Exhibit 10.6

 

2005 STOCK INCENTIVE PLAN

 

OF

 

PEOPLE'S LIBERATION, INC.

 

As Amended and Restated effective June 13, 2008

 

 

 

SECTION 1: GENERAL PURPOSE OF PLAN

 

The name of this plan is the 2005 Stock Incentive Plan (the "PLAN"). The purpose
of the Plan is to enable Century Pacific Financial Corporation, a Delaware
corporation (the “COMPANY"), and any Parent or any Subsidiary to obtain and
retain the services of the types of Employees, Consultants and Directors who
will contribute to the Company's long range success and to provide incentives
which are linked directly to increases in share value which will inure to the
benefit of all shareholders of the Company.

 

SECTION 2: DEFINITIONS

 

For purposes of the Plan, the following terms shall be defined as set forth
below:

 

"ADMINISTRATOR" shall have the meaning as set forth in SECTION 3, hereof.

 

"BOARD" means the Board of Directors of the Company.

 

"CAUSE" means (i) failure by an Eligible Person to substantially perform his or
her duties and obligations to the Company (other than any such failure resulting
from his or her incapacity due to physical or mental illness); (ii) engaging in
misconduct or a fiduciary breach which is or potentially is materially injurious
to the Company or its shareholders; (iii) commission of a felony; (iv) the
commission of a crime against the Company which is or potentially is materially
injurious to the Company; or (v) as otherwise provided in the Stock Option
Agreement or Stock Purchase Agreement. For purposes of this Plan, the existence
of Cause shall be determined by the Administrator in its sole discretion.

 

"CHANGE IN CONTROL" shall mean:

 

a) The consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if more than 80% of the
combined voting power (which voting power shall be calculated by assuming the
conversion of all equity securities convertible (immediately or at some future
time) into shares entitled to vote, but not assuming the exercise of any warrant
or right to subscribe to or purchase those shares) of the continuing or
Surviving Entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned, directly or indirectly, by
persons who were not shareholders of the Company immediately prior to such
merger, consolidation or other reorganization; PROVIDED, HOWEVER, that in making
the determination of ownership by the shareholders of the Company, immediately
after the reorganization, equity securities which persons own immediately before
the reorganization as shareholders of another party to the transaction shall be
disregarded; or

 

 

 

 

b) The sale, transfer or other disposition of all or substantially all of the
Company's assets.

 

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.

 

"CODE" means the Internal Revenue Code of 1986, as amended from time to time.

 

"COMMITTEE" means a committee of the Board designated by the Board to administer
the Plan.

 

"COMPANY" means People's Liberation, Inc., a corporation organized under the
laws of the State of Delaware (or any successor corporation).

 

"CONSULTANT" means a consultant or advisor who is a natural person and who
provides bona fide services to the Company, a Parent or a Subsidiary; provided
such services are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Company's securities.

 

"DATE OF GRANT" means the date on which the Administrator adopts a resolution
expressly granting a Right to a Participant or, if a different date is set forth
in such resolution as the Date of Grant, then such date as is set forth in such
resolution.

 

"DIRECTOR" means a member of the Board.

 

"DISABILITY" means that the Optionee is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment; provided, however, for purposes of determining the term of an ISO
pursuant to SECTION 6.6 hereof, the term Disability shall have the meaning
ascribed to it under Code Section 22(e)(3). The determination of whether an
individual has a Disability shall be determined under procedures established by
the Plan Administrator.

 

"ELIGIBLE PERSON" means an Employee, Consultant or Director of the Company, any
Parent or any Subsidiary.

 

"EMPLOYEE" shall mean any individual who is a common-law employee (including
officers) of the Company, a Parent or a Subsidiary.

 

"EXERCISE PRICE" shall have the meaning set forth in SECTION 6.3 hereof.

 

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

 

 

 

 

"FAIR MARKET VALUE" shall mean the fair market value of a Share, determined as
follows: (i) if the Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market,
the Fair Market Value of a share of Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
system or exchange (or the exchange with the greatest volume of trading in the
Stock) on the last market trading day prior to the day of determination, as
reported in the WALL STREET JOURNAL or such other source as the Administrator
deems reliable; (ii) if the Stock is quoted on the Nasdaq System (but not on the
Nasdaq National Market) or any similar system whereby the stock is regularly
quoted by a recognized securities dealer but closing sale prices are not
reported, the Fair Market Value of a share of Stock shall be the mean between
the bid and asked prices for the Stock on the last market trading day prior to
the day of determination, as reported in the WALL STREET JOURNAL or such other
source as the Administrator deems reliable; or (iii) in the absence of an
established market for the Stock, the Fair Market Value shall be determined in
good faith by the Administrator and such determination shall be conclusive and
binding on all persons.

