will not be
deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. Upon payment in Shares pursuant to the exercise of an SAR, the number of Shares available for issuance under the Plan will be reduced
only by the number of Shares actually issued in such payment. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of Shares owned by the Participant, the number of Shares available for issuance under
the Plan will be reduced by the gross number of Shares for which the Option is exercised. 
 (b) Lapsed Awards. If an Award expires or
becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Exchange Program, the unpurchased Shares which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under the Plan, whether upon exercise of an Award, will not be returned to the Plan and will not become available for future distribution under the Plan, except that
if unvested Shares are forfeited or repurchased by the Company, such Shares will become available for future grant under the Plan. 
 (c)
Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan. 
 4. Administration of the Plan. 
 (a)
Procedure. 
 (i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers
may administer the Plan. 
 (ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify
Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two or more “outside directors” within the meaning of
Section 162(m) of the Code. 
  

 -5- 

 (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule
16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3. 
 (iv)
Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws. 
 (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator will have the authority, in its discretion: 
 (i) to determine the Fair Market Value;

 (ii) to select the Service Providers to whom Awards may be granted hereunder; 
 (iii) to determine the number of Shares to be covered by each Award granted hereunder; 
 (iv) to approve forms of agreement for use under the Plan; 
 (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times
when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on
such factors as the Administrator will determine; 
 (vi) to institute an Exchange Program; 
 (vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan; 
 (viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for
the purpose of satisfying applicable foreign laws; 
 (ix) to modify or amend each Award (subject to Section 17(c) of the Plan),
including the discretionary authority to extend the post-termination exercisability period of Awards longer than is otherwise provided for in the Plan; 
 (x) to allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Award that number of Shares having a Fair Market Value equal
to the minimum amount required to be withheld (the 

  

 -6- 

 
Fair Market Value of the Shares to be withheld will be determined on the date that the amount of tax to be withheld is to be determined and all elections by
a Participant to have Shares withheld for this purpose will be made in such form and under such conditions as the Administrator may deem necessary or advisable); 
 (xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator; 
 (xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under
an Award 
 (xiii) to make all other determinations deemed necessary or advisable for administering the Plan. 
 (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be final and binding
on all Participants and any other holders of Awards. 
 5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Stock
Appreciation Rights, Performance Units and Performance Shares may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. 
 6. Stock Options. 
 (a) Limitations. 
 (i) Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any
Parent or Subsidiary) exceeds $100,000, such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market
Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. 
 (ii) The following limitations
will apply to grants of Options and Stock Appreciation Rights: 
 (1) Except as provided in Section 6(a)(ii)(2), no Service Provider
will be granted, in any Fiscal Year, Options to purchase more than 750,000 Shares. 
 (2) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional 2,000,000 Shares, which will not count against the limit set forth in Section 6(a)(2)(ii)(1) above. 
 (3) The foregoing limitations will be adjusted proportionately in connection with any change in the Company’s capitalization as described in
Section 13. 
  

 -7- 

 (4) If an Option is cancelled in the same Fiscal Year in which it was granted (other than in connection
with a transaction described in Section 13), the cancelled Option will be counted against the limits set forth in subsections (1) and (2) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option. 
 (b) Term of Option. The term of each Option will be stated
in the Award Agreement. In the case of an Incentive Stock Option, the term will be ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted
to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement. 
 (c) Option Exercise Price and Consideration. 
 (i) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option will be determined by the Administrator, subject to the following: 
 (1) In the case of an
Incentive Stock Option 
 a) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant. 
 b) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price will be no less than
100% of the Fair Market Value per Share on the date of grant. 
 c) Notwithstanding the foregoing, Incentive Stock Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code. 
 (2) In the case of a Nonstatutory Stock Option, the per Share exercise price will be determined by the Administrator. In the case of a Nonstatutory
Stock Option intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, the per Share exercise price will be no less than 100% of the Fair Market Value per Share on the date of grant.

