Document:

exv4w9

 

EXHIBIT 4.9

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER HEREOF FOR ITS OWN ACCOUNT FOR
INVESTMENT WITH NO INTENTION OF MAKING OR CAUSING TO BE MADE A PUBLIC DISTRIBUTION OF ALL OR ANY
PORTION THEREOF. SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT.

			
	 	 	 
	No. LE-1
	 	December 22, 2005
	 
	 	San Diego, California

ARTES MEDICAL, INC.

WARRANT TO PURCHASE SERIES E PREFERRED STOCK

Void after December 22, 2012

     Artes Medical, Inc., a Delaware corporation (the “Company”), hereby certifies that,
for value received, Legg Mason Wood Walker, Incorporated (including any successors and
assigns, “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company
from time to time (a) beginning on the later of (i) December 22, 2006, (ii) twelve (12) months
after the closing of the Company’s initial public offering of common stock or other securities (the
“IPO”) (the “Beginning Exercise Date”) and (b) ending on the earlier of (i) the closing of a
Corporate Transaction (as defined below) or (ii) 5:00 PM Pacific time, on December 22, 2012 (the
“Expiration Date”), fully paid and nonassessable shares of the Company’s Series E Preferred Stock
(the “Warrant Shares”) under the terms set forth herein. Notwithstanding the foregoing, in no
event shall the Beginning Exercise Date occur later than the earlier to occur of June 30, 2007 or
five (5) business days prior to a Corporate Transaction.

     1. Number of Warrant Shares; Exercise Price. This Warrant shall evidence the right of
the Holder to purchase up to 200,000 Warrant Shares at an initial exercise price per Warrant Share
of $2.50 per share (the “Exercise Price”), subject to adjustment as provided in Section 6 below.

     2. Definitions. As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

          (a) The term “Common Stock” shall mean the Common Stock of the Company.

          (b) The term “Company” shall include any company which shall succeed to or assume the
obligations of the Company hereunder.

          (c) The term “Corporate Transaction” shall mean (i) a sale, lease transfer or conveyance of
all or substantially all of the assets of the Company; (ii) a consolidation of the Company with, or
merger of the Company with or into, another corporation or other business

 

 

entity in which the
stockholders of the Company immediately prior to such consolidation or merger own less than 50% of
the voting power of the surviving entity immediately after such consolidation or merger; or (iii)
any transaction or series of related transactions to which the Company is a party in which in
excess of 50% of the Company’s voting power is transferred, excluding any consolidation or merger
effected exclusively to change the domicile of the Company, provided that (a) the acquisition
agreement pertaining to such Corporate Transaction requires exercise of the Warrant, (b) all other
holders of the Company’s options, warrants or other derivative securities who are no employees,
consultants or other service providers or vendors are required to exercise their respective
derivative securities of the Company prior to the Corporate Transaction and (c) the fair market
value of the securities or other property that Holder would be entitled to receive upon completion
of the Corporate Transaction in exchange for each Warrant Share underlying this Warrant (assuming
exercise of the Warrant immediately prior to the completion of the Corporate Transaction) exceeds
the per share Exercise Price (as may be adjusted under the terms of this Warrant).

     3. Exercise of Warrant; Partial Exercise. This Warrant may be exercised in full by
the Holder by surrender of this Warrant, together with the Holder’s duly executed form of
subscription attached hereto as Exhibit A, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable to the order of the
Company, of the aggregate exercise price (as determined above) of the number of Warrant Shares to
be purchased hereunder. The exercise of this Warrant pursuant to this Section 3 shall be deemed to
have been effected immediately prior to the close of business on the business day on which this
Warrant is surrendered to the Company as provided in this Section 3, and at such time the person in
whose name any certificate for Warrant Shares shall be issuable upon such exercise shall be deemed
to be the record holder of such Warrant Shares for all purposes. As soon as practicable after the
exercise of this Warrant, the Company at its expense will cause to be issued in the name of and
delivered to the Holder, or as the Holder may direct, a certificate or certificates for the number
of fully paid and nonassessable full shares of Warrant Shares to which the Holder shall be entitled
on such exercise, together with cash, in lieu of any fraction of a share, equal to such fraction of
the current fair market value of one full Warrant Share as determined in good faith by the Board of
Directors, and, if applicable, a new warrant evidencing the balance of the shares remaining subject
to the Warrant.

     4. Net Issuance.

          (a) Right to Convert. In addition to and without limiting the rights of the Holder
under the terms of this Warrant, the Holder shall have the right to convert this Warrant (the
“Conversion Right”) into Warrant Shares as provided in this Section 4 at any time or from time to
time during the Exercise Period. Upon exercise of the Conversion Right with respect to shares
subject to the Warrant (the “Converted Warrant Shares”), the Company shall deliver to the Holder
(without payment by the Holder of any exercise price or any cash or other consideration) that
number of fully paid and nonassessable Warrant Shares computed using the following formula:

	 	 	 	 	 	 	 
	 

	 	X =
	 	Y (A - B)
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	A	 	 

Where: X = the number of shares of Warrant Shares to be delivered to the Holder;

 

 

          Y = the number of Converted Warrant Shares;

          A = the fair market value of one Warrant Share on the Conversion Date (as defined below); and

          B = the Exercise Price (as adjusted to the Conversion Date).

     No fractional shares shall be issuable upon exercise of the Conversion Right, and if the
number of shares to be issued determined in accordance with the foregoing formula is other than a
whole number, the Company shall pay to the Holder an amount in cash equal to the fair market value
of the resulting fractional share on the Conversion Date (as defined below). Shares issued
pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of the
Warrant.

     (b) Method of Exercise. The Conversion Right may be exercised by the Holder by the
surrender of the Warrant at the principal office of the Company together with a written statement
specifying that the Holder thereby intends to exercise the Conversion Right and indicating the
total number of shares under the Warrant that the Holder is exercising through the Conversion
Right. Such conversion shall be effective upon receipt by the Company of the Warrant together with
the aforesaid written statement, or on such later date as is specified therein (the “Conversion
Date”). Certificates for the shares issuable upon exercise of the Conversion Right shall be
delivered to the Holder promptly following the Conversion Date.

     (c) Determination of Fair Market Value. For purposes of this Section 4, fair market
value of a Warrant Share on the Conversion Date shall be determined as follows:

          (i) If the Common Stock is traded on a stock exchange or the Nasdaq Stock Market (or a similar
national quotation system), the fair market value of a Warrant Share shall be deemed to be the
product of (x) the average of the closing selling prices of the Common Stock on the stock exchange
or system determined by the Board to be the primary market for the Common Stock over the ten (10)
trading day period ending on the date prior to the Conversion Date, as such prices are officially
quoted in the composite tape of transactions on such exchange or system and (y) the number of
shares of Common Stock into which such Warrant Share is convertible at the date of calculation;

          (ii) If the Common Stock is traded over-the-counter, the fair market value of a Warrant Share
shall be deemed to be the product of (x) the average of the closing bid prices (or, if such
information is available, the closing selling prices) of the Common Stock over the ten (10) trading
day period ending on the date prior to the Conversion Date, as such prices are reported by the
National Association of Securities Dealers through its NASDAQ system or any successor system and
(y) the number of shares of Common Stock into which such Warrant Share is convertible at the date
of calculation; and

          (iii) If there is no public market for the Common Stock, then the fair market value of a
Warrant Share shall be determined by the Board of Directors of the Company in good faith, and, upon
request of the Holder, the Board (or a representative thereof) shall, as

 

 

promptly as reasonably
practicable but in any event not later than 15 days after such request, notify the Holder of the
Fair Market Value per share of Common Stock.

     5. Market Stand-Off Agreement. If requested by the Company and an underwriter of
Common Stock (or other securities) of the Company, the Holder shall not sell (including, without
limitation, any short sale) or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder (other than those included in the registration)
during the one hundred eighty (180) day period (subject to such extension or extensions as may be
required by the underwriters in order to publish research reports while complying with the Rule
2711 of the National Association of Securities Dealers, Inc.) following the effective date of a
registration statement of the Company filed under the Securities Act, provided that:

          (a) such one hundred eighty (180) day “market stand-off” agreement shall only apply in the
context of the Company’s IPO; and

          (b) all officers and directors and five percent (5%) stockholders of the Company enter into
similar agreements.

     The obligations described in this Section 5 shall not apply to a registration relating solely
to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the
future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or
similar forms that may be promulgated in the future. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing restriction until
the end of such applicable one hundred eighty (180) day period.

