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PROXY STATEMENT

FOR

~~2010~~2013 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON ~~MAY~~JUNE 19, ~~2010~~2013

The Board of ~~directors~~Directors of Cutera, Inc., a Delaware corporation, is soliciting the enclosed proxy from you. The proxy will be used at our ~~2010~~2013 Annual Meeting of Stockholders to be held on Wednesday, ~~May~~June 19, ~~2010,~~2013, beginning at 10:00 a.m., Pacific Time, which is the local time, at our principal executive offices located at 3240 Bayshore Blvd., Brisbane, California 94005-1021, and at any postponements or adjournments thereof. This proxy statement contains important information regarding the meeting. Specifically, it identifies the matters upon which you are being asked to vote, provides information that you may find useful in determining how to vote and describes the voting procedures.

In this proxy statement the terms “we”, “our”, “Cutera” and the “Company” each refer to Cutera, Inc.; the term “Board” means our Board of ~~directors;~~Directors; the term “proxy materials” means this proxy statement, the enclosed proxy card, and our Annual Report ofon Form 10-K for the year ended December 31, ~~2009,~~2012, filed with the U.S. Securities and Exchange ~~commission~~Commission (the ~~“SEC”~~“SEC”) on March 15, ~~2010,~~2013, and the term “Annual Meeting” means our ~~2010~~2013 Annual Meeting of Stockholders.

We are sending the Notice of Internet Availability of Proxy Materials on or about ~~April~~May 9, ~~2010,~~2013, to all stockholders of record at the close of business on ~~March 24, 2010~~April 22, 2013 (the “Record Date”).

QUESTIONS AND ANSWERS REGARDING THIS SOLICITATION AND VOTING AT THE ANNUAL MEETING

Why am I receiving these proxy materials?		You are receiving these proxy materials from us because you were a stockholder of record at the close of business on the Record Date (which was ~~March 24, 2010)~~April 22, 2013). As a stockholder of record, you are invited to attend the meeting and are entitled to and requested to vote on the items of business described in this proxy statement.

Why did I receive a notice in the mail regarding the Internet availability of the proxy materials instead of a paper copy of the proxy materials?		Pursuant to SEC rules, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the ~~“Notice”~~“Notice”) to our stockholders. All stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found on the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual stockholders’ meetings on the environment. If you chose in connection with our ~~2009~~2012 Annual Meeting of Stockholders to receive future proxy materials by email, you should receive an email this year with instructions containing a link to those materials and a link to the proxy voting site. In connection with our upcoming Annual Meeting, if you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.

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What is the purpose of the Annual Meeting?		At our meeting, stockholders of record will vote upon the items of business outlined in the notice of meeting (on the cover page of this proxy statement), each of which is described more fully in this proxy statement. In addition, management will report on the performance of the Company and respond to questions from stockholders.

Who is entitled to attend the meeting?		You are entitled to attend the meeting only if you owned our common stock (or were a joint holder) as of the Record Date or if you hold a valid proxy for the meeting. You should be prepared to present photo identification for admittance. Please also note that if you are not a stockholder of record but hold shares in street name (that is, through a broker or nominee), you will need to provide proof of beneficial ownership as of the Record Date, such as your most recent brokerage account statement, a copy of the voting instruction card provided by your broker, trustee or nominee, or other similar evidence of ownership. The meeting will begin promptly at 10:00 a.m., local time. Check-in will begin at 9:3050 a.m., local time.

Who is entitled to vote at the meeting?		Only stockholders who owned our common stock at the close of business on the Record Date are entitled to notice of and to vote at the meeting, and at any postponements or adjournments thereof. As of the Record Date, ~~13,440,720~~14,674,829 shares of our common stock were outstanding. Each outstanding share of our common stock entitles the holder to one vote on each matter considered at the meeting. Accordingly, there are a maximum of ~~13,440,720~~14,674,829 votes that may be cast at the meeting.

How many shares must be present or represented to conduct business at the meeting (that is, what constitutes a quorum)?		The presence at the meeting, in person or by proxy, of the holders of a majority of the shares of our common stock entitled to vote at the meeting will constitute a quorum. A quorum is required to conduct business at the meeting. The presence of the holders of our common stock representing at least ~~6,720,361~~7,337,415 votes will be required to establish a quorum at the meeting. Both abstentions and broker non-votes are counted for the purpose of determining the presence of a quorum.

What items of business will be voted on at the meeting?		The items of business scheduled to be voted on at the meeting are as follows: 1. the election of three nominees to serve as Class III directors on our Board; ~~and~~ 2. the ratification of ~~the appointment of PricewaterhouseCoopers~~Ernst & Young LLP as ~~our~~the Independent Registered Public Accounting Firm for the ~~2010~~2013 fiscal ~~year.~~year; 3. the approval of our amended and restated 2004 Equity Incentive Plan: and 4. a non-binding vote on executive compensation. These proposals are described more fully below in this proxy statement. As of the date of this proxy statement, the only business that our Board intends to present or knows of that others will present at the meeting is as set forth in this proxy statement. If any other matter or matters are properly brought before the meeting, it is the intention of the persons who hold proxies to vote the shares they represent in accordance with their best judgment.

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How does the Board recommend that I vote?

Our Board recommends that you vote your shares “FOR” each of the director nominees, ~~and~~ “FOR” the ratification of ~~PricewaterhouseCoopers~~Ernst & Young LLP as ~~our~~the Independent Registered Public Accounting Firm for the ~~2010~~2013 fiscal ~~year.~~year, “FOR” the approval of our amended and restated 2004 Equity Incentive Plan and “FOR” the approval of a non-binding vote on executive compensation.


What shares can I vote at the meeting?		You may vote all shares owned by you as of the Record Date, including (1) shares held directly in your name as the stockholder of record, and (2) shares held for you as the beneficial owner through a broker, trustee or other nominee such as a bank.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?		Most of our stockholders hold their shares through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
		Stockholders of Record. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, Inc., you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent directly to you by us. As the stockholder of record, you have the right to grant your voting proxy directly to Cutera or to vote in person at the meeting. We have enclosed a proxy card for your use.

		Beneficial Owner. If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote and are also invited to attend the meeting. Please note that since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting. Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing the broker, trustee or nominee how to vote your shares.

How can I vote my shares without attending the meeting?		Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the meeting. Stockholders of record of our common stock may submit proxies by completing, signing and dating their proxy cards and mailing them in the accompanying pre-addressed envelope. Our stockholders who hold shares beneficially in street name may vote by mail by completing, signing and dating the voting instruction cards provided by the broker, trustee or nominee and mailing them in the accompanying pre-addressed envelope.

How can I vote my shares in person at the meeting?		Shares held in your name as the stockholder of record may be voted in person at the meeting. Shares held beneficially in street name may be voted in person only if you obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the meeting, we recommend that you also submit your proxy card or voting instructions as described above so that your vote will be counted if you later decide not to, or are unable to, attend the meeting.

Can I change my vote?		You may change your vote at any time prior to the vote at the meeting. If you are the stockholder of record, you may change your vote by granting a new proxy bearing a later date (which automatically revokes the earlier proxy), by providing a written notice of revocation to our Secretary prior to your shares being voted, or by attending the meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request.

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For shares you hold beneficially in street name, you may change your vote by submitting new voting instructions to your broker, trustee or nominee, or, if you have obtained a legal proxy from your broker, trustee or nominee giving you the right to vote your shares, by attending the meeting and voting in person.


Is my vote confidential?		Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Cutera or to third parties, except: (1) as necessary to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the vote, and (3) to facilitate a successful proxy solicitation. Occasionally, stockholders provide written comments on their proxy card, which are then forwarded to our management.

What vote is required to approve each item and how are votes counted?		The vote required to approve each item of business and the method for counting votes is set forth below:
		Election of Directors. The three director nominees receiving the highest number of affirmative “FOR” votes at the meeting (a plurality of votes cast) will be elected to serve as Class III directors. You may vote either “FOR” or “WITHHOLD” your vote for the director nominees. A properly executed proxy marked “WITHHOLD” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum.

		Ratification of ~~PricewaterhouseCoopers~~Ernst & Young LLP as our Independent Registered Public Accounting Firm. For the ratification of ~~the appointment of~~Ernst & Young LLP as our Independent Registered Public Accounting Firm, the affirmative “FOR” vote of a majority of the shares represented in person or by proxy and entitled to vote on the item will be required for approval. You may vote “FOR,” “AGAINST” or “ABSTAIN” for this item of business. If you “ABSTAIN,” your abstention has the same effect as a vote “AGAINST.”

		Approval of our amended and restated 2004 Equity Incentive Plan. For the approval of our amended and restated 2004 Equity Incentive Plan, the affirmative “FOR” vote of a majority of the shares represented in person or by proxy and entitled to vote on the item will be required for approval. You may vote “FOR,” “AGAINST” or “ABSTAIN” for this item of business. If you “ABSTAIN,” your abstention has the same effect as a vote “AGAINST.”

		Non-binding Vote on Executive Compensation. For the non-binding vote on executive compensation, the affirmative “FOR” vote of a majority of the shares represented in person or by proxy and entitled to vote on the item will be required for approval. You may vote “FOR,” “AGAINST” or “ABSTAIN” for this item of business. If you “ABSTAIN,” your abstention has the same effect as a vote “AGAINST.”

		If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If you sign your proxy card or voting instruction card without giving specific instructions, your shares will be voted in accordance with the recommendations of the Board (“FOR” all of the Company’s nominees to the Board, “FOR” ratification of ~~PricewaterhouseCoopers~~Ernst & Young LLP as our Independent Registered Public Accounting Firm, “FOR” the adoption of the amended and restated 2004 Equity Incentive Plan, “FOR” the approval, by non-binding vote, of executive compensation, and in the discretion of the proxy holders on any other matters that may properly come before the meeting).

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What is a “broker non-vote”?		A “broker non-vote” occurs when a broker expressly instructs on a proxy card that it is not voting on a matter, whether routine or non-routine. Under the rules that govern brokers who have record ownership of shares that are held in street name for their clients who are the beneficial owners of the shares, brokers have the discretion to vote such shares on routine matters, which includes ratifying the appointment of an independent registered public accounting firm but does not include the election of ~~directors.~~directors, and the non-binding vote on executive compensation. Therefore, if you do not otherwise instruct your broker, the broker may turn in a proxy card voting your shares “FOR” ratification of Ernst & Young LLP as the Independent Registered Public Accounting Firm. However, ~~beginning this year,~~ if you do not instruct your broker how to vote with respect to the election of directors, the approval of the amended and restated 2004 Equity Incentive Plan and the non-binding vote on executive compensation your broker may not vote with respect to such proposal and your shares will not be counted as voting in favor of ~~the election of directors~~.these matters.

How are “broker non-votes” counted?		Broker non-votes will be counted for the purpose of determining the presence or absence of a quorum for the transaction of business, but they will not be counted in tabulating the voting result for any particular proposal.


How are abstentions counted?		If you return a proxy card that indicates an abstention from voting on all matters, the shares represented will be counted for the purpose of determining both the presence of a quorum and the total number of votes cast with respect to a proposal (other than the election of directors), but they will not be voted on any matter at the meeting. In the absence of controlling precedent to the contrary, we intend to treat abstentions in this manner. Accordingly, abstentions will have the same effect as a vote “AGAINST” a proposal.

What happens if additional matters are presented at the meeting?		Other than the ~~two~~four proposals described in this proxy statement, we are not aware of any other business to be acted upon at the meeting. If you grant a proxy, the persons named as proxy holders, Kevin P. Connors (our President and Chief Executive ~~Officer and member of our Board)~~Officer) and Ronald J. Santilli (our Executive Vice President and Chief Financial Officer), will have the discretion to vote your shares on any additional matters that may be properly presented for a vote at the meeting. If, for any unforeseen reason, any of our nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by our Board.