 (ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within which the
Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised. 
 (iii) Form of
Consideration. The Administrator will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the 

  

 -8- 

 
case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist
entirely of: (1) cash; (2) check; (3) promissory note; (4) other Shares, provided Shares acquired directly or indirectly from the Company, (A) have been owned by the Participant and not subject to substantial risk of
forfeiture for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option will be exercised; (5) consideration
received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (6) a reduction in the amount of any Company liability to the Participant, including any liability attributable to the
Participant’s participation in any Company-sponsored deferred compensation program or arrangement; (7) any combination of the foregoing methods of payment; or (8) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws. 
 (d) Exercise of Option. 
 (i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. 
 An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specify from time to time) from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the Option is exercised (together with an applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by
the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date
the Shares are issued, except as provided in Section 13 of the Plan. 
 Exercising an Option in any manner will decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 
 (ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability, the Participant may exercise his or her
Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement).
In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the
Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the
Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan. 
  

 -9- 

 (iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of
the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant’s termination.
Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the
Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan. 
 (iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the Participant’s death
within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the
Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the
Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent
and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death
Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate,
and the Shares covered by such Option will revert to the Plan. 
 7. Restricted Stock. 
 (a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant
Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine. 
 (b)
Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its
sole discretion, will determine. Unless the Administrator determines otherwise, Shares of Restricted Stock will be held by the Company as escrow agent until the restrictions on such Shares have lapsed. 
 (c) Transferability. Except as provided in this Section 7, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of Restriction. 
  

 -10- 

 (d) Other Restrictions. The Administrator, in its sole discretion, may impose such other
restrictions on Shares of Restricted Stock as it may deem advisable or appropriate. 
 (e) Removal of Restrictions. Except as
otherwise provided in this Section 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction. The Administrator,
in its discretion, may accelerate the time at which any restrictions will lapse or be removed. 
 (f) Voting Rights. During the Period
of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise. 
 (g) Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to
receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. 
 (h) Return of Restricted
Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan. 
 8. Stock Appreciation Rights. 
 (a)
Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. The Administrator may grant
Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof. 
 (b) Number of Shares. The Administrator will have
complete discretion to determine the number of SARs granted to any Service Provider. 
 (c) Exercise Price and Other Terms. The
Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of SARs granted under the Plan. However, the exercise price of Tandem or Affiliated SARs will equal the exercise price of the
related Option. 
 (d) Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related
Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. With respect to a Tandem SAR granted in
connection with an Incentive Stock Option: (a) the Tandem SAR will expire no later than the expiration of the underlying Incentive Stock Option; (b) the value of the payout with respect to the Tandem SAR will be for no more than one
hundred percent (100%) of the difference between the exercise price of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the underlying Incentive Stock Option at the time the Tandem SAR is exercised; and
(c) the Tandem SAR will be exercisable only when the Fair Market Value of the Shares subject to the Incentive Stock Option exceeds the Exercise Price of the Incentive Stock Option. 
  

 -11- 

 (e) Exercise of Affiliated SARs. An Affiliated SAR will be deemed to be exercised upon the
exercise of the related Option. The deemed exercise of an Affiliated SAR will not necessitate a reduction in the number of Shares subject to the related Option. 
 (f) Exercise of Freestanding SARs. Freestanding SARs will be exercisable on such terms and conditions as the Administrator, in its sole discretion, will determine. 
 (g) SAR Agreement. Each SAR grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine. 
 (h)
Expiration of SARs. An SAR granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) also will
apply to SARs. 
 (i) Payment of SAR Amount. Upon exercise of an SAR, a Participant will be entitled to receive payment from the
Company in an amount determined by multiplying: 
 (i) The difference between the Fair Market Value of a Share on the date of exercise over
the exercise price; times 
 (ii) The number of Shares with respect to which the SAR is exercised. 
 At the discretion of the Administrator, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof.

 9. Performance Units and Performance Shares. 
 (a) Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole
discretion. The Administrator will have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant. 
 (b) Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value
equal to the Fair Market Value of a Share on the date of grant. 
 (c) Performance Objectives and Other Terms. The Administrator will
set performance objectives or other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance
Units/Shares that will be paid out to the Service Providers. The time period during which the performance objectives or other vesting provisions must be met will be called the “Performance Period.” Each Award of Performance
Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other 

  