     6. Adjustments to Conversion Price. The number and kind of Warrant Shares (or any
shares of stock or other securities which may be) issuable upon the exercise of this Warrant and
the exercise price hereunder shall be subject to adjustment from time to time upon the happening of
certain events, as follows:

          (a) Splits and Subdivisions. In the event the Company should at any time or from time
to time fix a record date for the effectuation of a split or subdivision of the outstanding shares
of Series E Preferred Stock or the determination of the holders of Series E Preferred Stock
entitled to receive a dividend or other distribution payable in additional shares of Series E
Preferred Stock or other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Series E Preferred Stock (hereinafter referred
to as the “Series E Preferred Stock Equivalents”) without payment of any consideration by such
holder for the additional shares of Series E Preferred Stock or Series E Preferred Stock
Equivalents, then, as of such record date (or the date of such distribution, split or subdivision
if no record date is fixed), the Exercise Price shall be appropriately decreased and the number of
Warrant Shares for which this Warrant is exercisable shall be appropriately increased in proportion
to such increase of outstanding shares.

          (b) Combination of Shares. If the number of shares of Series E Preferred Stock
outstanding at any time after the date hereof is decreased by a combination of the outstanding
shares of Series E Preferred Stock, the Exercise Price shall be appropriately

 

 

increased and the
number of Warrant Shares for which this Warrant is exercisable shall be appropriately decreased in
proportion to such decrease in outstanding shares.

          (c) Reclassification or Reorganization. If the Warrant Shares issuable upon the
exercise of this Warrant shall be changed into the same or different number of shares of any class
or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a
split, subdivision or stock dividend provided for in Section 6(a) above or a combination of shares
provided for in Section 6(b) above, or a reorganization, merger or consolidation provided for in
Section 6(d) below, then and in each such event the Holder shall be entitled to receive upon the
exercise of this Warrant the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, to which a holder of the
number of Warrant Shares issuable upon the exercise of this Warrant would have received if this
Warrant had been exercised immediately prior to such reorganization, reclassification or other
change, all subject to further adjustment as provided herein.

          (d) Notice of Record Dates; Adjustments. In the event of an IPO or a Corporate
Transaction, the Company shall provide to the Holder twenty (20) days advance written notice prior
to the closing of the IPO or Corporate Transaction, as the case may be. The Company shall promptly
notify the Holder in writing of each adjustment or readjustment of the Exercise Price hereunder and
the number of Warrant Shares issuable upon the exercise of this Warrant. Such notice shall state
the adjustment or readjustment and show in reasonable detail the facts on which that adjustment or
readjustment is based.

     7. Corporate Transaction. In the event of a Corporate Transaction, Holder shall be
required to exercise this Warrant (to the extent not previously exercised) immediately prior to the
closing of such Corporate Transaction if (i) the acquisition agreement pertaining to such Corporate
Transaction requires exercise of the Warrant, (ii) all other holders of the Company’s options,
warrants or other derivative securities who are no employees, consultants or other service
providers or vendors are required to exercise their respective derivative securities of the Company
prior to the Corporate Transaction and (iii) the fair market value of the securities or other
property that Holder would be entitled to receive upon completion of the Corporate Transaction in
exchange for each Warrant Share underlying this Warrant (assuming exercise of the Warrant
immediately prior to the completion of the Corporate Transaction) exceeds the per share Exercise
Price (as may be adjusted under the terms of this Warrant).

     8. Registration Rights. The Company hereby agrees that the Holder shall be entitled,
with respect to all shares of Common Stock issuable upon conversion of the Warrant Shares issued
upon the exercise of this Warrant, to the registration rights set forth in Section 1 of the Series
E Investors’ Rights Agreement, dated December 22, 2005, as may be amended or supplemented from time
to time, the terms of which are hereby incorporated by this reference, with the same force and
effect as if specifically set forth herein.

     9. Replacement of Warrants. On receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver to the Holder, in lieu thereof, a new Warrant of like tenor.

 

 

     10. No Rights or Liability as a Stockholder. This Warrant does not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Company. No provisions hereof,
in the absence of affirmative action by the Holder to purchase Warrant Shares, and no enumeration
herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder as
a stockholder of the Company.

     11. Miscellaneous.

          (a) Transfer of Warrant. The Holder agrees not to make any disposition of this
Warrant, the Warrant Shares or any rights hereunder without the prior written consent of the
Company. Any such permitted transfer must be made by the Holder in person or by duly authorized
attorney, upon delivery of this Warrant and the form of assignment attached hereto as Exhibit
B to any such permitted transferee. As a condition precedent to such transfer, the transferee
shall sign an investment letter in form and substance satisfactory to the Company. Subject to the
foregoing, the provisions of this Warrant shall inure to the benefit of and be binding upon any
successor to the Company and shall extend to any holder hereof.

          (b) Titles and Subtitles. The titles and subtitles used in this Warrant are for
convenience only and are not to be considered in construing or interpreting this Warrant.

          (c) Notices. Any notice required or permitted to be given to a party pursuant to the
provisions of this Warrant shall be in writing and shall be effective and deemed given to such
party under this Warrant on the earliest of the following: (a) the date of personal delivery; (b)
two (2) business days after transmission by facsimile, addressed to the other party at its
facsimile number, with confirmation of transmission; (c) four (4) business days after deposit with
a return receipt express courier for United States deliveries; or (d) five (5) business days after
deposit in the United States mail by registered or certified mail (return receipt requested) for
United States deliveries. All notices not delivered personally or by facsimile will be sent with
postage and/or other charges prepaid and properly addressed to such party at the address set forth
on the signature page hereto, or at such other address as such party may designate by ten (10) days
advance written notice to the other party hereto. Notices to the Company will be marked
“Attention: Chief Financial Officer.”

          (d) Attorneys’ Fees. If any action at law or in equity is necessary to enforce or
interpret the terms of this Warrant, the prevailing party shall be entitled to reasonable
attorneys’ fees, costs and disbursements in addition to any other relief to which such party may be
entitled.

          (e) Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a particular instance
and either retroactively or prospectively) with the written consent of the Holder and the Company.
Any amendment or waiver effected in accordance with this Section 11(e) shall be binding upon the
Holder of this Warrant (and of any securities into which this Warrant is convertible), each future
holder of all such securities, and the Company.

          (f) Severability. If one or more provisions of this Warrant are held to be
unenforceable under applicable law, such provision shall be excluded from this Warrant and the

 

 

balance of the Warrant shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.

          (g) Governing Law. This Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of California, without giving effect to its conflicts of laws
principles.

          (h) Counterparts. This Warrant may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

     In Witness Whereof, the Company has caused this Warrant to be executed by its duly
authorized officer as of the date first written above.

	 	 	 	 	 	 	 	 	 
	 	 	ARTES MEDICAL, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Stefan Lemperle, M.D.	 	 
	 	 	 	 	 	 	 
	 	 	Name:	 	Stefan Lemperle, M.D.	 	 
	 	 	Title:	 	CEO	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address:	 	5870 Pacific Center Blvd.	 	 
	 

	 	 	 	 	 	San Diego, CA 92121	 	 

 

 

EXHIBIT A

FORM OF SUBSCRIPTION

(To be signed only on exercise of Warrant)

To: ARTES MEDICAL, INC.

     The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby
irrevocably elects to (a) purchase ___shares of the Series E Preferred Stock covered by such
Warrant and herewith makes payment of $                     , representing the full purchase price for such
shares at the price per share provided for in such Warrant, or (b) exercise such Warrant for
                    shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of
Section 5 of such Warrant.

     Please issue a certificate or certificates representing                     shares in the name of the
undersigned or in such other name or names as are specified below:

 

(Name)

 

 

(Address)

     The undersigned represents that the aforesaid shares are being acquired for the account of the
undersigned for investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of distributing or reselling
such shares, all except as in compliance with applicable securities laws.

	 	 	 
	 

	 	 
	 

	 	(Signature must conform in all respects to name of
the Holder as specified on the face of the Warrant)
	 
	 	 
	 

	 	 
	 

	 	(Print Name)
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 

	 	(Address)

Dated:                                                             

 

 

EXHIBIT B

FORM OF ASSIGNMENT

(To assign the foregoing Warrant, execute this form
and supply required information. Do not use this
form to purchase shares.)

     For Value Received, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to:

	 	 	 	 	 
	Name:
	 	 	 	 
	 	 	 
	 	 	(Please Print)

	 
	 	 	 	 
	Address:
	 	 	 	 
	 	 	 
	 	 	(Please Print)

	 
	 	 	 	 
	Dated:                     , 20__	 	 
	 
	 	 	 	 
	Holder’s

Signature:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Holder’s

Address:
	 	 	 	 
	 

	 	 	 	 

NOTE: The signature to this Form of Assignment must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.exv10w7

 

EXHIBIT 10.7

2006 Equity Incentive Plan

of

ARTES MEDICAL, Inc.

1. Purpose of this Plan

     The purpose of this 2006 Equity Incentive Plan is to enhance the long-term stockholder value
of Artes Medical, Inc. by offering opportunities to eligible individuals to participate in the
growth in value of the equity of Artes Medical, Inc.