Who will serve as inspector of election?		We expect a representative of Computershare Trust Company, Inc., our transfer agent, to tabulate the votes, and expect Rajesh Madan, our Vice President of Finance and Legal to act as inspector of election at the meeting.

What should I do in the event that I receive more than one set of proxy/voting materials?		You may receive more than one set of these proxy solicitation materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. In addition, If you are a stockholder of record and your shares are registered in more than one name, you may receive more than one proxy card. Please complete, sign, date and return each Cutera proxy card and voting instruction card that you receive to ensure that all your shares are voted.

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Who is soliciting my vote and who will bear the costs of this solicitation?		Your vote is being solicited on behalf of the Board, and the Company will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of this proxy statement. In addition to these mailed proxy materials, our directors and employees may also solicit proxies in person, by telephone, by electronic mail or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners. We may also engage the services of a professional proxy solicitation firm to aid in the solicitation of proxies from certain brokers, bank nominees and other institutional owners. Our costs for such services, if retained, will not be material.

Where can I find the voting results of the meeting?		We intend to announce preliminary voting results at the Annual Meeting and file a Form 8-K with the SEC within four business days after the end of our Annual Meeting to report the voting results.


What is the deadline to propose actions for consideration at next year’s Annual Meeting of stockholders or to nominate individuals to serve as directors?		As a stockholder, you may be entitled to present proposals for action at a future meeting of stockholders, including director nominations. Stockholder Proposals: For a stockholder proposal to be considered for inclusion in our proxy statement for the Annual Meeting to be held in ~~2011,~~2014, the written proposal must be received by our corporate Secretary at our principal executive offices no later than ~~December 9, 2010,~~January 8, 2014, which is the date 120 calendar days before the anniversary of the mailing date of the Notice of Internet Availability of Proxy Materials. If the date of next year’s Annual Meeting is moved more than 30 days before or after the anniversary date of this year’s Annual Meeting, the deadline for inclusion of proposals in our proxy statement is instead a reasonable time before we begin to print and mail its proxy materials. Such proposals also must comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~“Exchange Act”), and any other applicable rules established by the SEC. Stockholders interested in submitting such a proposal are advised to contact knowledgeable legal counsel with regard to the detailed requirements of applicable securities laws. Proposals should be addressed to:

		Secretary Cutera, Inc. 3240 Bayshore Blvd. Brisbane, California 94005-1021

		Nomination of Director ~~Candidates:~~Candidates: You may propose director candidates for consideration by our Board. Any such recommendations should include the nominee’s name and qualifications for Board membership and should be directed to the “Secretary” at the address of our principal executive offices set forth above. In addition, our Bylaws permit stockholders to nominate directors for election at an Annual Meeting of stockholders. To nominate a director, the stockholder must provide the information required by our Bylaws, as well as a statement by the nominee consenting to being named as a nominee and to serve as a director if elected. In addition, the stockholder must give timely notice to our corporate Secretary in accordance with the provisions of our Bylaws, which require that the notice be received by our corporate Secretary no later than ~~December 9, 2010.~~January 8, 2014.

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Copy of Bylaw Provisions: You may contact our corporate Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

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STOCK OWNERSHIP

Security Ownership of Certain Beneficial Owners and Management

The following table provides information relating to the beneficial ownership of our common stock as of the Record Date, by:

each stockholder known by us to own beneficially more than 5% of our common stock;

each of our ~~Named Executive Officers~~executive officers named in the Summary Compensation Table on page ~~27 (our~~42 (including our Chief Executive Officer and our Chief Financial Officer);

each of our directors; and

all of our directors and Named Executive Officers as a group.

The number of shares beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has the sole or shared voting power or investment power and any shares that the individual has the right to acquire within 60 days of ~~March 24, 2010~~April 22, 2013 (the Record Date) through the exercise of any stock option or other right. The number and percentage of shares beneficially owned is computed on the basis of ~~13,440,720~~14,674,829 shares of our common stock outstanding as of the Record Date. The information in the following table regarding the beneficial owners of more than 5% of our common stock is based upon information supplied by principal stockholders or Schedules 13D and 13G filed with the SEC.

Shares of our common stock that a person has the right to acquire within 60 days of the Record Date are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person or entity named in the table has sole voting and disposition power with respect to the shares set forth opposite such person’s or entity’s name. The address for those persons for which an address is not otherwise provided is c/o Cutera, Inc., 3240 Bayshore Blvd., Brisbane, California 94005-1021.

Name and Address of Beneficial Owner	Number of Shares Outstanding		Warrants and Options Exercisable Within 60 Days		Approximate Percent Owned		Number of Shares Outstanding		Warrants and Options Exercisable Within 60 Days		Approximate Percent Owned
Eagle Asset Management, Inc.		1,471,089		—		10.9%
Individuals and entities affiliated with Fidelity Management & Research Company.		1,284,550		—		9.6%
Entities affiliated with American Century Companies, Inc.		1,025,800		—		7.6%
Individuals and entities affiliated with GAMCO Investors, Inc.		869,000		—		6.5%
Dimensional Fund Advisors LP		783,266		—		5.8%		1,156,629		—		7.9	%
BlackRock, Inc.		701,240		—		5.2%
David B. Apfelberg		27,308		52,000		*		33,796		60,823		*
Annette J. Campbell-White		64,082		62,000		*
Gregory Barrett								—		13,490		*
Kevin P. Connors		479,761		222,310		5.1%		598,971		556,634		7.6	%
David A. Gollnick		177,062		41,126		1.6%		162,573		23,719		1.3	%
W. Mark Lortz		9,593		62,000		*		23,389		70,823		*
Timothy J. O’Shea		7,308		42,000		*		19,354		50,823		*
Ronald J. Santilli								22,699		273,701		2.0	%
Jerry P. Widman		7,308		62,000		*		21,104		70,823		*
Ronald J. Santilli		12,770		120,003		1.0%
All directors and Named Executive Officers as a group (8 persons)		785,192		663,439		10.3%		881,886		1,120,836		12.7	%

*Less than 1%.

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, officers and beneficial owners of more than 10% of our common stock to file reports of ownership and reports of changes in the ownership with the SEC. Such persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

Based solely on our review of the copies of such forms received by us, or written representations from reporting persons that no Forms 3, 4 or 5 were required of such persons, we believe that during our fiscal year ended December 31, ~~2009,~~2012 all reports were timely filed.

CORPORATE GOVERNANCE AND BOARD MATTERS

Director Independence

Our Board currently consists of eight authorized directors, with one vacancy. The Company’s directors are David B. Apfelberg, Gregory Barrett, Kevin P. Connors, David A. Gollnick, Timothy J. O’Shea, ~~David B. Apfelberg,~~ W. Mark Lortz, and Jerry P. ~~Widman, and Annette J. Campbell-White.~~Widman. Our Board has determined that each of the directors other than Kevin P. Connors, the Company’s President and Chief Executive Officer, and David A. Gollnick, the Company’s former Executive Vice President of Research and Development and a current consultant to our Company, satisfy the current “independent director” standards established by rules of The NASDAQ Stock Market LLC (“~~Nasdaq”~~Nasdaq”).

Board Leadership Structure

Our Board does not have a chairman orbut David B. Apfelberg is the Board-designated lead independent director. We believe Dr. Apfelberg’s technical qualifications as a physician and Clinical Professor of Plastic Surgery at the Stanford University Medical Center, understanding of our products, tenure with the Company and his knowledge of the aesthetics market make him suitable for this lead independent director position. Our Chief Executive Officer, Mr. Connors, performs many of the functions that a chairman would typically perform ~~including~~and works together with Dr. Apfelberg in setting the agenda for each board meeting and presiding over such meetings. ~~In addition, as~~At the end of each board meeting, the independent directors meet without Mr. Connors and Mr. Gollnick present. Following each meeting, Dr. Apfelberg provides feedback to Mr. Connors on his performance and the performance of other Cutera employees during the meeting and frequently recommends new agenda items for the next meeting.

As described in more detail below, the Board has ~~two~~four standing committees, an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a ~~Compensation~~Strategic Transactions Committee. The chairman and each member of these committees is an independent director. The Board delegates substantial duties and responsibilities to each committee. The committees make recommendations to the Board and report regularly to the Board on their activities and any actions they have taken. We believe that our independent board committees and their chairman are an important aspect of our board leadership structure.

Risk Oversight and Analysis

Our management is responsible for managing the risks we face in the ordinary course of operating our business. The Board oversees potential risks and our risk management activities by receiving operational and strategic presentations from management which include discussions of key risks to our business. While our Board has the ultimate responsibility for risk management and oversight, various committees of the Board also support the Board in its fulfillment of this responsibility. For example, our Audit Committee assists the Board in its risk oversight function by reviewing and discussing with management our system of disclosure controls and our internal controls over financial reporting, and risks associated with our cash investment policies. Our business is run conservatively and excessive risk taking has been discouraged. As a result, risk analysis has not been a significant factor for our Compensation Committee in establishing compensation. The Nominating and Corporate Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure. In 2012 our Board established the Strategic Transactions Committee to evaluate business development opportunities and to report back to the full Board with their recommendations.

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Committees of the Board

Our Board has ~~two~~four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the ~~Compensation~~Strategic Transactions Committee. From time to time, our Board may also create various ad hoc committees for special purposes. The membership during the last fiscal year and the function of each of the committees are described below.

Name of Director

Audit Committee

Compensation Committee

Audit Committee

Compensation

Committee

Nominating

and

Corporate

Governance

Committee

Strategic

Transactions

Committee

Non-Employee Directors:

Jerry P. Widman

Timothy J. O’Shea

W. Mark Lortz

David B. Apfelberg

Annette J. Campbell-White

David A. Gollnick**

Employee Directors:

Gregory Barrett***

Employee Director:

Kevin P. Connors

Number of Meetings Held During the Last Fiscal Year

X =

= Committee member

* =

= Chairman of Committee

** =

= Mr. Gollnick ~~resigned from the position of Executive Vice President of Research and Development effective March 20, 2009 and continues to be~~is a member of our Board and a consultant to our Company.

***

= Mr. Barrett became the Chairman of the Compensation Committee effective January 1, 2013.

Audit Committee. The Audit Committee oversees the Company’s accounting and financial reporting processes and the audits of its financial statements. The committee operates under a written charter adopted by the Board of Directors in January 2004, and amended on July 24, 2009. A copy of the charter can be found at www.cutera.com under the Corporate Governance section. In this role, the Audit Committee monitors and oversees the integrity of the Company’s financial statements and related disclosures, the qualifications, independence, and performance of the Company’s Independent Registered Public Accounting Firm, and the Company’s compliance with applicable legal requirements and its business conduct policies. Our Board has determined that each member of the Audit Committee meets the independence and financial literacy requirements of the Nasdaq rules and the independence requirements of the SEC. Our Board has determined that Jerry P. Widman continues to qualify as an “audit committee financial expert,” as defined in SEC rules. The ~~Audit Committee has a written charter, which was adopted by our Board in January 2004, a copy of which can be found on our website at www.cutera.com. The~~ report of the Audit Committee appears on page 1315 of this proxy statement.

Compensation Committee. The Compensation Committee, together with ~~the~~our Board, establishes compensation for ~~the~~our Chief Executive Officer and the other executive officers and administers the Company’s 2004 Equity Incentive Plan ~~(as amended in 2008)~~ and 2004 Employee Stock Purchase Plan. The Compensation Committee has a written charter, which was adopted by our Board in January 2004, and amended on April 13, 2007 and on April 25, 2008, and can be found on our website at www.ir.cutera.com.

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Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee reviews and makes recommendations to the Board on matters concerning corporate governance, Board composition, identification, evaluation and nomination of director candidates, Board committees, Board compensation, and conflicts of interest. The Nominating and Corporate Governance Committee has a written charter, which was adopted by our Board in October 2011 and can be found on our website.

