IRIDEX CORPORATION SEPARATION AGREEMENT AND RELEASE

Exhibit 10.9

IRIDEX CORPORATION

SEPARATION AGREEMENT AND RELEASE

     This Separation Agreement and Release (“Agreement”) is made by and between Barry Caldwell (“Employee”) and IRIDEX Corporation (the “Company”) (collectively referred to as the “Parties” or individually referred to as a “Party”).

     WHEREAS, Employee was employed by the Company;

     WHEREAS, Employee signed an At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement with the Company on July 5, 2005 (the “Confidentiality Agreement”);

     WHEREAS, the Company and Employee have entered into (i) a stock option agreement (the “Stock Option Agreement”) dated July 5, 2005 issued pursuant to the Company’s 1998 Stock Plan, pursuant to which Employee was granted the option to purchase up to 65,896 shares of the Company’s Common Stock subject to the terms and conditions of the Company’s 1998 Stock Plan and the Stock Option Agreement, (ii) the Caldwell Inducement Grant Stock Option Agreement dated July 5, 2005, pursuant to which Employee was granted the option to purchase up to 234,104 shares of the Company’s Common Stock granting Employee the option to purchase shares of the Company’s common stock (the “Inducement Option” and, collectively with the Stock Option Agreement, the “Stock Agreements”), and (iii) a Change of Control and Severance Agreement dated July 5, 2005 (the “Change of Control and Severance Agreement”);

     WHEREAS, Employee resigned all positions as an officer, director and employee with the Company effective as of October 16, 2007 (the “Termination Date”); and

     WHEREAS, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that the Employee may have against the Company and any of the Releasees (as defined below), including, but not limited to, any and all claims arising out of or in any way related to Employee’s employment with or separation from the Company.

     NOW, THEREFORE, in consideration of the mutual promises made herein, the Company and Employee hereby agree as follows:

     1.  Consideration .

          a.  Amendments to Stock Agreements . The Company and Employee hereby agree that the Stock Agreements shall be amended as described below, effective as of the Effective Date (as defined below):

               i.  Extension of Exercise Period . The provision titled “Termination Period” in each of the Stock Option Agreement and the Inducement Option Agreement is hereby amended to provide that the option governed by each such agreement may be exercised for a period of 18 months following the Termination Date, rather than 90 days following termination.

               ii. Definition of Service Provider . The definition of “Service Provider” contained in the Inducement Option Agreement and as used in the Stock Option Agreement (by

reference to the Company’s 1998 Stock Plan, which shall not be effected by this Agreement) is hereby amended to read as follows: “ “ Service Provider ” means an Employee or Director.”

               iii.  Vested Options . The Parties agree that for purposes of determining the number of shares of the Company’s common stock that Employee is entitled to purchase from the Company, pursuant to the exercise of outstanding options, Employee will be considered to have vested up to and through November 5, 2007. Employee acknowledges that as of the November 5, 2007, Employee will have vested in 175,002 options and no more.

          b.  Consulting Agreement . The Company and Employee hereby agree to enter into a consulting agreement in substantially the form attached hereto as Exhibit A (the “Consulting Agreement”), pursuant to which Employee will provide the consulting services described therein for a period of three (3) months in exchange for the Company’s payment of a monthly consulting fee equal to $20,000, on the terms and subject to the conditions set forth in the Consulting Agreement.

          c.  COBRA Payments . If Employee properly elects continuation coverage under the Company’s group health plan pursuant to Sections 601 through 607 of the Employee Retirement Income Security Act of 1974, as amended (“COBRA”), the Company will pay the full COBRA premium on behalf of Employee and his enrolled family members for the period beginning on the Effective Date, and ending on the earlier of (a) the three (3) month anniversary of the Effective Date, (b) the termination of the Consulting Agreement, (c) the date Employee first becomes eligible for coverage under any group health plan maintained by another employer of Employee or his spouse, or (d) the date such COBRA continuation coverage otherwise terminates as to Employee under the provisions of the Company’s group health plan. Nothing herein shall be deemed to extend the otherwise applicable maximum period in which COBRA continuation coverage is provided or supersede the plan provisions relating to early termination of such COBRA continuation coverage.

          d.  Personal Computer . Employee may retain his current personal computer environment that was provided to him by the Company for his use during his employment with the Company; provided , however , that Employee shall return the personal computer to the Company on or before the termination of the Consulting Agreement, so that the Company may remove any confidential or proprietary information belonging to the Company and any computer programs that are licensed to the Company. Employee covenants and agrees that he will not make or retain copies of any such information. To ensure that all of its confidential and proprietary information and/or computer programs have been removed from the Employee’s personal computer, the Company may, at its sole option, exchange the hard drive contained in the laptop computer for a new hard drive provided that the new hard drive has at least the same processing speed, memory capacity, and other similar characteristics.

