Document:

EX-10.2

 Exhibit 10.2

VUZIX CORPORATION

2009 STOCK 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. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined
by the Administrator at the time of grant. Stock Purchase Rights and Restricted Stock Units may
also be granted under the Plan.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Administrator” means the Board or any of its Committees as shall be administering
the Plan in accordance with Section 4 hereof.

          (b) “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 other country or jurisdiction where Awards are granted under the Plan.

          (c) “Award” means, individually or collectively, a grant under the Plan of Options,
Stock Purchase Rights, or Restricted Stock Units as the Administrator may determine.

          (d) “Award Agreement” means the written or electronic agreement setting forth the
terms and provisions applicable to each Award granted under the Plan, including an Option
Agreement. The Award Agreement is subject to the terms and conditions of the Plan.

          (e) “Board” means the Board of Directors of the Company.

          (f) “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, except
that any change in the beneficial ownership of the securities of the Company as a result of
a private financing of the Company that is approved by the Board, shall not be deemed to be
a Change in Control; or

          (ii) The consummation of the sale or disposition by the Company of all or substantially
all of the Company’s assets; or

          (iii) 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.

          (g) “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.

          (h) “Committee” means a committee of Directors or of other individuals satisfying
Applicable Laws appointed by the Board in accordance with Section 4 hereof.

          (i) “Common Stock” means the Common Stock of the Company.

          (j) “Company” means Vuzix Corporation, a Delaware corporation.

          (k) “Consultant” means, in relation to the Company, an individual or Consultant
Company, other than an Employee or a Director, that: (i) is engaged to provide on a ongoing bona
fide basis, consulting, technical, management or other services to the Company or to a Parent or
Subsidiary of the Company, other than services provided in relation to a distribution of securities
of the Company; (ii) provides the services under a written contract between the Company or the
Parent or Subsidiary and the individual or the Consultant Company; (iii) in the reasonable opinion
of the Company, spends or will spend a significant amount of time and attention on the affairs and
business of the Company or a Parent or Subsidiary of the Company; and (iv) has a relationship with
the Company or a Parent or Subsidiary of the Company that enables the individual to be
knowledgeable about the business and affairs of the Company.

          (l) “Consultant Company” means for an individual consultant, a company or partnership
of which the individual is an employee, stockholder or partner.

          (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.

          (o) “Discounted Market Price” means the market price less the following maximum
discounts based on closing price (and subject, not withstanding the application of any such maximum
discount, to a minimum price per share of $0.05 and a minimum exercise price per warrant or
incentive stock option, as the case may be, of $0.10): (i) up to
$0.50 – 25%; (iii) $0.51 to $2.00
– 20%; and (iii) above $2.00 – 15%.

          (p) “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 shall be sufficient to constitute “employment” by the Company.

          (q) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

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          (r) “Exchange Program” means a program under which (a) 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 (b) the exercise price
of an outstanding Award is reduced. The terms and conditions of any Exchange Program will be
determined by the Administrator in its sole discretion.

          (s) “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 TSX Venture Exchange, the Nasdaq Global
Market, the Nasdaq Global Select Market, or The Nasdaq Capital Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system immediately
prior to the time of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;

          (ii) If the Common Stock is not listed on a stock exchange referred to in subsection
(i) immediately above and is regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the mean between the high bid and
low asked prices for the Common Stock on the day of determination; or

          (iii) In the absence of an established market for the Common Stock, the Fair Market
Value thereof shall be determined in good faith by the Administrator.

          (t) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.

          (u) “Insider” means:

               (i) a Director or senior officer of the Company;

               (ii) a Director or senior officer of a company that is an Insider or subsidiary of the
Company;

               (iii) a person that beneficially owns or controls, directly or indirectly, shares of Common
Stock carrying more than 10% of the voting rights attached to all outstanding shares of Common
Stock of the Company; or

               (iv) the Company itself if it holds any of its own securities.

          (v) “Investor Relations Activities” means any activities, by or on behalf of the
Company or stockholder of the Company, that promote or reasonably could be expected to promote the
purchase or sale of securities of the Company, but does not include:

               (i) the dissemination of information provided, or records prepared, in the ordinary course of
business of the Issuer (a) to promote the sale of products or services of the Company, or (b) to
raise public awareness of the Company,

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that cannot reasonably be considered to promote the purchase or sale of securities of the Company;

               (ii) activities or communications necessary to comply with the requirements of: (a) applicable
securities laws; (b) TSX Venture Exchange Requirements or the by-laws, rules or other regulatory
instruments of any other self regulatory body or exchange having jurisdiction over the Company;

               (iii) communications by a publisher of, or writer for, a newspaper, magazine or business or
financial publication, that is of general and regular paid circulation, distributed only to
subscribers to it for value or to purchasers of it, if: (a) the communication is only through the
newspaper, magazine or publication, and (b) the publisher or writer receives no commission or other
consideration other than for acting in the capacity of publisher or writer; or

               (iv) activities or communications that may be otherwise specified by the TSX Venture Exchange.

          (w) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

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

          (y) “Option Agreement” means a written or electronic agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement
is subject to the terms and conditions of the Plan.

          (z) “Optioned Stock” means the Common Stock subject to an Award.

          (aa) “Optionee” means the holder of an outstanding Option or Stock Purchase Right
granted under the Plan.

          (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, including an Optionee.

          (dd) “Plan” means this 2009 Stock Plan.

          (ee) “Restricted Stock” means Shares issued pursuant to a Stock Purchase Right or
Shares of restricted stock issued pursuant to an Option.

          (ff) “Restricted Stock Purchase Agreement” means a written or electronic agreement
between the Company and the Participant evidencing the terms and restrictions applying to Shares
purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the
terms and conditions of the Plan and the notice of grant.

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          (gg) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to
the Fair Market Value of one Share, granted pursuant to Section 12. Each Restricted Stock Unit
represents an unfunded and unsecured obligation of the Company.