 

"ISO" means a Stock Option intended to qualify as an "incentive stock option" as
that term is defined in Section 422(b) of the Code.

 

"NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an Employee of
the Company, a Parent or Subsidiary, who satisfies the requirements of such term
as defined in Rule 16b-3(b)(3)(i) promulgated by the Securities and Exchange
Commission.

 

"NON-QUALIFIED STOCK OPTION" means a Stock Option not described in Section
422(b) of the Code.

 

"OFFEREE" means a Participant who is granted a Purchase Right pursuant to the
Plan.

 

"OPTIONEE" means a Participant who is granted a Stock Option pursuant to the
Plan.

 

"OUTSIDE DIRECTOR" means a member of the Board who is not an Employee of the
Company, a Parent or Subsidiary, who satisfies the requirements of such term as
defined in Treasury Regulations (26 Code of Federal Regulation Section
1.162-27(e)(3)).

 

"PARENT" means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain. A
corporation that attains the status of a Parent on a date after the adoption of
the Plan shall be considered a Parent commencing as of such date.

 

"PARTICIPANT" means any Eligible Person selected by the Administrator, pursuant
to the Administrator's authority in SECTION 3, to receive grants of Rights.

 

"PLAN" means this 2005 Stock Incentive Plan, as the same may be amended or
supplemented from time to time.

 

"PURCHASE PRICE" shall have the meaning set forth in SECTION 7.3.

 

"PURCHASE RIGHT" means the right to purchase Stock granted pursuant to SECTION
7.

 

"RIGHTS" means Stock Options and Purchase Rights.

 

 

 

 

"REPURCHASE RIGHT" shall have the meaning set forth in SECTION 8.7 of the Plan.

 

"SERVICE" shall mean service as an Employee, Director or Consultant.

 

"STOCK" means Common Stock, par value $0.001 per share, of the Company.

 

"STOCK OPTION" or "OPTION" means an option to purchase shares of Stock granted
pursuant to SECTION 6.

 

"STOCK OPTION AGREEMENT" shall have the meaning set forth in SECTION

 

6.1.

 

"STOCK PURCHASE AGREEMENT" shall have the meaning set forth in SECTION

 

7.1.

 

"SUBSIDIARY" means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company, if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a
Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.

 

"SURVIVING ENTITY" means the Company if immediately following any merger,
consolidation or similar transaction, the holders of outstanding voting
securities of the Company immediately prior to the merger or consolidation own
equity securities possessing more than 50% of the voting power of the
corporation existing following the merger, consolidation or similar transaction.
In all other cases, the other entity to the transaction and not the Company
shall be the Surviving Entity. In making the determination of ownership by the
shareholders of an entity immediately after the merger, consolidation or similar
transaction, equity securities which the shareholders owned immediately before
the merger, consolidation or similar transaction as shareholders of another
party to the transaction shall be disregarded. Further, outstanding voting
securities of an entity shall be calculated by assuming the conversion of all
equity securities convertible (immediately or at some future time) into shares
entitled to vote.

 

"TEN PERCENT SHAREHOLDER" means a person who on the Date of Grant owns, either
directly or through attribution as provided in Section 424 of the Code, Stock
constituting more than 10% of the total combined voting power of all classes of
stock of his or her employer corporation or of any Parent or Subsidiary.

 

SECTION 3: ADMINISTRATION

 

3.1. ADMINISTRATOR. The Plan shall be administered by either (i) the Board or
(ii) the Committee (the group that administers the Plan is referred to as the
"ADMINISTRATOR").

 

3.2. POWERS IN GENERAL. The Administrator shall have the power and authority to
grant to Eligible Persons, pursuant to the terms of the Plan, (i) Stock Options,
(ii) Purchase Rights or (iii) any combination of the foregoing.

 

 

 

 

3.3. SPECIFIC POWERS. In particular, the Administrator shall have the authority:
(i) to construe and interpret the Plan and apply its provisions; (ii) to
promulgate, amend and rescind rules and regulations relating to the
administration of the Plan; (iii) to authorize any person to execute, on behalf
of the Company, any instrument required to carry out the purposes of the Plan;
(iv) to determine when Rights are to be granted under the Plan; (v) from time to
time to select, subject to the limitations set forth in this Plan, those
Eligible Persons to whom Rights shall be granted; (vi) to determine the number
of shares of Stock to be made subject to each Right; (vii) to determine whether
each Stock Option is to be an ISO or a Non-Qualified Stock Option; (viii) to
prescribe the terms and conditions of each Stock Option and Purchase Right,
including, without limitation, the Exercise Price, Purchase Price and medium of
payment, vesting provisions and repurchase provisions, and to specify the
provisions of the Stock Option Agreement or Stock Purchase Agreement relating to
such grant or sale; (ix) to amend any outstanding Rights for the purpose of
modifying the time or manner of vesting, the Purchase Price or Exercise Price,
as the case may be, subject to applicable legal restrictions and to the consent
of the other party to such agreement; (x) to determine the duration and purpose
of leaves of absences which may be granted to a Participant without constituting
termination of their employment for purposes of the Plan; (xi) to make decisions
with respect to outstanding Stock Options that may become necessary upon a
change in corporate control or an event that triggers anti-dilution adjustments;
(xii) to the extent permitted by law, by resolution adopted by the Board, to
authorize one or more officers of the Company to do one or both of the
following: (a) designate eligible officers and employees of the Company or any
of its subsidiaries to be recipients of Awards and (b) determine the number of
such Awards to be received by such officers and employees, provided that the
resolution so authorizing such officer or officers shall specify the total
number of Awards such officer or officers may award; and (xiii) to make any and
all other determinations which it determines to be necessary or advisable for
administration of the Plan.