Strategic Transactions Committee. The Strategic Transactions Committee reviews and evaluates any potential strategic business combination transactions as the possibilities arise and other related or pertinent strategic alternatives for the Company (which may include, but are not limited to, a merger, other business combination, recapitalization, acquisition, spin-off, split-off, acquisition of a subsidiary, division or unit, or other similar transaction).

Meetings Attended by Directors

During ~~2009,~~2012, the Board held five meetings, the Audit Committee held seven meetings, ~~and~~ the Compensation Committee held ~~four~~three meetings, the Strategic Transactions Committee held one meeting and the Nominating and Corporate Governance Committee held no meetings. No director attended fewer than 75% of the meetings of the Board or committee(s) on which he ~~or she~~ served during ~~2009.~~2012.

The directors of the Company are encouraged to attend the Company’s Annual Meeting of ~~Stockholders, and~~Stockholders. In 2012, director Kevin P. Connors attended the meeting in ~~2009 in~~ person and directors David B. Apfelberg, ~~Annette J. Campbell-White, Timothy J. O’Shea~~Jerry P. Widman and ~~Jerry Widman~~W. Mark Lortz attended ~~that~~the meeting telephonically. No other board members attended that meeting, in person or telephonically.

Director Nomination Process

~~Nominations~~. Our Board does not currently have a nominating committee or other committee performing a similar function nor do we have any formal written policies outlining the factors and process relating to the selection of nominees for consideration for Board membership by the full Board and the stockholders. Our Board has adopted resolutions in accordance with the Nasdaq Rules authorizing a majority of its independent members to recommend qualified nominees for consideration by the full Board. Our Board believes that it is appropriate for us to not have a standing nominating committee because of a number of factors, including the number of independent directors who want to participate in consideration of candidates for membership on the Board. Our Board consists of seven members, five of whom are independent. Our Board considered forming a nominating committee consisting of several of the independent members of our Board. Forming a committee consisting of less than all of the independent members would have resulted in the omission of the other independent members of our Board who wanted to participate in considering qualified candidates for Board membership. Since our Board desired the participation in the nominations process of all of its independent members, it therefore decided not to form a nominating committee and instead authorized a majority of the independent members of our Board to make and consider nominations for Board membership. The independent members of our Board do not have a nominating committee charter, but act pursuant to Board resolutions as described above. Each of the members of our Board authorized to recommend nominees to the full Board is independent within the meaning of the current “independent director” standards established by Nasdaq’s rules. Our Board intends to review this matter periodically, and may in the future elect to designate a formal nominating committee.

Director Qualifications. While the ~~independent members of our Board have~~Nominating and Corporate Governance Committee has not established specific minimum qualifications for director candidates, the candidates for Board membership should have the highest professional and personal ethics and values, and conduct themselves consistent with our Code of Ethics. While the ~~independent members of the Board have~~Nominating and Corporate Governance Committee has not formalized specific minimum qualifications they believe must be met by a candidate to be recommended by the independent members, the ~~independent members of the Board believe~~Nominating and Corporate Governance Committee believes that candidates and nominees must reflect a Board that is comprised of directors who (i) have broad and relevant experience, (ii) are predominantly independent, (iii) are of high integrity, (iv) have qualifications that will increase overall Board effectiveness and enhance long-term stockholder value, and (v) meet other requirements as may be required by applicable rules, such as financial literacy or financial expertise with respect to Audit Committee members.

Stockholder Nominations and Recommendations. As described above in the Question and Answer section of this proxy statement under “What is the deadline to propose actions for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?,” our Bylaws set forth the procedure for the proper submission of stockholder nominations for membership on our Board. In addition, the ~~independent members of our Board~~Nominating and Corporate Governance Committee may consider properly submitted stockholder recommendations (as opposed to formal nominations) for candidates for membership on the Board. A stockholder may make such a recommendation by submitting the following information to our Secretary at 3240 Bayshore Blvd., Brisbane, California 94005-1021: the candidate’s name, home and business contact information, detailed biographical data, relevant qualifications, professional and personal references, information regarding any relationships between the candidate and Cutera within the last three years and evidence of ownership of Cutera stock by the recommending stockholder.

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Identifying and Evaluating Director Nominees. Typically new candidates for nomination to the Board are suggested by existing directors or by our executive officers, although candidates may initially come to our attention through professional search firms, stockholders or other persons. The ~~independent members of the Board~~Nominating and Corporate Governance Committee carefully ~~review~~reviews the qualifications of any candidates who have been properly brought to ~~their~~its attention. Such a review may, in the ~~Board’s~~Nominating and Corporate Governance Committee’s discretion, include a review solely of information provided to the ~~Board~~Nominating and Corporate Governance Committee or may also include discussion with persons familiar with the candidate, an interview with the candidate or other actions that the ~~Board~~Nominating and Corporate Governance Committee deems proper. The ~~Board~~Nominating and Corporate Governance Committee shall consider the suitability of each candidate, including the current members of the Board, in light of the current size and composition of the Board. In evaluating the qualifications of the candidates, ~~the independent members of the Board~~Nominating and Corporate Governance Committee considers many factors, including, issues of character, judgment, independence, expertise, length of service, and other commitments. In addition, the ~~independent members of the Board take~~Nominating and Corporate Governance Committee takes into account diversity in professional experience, skills and background in considering and evaluating candidates. However, while diversity relating to background, skill, experience and perspective is one factor considered in the nomination process, the Company does not have a formal policy relating to diversity. The ~~Board~~Nominating and Corporate Governance Committee evaluates such factors, among others, and does not assign any particular weighting or priority to any of these factors. Candidates properly recommended by stockholders are evaluated by the ~~independent directors~~Nominating and Corporate Governance Committee using the same criteria as other candidates. Candidates are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law.

Director Nominees at our 2013 Annual Meeting. Our Nominating and Corporate Governance Committee recommended the director nominees for nomination to our Board.

Director Compensation

The following table sets forth a summary of the cash compensation paid and the grant date fair value of ~~fully vested~~shares of Cutera common stock which vest over a one-year period, awarded to our non-employee directors in the fiscal year ended December 31, ~~2009.~~

Name

Fees Earned or Paid in Cash(1)

Stock
Awards(2)

Total

David B. Apfelberg
$ 55,000 $ 60,000 (3) $ 115,000
Annette J. Campbell-White 41,000 60,000 (4) 101,000
David A. Gollnick
22,500 — (5) 22,500
W. Mark Lortz
42,500 60,000 (6) 102,500
Timothy J. O’Shea
42,500 60,000 (7) 102,500
Jerry P. Widman
61,000 60,000 (8) 121,000
2012.

2012 Director Compensation Table

Name	Fees Earned or Paid in Cash (1)		Stock Awards (2)			All Other Compensation (3)			Total
David B. Apfelberg	$	61,500	$	60,000	(4)	$	21,600	(4)	$	143,100
Gregory Barrett		54,500		60,000	(5)		—			114,500
David A. Gollnick		45,000		60,000	(6)		109,360	(6)		214,360
W. Mark Lortz		53,750		60,000	(7)		—			113,750
Timothy J. O’Shea		57,500		60,000	(8)		—			117,500
Jerry P. Widman		71,000		60,000	(9)		—			131,000

(1)

~~Amounts~~The amounts reported in this column were earned in connection with serving on our Board and its committees, or as committee Chairman retainers, each as described below.

(2)

~~Amounts shown~~The amounts reported in this column ~~are~~represent the aggregate grant date fair value of ~~fully vested~~shares of Cutera common stock ~~awards granted~~which vest over a one-year period, awarded during the fiscal year ended December 31, ~~2009~~2012 calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718. ~~See Note 5 of the Notes to Consolidated Financial Statements included~~

(3)

The amounts reported in this column were earned for services provided for other than serving on our ~~Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on March 15, 2010 for a discussion of valuation assumptions for stock-based compensation.~~Board or its committees, each as described below.

~~(3)~~

(4)

At December 31, ~~2009, David B.~~2012, Dr. Apfelberg held options to purchase 52,000 shares of Cutera common stock. From January 1, 2012 to April 20, 2012, Dr. Apfelberg was the Medical Director of the Cutera Clinic, and, in connection with this role, was paid $21,600 during the fiscal year ended December 31, 2012.

~~(4)~~

(5)

At December 31, ~~2009, Annette J. Campbell-White~~2012, Mr. Barrett held options to purchase ~~62,000~~14,000 shares of Cutera common stock.

~~(5)~~

~~David A.~~(6)

Mr. Gollnick resigned from the position of Executive Vice President of Research and Development effective March 20, 2009. He continues to be a member of our Board and is a consultant to ~~our~~the Company. In connection with his consulting agreement, he was paid $109,360 during the fiscal year ended December 31, 2012. At December 31, ~~2009,~~2012, Mr. Gollnick held options to purchase ~~41,126~~35,001 shares of Cutera common stock.

~~(6)~~

(7)

At December 31, ~~2009, W. Mark~~2012, Mr. Lortz held options to purchase 62,000 shares of Cutera common stock.

~~(7)~~

(8)

At December 31, ~~2009, Timothy J.~~2012, Mr. O’Shea held options to purchase 42,000 shares of Cutera common stock.

~~(8)~~

(9)

At December 31, ~~2009, Jerry P.~~2012, Mr. Widman held options to purchase 62,000 shares of Cutera common ~~stock.~~stock.

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~~From January 1, 2009 through June 28, 2009,~~For 2012, our non-employee directors earned an annual retainer of $25,000 for regular board meetings. In June 2009, the Board reviewed a report from Mercer, the Company’s compensation consultant, relating to director compensation. The results of the Mercer report demonstrated that: 1) there was a trend away from per meeting fees and towards annual retainers for services rendered by Board and Committee members, 2) cash compensation for directors was increasing based on the additional duties and responsibilities of Board and committee members, and 3) there was a trend away from stock options to fully vested equity grants based on a fixed dollar value rather than a share value. On June 29, 2009, our Board, following recommendations of its Compensation Committee revised the annual compensation of its non-employee directors. Accordingly, our non-employee directors currently earn an annual retainer of $45,000 for regular ~~board~~Board meetings; $6,000 for Compensation Committee ~~meetings; and~~meetings (for members other than the Chairman); $7,500 for Audit Committee ~~meetings. Additionally in 2009,~~meetings (for members other than the Chairman); and $5,000 for Strategic Transactions Committee meetings (for members other than the Chairman). Our non-employee directors did not earn an annual retainer for Nominating and Corporate Governance Committee meetings (for members other than the Chairman). The Chairman of the Audit Committee and the Compensation Committee each earned an annual retainer of $20,000 for their services on the respective committees. The Chairman of the Nominating and Corporate Governance Committee earned an annual retainer of ~~$20,000 and the Chairman of the Compensation Committee earned an annual retainer of $20,000.~~$5,000 for his services. Our non-employee directors no longer receive ~~per~~ meeting fees for ~~board~~Board and committee meetings regardless of the number of meetings held throughout the year.

Our 2004 Equity Incentive Plan provides for the automatic grant of options to purchase shares of Cutera common stock to our non-employee directors. ~~Effective from January 1, 2008, each~~Each non-employee director who is appointed to the Board will receive an initial option to purchase 14,000 shares of ~~our~~Cutera common stock upon such ~~appointment, and effective June 29, 2009, each non-employee director who is a director on the date~~appointment. Each of ~~each Annual Meeting of stockholders and has been a director for at least the preceding six months will receive~~these stock on an annual basis equivalent to the number of shares represented by the quotient of $60,000 divided by the closing stock price of our common stock on the date of each Annual Meeting of stockholders. All options ~~granted under those automatic grant provisions~~ will have an exercise price equal to fair market value of Cutera common stock on the date of grant and a term of seven ~~years. Each option to purchase 14,000 shares~~years and will become exercisable as to one-third of the shares subject to the option on each anniversary of its date of grant, provided the non-employee director remains a director on such dates. ~~Each stock will become vested as to 100% of the shares~~In addition, each non-employee director who is a director on the date of ~~grant.~~each Annual Meeting of Stockholders and has been a director for at least the preceding six months, will receive an award of shares represented by the quotient of $60,000 divided by the closing market price of Cutera common stock on the date of such Annual Meeting. These shares vest on the one-year anniversary of the grant date.