2. Definitions and Rules of Interpretation

     2.1 Definitions.

     This Plan uses the following defined terms:

          (a) “Administrator” means the Board or the Committee, or any officer or employee of
the Company to whom the Board or the Committee delegates authority to administer this Plan.

          (b) “Affiliate” means a “parent” or “subsidiary” (as each is defined in Section 424
of the Code) of the Company and any other entity that the Board or Committee designates as an
“Affiliate” for purposes of this Plan.

          (c) “Applicable Law” means any and all laws of whatever jurisdiction, within or
without the United States, and the rules of any stock exchange or quotation system on which Shares
are listed or quoted, applicable to the taking or refraining from taking of any action under this
Plan, including the administration of this Plan and the issuance or transfer of Awards or Award
Shares.

          (d) “Award” means a Stock Award (e.g. restricted stock unit award), SAR, Cash Award,
or Option granted in accordance with the terms of this Plan.

          (e) “Award Agreement” means the document evidencing the grant of an Award.

          (f) “Award Shares” means Shares covered by an outstanding Award or purchased under
an Award.

          (g) “Awardee” means: (i) a person to whom an Award has been granted, including a
holder of a Substitute Award, (ii) a person to whom an Award has been transferred in accordance
with all applicable requirements of Sections 6.5, 7(h), and 17.

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

          (i) “Cash Award” means the right to receive cash as described in Section 8.3.

 

 

          (j) “Change in Control” means any transaction or event that the Board specifies as a
Change in Control under Section 10.4.

          (k) “Code” means the Internal Revenue Code of 1986.

          (l) “Committee” means a committee composed of Company Directors appointed in
accordance with the Company’s charter documents and Section 4.

          (m) “Company” means Artes Medical, Inc., a Delaware corporation.

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

          (o) “Consultant” means an individual who, or an employee of any entity that,
provides bona fide services to the Company or an Affiliate not in connection with the offer or sale
of securities in a capital-raising transaction, but who is not an Employee.

          (p) “Director” means a member of the Board of Directors of the Company or an
Affiliate.

          (q) “Divestiture” means any transaction or event that the Board specifies as a
Divestiture under Section 10.5.

          (r) “Domestic Relations Order” means a “domestic relations order” as defined in, and
otherwise meeting the requirements of, Section 414(p) of the Code, except that reference to a
“plan” in that definition shall be to this Plan.

          (s) “Effective Date” means the first date of the sale by the Company of shares of
its capital stock in an initial public offering pursuant to a registration statement on Form S-1
filed with the SEC.

          (t) “Employee” means a regular employee of the Company or an Affiliate, including an
officer or Director, who is treated as an employee in the personnel records of the Company or an
Affiliate, but not individuals who are classified by the Company or an Affiliate as: (i) leased
from or otherwise employed by a third party, (ii) independent contractors, or (iii) intermittent or
temporary workers. The Company’s or an Affiliate’s classification of an individual as an
“Employee” (or as not an “Employee”) for purposes of this Plan shall not be altered retroactively
even if that classification is changed retroactively for another purpose as a result of an audit,
litigation or otherwise. An Awardee shall not cease to be an Employee due to transfers between
locations of the Company, or between the Company and an Affiliate, or to any successor to the
Company or an Affiliate that assumes the Awardee’s Options under Section 10. Neither service as a
Director nor receipt of a director’s fee shall be sufficient to make a Director an “Employee.”

          (u) “Exchange Act” means the Securities Exchange Act of 1934.

          (v) “Executive” means, if the Company has any class of any equity security
registered under Section 12 of the Exchange Act, an individual who is subject to Section 16 of

2

 

the Exchange Act or who is a “covered employee” under Section 162(m) of the Code, in either
case because of the individual’s relationship with the Company or an Affiliate. If the Company
does not have any class of any equity security registered under Section 12 of the Exchange Act,
“Executive” means any (i) Director, (ii) officer elected or appointed by the Board, or (iii)
beneficial owner of more than 10% of any class of the Company’s equity securities.

          (w) “Expiration Date” means, with respect to an Award, the date stated in the Award
Agreement as the expiration date of the Award or, if no such date is stated in the Award Agreement,
then the last day of the maximum exercise period for the Award, disregarding the effect of an
Awardee’s Termination or any other event that would shorten that period.

          (x) “Fair Market Value” means the value of Shares as determined under Section 18.2.

          (y) “Fundamental Transaction” means any transaction or event described in Section
10.3.

          (z) “Grant Date” means the date the Administrator approves the grant of an Award.
However, if the Administrator specifies that an Award’s Grant Date is a future date or the date on
which a condition is satisfied, the Grant Date for such Award is that future date or the date that
the condition is satisfied.

          (aa) “Incentive Stock Option” means an Option intended to qualify as an incentive
stock option under Section 422 of the Code and designated as an Incentive Stock Option in the Award
Agreement for that Option.

          (bb) “Nonstatutory Option” means any Option other than an Incentive Stock Option.

          (cc) “Non-Employee Director” means any person who is a member of the Board but is
not an Employee of the Company or any Affiliate of the Company and has not been an Employee of the
Company or any Affiliate of the Company at any time during the preceding twelve months. Service as
a Director does not in itself constitute employment for purposes of this definition.

          (dd) “Objectively Determinable Performance Condition” shall mean a performance
condition (i) that is established (A) at the time an Award is granted or (B) no later than the
earlier of (1) 90 days after the beginning of the period of service to which it relates, or (2)
before the elapse of 25% of the period of service to which it relates, (ii) that is uncertain of
achievement at the time it is established, and (iii) the achievement of which is determinable by a
third party with knowledge of the relevant facts. Examples of measures that may be used in
Objectively Determinable Performance Conditions include net order dollars, net profit dollars, net
profit growth, net revenue dollars, revenue growth, individual performance, earnings per share,
return on assets, return on equity, and other financial objectives, objective customer satisfaction
indicators and efficiency measures, each with respect to the Company and/or an Affiliate or
individual business unit.

3

 

          (ee) “Officer” means an officer of the Company as defined in Rule 16a-1 adopted
under the Exchange Act.

          (ff) “Option” means a right to purchase Shares of the Company granted under this
Plan.

          (gg) “Option Price” means the price payable under an Option for Shares, not
including any amount payable in respect of withholding or other taxes.

          (hh) “Option Shares” means Shares covered by an outstanding Option or purchased
under an Option.

          (ii) “Plan” means this 2006 Equity Incentive Plan of Artes Medical, Inc.

          (jj) “Prior Plans” means the Company’s 2001 Stock Option/Stock Issuance Plan.

          (kk) “Purchase Price” means the price payable under a Stock Award for Shares, not
including any amount payable in respect of withholding or other taxes.

          (ll) “Rule 16b-3” means Rule 16b-3 adopted under Section 16(b) of the Exchange Act.

          (mm) “SAR” or “Stock Appreciation Right” means a right to receive cash based on a
change in the Fair Market Value of a specific number of Shares pursuant to an Award Agreement, as
described in Section 8.1.

          (nn) “Securities Act” means the Securities Act of 1933.

          (oo) “Share” means a share of the common stock of the Company or other securities
substituted for the common stock under Section 10.

          (pp) “Stock Award” means an offer by the Company to sell shares subject to certain
restrictions pursuant to the Award Agreement as described in Section 8.2 or, as determined by the
Committee, a notional account representing the right to be paid an amount based on Shares.

          (qq) “Substitute Award” means a Substitute Option, Substitute SAR or Substitute
Stock Award granted in accordance with the terms of this Plan.

          (rr) “Substitute Option” means an Option granted in substitution for, or upon the
conversion of, an option granted by another entity to purchase equity securities in the granting
entity.

          (ss) “Substitute SAR” means a SAR granted in substitution for, or upon the
conversion of, a stock appreciation right granted by another entity with respect to equity
securities in the granting entity.

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          (tt) “Substitute Stock Award” means a Stock Award granted in substitution for, or
upon the conversion of, a stock award granted by another entity to purchase equity securities in
the granting entity.

          (uu) “Termination” means that the Awardee has ceased to be, with or without any
cause or reason, an Employee, Director or Consultant. However, unless so determined by the
Administrator, or otherwise provided in this Plan, “Termination” shall not include a change in
status from an Employee, Consultant or Director to another such status. An event that causes an
Affiliate to cease being an Affiliate shall be treated as the “Termination” of that Affiliate’s
Employees, Directors, and Consultants.

     2.2 Rules of Interpretation. Any reference to a “Section,” without more, is to a
Section of this Plan. Captions and titles are used for convenience in this Plan and shall not, by
themselves, determine the meaning of this Plan. Except when otherwise indicated by the context,
the singular includes the plural and vice versa. Any reference to a statute is also a reference to
the applicable rules and regulations adopted under that statute. Any reference to a statute, rule
or regulation, or to a section of a statute, rule or regulation, is a reference to that statute,
rule, regulation, or section as amended from time to time, both before and after the Effective Date
and including any successor provisions.