 

3.4. DECISIONS FINAL. All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final and binding on the Company and the
Participants.

 

3.5. THE COMMITTEE. The Board may, in its sole and absolute discretion, from
time to time, and at any period of time during which the Company's Stock is
registered pursuant to Section 12 of the Exchange Act shall, delegate any or all
of its duties and authority with respect to the Plan to the Committee whose
members are to be appointed by and to serve at the pleasure of the Board. From
time to time, the Board may increase or decrease the size of the Committee, add
additional members to, remove members (with or without cause) from, appoint new
members in substitution therefor, and fill vacancies, however caused, in the
Committee. The Committee shall act pursuant to a vote of the majority of its
members or, in the case of a committee comprised of only two members, the
unanimous consent of its members, whether present or not, or by the unanimous
written consent of the majority of its members and minutes shall be kept of all
of its meetings and copies thereof shall be provided to the Board. Subject to
the limitations prescribed by the Plan and the Board, the Committee may
establish and follow such rules and regulations for the conduct of its business
as it may determine to be advisable. During any period of time during which the
Company's Stock is registered pursuant to Section 12 of the Exchange Act, all
members of the Committee shall be Non-Employee Directors and Outside Directors.

 

 

 

 

3.6. INDEMNIFICATION. In addition to such other rights of indemnification as
they may have as Directors or members of the Committee, and to the extent
allowed by applicable law, the Administrator and each of the Administrator's
consultants shall be indemnified by the Company against the reasonable expenses,
including attorney's fees, actually incurred in connection with any action, suit
or proceeding or in connection with any appeal therein, to which the
Administrator or any of its consultants may be party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted under the Plan, and against all amounts paid by the Administrator or any
of its consultants in settlement thereof (provided that the settlement has been
approved by the Company, which approval shall not be unreasonably withheld) or
paid by the Administrator or any of its consultants in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Administrator or any of its consultants did not act in good faith and in a
manner which such person reasonably believed to be in the best interests of the
Company, and in the case of a criminal proceeding, had no reason to believe that
the conduct complained of was unlawful; PROVIDED, HOWEVER, that within 60 days
after institution of any such action, suit or proceeding, such Administrator or
any of its consultants shall, in writing, offer the Company the opportunity at
its own expense to handle and defend such action, suit or proceeding.

 

SECTION 4: STOCK SUBJECT TO THE PLAN

 

4.1. STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided in SECTION 9,
5,500,000 shares of Common Stock shall be reserved and available for issuance
under the Plan. Stock reserved hereunder may consist, in whole or in part, of
authorized and unissued shares or treasury shares.

 

4.2. BASIC LIMITATION. The maximum number of shares with respect to which
Options, awards or sales of Stock may be granted under the Plan to any
Participant in any one calendar year shall be 1,000,000 shares. The number of
shares that are subject to Rights under the Plan shall not exceed the number of
shares that then remain available for issuance under the Plan. The Company,
during the term of the Plan, shall at all times reserve and keep available a
sufficient number of shares to satisfy the requirements of the Plan.

 

4.3. ADDITIONAL SHARES. In the event that any outstanding Option or other right
for any reason expires or is canceled or otherwise terminated, the shares
allocable to the unexercised portion of such Option or other right shall again
be available for the purposes of the Plan. In the event that shares issued under
the Plan are reacquired by the Company pursuant to the terms of any forfeiture
provision or right of repurchase, such shares shall again be available for the
purposes of the Plan.

 

 

 

 

SECTION 5: ELIGIBILITY

 

Eligible Persons who are selected by the Administrator shall be eligible to be
granted Rights hereunder subject to limitations set forth in this Plan;
PROVIDED, HOWEVER, that only Employees shall be eligible to be granted ISOs
hereunder.