Code of Ethics

We are committed to maintaining the highest standards of business conduct and ethics. Our Code of Ethics, as amended, (the ~~“Code”~~“Code”) reflects our values and the business practices and principles of behavior that support this commitment. The Code is intended to satisfy SEC rules for a “code of ethics” required by Section 406 of the Sarbanes-Oxley Act of 2002, as well as the Nasdaq listing standards requirement for a “code of conduct.” The Code is an Exhibit to our Form 8-K filed with the SEC on April ~~27,~~29, 2004, was amended and restated on ~~November 19, 2009,~~January 1, 2011, and is available on the Company’s website at ~~www.cutera.com.~~www.cutera.com. We will post any amendment to the Code, as well as any waivers that are required to be disclosed by the rules of the SEC or Nasdaq, on our website.

~~Corporate Governance Committee Guidelines~~

We do not have a Corporate Governance Committee and have not adopted corporate governance guidelines. Our Board, together with our committees fulfill the role that a Corporate Governance Committee would provide and work with management on corporate governance matters generally.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee consists of the following members: David Apfelberg, Gregory Barrett and Jerry Widman. No member of ~~our Compensation Committee,~~this committee, nor any of our executive officers, has a relationship that would constitute an interlocking relationship with executive officers or directors of another entity. No Compensation Committee member is an officer or employee of Cutera.

Certain Relationships and Related Transactions

In the Company’s last fiscal year, and except for compensation paid to its directors and executive officers for services performed in such roles, and except as provided in the following paragraph, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which the Company was or is to be a party in which the amount involved exceeds $120,000 and in which any director, executive officer, holder of more than 5% of our common stock or any member of their immediate families had or will have a direct or indirect material interest.

We ~~entered into~~have a consulting agreement with David A. Gollnick ~~on March 2, 2009 upon Mr. Gollnick’s resignation as the Company’s Executive Vice President of Research and Development,~~ pursuant to which Mr. Gollnick is compensated for services that he provides to us, including ~~assisting with transitioning the duties and responsibilities of the position of Vice President of Research and Development to a successor and providing~~ product development and clinical support. Payments to Mr. Gollnick under this agreement in ~~2009~~2012 and 2011 were ~~approximately $110,400. In addition, Mr. Gollnick was paid approximately $22,500~~$109,360 and $181,920, respectively.

Review, Approval or Ratification of Related Party Transactions

As provided by our Audit Committee charter, our Audit Committee must review and approve in ~~connection with serving on~~advance any proposed related party transaction. All of our ~~Board~~directors and ~~approximately $71,784 in base salary~~officers are required to report to our Audit Committee any such related party transaction prior to ~~his resignation~~its completion. We have not adopted specific standards for approval of related party transactions, but instead our Audit Committee reviews each such transaction on a case-by-case basis. Our policy is to require that all executive compensation-related matters be recommended and approved by our Compensation Committee as ~~the Company’s Executive Vice President of Research~~provided by our Compensation Committee charter and ~~Development in the year ended December 31, 2009.~~be reported under applicable SEC rules.

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Family Relationships

There are no family relationships among any of our directors or executive officers.

Indemnification Agreements

Each of our directors and officers has an indemnification agreement with our Company.

Communications with the Board by Stockholders

Stockholders wishing to communicate with the Board or with an individual Board member concerning the Company may do so by writing to the Board or to the particular Board member, and mailing the correspondence to: Attention: Board of Directors, c/o Secretary, Cutera, Inc., 3240 Bayshore Blvd., Brisbane, California 94005-1021. The envelope should indicate that it contains a stockholder communication. All such stockholder communications will be forwarded to the director or directors to whom the communications are addressed.

Stock Ownership Guidelines

To enhance our overall corporate governance practices and director compensation program, in April 2012, our Board adopted stock ownership guidelines for our non-employee directors, which the Compensation Committee intends to review annually. These guidelines are designed to align our non-employee directors’ interests with our stockholders’ long-term interests by promoting long-term ownership of Cutera common stock. These guidelines provide that, within five years of the later of the adoption of the guidelines or his or her first date of election to our Board, our non-employee directors must hold shares of Cutera common stock having a value not less than three times the value of their annual retainer for general Board service.

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REPORT OF THE AUDIT COMMITTEE

The material in this section is not deemed filed with the SEC and is not incorporated by reference in any filing of our Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date of this Proxy Statement and irrespective of any general incorporation language in those filings.

~~The~~As required by Nasdaq rules, the Audit Committee of the Cutera, Inc. Board of Directors is ~~comprised solely~~composed of three independent ~~directors (as defined by Nasdaq rules) who were all appointed by the Board of Directors.~~directors. The ~~Audit Committee~~committee operates ~~pursuant to~~under a written charter adopted by the Board of Directors ~~a copy of which can be found~~and posted on our website. The Audit Committee reviews and assesses the adequacy of its charter on an annual basis. As more fully described in the charter, the purpose of the Audit Committee is to provide general oversight of Cutera’s financial reporting, integrity of financial statements, internal controls and internal audit functions. The Audit Committee has authority to retain outside legal, accounting or other advisors as its deems necessary to carry out its duties and to require Cutera to pay for such expenditures.

The Audit Committee ~~monitors Cutera’s external audit process, including~~recommends to the ~~scope, fees, auditor independence matters and~~Board of Directors, subject to stockholder ratification, the ~~extent~~selection of an accounting firm to ~~which~~be engaged as the Company’s Independent Registered Public Accounting ~~Firm may be retained to perform non-audit services.~~firm. The ~~Audit Committee has responsibility for the appointment, compensation, retention and oversight of Cutera’s~~ Independent Registered Public Accounting Firm. The Audit Committee also reviews the results of the external audit work with regard to the adequacy and appropriateness of Cutera’s financial, accounting and internal controls over financial reporting. In addition, the Audit Committee generally oversees Cutera’s internal compliance programs. The Audit Committee members are not all professional accountants or auditors, and their function is not intended to duplicate or to certify the activities of management and the Independent Registered Public Accounting Firm ~~nor can the Audit Committee certify that the Independent Registered Public Accounting Firm is “independent” under applicable rules.~~

The Audit Committee provides advice, counsel and direction to management and the Independent Registered Public Accounting Firm on matters for which it is responsible based on the information it receives from management and the Independent Registered Public Accounting Firm and the experience of its members in business, financial and accounting matters.

Management is responsible for the preparation and integrity of Cutera’s financial statements, accounting and financial reporting processes and internal control over financial reporting for compliance with applicable accounting standards, laws and regulations.

~~Cutera’s Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP,~~ is responsible for performing an independent audit of ~~Cutera’s~~the Company’s financial statements in accordance with generally accepted auditing standards and ~~expressing an opinion in its~~to issue a report ~~on those~~thereon. Management is responsible for our internal controls and the financial ~~statements,~~reporting process. The Audit Committee is responsible for monitoring and ~~for expressing an opinion on the effectiveness of Cutera’s internal control over financial reporting.~~overseeing these processes.

~~In this context,~~The Audit Committee held seven meetings during the fiscal year 2012. Management represented to the Audit Committee ~~hereby reports as follows:~~that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. In 2013, the Audit Committee met and reviewed and discussed the audited financial statements for fiscal year 2012 with management and the Company’s Independent Registered Public Accounting Firm.

~~The Audit Committee has reviewed and discussed the audited financial statements for 2009 with Cutera’s management.~~

The Audit Committee discussed with the Independent Registered Public Accounting Firm the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

The Audit Committee has discussed with the Independent Registered Public Accounting Firm the matters required to be discussed by SAS 61 (Codification of Statements on Auditing Standard, AU 380), SAS 99 (Consideration of Fraud in a Financial Statement Audit) and SEC rules discussed in Final Releases Nos. 33-8183 and 33-8183a.

The Audit Committee has received and reviewed the written disclosures and athe letter from the Independent Registered Public Accounting Firm, ~~PricewaterhouseCoopers~~Ernst & Young LLP ~~pursuant to Rule 3526,~~ ~~Communication with Audit Committees Concerning Independence~~,as required by applicable requirements of the Public Company Accounting Oversight Board ~~(“PCAOB”), and~~regarding the independent accountant’s communications with the Audit Committee concerning independence. Additionally, the Audit Committee has discussed with ~~PricewaterhouseCoopers~~Ernst & Young LLP the issue of its ~~independence.~~independence from Cutera, Inc.

~~The Audit Committee has discussed with the Independent Registered Public Accounting Firm the overall scope and plans for its audit.~~

The Audit Committee has met with the Independent Registered Public Accounting Firm, with and without management present, to discuss the results of its examinations, its evaluations of our internal control over financial reporting, and to discuss the overall quality of our financial reporting.

~~The Audit Committee has considered whether the provision by the Independent Registered Public Accounting Firm of non-audit services is compatible with maintaining its independence.~~

Based on the review and discussion referred to above, the Audit Committee has approved that the audited financial statements and the report of management on internal control over financial reporting be included in Cutera’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Based on its review of the audited financial statements and the various discussions noted above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

The foregoing report is provided by the undersigned members of the Audit Committee.

	W. Mark Lortz
	Timothy J. O’Shea
	Jerry P. Widman

~~Timothy J. O’Shea~~

~~Jerry P. Widman~~

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PROPOSAL ONE—ELECTION OF DIRECTORS

Classes of the Board of Directors

Our Amended and Restated Certificate of Incorporation provides that our Board shall be divided into three classes designated as Class I, Class II and Class III, respectively, with the classes of directors serving for staggered three-year terms. Our Board currently consists of seven directors, divided among the three classes as follows: two Class I directors, Kevin P. Connors and David A. Gollnick, whose terms expire at our Annual Meeting of Stockholder to be held in 2011; two Class II directors, David B. Apfelberg and Timothy J. O’Shea, whose terms expire at our Annual Meeting of Stockholders to be held in 2012; and three Class III directors, Annette J. Campbell-White, W. Mark Lortz and Jerry P. Widman, whose terms expire at this Annual Meeting.

two Class I directors, Kevin P. Connors and David A. Gollnick, whose terms expire at our Annual Meeting of Stockholders to be held in 2014;

two Class II directors, David B. Apfelberg and Timothy J. O’Shea, whose terms expire at our Annual Meeting of Stockholders to be held in 2015; and

three Class III directors W. Mark Lortz, Gregory Barrett and Jerry P. Widman, whose terms expire at the Annual Meeting of Stockholders to be held in 2013.