3. Shares Subject to this Plan; Term of this Plan

     3.1 Number of Award Shares. The Shares issuable under this Plan shall be authorized
but unissued or reacquired Shares, including Shares repurchased by the Company on the open market.
The number of Shares initially reserved for issuance over the term of this Plan shall be
25,000,000, which number includes (i) the 10,000,000 Shares authorized and reserved for issuance
under the Prior Plans as last approved by the Company’s stockholders, (ii) those Shares that are
not delivered because of net exercise to pay taxes or an exercise price under the Plan or the Prior
Plans, and (iii) those Shares that are restored pursuant to the decision of the Board or Committee
pursuant to Section 6.4(a) to deliver only such Shares as are necessary to award the net Share
appreciation; provided, however, that the Shares reserved for issuance under the Plan shall not
include the Shares actually issued, whether before or after the Effective Date, upon the exercise
of options granted under the Prior Plans (i.e., the Shares reserved under the Plan shall include
the number of Shares available for issuance, as of the Effective Date, under the Prior Plans as
last approved by the Company’s stockholders and (ii) those Shares issued under the Prior Plans that
are forfeited or repurchased by the Company or that are issuable upon exercise of options granted
pursuant to the Prior Plans that expire or become unexercisable for any reason without having been
exercised in full after the Effective Date). The maximum number of Shares shall be cumulatively
increased on the first January 1 after the Effective Date and each January 1 thereafter for 9 more
years, by a number of Shares equal to the least of (a) 5% of the number of Shares issued and
outstanding on the immediately preceding December 31, (b) 10,000,000 Shares, and (c) a number of
Shares set by the Board. Except as required by applicable law, Shares shall not reduce the number
of Shares reserved for issuance under this Plan until the earlier of the date such
Shares are vested pursuant to the terms of the applicable Award or the actual date of delivery
of the Shares to the Awardee. Also, if an Award later terminates or expires without having been
exercised in full, the maximum number of shares that may be issued under this Plan shall be
increased by the number of Shares that were covered by,

5

 

but not purchased under, that Award. By
contrast, the repurchase of Shares by the Company shall not increase the maximum number of Shares
that may be issued under this Plan.

     3.2 Source of Shares. Award Shares may be: (a) Shares that have never been issued,
(b) Shares that have been issued but are no longer outstanding, or (c) Shares that are outstanding
and are acquired to discharge the Company’s obligation to deliver Award Shares.

3.3 Term of this Plan

          (a) This Plan shall be effective on, and Awards may be granted under this Plan on
and after, the earliest the date on which the Plan has been both adopted by the Board and approved
by the Company’s stockholders.

          (b) Subject to the provisions of Section 14, Awards may be granted under this Plan
for a period of ten years from the earlier of the date on which the Board approves this Plan and
the date the Company’s stockholders approve this Plan. Accordingly, Awards may not be granted
under this Plan after the earlier of those dates.

4. Administration

     4.1 General

          (a) The Board shall have ultimate responsibility for administering this Plan. The
Board may delegate certain of its responsibilities to a Committee, which shall consist of at least
two members of the Board. The Board or the Committee may further delegate its responsibilities to
any Employee of the Company or any Affiliate. Where this Plan specifies that an action is to be
taken or a determination made by the Board, only the Board may take that action or make that
determination. Where this Plan specifies that an action is to be taken or a determination made by
the Committee, only the Committee may take that action or make that determination. Where this Plan
references the “Administrator,” the action may be taken or determination made by the Board, the
Committee, or other Administrator. However, only the Board or the Committee may approve grants of
Awards to Executives, and an Administrator other than the Board or the Committee may grant Awards
only within the guidelines established by the Board or Committee. Moreover, all actions and
determinations by any Administrator are subject to the provisions of this Plan.

          (b) So long as the Company has registered and outstanding a class of equity
securities under Section 12 of the Exchange Act, the Committee shall consist of Company Directors
who are “Non-Employee Directors” as defined in Rule 16b-3 and, after the expiration of any
transition period permitted by Treasury Regulations Section 1.162-27(h)(3), who are “outside
directors” as defined in Section 162(m) of the Code.

     4.2
Authority of the Board or the Committee. Subject to the other provisions of this
Plan, the Board or the Committee shall have the authority to:

          (a) grant Awards, including Substitute Awards;

6

 

          (b) determine the Fair Market Value of Shares;

          (c) determine the Option Price and the Purchase Price of Awards;

          (d) select the Awardees;

          (e) determine the times Awards are granted;

          (f) determine the number of Shares subject to each Award;

          (g) determine the methods of payment that may be used to purchase Award Shares;

          (h) determine the methods of payment that may be used to satisfy withholding tax
obligations;

          (i) determine the other terms of each Award, including but not limited to the time
or times at which Awards may be exercised, whether and under what conditions an Award is
assignable, and whether an Option is a Nonstatutory Option or an Incentive Stock Option;

          (j) modify or amend any Award;

          (k) authorize any person to sign any Award Agreement or other document related to
this Plan on behalf of the Company;

          (l) determine the form of any Award Agreement or other document related to this
Plan, and whether that document, including signatures, may be in electronic form;

          (m) interpret this Plan and any Award Agreement or document related to this Plan;

          (n) correct any defect, remedy any omission, or reconcile any inconsistency in this
Plan, any Award Agreement or any other document related to this Plan;

          (o) adopt, amend, and revoke rules and regulations under this Plan, including rules
and regulations relating to sub-plans and Plan addenda;

          (p) adopt, amend, and revoke special rules and procedures which may be inconsistent
with the terms of this Plan, set forth (if the Administrator so chooses) in sub-plans regarding
(for example) the operation and administration of this Plan and the terms of Awards, if and to the
extent necessary or useful to accommodate non-U.S. Applicable Laws and practices as
they apply to Awards and Award Shares held by, or granted or issued to, persons working or
resident outside of the United States or employed by Affiliates incorporated outside the United
States;

          (q) determine whether a transaction or event should be treated as a Change in
Control, a Divestiture or neither;

7

 

          (r) determine the effect of a Fundamental Transaction and, if the Board determines
that a transaction or event should be treated as a Change in Control or a Divestiture, then the
effect of that Change in Control or Divestiture; and

          (s) make all other determinations the Administrator deems necessary or advisable for
the administration of this Plan.

     4.3 Scope of Discretion. Subject to the provisions of this Section 4.3, on all
matters for which this Plan confers the authority, right or power on the Board, the Committee, or
other Administrator to make decisions, that body may make those decisions in its sole and absolute
discretion. Those decisions will be final, binding and conclusive. In making its decisions, the
Board, Committee or other Administrator need not treat all persons eligible to receive Awards, all
Awardees, all Awards or all Award Shares the same way. Notwithstanding anything herein to the
contrary, and except as provided in Section 14.3, the discretion of the Board, Committee or other
Administrator is subject to the specific provisions and specific limitations of this Plan, as well
as all rights conferred on specific Awardees by Award Agreements and other agreements.

5. Persons Eligible to Receive Awards

     5.1 Eligible Individuals. Awards (including Substitute Awards) may be granted to,
and only to, Employees, Directors and Consultants, including to prospective Employees, Directors
and Consultants conditioned on the beginning of their service for the Company or an Affiliate.
However, Incentive Stock Options may only be granted to Employees, as provided in Section 7(g).

     5.2 Section 162(m) Limitation.

          (a) Options and SARs. Subject to the provisions of this Section 5.2, for so long as
the Company is a “publicly held corporation” within the meaning of Section 162(m) of the Code: (i)
no Employee may be granted one or more SARs and Options within any fiscal year of the Company under
this Plan to purchase more than 2,000,000 Shares under Options or to receive compensation
calculated with reference to more than that number of Shares under SARs, subject to adjustment
pursuant to Section 10, (ii) Options and SARs may be granted to an Executive only by the Committee
(and, notwithstanding anything to the contrary in Section 4.1(a), not by the Board). If an Option
or SAR is cancelled without being exercised or of the Option Price of an Option is reduced, that
cancelled or repriced Option or SAR shall continue to
be counted against the limit on Awards that my be granted to any individual under this Section
5.2.

          (b) Cash Awards and Stock Awards. Any Cash Award or Stock Award intended as
“qualified performance-based compensation” within the meaning of Section 162(m) of the Code must
vest or become exercisable contingent on the achievement of one or more Objectively Determinable
Performance Conditions. The Committee shall have the discretion to determine the time and manner
of compliance with Section 162(m) of the Code. The maximum annual Stock Award to any individual
shall be 2,000,000 Shares and the maximum annual cash award to any individual shall be $2,000,000.