 

SECTION 6: TERMS AND CONDITIONS OF OPTIONS

 

6.1. STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the Company (the
"STOCK OPTION AGREEMENT"). Such Option shall be subject to all applicable terms
and conditions of the Plan and may be subject to any other terms and conditions
which are not inconsistent with the Plan and which the Administrator deems
appropriate for inclusion in a Stock Option Agreement. The provisions of the
various Stock Option Agreements entered into under the Plan need not be
identical.

 

6.2. NUMBER OF SHARES. Each Stock Option Agreement shall specify the number of
shares of Stock that are subject to the Option and shall provide for the
adjustment of such number in accordance with SECTION 9, hereof. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Non-Qualified
Stock Option.

 

6.3. EXERCISE PRICE.

 

6.3.1 IN GENERAL. Each Stock Option Agreement shall state the price at which
shares subject to the Stock Option may be purchased (the "EXERCISE PRICE"),
which shall be not less than 100% of the Fair Market Value of the Stock on the
Date of Grant.

 

6.3.2 TEN PERCENT SHAREHOLDER. A Ten Percent Shareholder shall not be eligible
for designation as an Optionee or Purchaser, unless (i) the Exercise Price of a
Non-Qualified Stock Option is at least 110% of the Fair Market Value of a Share
on the Date of Grant, or (ii) in the case of an ISO, the Exercise Price is at
least 110% of the Fair Market Value of a Share on the Date of Grant and such ISO
by its terms is not exercisable after the expiration of five years from the Date
of Grant.

 

6.3.3 NON-APPLICABILITY. The Exercise Price restriction applicable to
Non-Qualified Stock Options required by SECTIONS 6.3.1 and 6.3.2(I) shall be
inoperative if a determination is made by counsel for the Company that such
Exercise Price restrictions are not required in the circumstances under
applicable federal or state securities laws.

 

6.3.4 PAYMENT. The Exercise Price shall be payable in a form described in
SECTION 8 hereof.

 

6.4. WITHHOLDING TAXES. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Board may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such exercise or with the disposition of
shares acquired by exercising an Option.

 

 

 

 

6.5. EXERCISABILITY. Each Stock Option Agreement shall specify the date when all
or any installment of the Option becomes exercisable. In the case of an Optionee
who is not an officer of the Company, a Director or a Consultant, an Option
shall become exercisable at least as rapidly as 20% per year over the five-year
period commencing on the Date of Grant. Subject to the preceding sentence, the
exercise provisions of any Stock Option Agreement shall be determined by the
Administrator, in its sole discretion.

 

6.6. TERM. The Stock Option Agreement shall specify the term of the Option. No
Option shall be exercised after the expiration of ten years after the date the
Option is granted. In the case of an ISO granted to a Ten Percent Shareholder,
the ISO shall not be exercised after the expiration of five years after the date
the ISO is granted. Unless otherwise provided in the Stock Option Agreement, no
Option may be exercised (i) three months after the date the Optionee's Service
with the Company, its Parent or its Subsidiaries terminates if such termination
is for any reason other than death, Disability or Cause, (ii) one year after the
date the Optionee's Service with the Company and its subsidiaries terminates if
such termination is a result of death or Disability, and (iii) if the Optionee's
Service with the Company and its Subsidiaries terminates for Cause, all
outstanding Options granted to such Optionee shall expire as of the commencement
of business on the date of such termination. The Administrator may, in its sole
discretion, waive the accelerated expiration provided for in (i) or (ii).
Outstanding Options that are not vested at the time of termination of employment
for any reason shall expire at the close of business on the date of such
termination.

 

6.7. LEAVES OF ABSENCE. For purposes of SECTION 6.6 above, to the extent
required by applicable law, Service shall be deemed to continue while the
Optionee is on a bona fide leave of absence. To the extent applicable law does
not require such a leave to be deemed to continue while the Optionee is on a
bona fide leave of absence, such leave shall be deemed to continue if, and only
if, expressly provided in writing by the Administrator or a duly authorized
officer of the Company, Parent or Subsidiary for whom Optionee provides his or
her services.

 

6.8. MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS. Within the limitations
of the Plan, the Administrator may modify, extend or assume outstanding Options
(whether granted by the Company or another issuer) or may accept the
cancellation of outstanding Options (whether granted by the Company or another
issuer) in return for the grant of new Options for the same or a different
number of shares and at the same or a different Exercise Price. Without limiting
the foregoing, the Administrator may amend a previously granted Option to fully
accelerate the exercise schedule of such Option (including without limitation,
in connection with a Change in Control). The foregoing notwithstanding, no
modification of an Option shall, without the consent of the Optionee, impair the
Optionee's rights or increase the Optionee's obligations under such Option.
However, a termination of the Option in which the Optionee receives a cash
payment equal to the difference between the Fair Market Value and the Exercise
Price for all shares subject to exercise under any outstanding Option shall not
be deemed to impair any rights of the Optionee or increase the Optionee's
obligations under such Option.