The name of each member of the Board, the class in which he or she serves, and his or her age as of the Record Date, principal occupation and length of service on the Board are as follows:

Name	Term Expires	Age		Principal Occupation	Director Since		Term Expires	Age	Principal Occupation	Director Since
Class I Directors
Kevin P. Connors	2011		48	President and Chief Executive Officer		1998	2014	51	President and Chief Executive Officer	1998
David A. Gollnick~~(1)~~	2011		45	Former Executive Vice President of Research and Development		1998	2014	49	Former Executive Vice President of Research and Development	1998

Class II Directors
Timothy J. O’Shea(3)	2012		57	Managing Director, Oxo Capital		2004
Timothy J. O’Shea(2)(3) (4)							2015	60	Managing Director, Oxo Capital	2004
David B. Apfelberg~~(2)~~(3)	2012		68	Clinical Professor of Plastic Surgery, Stanford University Medical Center		1998	2015	71	Clinical Professor of Plastic Surgery, Stanford University Medical Center	1998

Class III Directors
W. Mark Lortz(3)	2010		58	Former Chief Executive Officer, TheraSense, Inc.		2004
Jerry P. Widman(2)(3)	2010		67	Former Chief Financial Officer, Ascension Health		2004
Annette J. Campbell-White(2)	2010		63	Managing General Partner, MedVenture Associates I-V		1998
W. Mark Lortz(2)(3) (4)							2013	61	Former Chief Executive Officer, TheraSense, Inc.	2004
Gregory Barrett(1)(3)							2013	59	Former Chairman, President and Chief Executive Officer, BÂRRX Medical	2011
Jerry P. Widman(1)(2)(3)							2013	70	Former Chief Financial Officer, Ascension Health	2004

	Option Awards						Stock Awards
Name	Number of Securities Underlying Unexercised Earned Options	Number of Securities Underlying Unexercised Unearned Options			Option Exercise Price	Option Expiration Date	Number of Shares or Units of Stock that Have Not Vested			Market Value of Shares or Units of Stock that Have Not Vested			Date Awards Will be Fully Vested
Mr. Connors	3,333	—		$	4.25	8/13/2013
	30,000	—			20.25	7/28/2015
	33,300	—			10.43	5/28/2015
	100,000	—			10.43	5/28/2015
	120,000	—			8.66	6/08/2016
	100,000	20,000	(1)		10.24	5/14/2017
	60,000	60,000	(1)		8.72	5/27/2018
	—	91,000	(1)		6.88	7/27/2019
								3,667	(2)	$	33,003	(2)	6/01/2013 (2)
								36,000	(3)		324,000	(3)	6/01/2013 (3)

Mr. Santilli	14,753	—			4.25	8/13/2013
	10,000	—			13.30	7/20/2014
	15,000	—			20.25	7/28/2015
	13,700	—			10.43	5/28/2015
	50,000	—			10.43	5/28/2015
	55,000	—			8.66	6/08/2016
	45,834	9,166	(1)		10.24	5/14/2017
	40,000	40,000	(1)		8.72	5/27/2018
	—	32,500	(1)		6.88	7/27/2019
								2,500	(2)	$	22,500	(2)	6/01/2013 (2)
								6,250	(3)		56,250	(3)	6/01/2013 (3)
								6,250	(4)		56,250	(4)	6/01/2015 (4)

Option Awards

Stock Awards

Name

Number of Securities Underlying Unexercised Earned
Options

Number of Securities Underlying Unexercised Unearned Options

Option
Exercise
Price

Option
Expiration
Date

Number of Shares or
Units of
Stock that
Have Not
Vested

Market
Value of
Shares or
Units of
Stock that
Have Not Vested

Date
Awards Will
be Fully
Vested

Kevin P. Connors 50,000 — $ 0.50 8/4/2010
President and 40,000 — 2.50 6/8/2011
Chief Executive Officer 3,333 — 4.25 8/13/2013
30,000 — 20.25 7/28/2015
48,125 6,875 (1) 23.75 6/8/2013
25,000 15,000 (1) 24.46 6/8/2012
12,488 20,812 (1) 10.43 5/28/2015
— 100,000 (2) 10.43 5/28/2015
— 120,000 (3) 8.66 6/08/2016
— $ — —
Ronald J. Santilli 20,000 — 5.50 9/24/2011
Executive Vice President and
3,372 — 4.25 8/7/2012
Chief Financial Officer
14,753 — 4.25 8/13/2013
10,000 — 13.30 7/20/2014
15,000 — 20.25 7/28/2015
30,625 4,375 (1) 23.75 6/8/2013
13,750 8,250 (1) 24.46 6/8/2012
5,138 8,562 (1) 10.43 5/28/2015
— 50,000 (2) 10.43 5/28/2015
— 55,000 (3) 8.66 6/08/2016
— $ — —

(1)

~~One-quarter (1/4th)~~

One-third of the shares underlying each of these stock options vest on the ~~one year~~first anniversary of the vesting commencement date and 1/~~48th~~36th of the underlying shares vest each month thereafter.

~~(2)~~

~~100%~~(2)

These unvested shares represent RSU awards granted in 2011 that will vest on June 1, 2013.

(3)

These unvested shares represent the PSU awards assuming they are paid at target performance levels and will vest on June 1, 2013.

(4)

One-third of the shares underlying ~~each of these options~~this award vest on the ~~three year anniversary of the vesting commencement date.~~

~~(3)~~

~~One-third (1/3rd) of the shares underlying each of these options vest on the one year~~first, second and third anniversary of the vesting commencement date ~~and 1/36th~~ of ~~the underlying shares vest each month thereafter.~~June 1, 2012.

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2012 Options Exercised and Stock Vested Table

The following table lists the stock options exercised by, and stock awards vested to, our Named Executive Officers in the fiscal year ended December 31, ~~2009.~~2012.

Option Awards

Stock Awards

Name

Number of Shares Acquired on Exercise

Value Realized on Exercise (1)

Number of Shares Acquired on Vesting

Value Realized Upon Vesting (2)

Kevin P. Connors
President and Chief Executive Officer
408,333 2,396,915 2,500 20,350
Ronald J. Santilli
Executive Vice President and Chief Financial Officer
― ― 1,250 10,175

	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise		Value Realized on Exercise (1)		Number of Shares Acquired on Vesting		Value Realized Upon Vesting (2)
Mr. Connors		—	$	—		14,667	$	98,562
Mr. Santilli		3,372	$	16,234		9,833	$	66,078
Mr. DeBenedictis		72,223	$	28,141		1,250	$	8,400

(1)

~~Represents~~The amounts reported in this column represents the excess of fair market value of the shares ~~exercised~~of Cutera common stock purchased on the exercise date over the aggregate exercise price ~~for~~of such ~~shares.~~options.

(2)

~~These shares were originally issued by us pursuant to performance unit awards. On each vesting date, the unit had a value equal to~~The amounts reported in this column represent the fair market value of ~~our~~the shares of Cutera common stock on the vesting date of ~~vesting.~~each Named Executive Officer’s outstanding RSU awards.

Pension Benefits

We did not sponsor any defined benefit pension or other actuarial plan for our executive officers, including our Named Executive Officers, during 2012.

Nonqualified Deferred Compensation

We did not maintain any nonqualified defined contribution or other deferred compensation plans or arrangements for our executive officers, including our Named Executive Officers, during 2012.

Employment Agreements

We do not have employment agreements with any of our Named Executive Officers.

Potential Payments Upon Termination or Change in Control

We have entered into Change of Control and Severance Agreements with each of our Named Executive Officers. These agreements provide that if a Named Executive Officer’s employment with the Company is terminated by the Company without “cause” (as defined in the agreement) or by the Named Executive Officer for “good reason” (as defined in the agreement) either prior to three months before or after 12 months following a Change of Control (as defined in the agreement) of the Company but not in connection with a Change of Control, the Named Executive Officer will receive, subject to signing a release of claims in favor of the Company:

a lump sum severance payment equal to 200% of the annual base salary as in effect immediately prior to such termination for our Chief Executive Officer and 100% of the annual base salary as in effect immediately prior to such termination for our Chief Financial Officer and Chief Technology Officer; and

up to 24 months for our Chief Executive Officer and up to 12 months for our Chief Financial Officer and Chief Technology Officer of reimbursement for premiums paid for COBRA coverage.

These agreements also provide that if a Named Executive Officer’s employment with the Company is terminated by the Company without “cause” or by the Named Executive Officer for “good reason” and such termination occurs within the period beginning three months before, and ending 12 months following, a Change of Control of the Company and in connection with a Change of Control, the Named Executive Officer will receive, subject to signing a release of claims in favor of the Company:

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a lump sum severance payment equal to 200% of the annual base salary as in effect immediately prior to such termination or, if greater, at the level in effect immediately prior to the Change of Control for our Chief Executive Officer and 100% of the annual base salary as in effect immediately prior to such termination or, if greater, at the level in effect immediately prior to the Change of Control for our Chief Financial Officer and Chief Technology Officer;

a lump sum severance payment equal to 100% of the Named Executive Officer’s annual target bonus for the fiscal year in which the termination occurs or, if greater, his annual target bonus in effect immediately prior to the Change of Control;

automatic vesting in full of all outstanding and unvested equity awards held by the Named Executive Officer as of the date of the Change of Control; and

up to 24 months for our Chief Executive Officer and up to 12 months for our Chief Financial Officer and Chief Technology Officer of reimbursement for premiums paid for COBRA coverage.

Each of these agreements were renewed in 2013 for another initial term of three years, and will extend for an additional year unless the Company or the applicable Named Executive Officer provides written notice at least 60 days prior to the third anniversary of the agreement.

For purposes of these agreements, “cause” means a Named Executive Officer’s termination of employment only upon (i) his willful failure to substantially perform his duties (subject to notice and a reasonable period to cure), other than a failure resulting from his complete or partial incapacity due to physical or mental illness or impairment; (ii) his willful act which constitutes gross misconduct and which is injurious to the Company; (iii) his willful breach of a material provision of the agreement (subject to notice and reasonable period to cure); or (iv) his knowing, material and willful violation of a federal or state law or regulation applicable to the business of the Company.

For purposes of these agreements, “good reason” means a Named Executive Officer’s termination of employment within 90 days following the expiration of any cure period following the occurrence of one or more of the following, without his consent: (i) a material reduction in his authority, duties, or responsibilities relative to duties, position or responsibilities in effect immediately prior to such reduction; (ii) a material reduction in his base salary as in effect immediately prior to such reduction; or (iii) a material change in the geographic location at which he must perform services (in other words, the relocation of the Named Executive Officer to a facility that is more than 50 miles from his then-current location).

The following table lists our Named Executive Officers and the estimated payments and benefits that each of them would have received had their employment with the Company been terminated without “cause” or had they resigned for “good reason” on December 31, 2012.

Name	Estimated Total Value of Cash Payment		Estimated Total Value of Health Coverage Continuation
Mr. Connors	$	870,000	$	20,518
Mr. Santilli	$	310,000	$	29,775

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Name	Estimated Total Value of Cash Payment		Estimated Total Value of Health Coverage Continuation		Value of Accelerated Equity (1)
Mr. Connors	$	1,283,250	$	20,518	$	566,723
Mr. Santilli	$	480,500	$	29,775	$	251,100

(1)

We estimate the value of acceleration of the outstanding and unvested stock options, RSU and PSU awards (assuming paid at 100% of target) held by each of our Named Executive Officers based on a market price of $9.00 per share for Cutera common stock as of December 31, 2012.

Severance payments upon termination or change in control would be payable to the recipient only if the executive signs and does not revoke a release of claims with the Company (in a form reasonably acceptable to the Company) and provided that such release of claims becomes effective no later than sixty (60) days following the termination date. In addition, the executive would need to have complied with the terms of any confidential information agreement executed by executive in favor of the Company and the provisions of the severance agreements.

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COMPENSATION COMMITTEE REPORT ~~(1)~~

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of SEC Regulation S-K with management. Based on such review and ~~discussions,~~discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Cutera’s proxy statement.

The foregoing report is provided by the undersigned members of the Compensation Committee.

~~Dr.~~ David B. Apfelberg

~~Mr.~~ Gregory Barrett

Jerry P. Widman

~~Ms. Annette J. Campbell-White~~

(1) The material in this report is not deemed soliciting material or filed with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Proxy Statement and irrespective of any general incorporation language in those filings.

~~(1)~~

The material in this report is not deemed soliciting material or filed with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Proxy Statement and irrespective of any general incorporation language in those filings.

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OTHER MATTERS

We are not aware of any other business to be presented at the meeting. As of the date of this proxy statement, no stockholder had advised us of the intent to present any business at the meeting. Accordingly, the only business that our Board of Directors intends to present at the meeting is as set forth in this proxy statement.

If any other matter or matters are properly brought before the meeting, the proxies will use their discretion to vote on such matters in accordance with their best judgment.

By order of the Board of Directors,

Kevin P. Connors
President and Chief Executive Officer

Brisbane, California
April 29, 2013

~~Kevin P. Connors~~

~~President and Chief Executive Officer~~

~~Brisbane, California~~

~~April 9, 2010~~

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APPENDIX A

CUTERA, INC.