8

 

6. Terms and Conditions of Options

     The following rules apply to all Options:

     6.1 Price. No Option intended as “qualified incentive-based compensation” within
the meaning of Section 162(m) of the Code may have an Option Price less than 100% of the Fair
Market Value of the Shares on the Grant Date. In no event will the Option Price of any Option be
less than the par value of the Shares issuable under the Option if that is required by Applicable
Law. The Option Price of an Incentive Stock Option shall be subject to Section 7(f).

     6.2 Term. No Option shall be exercisable after its Expiration Date. No Option may
have an Expiration Date that is more than ten years after its Grant Date. Additional provisions
regarding the term of Incentive Stock Options are provided in Sections 7(a) and 7(e).

     6.3 Vesting. Options shall be exercisable: (a) on the Grant Date, or (b) in
accordance with a schedule related to the Grant Date, the date the Optionee’s directorship,
employment or consultancy begins, or a different date specified in the Option Agreement.
Additional provisions regarding the vesting of Incentive Stock Options are provided in Section
7(c). No Option granted to an individual who is subject to the overtime pay provisions of the Fair
Labor Standards Act may be exercised before the expiration of six months after the Grant Date.

     6.4 Form and Method of Payment.

          (a) The Board or Committee shall determine the acceptable form and method of payment
for exercising an Option. So long as variable accounting pursuant to “APB 25” does not apply and
the Board or Committee otherwise determines there is no material adverse accounting consequence at
the time of exercise, the Board or Committee may require the delivery in Shares for the value of
the net appreciation of the Shares at the time of exercise over the exercise price. The difference
between full number of Shares covered by the exercised
portion of the Award and the number of Shares actually delivered shall be restored to the
amount of Shares reserved for issuance under Section 3.1.

          (b) Acceptable forms of payment for all Option Shares are cash, check or wire
transfer, denominated in U.S. dollars except as specified by the Administrator for non-U.S.
Employees or non-U.S. sub-plans.

          (c) In addition, the Administrator may permit payment to be made by any of the
following methods:

               (i) other Shares, or the designation of other Shares, which (A) are “mature” shares
for purposes of avoiding variable accounting treatment under generally accepted accounting
principles (generally mature shares are those that have been owned by the Optionee 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 Option Price of the Shares as to which the Option is being exercised;

               (ii) provided that a public market exists for the Shares, consideration received by
the Company under a procedure under which a licensed broker-dealer advances

9

 

funds on behalf of an
Optionee or sells Option Shares on behalf of an Optionee (a “Cashless Exercise Procedure”),
provided that if the Company extends or arranges for the extension of credit to an Optionee under
any Cashless Exercise Procedure, no Officer or Director may participate in that Cashless Exercise
Procedure;

               (iii) cancellation of any debt owed by the Company or any Affiliate to the Optionee
by the Company including without limitation waiver of compensation due or accrued for services
previously rendered to the Company; and

               (iv) any combination of the methods of payment permitted by any paragraph of this
Section 6.4.

          (d) The Administrator may also permit any other form or method of payment for Option
Shares permitted by Applicable Law.

     6.5 Nonassignability of Options. Except as determined by the Administrator, no
Option shall be assignable or otherwise transferable by the Optionee except by will or by the laws
of descent and distribution. However, Options may be transferred and exercised in accordance with
a Domestic Relations Order and may be exercised by a guardian or conservator appointed to act for
the Optionee. Incentive Stock Options may only be assigned in compliance with Section 7(h).

     6.6 Substitute Options. The Board may cause the Company to grant Substitute Options
in connection with the acquisition by the Company or an Affiliate of equity securities of any
entity (including by merger, tender offer, or other similar transaction) or of all or a portion of
the assets of any entity. Any such substitution shall be effective on the effective date of the
acquisition. Substitute
Options may be Nonstatutory Options or Incentive Stock Options. Unless and to the extent
specified otherwise by the Board, Substitute Options shall have the same terms and conditions as
the options they replace, except that (subject to the provisions of Section 10) Substitute Options
shall be Options to purchase Shares rather than equity securities of the granting entity and shall
have an Option Price determined by the Board.

     6.7 Repricings. In furtherance of, and not in limitation of the provisions of
Section 10, Options may be repriced, replaced or regranted through cancellation or modification
without stockholder approval.

7. Incentive Stock Options.

     The following rules apply only to Incentive Stock Options and only to the extent these rules
are more restrictive than the rules that would otherwise apply under this Plan. With the consent
of the Optionee, or where this Plan provides that an action may be taken notwithstanding any other
provision of this Plan, the Administrator may deviate from the requirements of this Section,
notwithstanding that any Incentive Stock Option modified by the Administrator will thereafter be
treated as a Nonstatutory Option.

10

 

          (a) The Expiration Date of an Incentive Stock Option shall not be later than ten
years from its Grant Date, with the result that no Incentive Stock Option may be exercised after
the expiration of ten years from its Grant Date.

          (b) No Incentive Stock Option may be granted more than ten years from the date this
Plan was approved by the Board.

          (c) Options intended to be incentive stock options under Section 422 of the Code
that are granted to any single Optionee under all incentive stock option plans of the Company and
its Affiliates, including incentive stock options granted under this Plan, may not vest at a rate
of more than $100,000 in Fair Market Value of stock (measured on the grant dates of the options)
during any calendar year. For this purpose, an option vests with respect to a given share of stock
the first time its holder may purchase that share, notwithstanding any right of the Company to
repurchase that share. Unless the administrator of that option plan specifies otherwise in the
related agreement governing the option, this vesting limitation shall be applied by, to the extent
necessary to satisfy this $100,000 rule, treating certain stock options that were intended to be
incentive stock options under Section 422 of the Code as Nonstatutory Options. The stock options or
portions of stock options to be reclassified as Nonstatutory Options are those with the highest
option prices, whether granted under this Plan or any other equity compensation plan of the Company
or any Affiliate that permits that treatment. This Section 7(c) shall not cause an Incentive Stock
Option to vest before its original vesting date or cause an Incentive Stock Option that has already
vested to cease to be vested.

          (d) In order for an Incentive Stock Option to be exercised for any form of payment
other than those described in Section 6.4(b), that right must be stated at the time of grant in the
Option Agreement relating to that Incentive Stock Option.

          (e) Any Incentive Stock Option granted to a Ten Percent Stockholder, must have an
Expiration Date that is not later than five years from its Grant Date, with the result that no such
Option may be exercised after the expiration of five years from the Grant Date. A “Ten Percent
Stockholder” is any person who, directly or by attribution under Section 424(d) of the Code, owns
stock possessing more than ten percent of the total combined voting power of all classes of stock
of the Company or of any Affiliate on the Grant Date.

          (f) The Option Price of an Incentive Stock Option shall never be less than the Fair
Market Value of the Shares at the Grant Date. The Option Price for the Shares covered by an
Incentive Stock Option granted to a Ten Percent Stockholder shall never be less than 110% of the
Fair Market Value of the Shares at the Grant Date.

          (g) Incentive Stock Options may be granted only to Employees. If an Optionee changes
status from an Employee to a Consultant, that Optionee’s Incentive Stock Options become
Nonstatutory Options if not exercised within the time period described in Section 7(i) (determined
by treating that change in status as a Termination solely for purposes of this Section 7(g)).

          (h) No rights under an Incentive Stock Option may be transferred by the Optionee,
other than by will or the laws of descent and distribution. During the life of the

11

 

Optionee, an
Incentive Stock Option may be exercised only by the Optionee. The Company’s compliance with a
Domestic Relations Order, or the exercise of an Incentive Stock Option by a guardian or conservator
appointed to act for the Optionee, shall not violate this Section 7(h).

          (i) An Incentive Stock Option shall be treated as a Nonstatutory Option if it
remains exercisable after, and is not exercised within, the three-month period beginning with the
Optionee’s Termination for any reason other than the Optionee’s death or disability (as defined in
Section 22(e) of the Code). In the case of Termination due to death, an Incentive Stock Option
shall continue to be treated as an Incentive Stock Option if it remains exercisable after, and is
not exercised within, the three month period after the Optionee’s Termination provided it is
exercised before the Expiration Date. In the case of Termination due to disability, an Incentive
Stock Option shall be treated as a Nonstatutory Option if it remains exercisable after, and is not
exercised within, one year after the Optionee’s Termination.

          (j) An Incentive Stock Option may only be modified by the Board.

8. Stock Appreciation Rights, Stock Awards and Cash Awards

     8.1 Stock Appreciation Rights. The following rules apply to SARs:

          (a) General. SARs may be granted either alone, in addition to, or in tandem with
other Awards granted under this Plan. The Administrator may grant SARs to eligible participants
subject to terms and conditions not inconsistent with this Plan and determined by the
Administrator. The specific terms and conditions applicable to the Awardee shall be provided for in
the Award Agreement. SARs shall be exercisable, in whole or in part, at such times as the
Administrator shall specify in the Award Agreement. The grant or vesting of a SAR may be made
contingent on the achievement of Objectively Determinable Performance Conditions.