          (hh) “Securities Act” means the Securities Act of 1933, as amended, plus any
applicable foreign laws covering where the Company’s stock is traded.

          (ii) “Service Provider” means an Employee, Director or Consultant.

          (jj) “Share” means a share of the Common Stock, as adjusted in accordance with Section
14 below.

          (kk) “Stock Compensation Arrangement” means a stock option, stock option plan,
employee stock purchase plan or any other compensation or incentive mechanism involving the
issuance or potential issuance of securities of the Company to one or more service providers,
including a purchase of shares of common stock from treasury which is financially assisted by the
Company by way of a loan, guarantee or otherwise.

          (ll) “Stock Purchase Right” means a right to purchase Common Stock pursuant to Section
11 below.

          (mm) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing,
as defined in Section 424(f) of the Code.

          (nn) “TSX Venture Exchange Requirements” means and includes the Articles, by-laws, policies,
circulars, rules (including UMIR) guidelines, orders, notices, rulings, forms, decisions and
regulations of the Exchange as from time to time enacted, any instructions, decisions and
directions of a Regulation Services Provider or the TSX Venture Exchange (including those of any
committee of the Exchange as appointed from time to time), the Securities Act (Alberta) and rules
and regulations thereunder as amended, the Securities Act (British Columbia) and rules and
regulations thereunder as amended and any policies, rules, orders, rulings, forms or regulations
from time to time enacted by the Alberta Securities Commission or the British Columbia Securities
Commission and all applicable provisions of the securities laws of any other jurisdiction.

     3. Stock Subject to the Plan. Subject to the provisions of Section 14 of the Plan, the
maximum aggregate number of Shares that may be subject to Awards and issued under the Plan is
30,000,000. The Shares may be authorized but unissued, or reacquired Common Stock.

     If an Award expires or becomes unexercisable without having been exercised in full, or is
surrendered pursuant to an Exchange Program, the unpurchased Shares that were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has terminated).
However, Shares that have actually been issued under the Plan, upon exercise of an Award, shall not
be returned to the Plan and shall not become available for future distribution under the Plan,
except that if unvested Shares of Restricted Stock or Shares acquired pursuant to Restricted Stock
Units are forfeited to or repurchased by the Company, such Shares shall become available for future
grant under the Plan.

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     4. Administration of the Plan.

          (a) Administrator. The Plan shall be administered by the Board or a Committee
appointed by the Board, which Committee shall be constituted to comply with Applicable Laws.

          (b) Powers of the Administrator. Subject to the provisions of the Plan and, in the
case of a Committee, the specific duties delegated by the Board to such Committee, and subject to
the rules and policies of the stock exchange on which the Shares are listed and subject to the
approval of any relevant authorities, the Administrator shall have the authority in its discretion:

          (i) to determine the Fair Market Value subject to the rules and policies of the stock
exchange on which the Shares are listed;

          (ii) to select the Service Providers to whom Awards may from time to time be granted
hereunder;

          (iii) to determine the number of Shares to be covered by each such Award granted
hereunder;

          (iv) to approve forms of agreement for use under the Plan;

          (v) to determine the terms and conditions 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 Common Stock relating thereto, based in each case on such factors
as the Administrator, in its sole discretion, shall determine;

          (vi) to institute an Exchange Program;

          (vii) 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;

          (viii) 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
Fair Market Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by Participants to have
Shares withheld for this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and

          (ix) to construe and interpret the terms of the Plan and Awards granted pursuant to the
Plan.

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          (c) Effect of Administrator’s Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Participants.

     5. Eligibility. Nonstatutory Stock Options, Stock Purchase Rights, and Restricted
Stock Units may be granted to any Service Provider. Incentive Stock Options may be granted to
Employees only.

     6. Limitations.

          (a) Limits on Awards. Notwithstanding any provision to the contrary, paragraphs,
unless the Company obtains approval of disinterested holders of Shares of Common Stock in the
manner prescribed by TSX Venture Exchange Policy 2.4 and any successor rule, policy or instrument
thereto or the rules of the applicable stock exchange on which the Shares of Common Stock are then
listed,

               (i) the number of Shares of Common Stock reserved for issuance pursuant to Awards granted to
Insiders under the Plan, together with shares of Common Stock issuable to Insiders under any other
Stock Compensation Arrangement of the Company, shall at no time exceed 10% of the issued and
outstanding Shares of Common Stock of the Company;

               (ii) the Company shall not grant to Insiders under the Plan, together with stock options
granted to Insiders under any other Stock Compensation Arrangement of the Company, in aggregate,
within a 12 month period, a number of Awards exceeding 10% of the issued and outstanding Shares of
Common Stock of the Company pursuant to the exercise of Awards; and

               (iii) the Company shall not issue to any one individual, within a 12 month period, a number
of shares exceeding 5% of the issued and outstanding Shares of Common Stock of the Company pursuant
to the exercise of Awards granted under the Plan, together with Shares of Common Stock issuable to
any individuals under any other Stock Compensation Arrangement of the Company.

          (b) The Company shall not issue to any one Consultant, within a 12 month period, a number of
shares exceeding 2% of the issued and outstanding Shares of Common Stock of the Company pursuant to
the exercise of Awards granted under the Plan, together with Shares of Common Stock issuable to
Consultants under any other Stock Compensation Arrangement of the Company.

          (c) The Company shall not issue to an Employee conducting Investor Relations Activities,
within a 12 month period, a number of shares exceeding an aggregate of 2% of the issued and
outstanding Shares of Common Stock of the Company pursuant to the exercise of Awards granted under
the Plan, together with Shares of Common Stock issuable to Employees conducting Investor Relations
Activities under any other Stock Compensation Arrangement of the Company.