2004 EQUITY INCENTIVE PLAN

(as amended on April 27, 2012, subject to stockholder approval on June 13, 2012)

1.	Purposes of the Plan. The purposes of this Plan are:

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

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

to promote the success of the Company's business.

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.

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

(a)

“Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 of the Plan.

(b)

“Affiliated SAR” means an SAR that is granted in connection with a related Option, and which automatically will be deemed to be exercised at the same time that the related Option is exercised.

(c)

“Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

(d)

“Award” means, individually or collectively, a grant under the Plan of Options, SARs, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.

(e)

“Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.

(f)

“Board” means the Board of Directors of the Company.

(g)

“Change in Control” means the occurrence of any of the following events:

(i)

Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii)

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

(iii)

A change in the composition of the Board occurring within a two-year period, as a result of which less than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the effective date of the Plan, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

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(iv)

The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

(h)

“Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.

(i)

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

(j)

“Common Stock” means the common stock of the Company.

(k)

“Company” means Cutera, Inc., a Delaware corporation, or any successor thereto.

(l)

“Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.

(m)

“Determination Date” means the latest possible date that will not jeopardize the qualification of an Award granted under the Plan as “performance-based compensation” under Section 162(m) of the Code.

(n)

“Director” means a member of the Board.

(o)

“Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

(p)

“Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director's fee by the Company will be sufficient to constitute “employment” by the Company.

(q)

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

(r)

“Exchange Program” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is reduced. The Administrator will determine the terms and conditions of any Exchange Program in its sole discretion.

(s)

“Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

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(i)

If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Market, the Nasdaq Global Select Market or the Nasdaq Capital Market, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii)

If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock will be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(iii)

In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator.

(t)

“Fiscal Year” means the fiscal year of the Company.

(u)

“Freestanding SAR” means a SAR that is granted independently of any Option.

(v)

“Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(w)

“Inside Director” means a Director who is an Employee.

(x)

“Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

(y)

“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(z)

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

(aa)

“Outside Director” means a Director who is not an Employee.

(bb)

“Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(cc)

“Participant” means the holder of an outstanding Award.

(dd)

“Performance Goals” will have the meaning set forth in Section 12 of the Plan.

(ee)

“Performance Period” means any Fiscal Year or such other period as determined by the Administrator in its sole discretion.

(ff)

“Performance Share” means an Award denominated in Shares which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine pursuant to Section 10.

(gg)

“Performance Unit” means an Award which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10.

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(hh)

“Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.

(ii)

“Plan” means this 2004 Equity Incentive Plan.

(jj)

“Restricted Stock” means Shares issued pursuant to an Award of Restricted Stock under Section 7 of the Plan, or issued pursuant to the early exercise of an Option.

(kk)

“Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 8. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.

(ll)

“Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(mm)

“Section 16(b) “ means Section 16(b) of the Exchange Act.

(nn)

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

(oo)

“Share” means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan.

(pp)

“Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with an Option, that pursuant to Section 9 is designated as a SAR.

(qq)

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

(rr)

“Tandem SAR” means a SAR that is granted in connection with a related Option, the exercise of which will require forfeiture of the right to purchase an equal number of Shares under the related Option (and when a Share is purchased under the Option, the SAR will be canceled to the same extent).

(ss)

“Unvested Awards” will mean Options or Restricted Stock that (i) were granted to an individual in connection with such individual’s position as an Employee and (ii) are still subject to vesting or lapsing of Company repurchase rights or similar restrictions.

3.	Stock Subject to the Plan.

(a)

Stock Subject to the Plan. Subject to the provisions of Section 14 of the Plan, as of April 16, 2012, the maximum aggregate number of shares of common stock that may be awarded and sold under the amended 2004 Plan was 4,647,992, of which 564,329 shares remained available for future awards.

(b)

Full Value Awards. Any Shares subject to Awards granted with an exercise price less than Fair Market Value on the date of grant of such Awards will be counted against the numerical limits of this Section 3 as 2.12 Shares for every one Share subject thereto. Further. if Shares acquired pursuant to any such Award are forfeited or repurchased by the Company and would otherwise return to the Plan pursuant to Section 3(c), 2.12 times the number of Shares so forfeited or repurchased will return to the Plan and will again become available for issuance

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(c)

Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and Stock Appreciation Rights, the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). Upon exercise of a Stock Appreciation Right settled in Shares, the gross number of Shares covered by the portion of the Award so exercised will cease to be available under the Plan. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of Shares owned by the Participant, the number of Shares available for issuance under the Plan will be reduced by the gross number of Shares for which the Option is exercised. Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if unvested Shares of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company, such Shares will become available for future grant under the Plan. Shares used to pay the tax and/or exercise price of an Award will not become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing provisions of this Section 3(c), subject to adjustment provided in Section 14, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan under this Section 3(c).

(d)

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

4.	Administration of the Plan.

(a)

Procedure.

(i)

Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may administer the Plan.

(ii)

Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two (2) or more “outside directors” within the meaning of Section 162(m) of the Code.

(iii)

Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.

(iv)

Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws.

(b)

Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:

(i)

to determine the Fair Market Value;

(ii)

to select the Service Providers to whom Awards may be granted hereunder;

(iii)

to determine the number of Shares to be covered by each Award granted hereunder;

(iv)

to approve forms of agreement for use under the Plan;

(v)

with the approval of the Company’s stockholders, to institute an Exchange Program;

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(vi)

to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine;

(vii)

to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;

(viii)

to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;

(ix)

to modify or amend each Award (subject to Section 18(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Awards longer than is otherwise provided for in the Plan;

(x)

to allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Award that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld (the Fair Market Value of the Shares to be withheld will be determined on the date that the amount of tax to be withheld is to be determined and all elections by a Participant to have Shares withheld for this purpose will be made in such form and under such conditions as the Administrator may deem necessary or advisable);

(xi)

to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;

(xii)

to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award pursuant to such procedures as the Administrator may determine; and

(xiii)

to make all other determinations deemed necessary or advisable for administering the Plan.

(c)

Effect of Administrator's Decision. The Administrator's decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards.

Eligibility. Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares, and such other cash or stock awards as the Administrator determines may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

6.	Stock Options.

(a)

Limitations.

(i)

Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000 (U.S.), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.

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(ii)

The following limitations will apply to grants of Options:

(1)

No Service Provider will be granted, in any Fiscal Year, Options to purchase more than 1,000,000 Shares.

(2)

In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 1,000,000 Shares, which will not count against the limit set forth in Section 6(a)(ii)(1) above.

(3)

The foregoing limitations will be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 14.

(4)

If an Option is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 14), the cancelled Option will be counted against the limits set forth in subsections (1) and (2) above.

(b)

Term of Option. The term of each Option will be stated in the Award Agreement, but in no event will the term be greater than seven (7) years from the date of grant. In the case of an Incentive Stock Option, the term will be seven (7) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.

(c)

Option Exercise Price and Consideration.

(i)

Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined by the Administrator, subject to the following:

(1)

In the case of an Incentive Stock Option

granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant.

granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price will be no less than 100% of the Fair Market Value per Share on the date of grant.

Notwithstanding the foregoing, Incentive Stock Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.

(2)

In the case of a Nonstatutory Stock Option, the per Share exercise price will be determined by the Administrator, but the per Share exercise price will be no less than 100% of Fair Market Value per Share on the date of grant. In the case of a Nonstatutory Stock Option intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, the per Share exercise price will be no less than 100% of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing, Nonstatutory Stock Options may be grated with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.

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(3)

Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.

(ii)

Form of Consideration. The Administrator will determine the acceptable form(s) of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (1) cash; (2) check; (3) promissory note; (4) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option will be exercised and provided that accepting such Shares, in the sole discretion of the Administrator, shall not result in any adverse accounting consequences to the Company; (5) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (6) a reduction in the amount of any Company liability to the Participant, including any liability attributable to the Participant's participation in any Company-sponsored deferred compensation program or arrangement; (7) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (8) any combination of the foregoing methods of payment.

(d)

Exercise of Option.

(i)

Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.

An Option will be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 14 of the Plan.

Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(ii)

Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant's termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

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(iii)

Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant's Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant's termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

(iv)

Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the Participant's death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant's designated beneficiary, provided such beneficiary has been designated prior to Participant's death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant's estate or by the person(s) to whom the Option is transferred pursuant to the Participant's will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant's death. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

7.	Restricted Stock.

(a)

Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.

(b)

Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Notwithstanding the foregoing sentence, for Restricted Stock intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, during any Fiscal Year no Participant will receive more than an aggregate of 300,000 Shares of Restricted Stock. Notwithstanding the foregoing limitation, in connection with his or her initial service as an Employee, for Restricted Stock intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, an Employee may be granted an aggregate of up to an additional 300,000 Shares of Restricted Stock. Unless the Administrator determines otherwise, Shares of Restricted Stock will be held by the Company as escrow agent until the restrictions on such Shares have lapsed.

(c)

Transferability. Except as provided in this Section 7, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.

(d)

Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.

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(e)

Removal of Restrictions. Except as otherwise provided in this Section 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.

(f)

Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.

(g)

Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.

(h)

Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.

(i)

Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Restricted Stock which is intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).

8.	Restricted Stock Units.

(a)

Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. Each Restricted Stock Unit grant will be evidenced by an Award Agreement that will specify such other terms and conditions as the Administrator, in its sole discretion, will determine, including all terms, conditions, and restrictions related to the grant, the number of Restricted Stock Units and the form of payout, which, subject to Section 8(d), may be left to the discretion of the Administrator. Notwithstanding anything to the contrary in this subsection (a), for Restricted Stock Units intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, during any Fiscal Year of the Company, no Participant will receive more than an aggregate of 300,000 Restricted Stock Units. Notwithstanding the limitation in the previous sentence, for Restricted Stock Units intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, in connection with his or her initial service as an Employee, an Employee may be granted an aggregate of up to an additional 300,000 Restricted Stock Units.

(b)

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

(c)

Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as specified in the Award Agreement.

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(d)

Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) set forth in the Award Agreement. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination thereof. Shares represented by Restricted Stock Units that are fully paid in cash again will be available for grant under the Plan.

(e)

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

(f)

Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Restricted Stock Units which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).

9.	Stock Appreciation Rights.

(a)

Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. The Administrator may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof.

(b)

Number of Shares. The Administrator will have complete discretion to determine the number of SARs granted to any Service Provider; provided, however, no Service Provider will be granted, in any Fiscal Year, SARs covering more than 1,000,000 Shares. Notwithstanding the limitation in the previous sentence, in connection with his or her initial service a Service Provider may be granted SARs covering up to an additional 1,000,000 Shares. The foregoing limitations will be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 14. In addition, if a SAR is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 14), the cancelled SAR will be counted against the numerical share limits set forth above.

(c)

Exercise Price and Other Terms. The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of SARs granted under the Plan; provided, however, that the per Share exercise price of a SAR will be no less than 100% of the Fair Market Value per Share on the date of grant. However, the exercise price of Tandem or Affiliated SARs will equal the exercise price of the related Option.

(d)

Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. With respect to a Tandem SAR granted in connection with an Incentive Stock Option: (a) the Tandem SAR will expire no later than the expiration of the underlying Incentive Stock Option; (b) the value of the payout with respect to the Tandem SAR will be for no more than one hundred percent (100%) of the difference between the exercise price of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the underlying Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the Tandem SAR will be exercisable only when the Fair Market Value of the Shares subject to the Incentive Stock Option exceeds the Exercise Price of the Incentive Stock Option.

(e)

Exercise of Affiliated SARs. An Affiliated SAR will be deemed to be exercised upon the exercise of the related Option. The deemed exercise of an Affiliated SAR will not necessitate a reduction in the number of Shares subject to the related Option.

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(f)

Exercise of Freestanding SARs. Freestanding SARs will be exercisable on such terms and conditions as the Administrator, in its sole discretion, will determine.

(g)

SAR Agreement. Each SAR grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

(h)

Maximum Term/Expiration of SARs. An SAR granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing provisions of this Section 9, the rules of Section 6(b) relating to the maximum term, (i.e., that an SAR may not have a term longer than seven (7) years from the date of grant) and Section 6(d) relating to post-termination exercise also will apply to SARs.