          (b) Exercise of SARs. Upon the exercise of an SAR, in whole or in part, an Awardee
shall be entitled to a payment in an amount equal to the excess of the Fair Market Value of a fixed
number of Shares covered by the exercised portion of the SAR on the date of exercise, over the Fair
Market Value of the Shares covered by the exercised portion of the SAR on the Grant Date. The
amount due to the Awardee upon the exercise of a SAR shall be paid in cash, Shares or a combination
thereof, over the period or periods specified in the Award Agreement. An Award Agreement may place
limits on the amount that may be paid over any specified period or periods upon the exercise of a
SAR, on an aggregate basis or as to any Awardee. A SAR shall be considered exercised when the
Company receives written notice of exercise in accordance with the terms of the Award Agreement
from the person entitled to exercise the SAR. If a SAR has been granted in tandem with an Option,
upon the exercise of the SAR, the number of shares that may be purchased pursuant to the Option
shall be reduced by the number of shares with respect to which the SAR is exercised.

          (c) Nonassignability of SARs. Except as determined by the Administrator, no SAR
shall be assignable or otherwise transferable by the Awardee except by will or by the laws of
descent and distribution. Notwithstanding anything herein to the contrary, SARs may be transferred
and exercised in accordance with a Domestic Relations Order.

12

 

          (d) Substitute SARs. The Board may cause the Company to grant Substitute SARs in
connection with the acquisition by the Company or an Affiliate of equity securities of any entity
(including by merger) or all or a portion of the assets of any entity. Any such substitution shall
be effective on the effective date of the acquisition. Unless and to the extent specified
otherwise by the Board, Substitute SARs shall have the same terms and conditions as the options
they replace, except that (subject to the provisions of Section 9) Substitute SARs shall be
exercisable with respect to the Fair Market Value of Shares rather than equity securities of the
granting entity and shall be on terms that, as determined by the Board in its sole and absolute
discretion, properly reflects the substitution.

          (e) Repricings. A SAR may not be repriced, replaced or regranted, through
cancellation or modification without stockholder approval.

     8.2 Stock Awards. The following rules apply to all Stock Awards:

          (a) General. The specific terms and conditions of a Stock Award applicable to the
Awardee shall be provided for in the Award Agreement. The Award Agreement shall state the number of
Shares that the Awardee shall be entitled to receive or purchase, the terms and conditions on which
the Shares shall vest, the price to be paid, whether Shares are to be delivered at the time of
grant or at some deferred date specified in the Award Agreement (e.g. a restricted stock unit award
agreement), whether the Award is payable solely in Shares, cash or either and, if applicable, the
time within which the Awardee must accept such offer. The offer shall be accepted by execution of
the Award Agreement. The Administrator may require that all Shares
subject to a right of repurchase or risk of forfeiture be held in escrow until such repurchase
right or risk of forfeiture lapses. The grant or vesting of a Stock Award may be made contingent
on the achievement of Objectively Determinable Performance Conditions.

          (b) Right of Repurchase. If so provided in the Award Agreement, Award Shares
acquired pursuant to a Stock Award may be subject to repurchase by the Company or an Affiliate if
not vested in accordance with the Award Agreement.

          (c) Form of Payment. The Administrator shall determine the acceptable form and
method of payment for exercising a Stock Award. Acceptable forms of payment for all Award Shares
are cash, check or wire transfer, denominated in U.S. dollars except as specified by the
Administrator for non-U.S. sub-plans. In addition, the Administrator may permit payment to be made
by any of the methods permitted with respect to the exercise of Options pursuant to Section 6.4.

          (d) Nonassignability of Stock Awards. Except as determined by the Administrator, no
Stock Award shall be assignable or otherwise transferable by the Awardee except by will or by the
laws of descent and distribution. Notwithstanding anything to the contrary herein, Stock Awards
may be transferred and exercised in accordance with a Domestic Relations Order.

          (e) Substitute Stock Award. The Board may cause the Company to grant Substitute
Stock Awards in connection with the acquisition by the Company or an Affiliate of equity securities
of any entity (including by merger) or all or a portion of the assets of any entity.

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Unless and to
the extent specified otherwise by the Board, Substitute Stock Awards shall have the same terms and
conditions as the stock awards they replace, except that (subject to the provisions of Section 10)
Substitute Stock Awards shall be Stock Awards to purchase Shares rather than equity securities of
the granting entity and shall have a Purchase Price that, as determined by the Board in its sole
and absolute discretion, properly reflects the substitution. Any such Substituted Stock Award
shall be effective on the effective date of the acquisition.

     8.3 Cash Awards. The following rules apply to all Cash Awards:

     Cash Awards may be granted either alone, in addition to, or in tandem with other Awards
granted under this Plan. After the Administrator determines that it will offer a Cash Award, it
shall advise the Awardee, by means of an Award Agreement, of the terms, conditions and restrictions
related to the Cash Award.

9. Exercise of Awards

     9.1 In General. An Award shall be exercisable in accordance with this Plan and the
Award Agreement under which it is granted.

     9.2 Time of Exercise. Options and Stock Awards shall be considered exercised when the Company receives: (a) written
notice of exercise from the person entitled to exercise the Option or Stock Award, (b) full
payment, or provision for payment, in a form and method approved by the Administrator, for the
Shares for which the Option or Stock Award is being exercised, and (c) with respect to Nonstatutory
Options, payment, or provision for payment, in a form approved by the Administrator, of all
applicable withholding taxes due upon exercise. An Award may not be exercised for a fraction of a
Share. SARs shall be considered exercised when the Company receives written notice of the exercise
from the person entitled to exercise the SAR.

     9.3 Issuance of Award Shares. The Company shall issue Award Shares in the name of
the person properly exercising the Award. If the Awardee is that person and so requests, the Award
Shares shall be issued in the name of the Awardee and the Awardee’s spouse. The Company shall
endeavor to issue Award Shares promptly after an Award is exercised or after the Grant Date of a
Stock Award, as applicable. Until Award Shares are actually issued, as evidenced by the
appropriate entry on the stock register of the Company or its transfer agent, the Awardee will not
have the rights of a stockholder with respect to those Award Shares, even though the Awardee has
completed all the steps necessary to exercise the Award. No adjustment shall be made for any
dividend, distribution, or other right for which the record date precedes the date the Award Shares
are issued, except as provided in Section 10.

     9.4 Termination

          (a) In General. Except as provided in an Award Agreement or in writing by the
Administrator, including in an Award Agreement, and as otherwise provided in Sections 9.4(b), (c),
(d) and (e) after an Awardee’s Termination, the Awardee’s Awards shall be exercisable to the extent
(but only to the extent) they are vested on the date of that Termination and only during the ninety
(90) days after the Termination, but in no event after the Expiration

14

 

Date. To the extent the
Awardee does not exercise an Award within the time specified for exercise, the Award shall
automatically terminate. Notwithstanding the foregoing, as a clarification of rules in effect under
the Plan, in the event Shares pursuant to an Award may not be issued at the time they would
otherwise expire as provided in this Section 9.4 because the issuance would otherwise violate
Applicable Law, or in the event an Option would expire following termination of employment during a
time when trading in Shares is prohibited pursuant to the Company’s insider trading policy, the
exercise period provided herein shall be automatically extended past the date that the prohibition
on issuance or trading or trading ends by the lesser of the number of days after termination of
employment that issuance or trading is actually prohibited or 90 days. Notwithstanding the
foregoing, in no event may the Shares be exercised after the term of the Award.

          (b) Leaves of Absence. Unless otherwise provided in the Award Agreement, no Award
may be exercised more than three months after the beginning of a leave of absence, other than a
personal or medical leave approved by an authorized representative of the Company with employment
guaranteed upon return. Awards shall not continue to vest during a leave of absence, unless
otherwise determined by the Administrator with respect to an approved personal or medical leave
with employment guaranteed upon return.

          (c) Death or Disability. Unless otherwise provided by the Administrator, if an
Awardee’s Termination is due to death or disability (as determined by the Administrator with
respect to all Awards other than Incentive Stock Options and as defined by Section 22(e) of the
Code with respect to Incentive Stock Options), all Awards of that Awardee to the extent exercisable
at the date of that Termination may be exercised for one year after that Termination, but in no
event after the Expiration Date. In the case of Termination due to death, an Award may be
exercised as provided in Section 17. In the case of Termination due to disability, if a guardian
or conservator has been appointed to act for the Awardee and been granted this authority as part of
that appointment, that guardian or conservator may exercise the Award on behalf of the Awardee.
Death or disability occurring after an Awardee’s Termination shall not cause the Termination to be
treated as having occurred due to death or disability. To the extent an Award is not so exercised
within the time specified for its exercise, the Award shall automatically terminate.