          (d) Incentive Stock Option Limit. Each Option shall be designated in the Option
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

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of the Shares with respect to which Incentive Stock Options are exercisable for the first time
by the Participant during any calendar year (under all plans of the Company and any Parent or
Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 6(d), Incentive Stock Options shall be taken into account in the order in
which they were granted. The Fair Market Value of the Shares shall be determined as of the time
the Option with respect to such Shares is granted.

          (e) At-Will Employment. Neither the Plan nor any Award shall confer upon any
Participant any right with respect to continuing the Participant’s relationship as a Service
Provider with the Company, nor shall it interfere in any way with his or her right or the Company’s
right to terminate such relationship at any time, with or without cause, and with or without
notice.

     7. Term of Plan. Subject to stockholder approval in accordance with Section 20, the
Plan shall become effective upon its adoption by the Board. Unless sooner terminated under Section
16, it shall continue in effect for a term of ten (10) years from the later of (i) the effective
date of the Plan, or (ii) stockholder approval of an increase in the number of Shares reserved for
issuance under the Plan.

     8. Term of Option. The term of each Option shall be stated in the Option Agreement;
provided, however, that the term shall be no more than ten (10) years from the date of grant
thereof. In the case of an Incentive Stock Option granted to an Participant who, at the time the
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 term of the Option shall be five
(5) years from the date of grant or such shorter term as may be provided in the Option Agreement.

     9. Option Exercise Price and Consideration.

          (a) Exercise Price. The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator, but shall be
subject to the following:

               (i) In the case of an Incentive Stock Option

          (1) granted to an Employee who, at the time of grant of such Option, 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 exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.

          (2) granted to any other Employee, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.

               (ii) In the case of a Nonstatutory Stock Option

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          (1) granted to a Service Provider who, at the time of grant of such Option,
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 exercise price
shall be no less than 110% of the Fair Market Value per Share on the date of grant.

          (2) granted to any other Service Provider, the per Share exercise price shall
be no less than 85% of the Fair Market Value per Share on the date of grant.

          (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise
price other than as required above in accordance with and pursuant to a transaction
described in Section 424 of the Code.

          (iv) Notwithstanding any provision to the contrary, the exercise price of any Option
shall not be less than the Discounted Market Price as of the date of grant.

               (v) No amendment which reduces the exercise price of an Option that is held by an Insider may
be made unless the Company obtains approval of disinterested holders of Shares of Common Stock in
the manner prescribed by TSX Venture Exchange Policy 2.4 and any successor rule, policy or
instrument thereto or the rules of the applicable stock exchange on which the Shares of Common
Stock are then listed.

          (b) Forms of Consideration. The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of
grant). Such consideration may consist of, without limitation, (1) cash, (2) check, or (3) any
combination of the foregoing methods of payment. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such consideration may
be reasonably expected to benefit the Company.

     10. Exercise of Option.

          (a) Procedure for Exercise; Rights as a Stockholder. Any Award granted hereunder
shall be exercisable according to the terms hereof at such times and under such conditions as
determined by the Administrator and set forth in the Award Agreement. An Award may not be
exercised for a fraction of a Share. Except in the case of Awards granted to officers, Directors
and Consultants, Options shall become exercisable at a rate of no less than 20% per year over five
(5) years from the date the Awards are granted.

          An Option shall be deemed exercised when the Company receives (i) written or electronic notice
of exercise (in accordance with the Option Agreement) from the person entitled to exercise the
Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be
issued in the name of the Participant or, if requested by the Participant, in the name of the
Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer

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agent of the Company), no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option.
The Company shall 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 14 of the Plan.

          Exercise of an Option in any manner shall result in a decrease in 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.

          (b) Termination of Relationship as a Service Provider. If a Participant ceases to be
a Service Provider, such Participant may exercise his or her Award within thirty (30) days of
termination, or such longer period of time as specified in the Award Agreement, to the extent that
the Award is vested on the date of termination (but in no event later than the expiration of the
term of the Award as set forth in the Award Agreement). Unless the Administrator provides
otherwise, if on the date of termination the Participant is not vested as to his or her entire
Award, the Shares covered by the unvested portion of the Award shall revert to the Plan. If, after
termination, the Participant does not exercise his or her Award within the time specified by the
Administrator, the Award shall terminate, and the Shares covered by such Award shall revert to the
Plan.

          (c) 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 Award within six
(6) months of termination, or such longer period of time as specified in the Award Agreement, to
the extent the Award is vested on the date of termination (but in no event later than the
expiration of the term of such Award as set forth in the Award Agreement). Unless the
Administrator provides otherwise, if on the date of termination the Participant is not vested as to
his or her entire Award, the Shares covered by the unvested portion of the Award shall revert to
the Plan. If, after termination, the Participant does not exercise his or her Award within the
time specified herein, the Award shall terminate, and the Shares covered by such Award shall revert
to the Plan.

          (d) Death of Participant. If a Participant dies while a Service Provider, to the
extent that the Award is vested on the date of death, the Award may be exercised within the earlier
of (i) twelve (12) months following the Participant’s death, or (ii) the expiration of the term of
such Award 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 Award
may be exercised by the personal representative of the Participant’s estate or by the person(s) to
whom the Award is transferred pursuant to the Participant’s will or in accordance with the laws of
descent and distribution. If, at the time of death, the Participant is not vested as to his or her
entire Award, the Shares covered by the unvested portion of the Award shall immediately revert to
the Plan. If the Award is not so exercised within the time specified herein, the Award shall
terminate, and the Shares covered by such Award shall revert to the Plan.

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          (e) Leaves of Absence.

          (i) Unless the Administrator provides otherwise, vesting of Awards granted hereunder to
officers and Directors shall be suspended during any unpaid leave of absence.

          (ii) A Service Provider shall not cease to be an Employee in the case of (A) any leave
of absence approved by the Company or (B) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor.

          (iii) For purposes of Incentive Stock Options, no such leave may exceed ninety (90)
days, unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, then three (3) months following the 91st day of such leave, any Incentive
Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option
and shall be treated for tax purposes as a Nonstatutory Stock Option.