 

 

 

 

SECTION 7: TERMS AND CONDITIONS OF AWARDS OR SALES

 

7.1. STOCK PURCHASE AGREEMENT. Each award or sale of share of Stock under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Purchaser and the Company. Such award or sale
shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions which are not inconsistent with the
Plan and which the Board deems appropriate for inclusion in a Stock Purchase
Agreement. The provisions of the various Stock Purchase Agreements entered into
under the Plan need not be identical.

 

7.2. DURATION OF OFFERS. Unless otherwise provided in the Stock Purchase
Agreement, any right to acquire shares of Stock under the Plan (other than an
Option) shall automatically expire if not exercised by the Purchaser within 30
days after the grant of such right was communicated to the Purchaser by the
Company.

 

7.3. PURCHASE PRICE.

 

7.3.1 IN GENERAL. Each Stock Purchase Agreement shall state the price at which
the Stock subject to such Stock Purchase Agreement may be purchased (the
"PURCHASE PRICE"), which, with respect to Stock Purchase Rights, shall be
determined in the sole discretion of the Administrator; PROVIDED, HOWEVER, that
the Purchase Price shall be no less than 100% of the Fair Market Value of the
shares of Stock on either the Date of Grant or the date of purchase of the
Purchase Right.

 

7.3.2 TEN PERCENT STOCKHOLDERS. A Ten Percent Stockholder shall not be eligible
for designation as a Purchaser unless the Purchase Price (if any) is at least
100% of the Fair Market Value of a Share.

 

7.3.3 NON APPLICABILITY. The Purchase Price restrictions required by SECTIONS
7.3.1 and 7.3.2 shall be inoperative if a determination is made by counsel for
the Company that such Purchase Price restrictions are not required in the
circumstances under applicable federal or state securities laws.

 

7.3.4 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable in a form
described in SECTION 8.

 

7.4. WITHHOLDING TAXES. As a condition to the purchase of shares, the Purchaser
shall make such arrangements as the Board may require for the satisfaction of
any federal, state, local or foreign withholding tax obligations that may arise
in connection with such purchase.

 

 

 

 

SECTION 8: PAYMENT; RESTRICTIONS

 

8.1. GENERAL RULE. The entire Purchase Price or Exercise Price of shares issued
under the Plan shall be payable in full by, as applicable, cash or check for an
amount equal to the aggregate Purchase Price or Exercise Price for the number of
shares being purchased, or in the discretion of the Administrator, upon such
terms as the Administrator shall approve, (i) in the case of an Option, by a
copy of instructions to a broker directing such broker to sell the Stock for
which such Option is exercised, and to remit to the Company the aggregate
Exercise Price of such Options (a "CASHLESS EXERCISE"), (ii) in the case of an
Option or a sale of Stock, by paying all or a portion of the Exercise Price or
Purchase Price for the number of shares being purchased by tendering Stock owned
by the Optionee, duly endorsed for transfer to the Company, with a Fair Market
Value on the date of delivery equal to the aggregate Purchase Price of the Stock
with respect to which such Option or portion thereof is thereby exercised or
Stock acquired (a "STOCK-FOR-STOCK EXERCISE") or (iii) by a stock-for-stock
exercise by means of attestation whereby the Optionee identifies for delivery
specific shares of Stock already owned by Optionee and receives a number of
shares of Stock equal to the difference between the Option shares thereby
exercised and the identified attestation shares of Stock (an "ATTESTATION
EXERCISE").

 

8.2. WITHHOLDING PAYMENT. The Purchase Price or Exercise Price shall include
payment of the amount of all federal, state, local or other income, excise or
employment taxes subject to withholding (if any) by the Company or any parent or
subsidiary corporation as a result of the exercise of a Stock Option. The
Optionee may pay all or a portion of the tax withholding by cash or check
payable to the Company, or, at the discretion of the Administrator, upon such
terms as the Administrator shall approve, by (i) cashless exercise or
attestation exercise; (ii) stock-for-stock exercise; (iii) in the case of an
Option, by paying all or a portion of the tax withholding for the number of
shares being purchased by withholding shares from any transfer or payment to the
Optionee ("STOCK WITHHOLDING"); or (iv) a combination of one or more of the
foregoing payment methods. Any shares issued pursuant to the exercise of an
Option and transferred by the Optionee to the Company for the purpose of
satisfying any withholding obligation shall not again be available for purposes
of the Plan. The Fair Market Value of the number of shares subject to Stock
Withholding shall not exceed an amount equal to the applicable minimum required
tax withholding rates.

 

8.3. SERVICES RENDERED. At the discretion of the Administrator, shares of Stock
may be awarded under the Plan in consideration of services rendered to the
Company, a Parent or a Subsidiary prior to the award.