(i)

Payment of SAR Amount. Upon exercise of an SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:

(i)

The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

(ii)

The number of Shares with respect to which the SAR is exercised.

(iii)

At the discretion of the Administrator, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof.

10.	Performance Units and Performance Shares.

(a)

Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant provided that during any Fiscal Year, for Performance Units or Performance Shares intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, (i) no Participant will receive Performance Units having an initial value greater than $2,000,000, and (ii) no Participant will receive more than 300,000 Performance Shares. Notwithstanding the foregoing limitation, for Performance Shares intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, in connection with his or her initial service, a Service Provider may be granted up to an additional 300,000 Performance Shares.

(b)

Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.

(c)

Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting provisions in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid out to the Service Providers. Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the Administrator in its discretion.

(d)

Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share.

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(e)

Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof.

(f)

Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.

(g)

Section 162(m) Performance Restrictions. For purposes of qualifying grants of Performance Units/Shares as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Performance Units/Shares which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).

11.	Formula Option and Award Grants to Outside Directors.

All grants of Options and Awards to Outside Directors pursuant to this Section will be automatic and nondiscretionary and will be made in accordance with the following provisions:

(a)

Type of Option. All Options granted pursuant to this Section will be Nonstatutory Stock Options and, except as otherwise provided herein, will be subject to the other terms and conditions of the Plan.

(b)

No Discretion. No person will have any discretion to select which Outside Directors will be granted Options under this Section or to determine the number of Shares to be covered by such Options (except as provided in Sections 10(f) and 13).

(c)

First Option. Each person who first becomes an Outside Director following the Registration Date will be automatically granted an Option to purchase 14,000 Shares (the “First Option”) on or about the date on which such person first becomes an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy; provided, however, that an Inside Director who ceases to be an Inside Director, but who remains a Director, will not receive a First Option.

(d)

Subsequent Award. Each Outside Director will be automatically granted an award of shares represented by the quotient of $60,000 divided by the closing market price of the Company's common stock on the date of the annual meeting of the stockholders of the Company (a "Subsequent Award"), if as of such date, he or she will have served on the Board for at least the preceding six (6) months.

(e)

Terms. The terms of each First Option and the Subsequent Award granted pursuant to this Section will be as follows:

(i)

The term of the First Option will be seven (7) years.

(ii)

The exercise price per Share will be 100% of the Fair Market Value per Share on the date of grant of the First Option.

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(iii)

Subject to Section 14, the First Option will vest and become exercisable as to 1/3rd of the Shares subject to such First Option on each anniversary of its date of grant, provided that the Participant continues to serve as a Director through each such date.

(iv)

Subject to Section 14, the Subsequent Award will vest as to 100% of the Shares subject to such Award on the first anniversary of its date of grant, provided that the Participant continues to serve as a Director through such date.

(f)

Amendment. The Administrator in its discretion may change and otherwise revise the terms of Awards granted under this Section 11, including, without limitation, the number of Shares and exercise prices thereof or the type of Award to be granted, with respect to Awards granted on or after the date the Administrator determines to make any such change or revision.

12.	Performance-Based Compensation Under Code Section 162(m).

(a) General. If the Administrator, in its discretion, decides to grant an Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the provisions of this Section 12 will control over any contrary provision in the Plan; provided, however, that the Administrator may in its discretion grant Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) of the Code to such Participants that are based on Performance Goals or other specific criteria or goals but that do not satisfy the requirements of this Section 12.

(b) Performance Goals. The granting and/or vesting of Awards of Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Code and may provide for a targeted level or levels of achievement (“Performance Goals”) including: (i) cash position, (ii) earnings per Share, (iii) net income, (iv) operating cash flow, (v) operating income, (vi) operating expenses, (vii) product revenues, (viii) profit after-tax, (ix) revenue, (x) revenue growth, and (xii) total stockholder return. Prior to the Determination Date, the Administrator will determine whether any significant element(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Participant. Any Performance Goals may be used to measure the performance of the Company as a whole or a business unit of the Company and may be measured relative to a peer group or index. With respect to any Award, Performance Goals may be used alone or in combination. The Performance Goals may differ from Participant to Participant and from Award to Award. Prior to the Determination Date, the Administrator will determine whether any significant element(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Participant.

(c) Procedures. To the extent necessary to comply with the performance-based compensation provisions of Section 162(m) of the Code, with respect to any Award granted subject to Performance Goals, within the first twenty-five percent (25%) of the Performance Period, but in no event more than ninety (90) days following the commencement of any Performance Period (or such other time as may be required or permitted by Code Section 162(m)), the Administrator will, in writing, (i) designate one or more Participants to whom an Award will be made, (ii) select the Performance Goals applicable to the Performance Period, (iii) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (iv) specify the relationship between Performance Goals and the amounts of such Awards, as applicable, to be earned by each Participant for such Performance Period. Following the completion of each Performance Period, the Administrator will certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining the amounts earned by a Participant, the Administrator will have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the Performance Period. A Participant will be eligible to receive payment pursuant to an Award for a Performance Period only if the Performance Goals for such period are achieved.

(d) Additional Limitations. Notwithstanding any other provision of the Plan, any Award which is granted to a Participant and is intended to constitute qualified performance based compensation under Code Section 162(m) will be subject to any additional limitations set forth in the Code (including any amendment to Section 162(m)) or any regulations and ruling issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m) of the Code, and the Plan will be deemed amended to the extent necessary to conform to such requirements.

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13.

Leaves of Absence. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company, or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months and one day following the commencement of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.

14.

Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate.

15.	Adjustments; Dissolution or Liquidation; Merger or Change in Control.

(a)

Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, shall appropriately adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award, and the numerical Share limits set forth in Sections 3, 6, 7, 8, 9, and 10.

(b)

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

(c)

Change in Control. In the event of a Change in Control, each outstanding Award will be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Award, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock shall lapse, and, with respect to Restricted Stock Units, Performance Shares and Performance Units, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted for in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.

With respect to Awards granted to an Outside Director that are assumed or substituted for, if on the date of or following such assumption or substitution the Participant’s status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant not at the request of the successor, then the Participant will fully vest in and have the right to exercise Options and/or Stock Appreciation Rights as to all of the Shares subject to the Award, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock shall lapse, and, with respect to Restricted Stock Units, Performance Shares and Performance Units, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met.

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For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Restricted Stock Unit, Performance Share or Performance Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Share or Performance Unit, for each Share subject to such Award (or in the case of Performance Units, the number of implied shares determined by dividing the value of the Performance Units by the per share consideration received by holders of Common Stock in the Change in Control), to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.

Notwithstanding anything in this Section 15(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more Performance Goals will not be considered assumed if the Company or its successor modifies any of such Performance Goals without the Participant’s consent; provided, however, a modification to such Performance Goals only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.

16.	Tax Withholding

(a)

Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).

(b)

Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum amount required to be withheld, (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld, or (iv) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.

17.

No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant's relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant's right or the Company's right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.

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18.

Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.

19.	Term of Plan. Subject to Section 23 of the Plan, the Plan will become effective upon its adoption by the Board. It will continue in effect for a term of ten (10) years unless terminated earlier under Section 20 of the Plan.

20.	Amendment and Termination of the Plan.

(a)

Amendment and Termination. The Administrator may at any time amend, alter, suspend or terminate the Plan.

(b)

Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c)

Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

21.	Conditions Upon Issuance of Shares.

(a)

Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.

(b)

Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

22.

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

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

-65-

Table of Contents

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CUTERA, INC.

~~2010~~2013 ANNUAL MEETING OF STOCKHOLDERS

The undersigned stockholder of Cutera, Inc., a Delaware corporation, hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement each dated April ~~9, 2010~~29, 2013 and hereby appoints Kevin P. Connors (our President and Chief Executive ~~Officer and a member of our Board of Directors)~~Officer) and Ronald J. Santilli (our Chief Financial Officer), each as proxy and attorney-in-fact, with full power of substitution, on behalf and in the name of the undersigned to represent the undersigned at the ~~2010~~2013 Annual Meeting of Stockholders of Cutera, Inc. to be held on ~~May~~June 19, ~~2010~~2013 at 10:00 a.m., local time, at Cutera’s offices located at 3240 Bayshore Blvd., Brisbane, California 94005-1021, and at any postponement or adjournment thereof, and to vote all shares of common stock which the undersigned would be entitled to vote if then and there personally present, on the matters set forth below:

SEE REVERSE SIDE

FOLD AND DETACH HERE

Table of Contents

The Board of Directors of Cutera, Inc. recommends a vote FOR the following proposals: Please mark your votes as indicated: x
				~~Please mark your votes as indicated~~	x
~~1.Election~~ 1. Election of ~~Directors~~Directors: CLASS III NOMINEES: W. Mark Lortz Gregory Barrett Jerry P. Widman	FOR o	WITHHOLD o	2. ~~Ratify the appointment~~	Ratification of ~~PricewaterhouseCoopers~~Ernst & Young LLP as ~~the~~our Independent Registered Public Accounting Firm ~~of the Company~~ for the fiscal year ending December 31, ~~2010~~2013.	FOR o	AGAINST o	ABSTAIN o

	o		3.	Approval of the amended and restated 2004 Equity Incentive Plan.	FOR o	AGAINST o	ABSTAIN o
		o	o	o
~~CLASS III NOMINEES:~~ ~~W. MARK LORTZ~~ ~~JERRY P. WIDMAN~~ ~~ANNETTE J. CAMPBELL-WHITE~~
THE STOCKHOLDER MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE BY STRIKING OUT THE INDIVIDUAL’S NAME ABOVE			4.	A non-binding advisory vote on the approval of executive compensation.	FOR o	AGAINST o	ABSTAIN o

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR THE ELECTION OF THE NOMINATED CLASS III DIRECTORS; (2) FOR THE RATIFICATION OF THE APPOINTMENT OF ~~PRICEWATERHOUSECOOPERS~~ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM; (3) FOR THE APPROVAL OF OUR 2004 EQUITY INCENTIVE PLAN (AS AMENDED); (4) FOR THE APPROVAL, BY NON-BINDING VOTE, OF EXECUTIVE COMPENSATION; AND ~~(3)~~(5) AS THE PROXY HOLDERS DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
	PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF THE STOCK IS REGISTERED IN THE NAME OF TWO OR MORE PERSONS, EACH SHOULD SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS AND ATTORNEYS-IN-FACT SHOULD ADD THEIR TITLES. IF SIGNER IS A CORPORATION, PLEASE GIVE FULL CORPORATE NAME AND HAVE A DULY AUTHORIZED OFFICER SIGN, STATING TITLE. IF SIGNER IS A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
		PLEASE SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE, WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.

SIGNATURE(S)

DATE: , ~~2010~~

NOTE: This Proxy should be marked, signed by the stockholder(s) exactly as his or her name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both should sign.