     11. Stock Purchase Rights.

          (a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition
to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the
Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan,
it shall advise the offeree in writing or electronically of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must accept such offer. The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.

          (b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted
Stock Purchase Agreement shall grant the Company a repurchase option exercisable within 90 days of
the voluntary or involuntary termination of the Participant’s service with the Company for any
reason (including death or disability). Unless the Administrator provides otherwise, the purchase
price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the purchaser Participant and may be paid by cancellation of any
indebtedness of the purchaser Participant to the Company. The repurchase option shall lapse at
such rate as the Administrator may determine. Except with respect to Shares purchased by officers,
Directors and Consultants, the repurchase option shall in no case lapse at a rate of less than 20%
per year over five (5) years from the date of purchase.

          (c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be determined by the
Administrator in its sole discretion.

          (d) Rights as a Stockholder. Once the Stock Purchase Right is exercised, the
purchaser shall have rights equivalent to those of a stockholder and shall be a stockholder when
his or her purchase is entered upon the records of the duly authorized transfer agent of the
Company. No adjustment shall be made for a dividend or other right for which the record date is

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prior to the date the Stock Purchase Right is exercised, except as provided in Section 14 of
the Plan.

     12. Restricted Stock Units.

          (a) Grant. Restricted Stock Units may be granted at any time and from time to time as
determined by the Administrator. Each Restricted Stock Unit grant will be evidenced by an Award
Agreement that will specify such other terms and conditions as the Administrator, in its sole
discretion, will determine, including all terms, conditions, and restrictions related to the grant,
the number of Restricted Stock Units and the form of payout, which, subject to Section 12(d), may
be left to the discretion of the Administrator.

          (b) Vesting Criteria and Other Terms. The Administrator will set vesting criteria in
its discretion, which, depending on the extent to which the criteria are met, will determine the
number of Restricted Stock Units that will be paid out to the Participant. After the grant of
Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any
restrictions for such Restricted Stock Units. Each Award of Restricted Stock Units will be
evidenced by an Award Agreement that will specify the vesting criteria, and such other terms and
conditions as the Administrator, in its sole discretion, will determine.

          (c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the
Participant will be entitled to receive a payout as specified in the Award Agreement.
Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the
Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to
receive a payout.

          (d) Form and Timing of Payment. Payment of earned Restricted Stock Units will be made
as soon as practicable after the date(s) set forth in the Award Agreement. The Restricted Stock
Units will be paid in Shares.

          (e) Cancellation. On the date set forth in the Award Agreement, all unearned
Restricted Stock Units will be forfeited to the Company.

     13. Limited Transferability of Awards. Unless determined otherwise by the
Administrator, Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or the laws of descent and distribution, and may be exercised
during the lifetime of the Participant, only by the Participant.

     14. 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,
shall 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.

12

 

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as soon as practicable
prior to the effective date of such proposed transaction. To the extent it has not been previously
exercised, an Award will terminate immediately prior to the consummation of such proposed action.

          (c) Merger or Change in Control. In the event of a merger of the Company with or into
another corporation, or a Change in Control, each outstanding Award shall be assumed or an
equivalent award substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to assume or substitute
for the Award, the Participant will fully vest in and have the right to exercise all of his or her
outstanding Options and Stock Purchase Rights, including Shares as to which such Awards would not
otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and all
outstanding Restricted Stock Units will fully vest. If the successor corporation refuses to assume
or substitute an Option or Stock Purchase Right in the event of a merger or Change in Control, the
Administrator shall notify the Participant in writing or electronically that the Award shall be
fully exercisable for a period of time as determined by the Administrator, and the Award shall
terminate upon expiration of such period. For the purposes of this paragraph, the Award shall be
considered assumed if, following the merger or Change in Control, the option or right confers the
right to purchase or receive, for each Share subject to the Award immediately prior to the merger
or Change in Control, the consideration (whether stock, cash, or other securities or property)
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 merger or Change in Control is not solely free trading
common stock (without resale restrictions) 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 the Award, for each Share subject to the Award, to be solely
common stock of the successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of common stock in the merger or Change in Control.

     15. Time of Granting Awards. The date of grant of an Award shall, for all purposes,
be the date on which the Administrator makes the determination granting such Award, or such later
date as is determined by the Administrator. Notice of the determination shall be given to each
Service Provider to whom an Award is so granted within a reasonable time after the date of such
grant.

     16. Amendment and Termination of the Plan.

          (a) Amendment and Termination. Subject to any necessary approvals by the TSX Venture
Exchange and any other stock exchange on which the Shares are listed and other applicable
regulatory authorities, the Board may at any time amend, alter, suspend or terminate the Plan.

          (b) Stockholder Approval. The Board shall obtain stockholder approval of any Plan
amendment to the extent necessary and desirable to comply with Applicable Laws and

13

 

the rules and the policies of the TSX Venture Exchange and other stock exchange on which the
Shares are listed.

          (c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan shall 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 shall not affect the
Administrator’s ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.

     17. Conditions Upon Issuance of Shares.

          (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares shall comply with
Applicable Laws and shall 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
Administrator 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.

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

     19. Reservation of Shares. The Company, during the term of this Plan, shall at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

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

     21. Information to Participants. The Company shall provide to each Participant and to
each individual who acquires Shares pursuant to the Plan, not less frequently than annually during
the period such Participant has one or more Awards outstanding, and, in the case of an individual
who acquires Shares pursuant to the Plan, during the period such individual owns such Shares,
copies of annual financial statements. The Company shall not be required to provide such statements
to key employees whose duties in connection with the Company assure their access to equivalent
information.

14EX-10.4

 Exhibit 10.4

VUZIX CORPORATION

2009 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

1. PURPOSES.

(a) Eligible Option Recipients. The persons eligible to receive Options (as defined
herein) under the Plan are the Non-Employee Directors (as defined herein) of the Company (as
defined herein).