 -12- 

 
terms and conditions as the Administrator, in its sole discretion, will determine. The Administrator may set performance objectives based upon the
achievement of Company-wide, divisional, or individual goals, applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion. 
 (d) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be
entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions
have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share. 
 (e) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares will be made as soon as practicable after
the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof. 
 (f) Cancellation of
Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan. 
 10. Formula Option Grants to Outside Directors. 
 All grants of Options to Outside Directors pursuant to this Section will be automatic and nondiscretionary, except as otherwise provided herein, and will be made in accordance with the following provisions:

 (a) Type of Option. All Options granted pursuant to this Section will be Nonstatutory Stock Options and, except as otherwise
provided herein, will be subject to the other terms and conditions of the Plan. 
 (b) No Discretion. No person will have any
discretion to select which Outside Directors will be granted Options under this Section or to determine the number of Shares to be covered by such Options (except as provided in Sections 10(f) and 13). 
 (c) First Option. Each person who first becomes an Outside Director following the Registration Date will be automatically granted an Option to
purchase 56,523 Shares (the “First Option”) on or about the date on which such person first becomes an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director, but who remains a Director, will not receive a First Option. 
 (d) Terms. The terms of each Option granted pursuant to this Section will be as follows: 
 (i) The term of the Option will
be ten (10) years. 
  

 -13- 

 (ii) The exercise price per Share will be 100% of the Fair Market Value per Share on the date of grant
of the Option. 
 (iii) Subject to Section 14, the First Option will vest and become exercisable as to 18,841 of the Shares subject to
the Option on the first anniversary of the date of grant, and as to 1,570 of the Shares subject to the Option each month for the next twenty-three (23) months following the date of grant, and as to 1,572 of the Shares subject to the Option in
the twenty-fourth (24th) month following the date of grant, provided that the Participant continues to serve as
a Director through each such date. 
 (e) Amendment. The Administrator in its discretion may change the number of Shares subject to
the First Options and Subsequent Options. 
 11. Leaves of Absence. Unless the Administrator provides otherwise, vesting of Awards
granted hereunder will be suspended during any unpaid leave of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company
or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the Company is not so guaranteed, then three months following the 91st day of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and
will be treated for tax purposes as a Nonstatutory Stock Option. 
 12. Transferability of Awards. Unless determined otherwise by the
Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by
the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate. 
 13. Adjustments; Dissolution or Liquidation; Merger or Change in Control. 
 (a) Adjustments. In
the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, may (in its sole discretion) adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award,
the numerical Share limits in Sections 3 and 6 of the Plan and the number of Shares issuable pursuant to Options to be granted under Section 10. 
 (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such
proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action. 
  

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 (c) Change in Control. In the event of a Change in Control, each outstanding Award will be assumed
or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Award, the Participant will fully
vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and,
with respect to Performance Shares and Performance Units, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right becomes
fully vested and exercisable in lieu of assumption or substitution in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and
exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period. 
 With respect to Awards granted to an Outside Director that are assumed or substituted for, if on the date of or following such assumption or substitution
the Participant’s status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant, then the Participant will fully vest in and have the right to exercise
Options and/or Stock Appreciation Rights as to all of the Optioned Stock, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to Performance Shares
and Performance Units, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. 
 For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately
prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Performance Share or
Performance Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common
stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a
Performance Share or Performance Unit, for each Share subject to such Award (or in the case of Performance Units, the number of implied shares determined by dividing the value of the Performance Units by the per share consideration received by
holders of Common Stock in the Change in Control), to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.

  

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 Notwithstanding anything in this Section 13(c) to the contrary, an Award that vests, is earned or
paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the Participant’s consent; provided, however, a modification to such
performance goals only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption. 
 14. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the
Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws. 
 15. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the
Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.

 16. Term of Plan. Subject to Section 20 of the Plan, the Plan will become effective upon its adoption by the Board. It will
continue in effect for a term of ten (10) years unless terminated earlier under Section 17 of the Plan. 
 17. Amendment and
Termination of the Plan. 
 (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

 (b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws. 
 (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the
Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect
the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. 
 18. Conditions Upon Issuance of Shares. 
 (a) Legal Compliance. Shares will not be issued
pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such
compliance. 
 (b) Investment Representations. As a condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required. 
  

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 19. Inability to Obtain Authority. The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority will not have been obtained. 
 20. Stockholder Approval. The Plan will be
subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws. 
  

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