~~FOLD AND DETACH HERE~~

Service Category	2012		2011
Ernst & Young LLP
Audit Fees(1)	$	403,092	$	—
Total Ernst & Young LLP	$	403,092	$	—

PricewaterhouseCoopers LLP
Audit Fees(1)	$	30,000	$	643,250
Tax Fees(2)		223,907		147,338
All Other Fees(3)		29,000		1,800
Total PricewaterhouseCoopers LLP	$	282,907	$	792,388

Award Type	General Annual Limit	New Hire Limit	Maximum Limit
Stock Options	1,000,000 shares	1,000,000 shares	2,000,000 shares
Restricted Stock	300,000 shares	300,000 shares	600,000 shares
Restricted Stock Units	300,000 restricted stock units	300,000 restricted stock units	600,000 restricted stock units
Stock Appreciation Rights	1,000,000 shares	1,000,000 shares	2,000,000 shares
Performance Shares	300,000 shares	300,000 shares	600,000 shares
Performance Stock Units	$2,000,000	N/A	$2,000,000

Atrion Corporation	Exactech	Solta Medical
AtriCure	Kensey Nash	Spectranetics
Biolast Technology	Lemaitre Vascular	Synergetics USA
Cardiovascular Systems	Palomar Medical Technologies	Theragenics
Cryolife	Photomedex	Young Innovations
Cynosure	RTI Biologics	Zeltiq Aesthetics

Fiscal Period	Revenue Growth (expressed as a percentage)	Factor	Revenue Growth Multiplier	Adjusted Operating Profit (expressed as a percentage)	Factor	Adjusted Operating Profit Multiplier	Total Payout Multiplier
First quarter	35.34%	5	176.68%	-20.60%	5	—	176.68%
Second quarter	30.73%	5	153.65%	-2.40%	5	—	153.65%
Third quarter	27.53%	5	137.66%	0.20%	5	1.00%	138.66%
Fourth quarter	21.52%	5	107.60%	8.40%	5	42.00%	149.60%

Named Executive Officer	Annual Cash Bonus Target			Annual Cash Bonus Paid for 2012(1)
Mr. Connors	$	370,563		$	564,428
Mr. Santilli	$	158,667		$	243,280
Mr. DeBenedicts	$	78,000	(2)	$	128,829	(2)

	~~Pages~~Page

QUESTIONS AND ANSWERS REGARDING THIS SOLICITATION AND VOTING AT THE ANNUAL MEETING	1

Why am I receiving these proxy materials?	1
Why did I receive a notice in the mail regarding the Internet availability of the proxy materials instead of a paper copy of the proxy materials?	1
What is the purpose of the Annual Meeting?	2
Who is entitled to attend the meeting?	2
Who is entitled to vote at the meeting?	2
How many shares must be present or represented to conduct business at the meeting (that is, what constitutes a quorum)?	2
What items of business will be voted on at the meeting?	2
How does the Board recommend that I vote?	23
What shares can I vote at the meeting?	3
What is the difference between holding shares as a stockholder of record and as a beneficial owner?	3
How can I vote my shares without attending the meeting?	3
How can I vote my shares in person at the meeting?	3
Can I change my vote?	3
Is my vote confidential?	4
What vote is required to approve each item and how are votes counted?	4
What is a “broker non-vote”?	45
How are “broker non-votes” counted?	45
How are abstentions counted?	5
What happens if additional matters are presented at the meeting?	5
Who will serve as inspector of election?	5
What should I do in the event that I receive more than one set of proxy/voting materials?	5
Who is soliciting my vote and who will bear the costs of this solicitation?	56
Where can I find the voting results of the meeting?	56
What is the deadline to propose actions for consideration at next year’s Annual Meeting of stockholders or to nominate individuals to serve as directors?	6

STOCK OWNERSHIP	78

Security Ownership of Certain Beneficial Owners and Management	78
Section 16(a) Beneficial Ownership Reporting Compliance	89

CORPORATE GOVERNANCE AND BOARD MATTERS	89
~~Director Independence~~	8
Director Independence	9
Board Leadership Structure	89
Risk Oversight and Analysis	89
Committees of the Board	910
Meetings Attended by Directors	9
~~Director Nomination Process~~	10
~~Director Compensation~~	11
~~Code of Ethics~~ Director Nomination Process	11
Director Compensation	12
~~Corporate Governance Committee Guidelines~~ Code of Ethics	1213
Compensation Committee Interlocks and Insider Participation	1213
Certain Relationships and Related Transactions	12
~~Family Relationships~~	13
Review, Approval or Ratification of Related Party Transactions	13
Family Relationships	14
Indemnification Agreements	14
Communications with the Board by Stockholders	1314

	Page

Stock Ownership Guidelines	14

REPORT OF THE AUDIT COMMITTEE	1315

PROPOSAL ONE—ELECTION OF DIRECTORS	15
~~Classes of the Board of Directors~~	15
~~Director Nominees~~	15
~~Board of Directors’ Recommendation~~	16
~~Directors Whose Terms Extend Beyond the 2010 Annual Meeting~~	16

Classes of the Board of Directors	16
Director Nominees	16
Board of Directors’ Recommendation	17
Directors Whose Terms Extend Beyond the 2012 Annual Meeting	17

PROPOSAL ~~TWO —RATIFICATION~~TWO—RATIFICATION OF ~~PRICEWATERHOUSECOOPERS~~ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	18
~~Board of Directors’ Recommendation~~	18
~~Audit and Non-Audit Services~~	1819

~~NAMED EXECUTIVE OFFICERS~~ Board of Directors’ Recommendation	19
Audit and Non-Audit Services	19

PROPOSAL THREE— APPROVAL OF AMENDED AND RESTATED 2004 EQUITY INCENTIVE PLAN	21

PROPOSAL FOUR— NON-BINDING VOTE ON EXECUTIVE COMPENSATION	29

General	29
Summary of 2012 Executive Compensation Program	29
Board of Directors’ Recommendation	30

NAMED EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION	31

Compensation Discussion and Analysis	1931
~~Potential Payments Upon Termination or Change in Control~~	27
Internal Revenue Code Section 162(m) and Limitations on Executive Compensation	2840
Securities Authorized for Issuance Under Equity Compensation Plans	2841
Summary Compensation Table	2842
Grants of Plan-Based Awards	2943
Equity Incentive Awards Outstanding	2943
Options Exercised and Stock Vested	3044
Potential Payments Upon Termination or Change in Control	44

COMPENSATION COMMITTEE REPORT	3147

OTHER MATTERS	3248

APPENDIX A - 2004 EQUITY INCENTIVE PLAN (AS AMENDED)	49

Name	Fees Earned or Paid in Cash(1)		Stock Awards(2)			Total
David B. Apfelberg	$	55,000	$	60,000	(3)	$	115,000
Annette J. Campbell-White		41,000		60,000	(4)		101,000
David A. Gollnick		22,500		—	(5)		22,500
W. Mark Lortz		42,500		60,000	(6)		102,500
Timothy J. O’Shea		42,500		60,000	(7)		102,500
Jerry P. Widman		61,000		60,000	(8)		121,000

Service Category	2009		2008
Audit Fees	$	596,500	$	710,800
Audit Related Fees		—		—
Tax Fees		—		—
All Other Fees		1,500		1,500
Total	$	598,000	$	712,300

revenue growth of certain product lines	operating cash flow	product revenue	revenue growth
earnings per share	operating income as a percentage of revenue	profit after-tax	total stockholder return
net income	operating expenses	cash position	new product releases

Name of Individual or Group	Number of Options Granted		Average Per Share Exercise Price
Kevin P. Connors
President and Chief Executive Officer		91,000	$	6.88
Ronald J. Santilli
Executive Vice President and Chief Financial Officer		32,500	$	6.88
Leonard C. DeBenedictis
Chief Technology Officer		30,000	$	6.88
All Named Executive Officers as a group		153,500	$	6.88
All directors who are not Named Executive Officers, as a group		—	$	—
All employees who are not Named Executive Officers, as a group		768,000	$	7.07

Name	Age		Position(s)
Kevin P. Connors		48	51	President, Chief Executive Officer and Director
Ronald J. Santilli		50	53	Executive Vice President and Chief Financial Officer
Leonard C. DeBenedictis	72		Former Chief Technology Officer

Names	Stock Option Awards: Number of Securities Underlying Options		Number of Restricted Stock Unit Awards – Shares (1)		Number of Performance Share Unit Awards- Shares(2)		Exercise Price for Stock Options and Base Price of RSU and PSU Awards		Grant Date Fair Value of All Equity Award
Mr. Connors		91,000		—		36,000	$	6.88	$	466,016
Mr. Santilli		32,500		6,250		6,250	$	6.88	$	163,977
Mr. DeBenedictis		30,000		8,000			$	6.88	$	127,019

	Number of Shares of Common Stock that Would be Paid Out on June 1, 2013
Name	At 50% of Target Performance*		At 100% of Target Performance*		At 150% of Target Performance*
Kevin J. Connors		18,000		36,000		54,000
Ronald J. Santilli		3,125		6,250		9,375

Name	Estimated Total Value of Cash Payment		Estimated Total Value of Health Coverage Continuation
Kevin P. Connors	$	840,000	$	14,616
Ronald J. Santilli	$	290,000	$	20,652

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		2,692,555	$	10.87		1,840,381
Equity compensation plan not approved by security holders		—		—		—
Total		2,692,555	$	10.87		1,840,381

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted- average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		3,788,239	$	9.44		1,644,356
Equity compensation plan not approved by security holders		—		—		—
Total		3,788,239	$	9.44		1,644,356

Executive Officer		Stock Ownership Guideline (as a multiple of base salary)
Chief Executive Officer		Three times
Other Executive Officers		One time

Name and Principal Position	Salary		Bonus(1)			Option Awards(2)		Stock Awards(2)		Non-Equity Incentive Plan Compensation			All Other Compensation			Total
Kevin P. Connors
President and Chief Executive Officer
2012	$	428,750	$	569,048		$	218,336	$	247,680	$	―		$	23,520	(5)	$	1,487,334
2011		420,000		―			359,508		95,920		226,365	(3)		―			1,101,793
2010		420,000		―			391,852		337,920		―			―			1,149,772

Ronald J. Santilli
Executive Vice President and Chief Financial Officer
2012	$	301,667	$	247,087		$	77,977	$	86,000	$	―		$	15,032	(5)	$	727,763
2011		290,000		―			239,672		65,400		117,389	(3)		—			712,461
2010		290,000		―			171,266		225,280		―			―			686,546

Leonard C. DeBenedictis
Former Chief Technology Officer
2012	$	227,500	$	128,829		$	71,979	$	55,040	$	—		$	336,000	(6)	$	819,348
2011		312,000		50,550	(4)		460,686		32,700		140,249	(3)		—			996,185
2010		—		—			—		―		—			—			—

Name and Principal Position	Salary		Bonus(1)		Option and Stock Awards (2)		Non-Equity Incentive Plan Compensation (3)		All Other Compensation (4)		Total
Kevin P. Connors President and Chief Executive Officer
2009	$	420,000	$	18,454	$	481,284	$	―	$	―	$	919,738
2008		420,000		53,086		708,145		6,852		10,817		1,198,900
2007		390,833		258,267		444,608		7,725		10,358		1,111,791
Ronald J. Santilli Executive Vice President and Chief Financial Officer
2009	$	290,000	$	10,012	$	220,589	$	―	$	—	$	520,601
2008		290,000		28,513		339,765		—		10,350		668,628
2007		267,083		134,795		244,534		—		10,358		656,770

		Estimated Future Payouts Under Non-Equity Incentive Plan Awards						All Other Option Awards: Number of Securities Underlying		Exercise or Base Price of Option		Grant Date Fair Value of Stock Option
Name	Grant Date	Threshold		Target		Maximum		Options		Awards (2)		Awards (1)
Kevin P. Connors President and Chief Executive Officer	06/08/2009		—		—		—		120,000		$8.66		481,284
Ronald J. Santilli Executive Vice President and Chief Financial Officer	06/08/2009		—		—		—		55,000		$8.66		220,589

Name	Grant Date	Estimated Future Payouts Under Non-Equity Incentive Plan Awards						All Other Stock Awards: Number of Shares of Stock or Units		All Other Option Awards: Number of Securities Underlying Options		Exercise or Base Price of Option Awards (1)		Grant Date Fair Value of Stock and Option Awards (2)
Name	Grant Date	Threshold		Target		Maximum		All Other Stock Awards: Number of Shares of Stock or Units				Exercise or Base Price of Option Awards (1)		Grant Date Fair Value of Stock and Option Awards (2)

Mr. Connors	07/27/2012		—		—		—		36,000		91,000	$	6.88	$	466,016

Mr. Santilli	07/27/2012		—		—		—		12,500		32,500	$	6.88	$	163,977

Mr. DeBenedictis..	07/27/2012	__		__		__			8,000		30,000	$	6.88	$	127,019