 

8.4. PROMISSORY NOTE. To the extent that a Stock Option Agreement or Stock
Purchase Agreement so provides, in the discretion of the Administrator, upon
such terms as the Administrator shall approve, all or a portion of the Exercise
Price or Purchase Price (as the case may be) of shares issued under the Plan may
be paid with a full-recourse promissory note; PROVIDED, HOWEVER, that payment of
any portion of the Exercise Price by promissory note shall not be permitted
where such loan would be prohibited by applicable laws, regulations and rules of
the Securities and Exchange Commission and any other governmental agency having
jurisdiction. However, in the event there is a stated par value of the shares
and applicable law requires, the par value of the shares, if newly issued, shall
be paid in cash or cash equivalents. The shares shall be pledged as security for
payment of the principal amount of the promissory note and interest thereon. The
interest rate payable under the terms of the promissory note shall not be less
than the minimum rate (if any) required to avoid the imputation of additional
interest under the Code. Subject to the foregoing, the Administrator (at its
sole discretion) shall specify the term, interest rate, amortization
requirements (if any) and other provisions of such note. Unless the
Administrator determines otherwise, shares of Stock having a Fair Market Value
at least equal to the principal amount of the loan shall be pledged by the
holder to the Company as security for payment of the unpaid balance of the loan
and such pledge shall be evidenced by a pledge agreement, the terms of which
shall be determined by the Administrator, in its discretion; PROVIDED, HOWEVER,
that each loan shall comply with all applicable laws, regulations and rules of
the Board of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.

 

 

 

 

8.5. EXERCISE/PLEDGE. To the extent that a Stock Option Agreement or Stock
Purchase Agreement so allows, in the discretion of the Administrator, upon such
terms as the Administrator shall approve, payment may be made all or in part by
the delivery (on a form prescribed by the Administrator) of an irrevocable
direction to pledge shares to a securities broker or lender approved by the
Company, as security for a loan, and to deliver all or part of the loan proceeds
to the Company in payment of all or part of the Exercise Price and any
withholding taxes.

 

8.6. WRITTEN NOTICE. The purchaser shall deliver a written notice to the
Administrator requesting that the Company direct the transfer agent to issue to
the purchaser (or to his designee) a certificate for the number of shares of
Common Stock being exercised or purchased or, in the case of a cashless exercise
or share withholding exercise, for any shares that were not sold in the cashless
exercise or withheld.

 

8.7. REPURCHASE RIGHTS. Each Stock Purchase Agreement may provide that the
Company may repurchase the Participant's Rights as provided in this SECTION 8.7
(the "REPURCHASE RIGHT").

 

a. REPURCHASE PRICE. The Repurchase Right shall be exercisable at a price equal
to the Purchase Price.

 

b. EXERCISE OF REPURCHASE RIGHT. A Repurchase Right may be exercised only within
90 days after the termination of the Participant's Service for cash or for
cancellation of indebtedness incurred in purchasing the shares; PROVIDED,
HOWEVER, the Repurchase Right shall lapse at least as rapidly as to 20% of the
Restricted Stock purchased hereunder each year over a period of five years from
the date the Restricted Stock is purchased.

 

8.8. TERMINATION OF REPURCHASE RIGHT. Each Stock Purchase Agreement shall
provide that the Repurchase Rights shall have no effect with respect to, or
shall lapse and cease to have effect when a determination is made by counsel for
the Company that such Repurchase Rights are not permitted under applicable
federal or state securities laws.

 

8.9. NO TRANSFERABILITY. Except as provided herein, a Participant may not
assign, sell or transfer Rights, in whole or in part, other than by will or by
operation of the laws of descent and distribution.

 

 

 

 

8.9.1. PERMITTED TRANSFER OF NON-QUALIFIED OPTION. The Administrator, in its
sole discretion may permit the transfer of a Non-Qualified Option (but not an
ISO or Stock Purchase Right) as follows: (i) by gift to a member of the
Participant's immediate family or (ii) by transfer by instrument to a trust
providing that the Option is to be passed to beneficiaries upon death of the
trustor (either or both (i) or (ii) referred to as a "PERMITTED TRANSFEREE").
For purposes of this SECTION 8.9.1, "IMMEDIATE FAMILY" shall mean the Optionee's
spouse (including a former spouse subject to terms of a domestic relations
order); child, stepchild, grandchild, child-in-law; parent, stepparent,
grandparent, parent-in-law; sibling and sibling-in-law, and shall include
adoptive relationships.

