SKINS INC.
2005 INCENTIVE PLAN
 
NON-QUALIFIED STOCK OPTION AGREEMENT
 
NOTICE OF STOCK OPTION GRANT
 
Optionee: Antonio Pavan
 
The Optionee has been granted an Option to purchase a number of shares of Skins
Inc. Common Stock as designated below (“Shares”), subject to the terms and
conditions of the Skins Inc. 2005 Incentive Plan, as amended from time to time
(the “Plan”), and this Option Agreement, as follows:
 

Date of Grant:
04/13/2007
Type of Option:
Non-Qualified Stock Option
Exercise Price per Share:
$1.25
Expiration Date:
04/12/2012 
Total Number of Shares Granted:
500,000
Total Exercise Price:
$625,000
        Vesting Schedule:  1/6th of the Options shall vest on a semi-annual
basis, with the first vesting to occur six (6) months from the Date of Grant.   
     

Vesting is accelerated upon a Change in Control under Section 2(c).
 
Exercise After Termination of Employment:
 
a. Termination of Employment for any reason: any non-vested portion of the
Option expires immediately, except as indicated in subsection b and c, below.
 
b. Termination of Employment due to death or Disability: vested portion and an
additional 1/3 of the unvested portion of the Option is exercisable by the
Optionee (or, in the event of the Optionee’s death, the Optionee’s Beneficiary)
for one year after the Optionee’s Termination.
 
c. Termination of Employment Without Cause or for Good Reason (as defined in the
Employment Agreement): vested portion and an additional 1/6 unvested portion of
the Option shall be exercisable by the Optionee for one year after the
Optionee’s Termination
 
d. Termination of Employment for Cause (as defined in the Employment Agreement):
all vested and unvested options shall terminate immediately and cease to remain
outstanding
 
e. Termination of Employment for any reason other than as indicated in b, c, and
d, above: vested portion of the Option is exercisable for a period of ninety
(90) days following the Optionee’s Termination.
 
In no event may this Option be exercised after the Expiration Date as provided
above.

 

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I. AGREEMENT
 
1.    Grant of Option. The Option granted to the Optionee and described in the
Notice of Grant is subject to the terms and conditions of the Plan, which is
incorporated by reference in its entirety into this Option Agreement. In the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail. Capitalized terms
not otherwise defined in this Agreement shall have the meaning given to the
terms in the Plan.
 
If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this
Option is intended to qualify as an Incentive Stock Option as defined in Section
422 of the Code. Nevertheless, to the extent that the Option fails to meet the
requirements of an ISO under Section 422 of the Code, this Option shall be
treated as a Non-Qualified Stock Option (“NSO”).
 
2.    Exercise of Option.
 
(a) Right to Exercise. This Option shall be exercisable, in whole or in part,
during its term in accordance with the Vesting Schedule set out in the Notice of
Grant and with the applicable provisions of the Plan and this Option Agreement.
No Shares shall be issued pursuant to the exercise of an Option unless the
issuance and exercise comply with applicable laws. Assuming such compliance, for
income tax purposes the Shares shall be considered transferred to the Optionee
on the date on which the Option is exercised with respect to such Shares. The
Board may, in its discretion, (i) accelerate vesting of the Option, or (ii)
extend the applicable exercise period to the extent permitted under Section 6.03
of the Plan.
 
(b) Method of Exercise. The Optionee may exercise the Option by delivering an
exercise notice in a form approved or otherwise acceptable to the Company (the
“Exercise Notice”) which shall state the election to exercise the Option, the
number of Shares with respect to which the Option is being exercised, and such
other representations and agreements as may be required by the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Shares exercised. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by the
aggregate Exercise Price.
 
(c) Acceleration of Vesting on Change in Control. Subject to the exception
contained in Section 6.05 of the Plan, all Options outstanding on the date of a
Change of Control that have not previously vested or terminated under the terms
of the applicable Award Agreement shall be immediately and fully vested and
exercisable upon the date of a Change of Control (as defined in the Employment
Agreement).
 
3.    Method of Payment. If the Optionee elects to exercise the Option by
submitting an Exercise Notice under Section 2(b) of this Agreement, the
aggregate Exercise Price (as well as any applicable withholding or other taxes)
shall be paid by cash or check; provided, however, that the Board may consent,
in its discretion, to payment in any of the following forms, or a combination of
them:
 
(a) cash or check;
 

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(b) consideration received by the Company under a formal cashless exercise
program adopted by the Company in connection with the Plan;
 
(c) surrender of other Shares which (i) have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares; or
 
(d) any other consideration that the Board deems appropriate and in compliance
with applicable law.
 
4.    Restrictions on Exercise. This Option may not be exercised until such time
as the Plan has been approved by the stockholders of the Company, or if the
issuance of the Shares upon exercise or the method of payment of consideration
for those shares would constitute a violation of any applicable law or
regulation.
 
5.    Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of the Optionee only by the Optionee. Following
transfer, the Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer. In the event an
Option is transferred as contemplated in this Section 5, such Option may not be
subsequently transferred by the transferee except by will or the laws of descent
and distribution. The terms of the Plan and this Option Agreement shall be
binding upon the executors, administrators, heirs, successors and assigns of the
Optionee.
 
6.    Term of Option. This Option may be exercised only within the term set out
in the Notice of Grant, and may be exercised during such term only in accordance
with the Plan and the terms of this Option Agreement.
 
7.    Entire Agreement, Amendment and Governing Law. The Plan and this Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Optionee with respect to the subject matter
hereof (but not agreements, if any, relating to other matters), and may not be
modified adversely to the Optionee’s interest except by means of a writing
signed by the Company and the Optionee. This Option Agreement is governed by,
and shall be construed and enforced in accordance with, the internal laws of the
State of Delaware.
 
8.    Further Assurances. The Optionee agrees, upon demand of the Company or the
Board, to do all acts and execute, deliver and perform all additional documents,
instruments and agreements (including, without limitation, stock powers with
respect to shares of Common Stock issued upon exercise of the Option) which may
be reasonably required by the Company or the Board.
 
9.    No Guarantee of Continued Service. THE OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE IS EARNED ONLY BY
CONTINUING AS AN EMPLOYEE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF
BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). THE
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED UNDER IT AND THE VESTING SCHEDULE DO NOT CONSTITUTE AN EXPRESS OR
IMPLIED PROMISE OF CONTINUED EMPLOYMENT FOR THE VESTING PERIOD, FOR ANY PERIOD,
OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE OPTIONEE’S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT
CAUSE.
 

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The Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions of the Plan, and accepts this
Option subject to all of those terms and provisions. The Optionee has reviewed
the Plan and this Option Agreement in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option Agreement and fully
understands all provisions of the Option. The Optionee agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under the Plan or this Option Agreement. The Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
 
[SIGNATURE PAGE TO FOLLOW]
 

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IN WITNESS WHEREOF, intending to be legally bound, the parties have signed this
Option Agreement as of the Date of Grant.
 

Optionee:      SKINS INC.:                  /s/ Antonio Pavan     /s/ Mark Klein
Signature     By: Mark Klein         Antonio Pavan      President and Chief
Executive Officer  Print Name      Title          [RESIDENCE ADDRESS]           
    Residence Address       

  

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