          (d) Divestiture. If an Awardee’s Termination is due to a Divestiture, the Board may
take any one or more of the actions described in Section 10.3 or 10.4 with respect to the Awardee’s
Awards.

          (e) Administrator Discretion. Notwithstanding the provisions of Section 9.4
(a)-(e), the Plan Administrator shall have complete discretion, exercisable either at the time an
Award is granted or at any time while the Award remains outstanding, to:

               (i) Extend the period of time for which the Award is to remain exercisable,
following the Awardee’s Termination, from the limited exercise period otherwise in effect for that
Award to such greater period of time as the Administrator shall deem appropriate, but in no event
beyond the Expiration Date; and/or

15

 

               (ii) Permit the Award to be exercised, during the applicable post-Termination
exercise period, not only with respect to the number of vested Shares for which such Award may be
exercisable at the time of the Awardee’s Termination but also with respect to one or more
additional installments in which the Awardee would have vested had the Awardee not been subject to
Termination.

     (f) Consulting or Employment Relationship. Nothing in this Plan or in any Award
Agreement, and no Award or the fact that Award Shares remain subject to repurchase rights, shall:
(A) interfere with or limit the right of the Company or any Affiliate to terminate the employment
or consultancy of any Awardee at any time, whether with or without cause or reason, and with or
without the payment of severance or any other compensation or payment, or (B) interfere with the
application of any provision in any of the Company’s or any Affiliate’s charter documents or
Applicable Law relating to the election, appointment, term of office, or removal of a Director.

10. Certain Transactions and Events

     10.1 In General. Except as provided in this Section 10, no change in the capital structure of the Company, merger,
sale or other disposition of assets or a subsidiary, change in control, issuance by the Company of
shares of any class of securities or securities convertible into shares of any class of securities,
exchange or conversion of securities, or other transaction or event shall require or be the
occasion for any adjustments of the type described in this Section 10. Additional provisions with
respect to the foregoing transactions are set forth in Section 14.3.

     10.2 Changes in Capital Structure. In the event of any stock split, reverse stock
split, recapitalization, combination or reclassification of stock, stock dividend or extraordinary
cash dividend, spin-off, or similar change to the capital structure of the Company (not including a
Fundamental Transaction or Change in Control), the Board shall make whatever adjustments it
concludes are appropriate to: (a) the number and type of Awards that may be granted under this
Plan, (b) the number and type of Options that may be granted to any individual under this Plan, (c)
the terms of any SAR, (d) the Purchase Price of any Stock Award, (e) the Option Price and number
and class of securities issuable under each outstanding Option, and (f) the repurchase price of any
securities substituted for Award Shares that are subject to repurchase rights. The specific
adjustments shall be determined by the Board. Unless the Board specifies otherwise, any securities
issuable as a result of any such adjustment shall be rounded down to the next lower whole security.
The Board need not adopt the same rules for each Award or each Awardee.

     10.3 Fundamental Transactions. Except for grants to Non-Employee Directors pursuant
to Section 11 herein, in the event of (a) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock holdings and the
Awards granted under this Plan are assumed, converted or replaced by the successor corporation,
which assumption shall be binding on all Participants), (b) a merger in which the Company is the
surviving corporation but after which the stockholders of

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the Company immediately prior to such
merger (other than any stockholder that merges, or which owns or controls another corporation that
merges, with the Company in such merger) cease to own their shares or other equity interest in the
Company, (c) the sale of all or substantially all of the assets of the Company, or (d) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction (each, a “Fundamental Transaction”), any or all outstanding Awards may
be assumed, converted or replaced by the successor corporation (if any), which assumption,
conversion or replacement shall be binding on all participants under this Plan. In the
alternative, the successor corporation may substitute equivalent Awards or provide substantially
similar consideration to participants as was provided to stockholders (after taking into account
the existing provisions of the Awards). The successor corporation may also issue, in place of
outstanding Shares held by the participants, substantially similar shares or other property subject
to repurchase restrictions no less favorable to the participant. In the event such successor
corporation (if any) does not assume or substitute Awards, as provided above, pursuant to a
transaction described in this Subsection 10.3, the vesting with respect to such Awards shall fully
and immediately accelerate or the repurchase rights of the Company shall fully and
immediately terminate, as the case may be, so that the Awards may be exercised or the
repurchase rights shall terminate before, or otherwise in connection with the closing or completion
of the Fundamental Transaction or event, but then terminate. Notwithstanding anything in this Plan
to the contrary, the Committee may, in its sole discretion, provide that the vesting of any or all
Award Shares subject to vesting or right of repurchase shall accelerate or lapse, as the case may
be, upon a transaction described in this Section 10.3. If the Committee exercises such discretion
with respect to Options, such Options shall become exercisable in full prior to the consummation of
such event at such time and on such conditions as the Committee determines, and if such Options are
not exercised prior to the consummation of the Fundamental Transaction, they shall terminate at
such time as determined by the Committee. Subject to any greater rights granted to participants
under the foregoing provisions of this Section 10.3, in the event of the occurrence of any
Fundamental Transaction, any outstanding Awards shall be treated as provided in the applicable
agreement or plan of merger, consolidation, dissolution, liquidation, or sale of assets.

     10.4 Changes of Control. The Board may also, but need not, specify that other
transactions or events constitute a “Change in Control”. The Board may do that either before or
after the transaction or event occurs. Examples of transactions or events that the Board may treat
as Changes of Control are: (a) any person or entity, including a “group” as contemplated by Section
13(d)(3) of the Exchange Act, acquires securities holding 30% or more of the total combined voting
power or value of the Company, or (b) as a result of or in connection with a contested election of
Company Directors, the persons who were Company Directors immediately before the election cease to
constitute a majority of the Board. In connection with a Change in Control, notwithstanding any
other provision of this Plan, the Board may, but need not, take any one or more of the actions
described in Section 10.3. In addition, the Board may extend the date for the exercise of Awards
(but not beyond their original Expiration Date). The Board need not adopt the same rules for each
Award or each Awardee.

     10.5 Divestiture. If the Company or an Affiliate sells or otherwise transfers
equity securities of an Affiliate to a person or entity other than the Company or an Affiliate, or
leases, exchanges or transfers all or any portion of its assets to such a person or entity, then
the Board may specify that such transaction or event constitutes a “Divestiture”. In connection
with

17

 

a Divestiture, notwithstanding any other provision of this Plan, the Board may, but need not,
take one or more of the actions described in Section 10.3 or 10.4 with respect to Awards of Award
Shares held by, for example, Employees, Directors or Consultants for whom that transaction or event
results in a Termination. The Board need not adopt the same rules for each Award or Awardee.

     10.6 Dissolution. If the Company adopts a plan of dissolution, the Board may cause
Awards to be fully vested and exercisable (but not after their Expiration Date) before the
dissolution is completed but contingent on its completion and may cause the Company’s repurchase
rights on Award Shares to lapse upon completion of the dissolution. The Board need not adopt the
same rules for
each Award or each Awardee. Notwithstanding anything herein to the contrary, in the event of
a dissolution of the Company, to the extent not exercised before the earlier of the completion of
the dissolution or their Expiration Date, Awards shall terminate immediately prior to the
dissolution.

     10.7 Cut-Back to Preserve Benefits. If the Administrator determines that the net
after-tax amount to be realized by any Awardee, taking into account any accelerated vesting,
termination of repurchase rights, or cash payments to that Awardee in connection with any
transaction or event set forth in this Section 10 would be greater if one or more of those steps
were not taken or payments were not made with respect to that Awardee’s Awards or Award Shares,
then, at the election of the Awardee, to such extent, one or more of those steps shall not be taken
and payments shall not be made.

11. Reserved

12. Withholding and Tax Reporting

     12.1 Tax Withholding Alternatives

          (a) General. Whenever Award Shares are issued or become free of restrictions, the
Company may require the Awardee to remit to the Company an amount sufficient to satisfy any
applicable tax withholding requirement, whether the related tax is imposed on the Awardee or the
Company. The Company shall have no obligation to deliver Award Shares or release Award Shares from
an escrow or permit a transfer of Award Shares until the Awardee has satisfied those tax
withholding obligations. Whenever payment in satisfaction of Awards is made in cash, the payment
will be reduced by an amount sufficient to satisfy all tax withholding requirements.

          (b) Method of Payment. The Awardee shall pay any required withholding using the
forms of consideration described in Section 6.4(b), except that, in the discretion of the
Administrator, the Company may also permit the Awardee to use any of the forms of payment described
in Section 6.4(c). The Administrator, in its sole discretion, may also permit Award Shares to be
withheld to pay required withholding. If the Administrator permits Award Shares to be withheld,
the Fair Market Value of the Award Shares withheld, as determined as of the date of withholding,
shall not exceed the amount determined by the applicable minimum statutory withholding rates.