 

8.9.2. CONDITIONS OF PERMITTED TRANSFER. A transfer permitted under this Section
8.9 hereof may be made only upon written notice to and approval thereof by
Administrator. A Permitted Transferee may not further assign, sell or transfer
the transferred Option, in whole or in part, other than by will or by operation
of the laws of descent and distribution. A Permitted Transferee shall agree in
writing to be bound by the provisions of this Plan.

 

SECTION 9: ADJUSTMENTS; MARKET STAND-OFF

 

9.1. EFFECT OF CERTAIN CHANGES.

 

9.1.1. STOCK DIVIDENDS, SPLITS, ETC. If there is any change in the number of
outstanding shares of Stock by reason of a stock split, reverse stock split,
stock dividend, recapitalization, combination or reclassification, then (i) the
number of shares of Stock available for Rights, (ii) the number of shares of
Stock covered by outstanding Rights and (iii) the Exercise Price or Purchase
Price of any Stock Option or Purchase Right, in effect prior to such change,
shall be proportionately adjusted by the Administrator to reflect any increase
or decrease in the number of issued shares of Stock; provided, however, that any
fractional shares resulting from the adjustment shall be eliminated.

 

9.1.2. LIQUIDATION, DISSOLUTION, MERGER OR CONSOLIDATION. In the event of a
dissolution or liquidation of the Company, or any corporate separation or
division, including, but not limited to, a split-up, a split-off or a spin-off,
or a sale of substantially all of the assets of the Company; a merger or
consolidation in which the Company is not the Surviving Entity; a reverse merger
in which the Company is the Surviving Entity, but the shares of Company stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; or the transfer of more than 80% of the then outstanding voting stock
of the Company to another person or entity, then, the Company, to the extent
permitted by applicable law, but otherwise in its sole discretion may provide
for: (i) the continuation of outstanding Rights by the Company (if the Company
is the Surviving Entity); (ii) the assumption of the Plan and such outstanding
Rights by the Surviving Entity or its parent; (iii) the substitution by the
Surviving Entity or its parent of Rights with substantially the same terms for
such outstanding Rights; or (iv) the cancellation of such outstanding Rights
without payment of any consideration, provided that if such Rights would be
canceled in accordance with the foregoing, the Participant shall have the right,
exercisable during later of the ten-day period ending on the fifth day prior to
such merger or consolidation or ten days after the Administrator provides the
Rights holder a notice of cancellation, to exercise the vested of such Rights in
whole or in part, or, if provided for by the Administrator using its sole
discretion in a notice of cancellation, to exercise such Rights in whole or in
part without regard to any vesting provisions in the Rights agreement.

 

 

 

 

9.1.3. FURTHER ADJUSTMENTS. Subject to Section 9.1.2, the Administrator shall
have the discretion, exercisable at any time before a sale, merger,
consolidation, organization, liquidation or Change in Control, to take such
further action as it determines to be necessary or advisable, and fair and
equitable to Participants, with respect to Rights. Such authorized action may
include (but shall not be limited to) establishing, amending or waiving the
type, terms, conditions or duration of, or restrictions on, Rights so as to
provide for earlier, later, extended or additional time for exercise and other
modifications, and the Administrator may take such actions with respect to all
Participants, to certain categories of Participants or only to individual
Participants. The Administrator may take such action before or after granting
Rights to which the action relates and before or after any public announcement
with respect to such sale, merger, consolidation, reorganization, liquidation or
Change in Control that is the reason for such action.

 

9.1.4. PAR VALUE CHANGES. In the event of a change in the Stock of the Company
as presently constituted which is limited to a change of all of its authorized
shares with par value, into the same number of shares without par value, or a
change in the par value, the shares resulting from any such change shall be
"Stock" within the meaning of the Plan.

 

9.2. DECISION OF ADMINISTRATOR FINAL. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Administrator, whose determination in that respect shall be
final, binding and conclusive; PROVIDED, HOWEVER, that each ISO granted pursuant
to the Plan shall not be adjusted in a manner that causes such Stock Option to
fail to continue to qualify as an ISO without the prior consent of the Optionee
thereof.

 

9.3. NO OTHER RIGHTS. Except as hereinbefore expressly provided in this SECTION
9, no Participant shall have any rights by reason of any subdivision or
consolidation of shares of Company stock or the payment of any dividend or any
other increase or decrease in the number of shares of Company stock of any class
or by reason of any of the events described in SECTION 9.1, above, or any other
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class; and, except as provided in this SECTION 9,
none of the foregoing events shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Stock subject to
Rights. The grant of a Right pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structures or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or part of its
business or assets.

 

 

 

 

9.4. MARKET STAND-OFF. Each Stock Option Agreement and Stock Purchase Agreement
may provide that, in connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement
filed under the Securities Act of 1933, as amended, the Participant shall agree
not to sell, make any short sale of, loan, hypothecate, pledge, grant any option
for the repurchase of, or otherwise dispose or transfer for value or otherwise
agree to engage in any of the foregoing transactions with respect to any Stock
without the prior written consent of the Company or its underwriters, for such
period of time from and after the effective date of such registration statement
as may be requested by the Company or such underwriters (the "MARKET
STAND-OFF").

