AFOP » Topics » SECTION 2. Definitions.

This excerpt taken from the AFOP 8-K filed Apr 13, 2005.

SECTION 2. Definitions.

        (a)      “Accumulation Period” means a six-month period during which contributions may be made toward the purchase of Stock under the Plan, as determined pursuant to Section 4(b).

        (b)      “Board” means the Board of Directors of the Company, as constituted from time to time.

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

        (d)      “Committee” means a committee of the Board, as described in Section 3.

        (e)      "Company" means Alliance Fiber Optic Products, Inc., a Delaware corporation.

        (f)      “Compensation” means (i) the total compensation paid in cash to a Participant by a Participating Company, including salaries, wages, bonuses, incentive compensation, commissions, overtime pay and shift premiums, plus (ii) any pre-tax contributions made by the Participant under section 401(k) or section 125 of the Code. “Compensation” shall exclude all non-cash items, moving or relocation allowances, cost-of-living equalization payments, car allowances, tuition reimbursements, imputed income attributable to cars or life insurance, severance pay, fringe benefits, contributions or benefits received under employee benefit plans, income attributable to the exercise of stock options, and similar items. The Committee shall determine whether a particular item is included in Compensation.

        (g)      “Corporate Reorganization” means:

             (i)      The consummation of a merger or consolidation of the Company with or into another entity, or any other corporate reorganization; or

             (ii)     The sale, transfer or other disposition of all or substantially all of the Company’s assets or the complete liquidation or dissolution of the Company.

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        (h)     “Eligible Employee” means any employee of a Participating Company whose customary employment is for more than five months per calendar year and for more than 20 hours per week.

        The foregoing notwithstanding, an individual shall not be considered an Eligible Employee if his or her participation in the Plan is prohibited by the law of any country which has jurisdiction over him or her or if he or she is subject to a collective bargaining agreement that does not provide for participation in the Plan.

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

        (j)     “Fair Market Value” means the market price of Stock, determined by the Committee as follows:

             (i)     If Stock was traded on The Nasdaq National Market on the date in question, then the Fair Market Value shall be equal to the last-transaction price quoted for such date by The Nasdaq National Market; or

             (ii)     If Stock was traded on a stock exchange on the date in question, then the Fair Market Value shall be equal to the closing price reported by the applicable composite transactions report for such date; or

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

        Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported in the Wall Street Journal or as reported directly to the Company by Nasdaq or a stock exchange. Such determination shall be conclusive and binding on all persons.

        (k)     “IPO” means the initial offering of Stock to the public pursuant to a registration statement filed by the Company with the Securities and Exchange Commission.

        (l)     “Offering Period” means a 24-month period with respect to which the right to purchase Stock may be granted under the Plan, as determined pursuant to Section 4(a).

        (m)     “Participant” means an Eligible Employee who elects to participate in the Plan, as provided in Section 4(c).

        (n)     “Participating Company” means (i) the Company and (ii) each present or future Subsidiary designated by the Committee as a Participating Company.

        (o)     “Plan” means this Alliance Fiber Optic Products, Inc. 2000 Employee Stock Purchase Plan, as it may be amended from time to time.

        (p)     “Plan Account” means the account established for each Participant pursuant to Section 8(a).

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        (q)     “Purchase Price” means the price at which Participants may purchase Stock under the Plan, as determined pursuant to Section 8(b).

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

        (s)     “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

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