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     12.2 Reporting of Dispositions. Any holder of Option Shares acquired under an
Incentive Stock Option shall promptly notify the Administrator, following such procedures as the
Administrator may require, of the sale or other disposition of any of those Option Shares if the
disposition occurs during: (a) the longer of two years after the Grant Date of the Incentive Stock
Option and one year after the date the Incentive Stock Option was exercised, or (b) such other
period as the Administrator has established.

13. Compliance with Law

     The grant of Awards and the issuance and subsequent transfer of Award Shares shall be subject
to compliance with all Applicable Law, including all applicable securities laws. Awards may not be
exercised, and Award Shares may not be transferred, in violation of Applicable Law. Thus, for
example, Awards may not be exercised unless: (a) a registration statement under the Securities Act
is then in effect with respect to the related Award Shares, or (b) in the opinion of legal counsel
to the Company, those Award Shares may be issued in accordance with an applicable exemption from
the registration requirements of the Securities Act and any other applicable securities laws. The
failure or inability of the Company to obtain from any regulatory body the authority considered by
the Company’s legal counsel to be necessary or useful for the lawful issuance of any Award Shares
or their subsequent transfer shall relieve the Company of any liability for failing to issue those
Award Shares or permitting their transfer. As a condition to the exercise of any Award or the
transfer of any Award Shares, the Company may require the Awardee to satisfy any requirements or
qualifications that may be necessary or appropriate to comply with or evidence compliance with any
Applicable Law.

14. Amendment or Termination of this Plan or Outstanding Awards

     14.1 Amendment and Termination. The Board may at any time amend, suspend, or
terminate this Plan.

     14.2 Stockholder Approval. The Company shall obtain the approval of the Company’s
stockholders for any amendment to this Plan if stockholder approval is necessary or desirable to
comply with any Applicable Law or with the requirements applicable to the grant of Awards intended
to be Incentive Stock Options. The Board may also, but need not, require that the Company’s
stockholders approve any other amendments to this Plan.

     14.3 Effect. No amendment, suspension, or termination of this Plan, and no
modification of any Award even in the absence of an amendment, suspension, or termination of this
Plan, shall impair any existing contractual rights of any Awardee unless the affected Awardee
consents to the amendment, suspension, termination, or modification. Notwithstanding anything
herein to the contrary, no such consent shall be required if the Board determines, in its sole and
absolute discretion, that the amendment, suspension, termination, or modification: (a) is required
or advisable in order for the Company, this Plan or the Award to satisfy Applicable Law, to meet
the requirements of any accounting standard or to avoid any adverse accounting treatment, or (b) in
connection with any transaction or event described in Section 10, is in the best interests of the
Company or its stockholders. The Board may, but need not, take the tax or accounting consequences
to affected Awardees into consideration in acting under the preceding sentence. Those decisions
shall be final, binding and conclusive. Termination of this Plan shall

19

 

not affect the
Administrator’s ability to exercise the powers granted to it under this Plan with respect to
Awards granted before the termination of Award Shares issued under such Awards even if those
Award Shares are issued after the termination.

15. Reserved Rights

     15.1 Nonexclusivity of this Plan. This Plan shall not limit the power of the
Company or any Affiliate to adopt other incentive arrangements including, for example, the grant or
issuance of stock options, stock, or other equity-based rights under other plans.

     15.2 Unfunded Plan. This Plan shall be unfunded. Although bookkeeping accounts may
be established with respect to Awardees, any such accounts will be used merely as a convenience.
The Company shall not be required to segregate any assets on account of this Plan, the grant of
Awards, or the issuance of Award Shares. The Company and the Administrator shall not be deemed to
be a trustee of stock or cash to be awarded under this Plan. Any obligations of the Company to any
Awardee shall be based solely upon contracts entered into under this Plan, such as Award
Agreements. No such obligations shall be deemed to be secured by any pledge or other encumbrance
on any assets of the Company. Neither the Company nor the Administrator shall be required to give
any security or bond for the performance of any such obligations.

16. Special Arrangements Regarding Award Shares

     16.1 Escrow of Stock Certificates. To enforce any restrictions on Award Shares, the
Administrator may require their holder to deposit the certificates representing Award Shares, with
stock powers or other transfer instruments approved by the Administrator endorsed in blank, with
the Company or an agent of the Company to hold in escrow until the restrictions have lapsed or
terminated. The Administrator may also cause a legend or legends referencing the restrictions to
be placed on the certificates.

     16.2 Repurchase Rights

          (a) General. If a Stock Award is subject to vesting conditions, the Company shall
have the right, during the seven months after the Awardee’s Termination, to repurchase any or all
of the Award Shares that were unvested as of the date of that Termination. The repurchase price
shall be determined by the Administrator in accordance with this Section 16.2 which shall be either
(i) the Purchase Price for the Award Shares (minus the amount of any cash dividends paid or payable
with respect to the Award Shares for which the record date precedes the repurchase) or (ii) the
lower of (A) the Purchase Price for the Shares or (B) the Fair Market Value of those Award Shares
as of the date of the Termination. The repurchase price shall be paid in cash. The Company may
assign this right of repurchase.

          (b) Procedure. The Company or its assignee may choose to give the Awardee a written
notice of exercise of its repurchase rights under this Section 16.2. However, the Company’s
failure to give such a notice shall not affect its rights to repurchase Award Shares. The Company
must, however, tender the repurchase price during the period specified in this Section 16.2 for
exercising its repurchase rights in order to exercise such rights.

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17. Beneficiaries

     An Awardee may file a written designation of one or more beneficiaries who are to receive the
Awardee’s rights under the Awardee’s Awards after the Awardee’s death. An Awardee may change such
a designation at any time by written notice. If an Awardee designates a beneficiary, the
beneficiary may exercise the Awardee’s Awards after the Awardee’s death. If an Awardee dies when
the Awardee has no living beneficiary designated under this Plan, the Company shall allow the
executor or administrator of the Awardee’s estate to exercise the Award or, if there is none, the
person entitled to exercise the Option under the Awardee’s will or the laws of descent and
distribution. In any case, no Award may be exercised after its Expiration Date.

18. Miscellaneous

     18.1 Governing Law. This Plan, the Award Agreements and all other agreements
entered into under this Plan, and all actions taken under this Plan or in connection with Awards or
Award Shares, shall be governed by the laws of the State of Delaware.

     18.2 Determination of Value. Fair Market Value shall be determined as follows:

          (a) Listed Stock. If the Shares are traded on any established stock exchange or
quoted on a national market system, Fair Market Value shall be the closing sales price for the
Shares as quoted on that stock exchange or system for the date the value is to be determined (the
“Value Date”) as reported in The Wall Street Journal or a similar publication. If no sales are
reported as having occurred on the Value Date, Fair Market Value shall be that closing sales price
for the last preceding trading day on which sales of Shares are reported as having occurred. If no
sales are reported as having occurred during the five trading days before the Value Date, Fair
Market Value shall be the closing bid for Shares on the Value Date. If Shares are listed on
multiple exchanges or systems, Fair Market Value shall be based on sales or bid prices on the
primary exchange or system on which Shares are traded or quoted.

          (b) Stock Quoted by Securities Dealer. If Shares are regularly quoted by a
recognized securities dealer but selling prices are not reported on any established stock exchange
or quoted on a national market system, Fair Market Value shall be the mean between the high bid and
low asked prices on the Value Date. If no prices are quoted for the Value Date, Fair Market Value
shall be the mean between the high bid and low asked prices on the last preceding trading day on
which any bid and asked prices were quoted.

          (c) No Established Market. If Shares are not traded on any established stock
exchange or quoted on a national market system and are not quoted by a recognized securities
dealer, the Administrator (following guidelines established by the Board or Committee) will
determine Fair Market Value in good faith. The Administrator will consider the following factors,
and any others it considers significant, in determining Fair Market Value: (i) the price at which
other securities of the Company have been issued to purchasers other than Employees, Directors, or
Consultants, (ii) the Company’s stockholder’s equity, prospective earning power, dividend-paying
capacity, and non-operating assets, if any, and (iii) any other relevant factors, including the
economic outlook for the Company and the Company’s industry, the Company’s

21

 

position in that
industry, the Company’s goodwill and other intellectual property, and the values of securities of
other businesses in the same industry.

     18.3 Reservation of Shares. During the term of this Plan, the Company shall at all
times reserve and keep available such number of Shares as are still issuable under this Plan.

     18.4 Electronic Communications. Any Award Agreement, notice of exercise of an
Award, or other document required or permitted by this Plan may be delivered in writing or, to the
extent determined by the Administrator, electronically. Signatures may also be electronic if
permitted by the Administrator.

     18.5 Notices. Unless the Administrator specifies otherwise, any notice to the
Company under any Option Agreement or with respect to any Awards or Award Shares shall be in
writing (or, if so authorized by Section 18.4, communicated electronically), shall be addressed to
the Secretary of the Company, and shall only be effective when received by the Secretary of the
Company.

22

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