(b) Available Options. The purpose of the Plan is to provide a means by which Non-Employee
Directors may be given an opportunity to benefit from increases in value of the Common Stock
through the granting of Nonstatutory Stock Options (as defined herein).

(c) General Purpose. Vuzix Corporation, by means of the Plan, seeks to retain the services
of its Non-Employee Directors, to secure and retain the services of new Non-Employee Directors and
to provide incentives for such persons to exert maximum efforts for the success of Vuzix
Corporation and its Affiliates (as defined herein).

2. DEFINITIONS.

(a) “Accountant” means the independent public accountants of the Company.

(b) “Affiliate” means any parent corporation or subsidiary corporation of the Company,
whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f),
respectively, of the Code.

(c) “Annual Grant” means an Option granted annually to a Non Employee Director who meets
the specified criteria pursuant to subsection 6(b) of the Plan.

(d) “Annual Meeting” means the annual meeting of the stockholders of the Company.

(e) “Board” means the board of directors of the Company.

(f) “Change in Control” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events after the IPO Date:

     (i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power of the Company’s
then outstanding securities other than by virtue of a merger, consolidation or similar transaction;

     (ii) there is consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such merger, consolidation or
similar transaction, the stockholders of the Company immediately prior thereto

 

 

do not Own, directly or indirectly, outstanding voting securities representing more than fifty
percent (50%) of the combined outstanding voting power of the surviving Entity in such merger,
consolidation or similar transaction or more than fifty percent (50%) of the combined outstanding
voting power of the parent of the surviving Entity in such merger, consolidation or similar
transaction;

     (iii) there is consummated a sale, lease, license or other disposition of all or substantially
all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease,
license or other disposition of all or substantially all of the consolidated assets of the Company
and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of
the voting securities of which are Owned by stockholders of the Company in substantially the same
proportions as their Ownership of the Company immediately prior to such sale, lease, license or
other disposition; or

     (iv) notwithstanding the foregoing or any other provision of this Plan, the definition of
Change in Control (or any analogous term) in an individual written agreement between the Company or
any Affiliate and the Optionholder shall supersede the foregoing definition with respect to Options
subject to such agreement (it being understood, however, that if no definition of Change in Control
or any analogous term is set forth in such an individual written agreement, the foregoing
definition shall apply).

(g) “ Common Stock” means the common stock, par value $0.01 per share, of the Company.

(h) “Code” means the Internal Revenue Code of 1986, as amended.

(i) “Company” means Vuzix Corporation, a Delaware corporation.

(j) “Consultant” means, in relation to the Company, an individual or Consultant Company,
other than an Employee or a Director, that: (i) is engaged to provide on a ongoing bona fide basis,
consulting, technical, management or other services to the Company or to an Affiliate of the
Company, other than services provided in relation to a distribution of securities of the Company;
(ii) provides the services under a written contract between the Company or the Affiliate and the
individual or the Consultant Company; (iii) in the reasonable opinion of the Company, spends or
will spend a significant amount of time and attention on the affairs and business of the Company or
an Affiliate of the Company; and (iv) has a relationship with the Company or an Affiliate of the
Company that enables the individual to be knowledgeable about the business and affairs of the
Company.

(k) “Consultant Company” means for an individual consultant, a company or partnership
of which the individual is an employee, stockholder or partner.

(l) “Continuous Service” means that the Optionholder’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The
Optionholder’s Continuous Service shall not be deemed to have terminated merely because of a change
in the capacity in which the Optionholder renders service to the Company or an Affiliate as a
Director or a change in the entity for which the Optionholder renders such service, provided

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that there is no interruption or termination of the Optionholder’s Continuous Service. For example,
a change in status from a Non-Employee Director of the Company to a Consultant of an Affiliate or
an Employee of the Company will not constitute an interruption of Continuous Service. The Board,
in its sole discretion, may determine whether Continuous Service shall be considered interrupted in
the case of any leave of absence approved by that party, including sick leave, military leave or
any other personal leave.

(m) “Director” means a member of the Board.

(n) “Disability” means the inability of a person, in the opinion of a qualified physician
acceptable to the Company, to perform the major duties of that person’s position with the Company
or an Affiliate because of the sickness or injury of the person.

(o) “Discounted Market Price” means the market price less the following maximum discounts
based on closing price (and subject, not withstanding the application of any such maximum discount,
to a minimum price per share of $0.05 and a minimum exercise price per warrant or incentive stock
option, as the case may be, of $0.10): (i) up to $0.50 –
25%; (iii) $0.51 to $2.00 – 20%; and
(iii) above $2.00 – 15%.

(p) “Effective Date” means the date effective as of which the Plan is adopted by the Board.

(q) “Employee” means any person employed by the Company or an Affiliate. Mere service as a
Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to
constitute “employment” by the Company or an Affiliate.

(r) “Entity” means a corporation, partnership or other entity.

(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(t) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning
of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(A) the Company or any Subsidiary of the Company, (B) any employee benefit plan of the Company or
any Subsidiary of the Company or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the Company, (C) an underwriter
temporarily holding securities pursuant to an offering of such securities, or (D) an Entity Owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their Ownership of stock of the Company.

(u) “Fair Market Value” means, as of any date, the value of the 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 TSX Venture Exchange, the Nasdaq Global Market, the Nasdaq
Global Select Market, or The Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system immediately prior to the time of

3

 

determination, as reported in The Wall Street Journal or such other source as the Administrator
deems reliable;

     (ii) If the Common Stock is not listed on a stock exchange referred to in subsection (i)
immediately above and is regularly quoted by a recognized securities dealer but selling prices are
not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for
the Common Stock on the day of determination; or

     (iii) In the absence of an established market for the Common Stock, the Fair Market Value
thereof shall be determined in good faith by the Administrator.

(v) “Initial Grant” means an Option granted to a Non-Employee Director who meets the
specified criteria pursuant to subsection 6(a) of the Plan.

