Amendment of Investor Rights Agreement

On March 31, 2009 (the "Effective Date"), IRIDEX Corporation (the "Company") and each of BlueLine Capital Partners, LP, BlueLine Capital Partners II, LP and BlueLine Capital Partners III, LP (collectively, the "BlueLine Entities") entered into an amendment (the "Amendment") to that certain Investor Rights Agreement, dated as of August 27, 2007 (the "Rights Agreement"), by and among the Company and the BlueLine Entities. As previously disclosed, the Rights Agreement entitled the BlueLine Entities to certain registration rights, including the obligation by the Company to file a Form S-3 registration statement within 90 days of the Company becoming eligible to file a Form S-3 registration statement and the right of the BlueLine Entities to request that the Company file a Form S-1 registration statement any time after February 29, 2008.

Pursuant to the Amendment, the BlueLine Entities waived any right to receive liquidated damages relating to any breaches of the Rights Agreement prior to the Effective Date and waived the Company's obligation to file a registration statement on Form S-3 until such time, on or after June 30, 2009, as the holders of 60% of the Registrable Securities (as defined in the Rights Agreement) request such registration in writing. The Amendment also amended the Right Agreement so as to include the shares of common stock issuable upon exercise of the Warrants (as defined below) in the shares eligible for registration under the Rights Agreement.

The foregoing descriptions of the Rights Agreement and the Amendment do not purport to be complete and are qualified in their entirety by the Rights Agreement, a copy of which is filed as Exhibit 4.2 to the Current Report on Form 8-K filed on September 7, 2007, and the Amendment, a copy of which is filed as Exhibit 4.1 hereto, each of which is incorporated herein by reference.

Issuance of Warrants

In order to induce the BlueLine Entities' to enter into the Amendment, on the Effective Date, the Company issued to the BlueLine Entities warrants to purchase an aggregate of 20,000 shares of the Company's common stock at an exercise price of $0.01 per share (the "Warrants"). The Warrants will expire on September 30, 2009. The issuance of the Warrants was unregistered and was exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") pursuant to Section 4(2) of the Securities Act.

The foregoing description of the Warrants does not purport to be complete and is qualified in its entirety by the Warrants, copies of which are filed as Exhibits 4.3, 4.4 and 4.5 hereto and which are incorporated herein by reference.

(d) Exhibits

Exhibit No.    Description

    4.1        Amendment No. 1 to Investor Rights Agreement, dated as of March 31, 2009

    4.2        Investor Rights Agreement dated August 31, 2007 by and among BlueLine
               Capital Partners, LP; BlueLine Capital Partners III, LP; BlueLine
               Capital Partners II, LP and IRIDEX Corporation (incorporated by
               reference to Exhibit 4.2 to the Current Report on Form 8-K filed on
               September 7, 2007).

    4.3        Common Stock Purchase Warrant, dated March 31, 2009, issued to BlueLine
               Capital Partners, LP

    4.4        Common Stock Purchase Warrant, dated March 31, 2009, issued to BlueLine
               Capital Partners II, LP

    4.5        Common Stock Purchase Warrant, dated March 31, 2009, issued to BlueLine
               Capital Partners III, LP