     2.  Benefits . Employee’s health insurance benefits shall cease on the last day of October 2007, subject to Employee’s right to continue his/her health insurance under COBRA. Employee’s participation in all benefits and incidents of employment, including, but not limited to the accrual of bonuses, vacation, and paid time off, ceased as of the Termination Date; provided , however , that pursuant to Section 1.a.iii. above, Employee will be considered to have vested in the shares covered by the Stock Agreements up to and through November 5, 2007.

     3.  Payment of Salary and Receipt of All Benefits . Employee acknowledges and represents that (a) other than the consideration set forth in this Agreement, the Company has paid or provided all

salary, wages, bonuses, accrued vacation/paid time off, housing allowances, relocation costs, interest, severance, outplacement costs, fees, reimbursable expenses for which reimbursement documentation has been submitted to the Company, commissions, stock, stock options, vesting, and any and all other benefits and compensation due to Employee and (b) Employee is not entitled to and will not receive any benefits pursuant to the Change of Control and Severance Agreement. Notwithstanding the foregoing, the Parties hereby agree that in the event that Employee has any validly reimbursable expenses outstanding as of the date hereof for which reimbursement documentation has not previously been submitted to the Company, Employee shall submit such reimbursement documentation as soon as reasonably practicable following the date hereof and the Company shall reimburse such amounts pursuant to its standard expense reimbursement policies.

     4.  Release of Claims . Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Employee by the Company and its current and former officers, directors, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, plan administrators, insurers, divisions, and subsidiaries, and predecessor and successor corporations and assigns (collectively, the “Releasees”). Employee, on his own behalf and on behalf of his respective heirs, family members, executors, agents, and assigns, hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the Effective Date of this Agreement, including, without limitation:

          a. any and all claims relating to or arising from Employee’s employment relationship with the Company and the termination of that relationship;

          b. any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

          c. any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits;

          d. any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Labor Standards Act, except as prohibited by law; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act, except as prohibited by law; the Sarbanes-Oxley Act of 2002; the Uniformed Services Employment and Reemployment Rights Act; the California Family Rights Act; the

California Labor Code, except as prohibited by law; the California Workers’ Compensation Act, except as prohibited by law; and the California Fair Employment and Housing Act;

          e. any and all claims for violation of the federal or any state constitution;

          f. any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

          g. any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Employee as a result of this Agreement; and

          h. any and all claims for attorneys’ fees and costs.

Employee agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any obligations incurred under this Agreement. This release does not release claims that cannot be released as a matter of law, including, but not limited to: (1) Employee’s right to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, against the Company (with the understanding that any such filing or participation does not give Employee the right to recover any monetary damages against the Company; Employee’s release of claims herein bars Employee from recovering such monetary relief from the Company); (2) claims under Division 3, Article 2 of the California Labor Code (which includes California Labor Code section 2802 regarding indemnity for necessary expenditures or losses by employee); and (3) claims prohibited from release as set forth in California Labor Code section 206.5 (specifically “any claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of such wages has been made”).

     5. Acknowledgment of Waiver of Claims under ADEA . Employee acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary. Employee agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Employee acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that he has been advised by this writing that: (a) he should consult with an attorney prior to executing this Agreement; (b) he has twenty-one (21) days within which to consider this Agreement; (c) he has seven (7) days following his execution of this Agreement to revoke this Agreement; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law. In the event Employee signs this Agreement and returns it to the Company in less than the 21-day period identified above, Employee hereby acknowledges that he has freely and voluntarily chosen to waive the time period allotted for considering this Agreement.

     6.  California Civil Code Section 1542 . Employee acknowledges that he has been advised to consult with legal counsel and is familiar with the provisions of California Civil Code Section 1542, a statute that otherwise prohibits the release of unknown claims, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

     Employee, being aware of said code section, agrees to expressly waive any rights he/she may have thereunder, as well as under any other statute or common law principles of similar effect.

     7.  No Pending or Future Lawsuits . Employee represents that he has no lawsuits, claims, or actions pending in his name, or on behalf of any other person or entity, against the Company or any of the other Releasees. Employee also represents that he does not intend to bring any claims on his own behalf or on behalf of any other person or entity against the Company or any of the other Releasees.

     8.  Application for Employment . Employee understands and agrees that, as a condition of this Agreement, Employee shall not be entitled to any employment with the Company, and Employee hereby waives any right, or alleged right, of employment or re-employment with the Company. Employee further agrees not to apply for employment with the Company.

     9.  Confidentiality . Employee agrees to maintain in complete confidence the existence of this Agreement, the contents and terms of this Agreement, and the consideration for this Agreement (hereinafter collectively referred to as “Separation Information”). Except as required by law, Employee may disclose Separation Information only to his immediate family members, the court in any proceedings to enforce the terms of this Agreement, Employee’s undersigned counsel, and Employee’s accountant and any professional tax advisor to the extent that they need to know the Separation Information in order to provide advice on tax treatment or to prepare tax returns, and must prevent disclosure of any Separation Information to all other third parties. Employee agrees that he will not publicize, directly or indirectly, any Separation Information.