(w) “Insider” means:

     (i) a Director or senior Officer of the Company;

     (ii) a Director or senior Officer of a company that is an Insider or Subsidiary of the
Company;

     (iii) a Person that beneficially owns or controls, directly or indirectly, shares of Common
Stock carrying more than 10% of the voting rights attached to all outstanding shares of Common
Stock of the Company; or

     (iv) the Company itself if it holds any of its own securities.

(x) “IPO Date” means the date the Common Stock is first offered to the public under a
registration statement declared effective under the Securities Act.

(y) “Non-Employee Director” means a Director who is not an Employee or Consultant of the
Company or an Affiliate.

(z) “Nonstatutory Stock Option” means an Option not intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations promulgated
thereunder.

(aa) “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.

(bb) “Option” means a Nonstatutory Stock Option granted pursuant to the Plan.

(cc) “Option Agreement” means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be
subject to the terms and conditions of the Plan.

4

 

(dd) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or,
if applicable, such other person who holds an outstanding Option.

(ee) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall
be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired/ “Ownership” of
securities if such person or Entity, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares voting power, which includes the power to
vote or to direct the voting, with respect to such securities.

(ff) “Plan” means this Vuzix Corporation 2009 Non-Employee Directors’ Stock Option Plan.

(gg) “Rule 16n-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to
Rule 16b-3, as in effect from time to time.

(hh) “Securities Act” means the Securities Act of 1933, as amended.

(ii) “Stock Compensation Arrangement” means a stock option, stock option plan, employee
stock purchase plan or any other compensation or incentive mechanism involving the issuance or
potential issuance of securities of the Company to one or more service providers, including a
purchase of shares of Common Stock from treasury which is financially assisted by the Company by
way of a loan, guarantee or otherwise.

(jj) “Subsidiary” means, with respect to the Company, (i) any corporation of which more
than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership in which the Company has a direct or indirect interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent
(50%).

3. ADMINISTRATION.

(a) Administration by Board. The Board shall administer the Plan. The Board may not
delegate administration of the Plan to a committee.

(b) Powers of the Board. The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

     (i) To determine the provisions of each Option to the extent not specified in the Plan.

     (ii) To construe and interpret the Plan and Options granted under it, and to establish, amend
and revoke rules and regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

5

 

     (iii) To amend the Plan or an Option as provided in Section 12.

     (iv) Generally, to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company that are not in conflict with the
provisions of the Plan.

(c) Effect of Board’s Decision. All determinations, interpretations and constructions
made by the Board in good faith shall not be subject to review by/ any person and shall be final,
binding and conclusive on all persons.

4. SHARES SUBJECT TO THE PLAN.

(a) Share Reserve. Subject to the provisions of Section 11 relating to adjustments upon
changes in the Common Stock, the Common Stock that may be issued pursuant to Options shall not
exceed in the aggregate 8,000,000 shares of Common Stock.

(b) Reversion of Shares to the Share Reserve. If any Option shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in full, or if any
shares of Common Stock issued to a Non-Employee Director pursuant to an Option are forfeited back
to or repurchased by the Company because of or in connection with the failure to meet a contingency
or condition required to vest such shares in the Non-Employee Director, the shares of Common Stock
not acquired, forfeited or repurchased under such Stock Award shall revert to and again become
available for issuance under the Plan.

(c) Source of Shares. The shares of Common Stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise. If the aggregate number of shares
of Common Stock issuable pursuant to Section 6(a) or (b) would exceed the number of shares
remaining in the share reserve under Section 4(a) at such time of grant, then, in the absence of
any Board action otherwise, a pro rata allocation of the shares of Common Stock available shall be
made in as nearly a uniform manner as

shall be practicable and equitable.

5. ELIGIBILITY.

(a) The Options as set forth in Section 6 automatically shall be granted under the Plan to all
Non-Employee Directors.

6. NON-DISCRETIONARY GRANTS.

(a) Initial Grants. Without any further action of the Board, (i) each person who is or
becomes a Non-Employee Director as of the Effective Date, and (ii) each person who, after the
Effective Date, is elected or appointed for the first time to be a Non-Employee Director
automatically shall, upon the Effective Date or the date of his or her initial election or
appointment to be a Non-Employee Director, as applicable, be granted an Initial Grant to purchase
300,000 shares of Common Stock on the terms and conditions set forth herein.

6

 

(b) Annual Grants. Without any further action of the Board, on each January 1 (the
“Annual Grant Date”), commencing on January 1, 2010, each person who is then a Non-Employee
Director, automatically shall be granted an Annual Grant to purchase 150,000 shares of Common Stock
on the terms and conditions set forth herein, provided, however, that the number of shares subject
to an Annual Grant for a particular Non-Employee Director shall be reduced, on a pro rata basis,
for each month such person did not serve as a Non-Employee Director during the twelve-month period
from the prior Annual Grant Date (or from the Effective Date with respect to the first Annual Grant
hereunder) until the current Annual Grant Date.

(c) Limits on Option Grants. Notwithstanding the foregoing paragraphs, unless the Company
obtains approval of disinterested holders of shares of Common Stock in the manner prescribed by TSX
Venture Exchange Policy 2.4 and any successor rule, policy or instrument thereto or the rules of
the applicable stock exchange on which the shares of Common Stock are then listed,

     (i) the number of shares of Common Stock reserved for issuance pursuant to Options granted to
Insiders under the Plan, together with shares of Common Stock issuable to Insiders or Participants
under any other Stock Compensation Arrangement of the Company, shall at no time exceed 10% of the
issued and outstanding shares of Common Stock of the Company;

     (ii) the Company shall not grant to Insiders under the Plan, together with stock options
granted to Insiders under any other Stock Compensation Arrangement of the Company, in aggregate,
within a 12 month period, a number of Options exceeding 10% of the issued and outstanding shares of
Common Stock of the Company pursuant to the exercise of Awards;

     (iii) the Company shall not issue to any one individual, within a 12 month period, a number
of shares exceeding 5% of the issued and outstanding shares of Common Stock of the Company pursuant
to the exercise of Options granted under the Plan, together with shares of Common Stock issuable to
any individuals under any other Stock Compensation Arrangement of the Company; and

     (iv) no amendment which reduces the exercise price of an Option that is held by an Insider.