 

SECTION 10: AMENDMENT AND TERMINATION

 

The Board may amend, suspend or terminate the Plan at any time and for any
reason. At the time of such amendment, the Board shall determine, upon advice
from counsel, whether such amendment will be contingent on shareholder approval.

 

SECTION 11: GENERAL PROVISIONS

 

11.1. GENERAL RESTRICTIONS.

 

11.1.1. NO VIEW TO DISTRIBUTE. The Administrator may require each person
acquiring shares of Stock pursuant to the Plan to represent to and agree with
the Company in writing that such person is acquiring the shares without a view
towards distribution thereof. The certificates for such shares may include any
legend that the Administrator deems appropriate to reflect any restrictions on
transfer.

 

11.1.2. LEGENDS. All certificates for shares of Stock delivered under the Plan
shall be subject to such stop transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed and any applicable federal or state securities
laws, and the Administrator may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

 

11.1.3. NO RIGHTS AS SHAREHOLDER. Except as specifically provided in this Plan,
a Participant or a transferee of a Right shall have no rights as a shareholder
with respect to any shares covered by the Rights until the date of the issuance
of a Stock certificate to him or her for such shares, and no adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions of other rights for which the record date is
prior to the date such Stock certificate is issued, except as provided in
Section 9.1, hereof.

 

11.2. OTHER COMPENSATION ARRANGEMENTS. Nothing contained in this Plan shall
prevent the Board from adopting other or additional compensation arrangements,
subject to shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only in specific
cases.

 

 

 

 

11.3. DISQUALIFYING DISPOSITIONS. Any Participant who shall make a "DISPOSITION"
(as defined in Section 424 of the Code) of all or any portion of an ISO within
two years from the date of grant of such ISO or within one year after the
issuance of the shares of Stock acquired upon exercise of such ISO shall be
required to immediately advise the Company in writing as to the occurrence of
the sale and the price realized upon the sale of such shares of Stock.

 

11.4. REGULATORY MATTERS. Each Stock Option Agreement and Stock Purchase
Agreement shall provide that no shares shall be purchased or sold thereunder
unless and until (i) any then applicable requirements of state or federal laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel and (ii) if required to do so by the Company, the
Optionee or Offeree shall have executed and delivered to the Company a letter of
investment intent in such form and containing such provisions as the Board or
Committee may require.

 

11.5. RECAPITALIZATIONS. Each Stock Option Agreement and Stock Purchase
Agreement shall contain provisions required to reflect the provisions of SECTION
9.

 

11.6. DELIVERY. Upon exercise of a Right granted under this Plan, the Company
shall issue Stock or pay any amounts due within a reasonable period of time
thereafter. Subject to any statutory obligations the Company may otherwise have,
for purposes of this Plan, thirty days shall be considered a reasonable period
of time.

 

11.7. OTHER PROVISIONS. The Stock Option Agreements and Stock Purchase
Agreements authorized under the Plan may contain such other provisions not
inconsistent with this Plan, including, without limitation, restrictions upon
the exercise of the Rights, as the Administrator may deem advisable.

 

SECTION 12: INFORMATION TO PARTICIPANTS

 

To the extent necessary to comply with California law, the Company each year
shall furnish to Participants its balance sheet and income statement unless such
Participants are limited to key Employees whose duties with the Company assure
them access to equivalent information.

 

SECTION 13: EFFECTIVE DATE OF PLAN

 

The effective date of this Plan is November 23, 2005. The adoption of the Plan
is subject to approval by the Company's shareholders, which approval must be
obtained within 12 months from the date the Plan is adopted by the Board. In the
event that the shareholders fail to approve the Plan within 12 months after its
adoption by the Board, any grants of Options or sales or awards of shares that
have already occurred shall be rescinded, and no additional grants, sales or
awards shall be made thereafter under the Plan.

 

SECTION 14: TERM OF PLAN

 

The Plan shall terminate automatically on November 22, 2015, but no later than
prior to the 10th anniversary of the effective date. No Right shall be granted
pursuant to the Plan after such date, but Rights theretofore granted may extend
beyond that date. The Plan may be terminated on any earlier date pursuant to
SECTION 10 hereof.

 

 

 

 

SECTION 15: EXECUTION

 

To record the adoption of the Plan by the Board, the Company has caused its
authorized officer to execute the same as of November 23, 2005.

 

PEOPLE'S LIBERATION, INC.

 

/s/ Darryn Barber

 

-----------------------------

 

By: Darryn Barber

 

Its: Chief Financial Officer