     10.  Trade Secrets and Confidential Information/Company Property . Employee reaffirms and agrees to observe and abide by the terms of the Confidentiality Agreement, specifically including the provisions therein regarding non-disclosure of the Company’s trade secrets and confidential and proprietary information, and non-solicitation of Company employees. Employee’s signature below constitutes his certification under penalty of perjury that he has returned all documents and other items provided to Employee by the Company, developed or obtained by Employee in connection with his employment with the Company, or otherwise belonging to the Company.

     11.  No Cooperation . Employee agrees not to act in any manner that might damage the business of the Company. Employee further agrees that he will not knowingly encourage, counsel, or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against any of the Releasees, unless under a subpoena or other court order to do so or as related directly to the ADEA waiver in this Agreement. Employee agrees both to immediately notify the Company upon receipt of any such subpoena or court

order, and to furnish, as soon as practicable and, in any case, within three (3) business days of its actual receipt by Employee or his obtaining knowledge thereof, a copy of such subpoena or other court order. If approached by anyone for counsel or assistance in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints against any of the Releasees, Employee shall state no more than that he/she cannot provide counsel or assistance.

     12.  Non-Disparagement . Employee agrees to refrain from any disparagement, defamation, libel, or slander of any of the Releasees, and agrees to refrain from any tortious interference with the contracts and relationships of any of the Releasees. Employee shall direct any inquiries by potential future employers to the Company’s human resources department, which shall use its best efforts to provide only the Employee’s last position and dates of employment. Company agrees to refrain from any disparagement, defamation, libel, or slander of Employee, and agrees to refrain from any tortious interference with the contracts and relationships of Employee.

     13.  Breach . Employee acknowledges and agrees that any material breach of this Agreement, unless such breach constitutes a legal action by Employee challenging or seeking a determination in good faith of the validity of the waiver herein under the ADEA, or of any provision of the Confidentiality Agreement shall entitle the Company immediately to recover and/or cease providing the consideration provided to Employee under this Agreement, except as provided by law. Except as provided by law, Employee shall also be responsible to the Company for all costs, attorneys’ fees, and any and all damages incurred by the Company in (a) enforcing Employee’s obligations under this Agreement or the Confidentiality Agreement, including the bringing of any action to recover the consideration, and (b) defending against a claim or suit brought or pursued by Employee in violation of the terms of this Agreement.

     14.  No Admission of Liability . Employee understands and acknowledges that this Agreement constitutes a compromise and settlement of any and all actual or potential disputed claims by Employee. No action taken by the Company hereto, either previously or in connection with this Agreement, shall be deemed or construed to be (a) an admission of the truth or falsity of any actual or potential claims or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to Employee or to any third party.

     15.  Non-Solicitation . Employee agrees that for a period of twelve (12) months immediately following the Effective Date of this Agreement, Employee shall not directly or indirectly solicit any of the Company’s employees to leave their employment at the Company. For purposes of this paragraph, the term “solicit” shall be deemed not to include advertisements or other generalized employment searches, including advertisements in various media (including trade media) or any job posting system, not specifically directed to employees of the Company and shall not include any action by Employee following any response by any person to such advertisements or generalized searches or any communication initiated by such person and not by Employee.

     16.  Costs . The Parties shall each bear their own costs, attorneys’ fees, and other fees incurred in connection with the preparation of this Agreement.

     17.  ARBITRATION . THE PARTIES AGREE THAT ANY AND ALL DISPUTES ARISING OUT OF THE TERMS OF THIS AGREEMENT, THEIR INTERPRETATION, AND ANY OF THE MATTERS HEREIN RELEASED, SHALL BE SUBJECT TO ARBITRATION IN SANTA CLARA COUNTY, BEFORE JAMS, PURSUANT TO ITS EMPLOYMENT ARBITRATION RULES

& PROCEDURES (“JAMS RULES”). THE ARBITRATOR MAY GRANT INJUNCTIONS AND OTHER RELIEF IN SUCH DISPUTES. THE ARBITRATOR SHALL ADMINISTER AND CONDUCT ANY ARBITRATION IN ACCORDANCE WITH CALIFORNIA LAW, INCLUDING THE CALIFORNIA CODE OF CIVIL PROCEDURE, AND THE ARBITRATOR SHALL APPLY SUBSTANTIVE AND PROCEDURAL CALIFORNIA LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO ANY CONFLICT-OF-LAW PROVISIONS OF ANY JURISDICTION. TO THE EXTENT THAT THE JAMS RULES CONFLICT WITH CALIFORNIA LAW, CALIFORNIA LAW SHALL TAKE PRECEDENCE. THE DECISION OF THE ARBITRATOR SHALL BE