7. OPTION PROVISIONS.

          Each Option shall be in such form and shall contain such terms and conditions as required by
the Plan. Each Option shall contain such additional terms and conditions, not inconsistent with the
Plan, as the Board shall deem appropriate. Each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each of the following
provisions:

(a) Term. The Option term shall be a maximum of ten (10) years from the date the Option
is granted, provided that the Option term shall be reduced with respect to any Option as provided
in Section 7(g), (i), and (j), covering cessation of Continuous Service by the Optionholder,
disability of the Optionholder or death of the Optionholder.

7

 

(b) Exercise Price. The exercise price of each Option shall be one hundred percent (100%)
of the Fair Market Value of the shares. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence if such Option is
granted pursuant to an assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code. Notwithstanding any provision to the contrary, the
exercise price of any Option shall not be less than the Discounted Market Price as of the date of
grant.

(c) Consideration. The purchase price of stock acquired pursuant to an Option may be
paid, to the extent permitted by applicable statutes and regulations, in any combination of (i)
cash or check, or (ii) pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds.

(d) Transferability. All benefits, rights and Options accruing to any Non-Employee
Director in accordance with the terms and conditions of the Plan shall not be transferable or
assignable unless specifically provided for herein. An Option is transferable by will or by the
laws of descent and distribution. In addition, the Optionholder may, by delivering written notice
to the Company, in a form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionholder, shall thereafter be entitled to exercise the Option.

(e) Vesting. Options shall vest as determined by the Board follows:

     (i) Initial Grants: 1/2 of the shares of Common Stock covered by an Initial Grant shall be
immediately vested upon grant and the remaining shares shall vest in equal monthly installments
over twelve (12) months.

     (ii) Annual Grants: 1/12th of the shares of Common Stock covered by an Annual Grant shall
vest monthly over twelve (12) months.

(f) Early Exercise. The Option may, but need not, include a provision whereby the
Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to
exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior
to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject
to a repurchase option in favor of the Company or to any other restriction the Board determines to
be appropriate.

(g) Termination of Continuous Service. In the event an Optionholder’s Continuous Service
terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise
his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date
of termination) but only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder’s Continuous Service, or (ii) the expiration
of the term of the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate.

8

 

(h) Extension of Termination Date. If the exercise of the Option following the
termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or
Disability) would be prohibited at any time solely because the issuance of shares would violate the
registration requirements under the Securities Act, then the Option shall terminate on the earlier
of (i) the expiration of the term of the Option set forth in subsection 7(a) or (ii) the expiration
of a period of three (3) months after the termination of the Optionholder’s Continuous Service
during which the exercise of the Option would not be in violation of such registration
requirements.

(i) Disability of Optionholder. In the event an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of (i) the date six (6)
months following such termination or (ii) the expiration of the term of the Option as set forth in
the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option
within the time specified herein, the Option shall terminate.

(j) Death of Optionholder. In the event (i) an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the
three-month period after the termination of the Optionholder’s Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the Optionholder was entitled to
exercise the Option as of the date of death) by the Optionholder’s estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person designated to exercise
the Option upon the Optionholder’s death, but only within the period ending on the earlier of (i)
one (1) year from the date of the Optionholder’s death, or (ii) the expiration of the term of such
Option as set forth in the Option Agreement. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate.

8. COVENANTS OF THE COMPANY.

(a) Availability of Shares. During the terms of the Options, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy such Options.

(b) Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant
Options and to issue and sell shares of Common Stock upon exercise of the Options; provided,
however, that this undertaking shall not require the Company to register under the Securities Act
the Plan, any Option or any stock issued or issuable pursuant to any such Option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Options unless and until such authority is obtained.

9

 

9. USE OF PROCEEDS FROM STOCK.

(a) Proceeds from the sale of stock pursuant to Options shall constitute general funds of the
Company.

10. MISCELLANEOUS.

(a) Stockholder Rights. No Optionholder shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares subject to such Option unless and until
such Optionholder has satisfied all requirements for exercise of the Option pursuant to its terms.

(b) No Service Rights. Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Optionholder any right to continue to serve the Company as a
Non-Employee Director or shall affect the right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or
(iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.

(c) Investment Assurances. The Company may require an Optionholder, as a condition of
exercising or acquiring stock under any Option, (i) to give written assurances satisfactory to the
Company as to the Optionholder’s knowledge and experience in financial and business matters and/or
to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable
and experienced in financial and business matters and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of exercising the Option;
and (ii) to give written assurances satisfactory to the Company stating that the Optionholder is
acquiring the stock subject to the Option for the Optionholder’s own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the
shares upon the exercise or acquisition of stock under the Option has been registered under a then
currently effective registration statement under the Securities Act or (2) as to any particular
requirement, a determination is made by counsel for the Company that such requirement need not be
met in the circumstances under the then applicable securities laws. The Company may, upon advice of
counsel to the Company, place legends on stock certificates issued under the Plan as such counsel
deems necessary or appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

(d) Withholding Obligations. The Optionholder may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under an Option by any of
the following means (in addition to the Company’s right to withhold from any compensation paid to
the Optionholder by the Company) or by a combination of such means: (i) tendering a cash payment;
(ii) authorizing the Company to withhold shares from the shares of the Common Stock otherwise
issuable to the Optionholder as a result of the exercise or acquisition of stock under the Option,
provided, however, that no shares of Common Stock are withheld with a value

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exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the
Company owned and unencumbered shares of Common Stock.

(e) Lock-Up Period. Upon exercise of any Option, an Optionholder may not sell, dispose
of, transfer, make any short sale of, grant any option for the purchase of, or enter into any
hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock
or other securities of the Company held by the Optionholder, for a period of time specified by the
managing underwriter(s) (not to exceed one hundred eighty (180) days) following the effective date
of a registration statement of the Company filed under the Securities Act, other than a Form S-8
registration statement, (the “Lock Up Period”); provided, however, that nothing contained in this
section shall prevent the exercise of a repurchase option, if any, in favor of the Company during
the Lock Up Period. An Optionholder may be required to execute and deliver such other agreements
as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with
the foregoing or that are necessary to give further effect thereto. In order to enforce the
foregoing, the Company may impose stop-transfer instructions with respect to such shares of Common
Stock until the end of such period. The underwriters of the Company’s stock are intended third
party beneficiaries of this Section 10(e) and shall have the right, power and authority to enforce
the provisions hereof as though they were a party hereto.

11. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.

(a) Capitalization Adjustments. If any change is made in the stock subject to the Plan, or
subject to any Option, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the nature, class(es) and
maximum number of securities subject both to the Plan pursuant to Section 4 and to the
nondiscretionary Options specified in Section 6, and the outstanding Options will be appropriately
adjusted in the nature, class(es) and number of securities and price per share of stock subject to
such outstanding Options. The Board shall make such adjustments, and its determination shall be
final, binding and conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction “without receipt of consideration” by the Company.)

(b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the
Company, then all outstanding Options shall terminate immediately prior to such event.

(c) Change in Control. If a Change in Control occurs and as of, or within twelve (12)
months after, the effective time of such Change in Control, an Optionholder’s Continuous Service
terminates, then his or her options will accelerate and become fully vested and immediately
exercisable, unless the termination was a result of the Optionholder’s resignation (other than any
resignation contemplated by the terms of the Change in Control or required by the Company or the
acquiring entity pursuant to the Change in Control).

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(d) Parachute Payments. In the event that the acceleration of the vesting and
exercisability of the Options provided for in subsection 11(c) and benefits otherwise payable to a
Optionholder (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section
280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section
4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the Reduced Amount. The
“Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no
portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and
including the total, of the Payment, whichever amount, after taking into account all applicable
federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the
highest applicable marginal rate), results in the Optionholder’s receipt, on an after-tax basis,
of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be
subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute
payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the
following order unless the Optionholder elects in writing a different order (provided, however,
that such election shall be subject to Company approval if made on or after the effective date of
the event that triggers the Payment): reduction of cash payments; cancellation of accelerated
vesting of Options; reduction of employee benefits. In the event that acceleration of vesting of
Option compensation is to be reduced, such acceleration of vesting shall be cancelled in the
reverse order of the date of grant of the Optionholder’s Options (i.e., earliest granted Option
cancelled last) unless the Optionholder elects in writing a different order for cancellation.

The accounting firm engaged by the Company for general audit purposes as of the day prior to the
effective date of the Change in Control shall perform the foregoing calculations. If the accounting
firm so engaged by the Company is serving as accountant or auditor for the individual, entity or
group effecting the Change in Control, the Company shall appoint a nationally recognized accounting
firm to make the determinations required hereunder. The Company shall bear all expenses with
respect to the determinations by such accounting firm required to be made hereunder.

The accounting firm engaged to make the determinations hereunder shall provide its calculations,
together with detailed supporting documentation, to the Optionholder and the Company within fifteen
(15) calendar days after the date on which the Optionholder’s right to a Payment is triggered (if
requested at that time by the Optionholder or the Company) or such other time as requested by the
Optionholder or the Company. If the accounting firm determines that no Excise Tax is payable with
respect to a Payment, either before or after the application of the Reduced Amount, it shall
furnish the Optionholder and the Company with an opinion reasonably acceptable to the Optionholder
that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of
the accounting firm made hereunder shall be final, binding and conclusive upon the Optionholder and
the Company.

12. AMENDMENT OF THE PLAN AND OPTIONS.

(a) Amendment of Plan. Subject to any necessary approvals by the TSX Venture Exchange or
other regulatory body having jurisdiction over the securities of the Company, the Board at any
time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating
to adjustments upon changes in Common Stock, no amendment shall be effective unless

12

 

approved by the stockholders of the Company to the extent stockholder approval is necessary to
satisfy the requirements of Rule 16b-3 or any Nasdaq or securities exchange listing requirements.

(b) Stockholder Approval. The Board may, in its sole discretion, submit any other
amendment to the Plan for stockholder approval.

(c) No Impairment of Rights. Rights under any Option granted before amendment of the Plan
shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of
the Optionholder and (ii) the Optionholder consents in writing.

(d) Amendment of Options. The Board at any time, and from time to time, may amend the
terms of any one or more Options; provided, however, that the rights under any Option shall not be
impaired by any such amendment unless (i) the Company requests the consent of the Optionholder and
(ii) the Optionholder consents in writing.

13. TERMINATION OR SUSPENSION OF THE PLAN.

(a) Plan Term. Subject to any necessary approvals by the TSX Venture Exchange or other
regulatory body having jurisdiction over the securities of the Company, the Board may suspend or
terminate the Plan at any time. No Options may be granted under the Plan while the Plan is
suspended or after it is terminated.

(b) No Impairment of Rights. Suspension or termination of the Plan shall not impair
rights and obligations under any Option granted while the Plan is in effect except with the written
consent of the Optionholder.

14. EFFECTIVE DATE OF PLAN.

(a) The Plan shall become effective on the date the Plan is adopted by the Board, but no Option
shall be exercised unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the Plan is adopted by
the Board.

15. CHOICE OF LAW.

(a) All questions concerning the construction, validity and interpretation of this Plan shall be
governed by the law of the State of Delaware, without regard to such state’s conflict of laws
rules.

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