Document:

FermaVir Pharmaceuticals, Inc. 2005 Equity Compensation Incentive Plan.

 

Exhibit 4.2

 

FERMAVIR
PHARMACEUTICALS, INC. 

2005
EQUITY COMPENSATION INCENTIVE PLAN 

 

1.
PURPOSE 

 

The
Fermavir Pharmaceuticals, Inc. 2005 Equity Compensation Incentive Plan is
intended to promote the best interests of and its stockholders by (i) assisting
the Company and its Subsidiaries in the recruitment and retention of persons
with ability and initiative, (ii) providing an incentive to such persons to
contribute to the growth and success of the Company's businesses by affording
such persons equity participation in the Company and (iii) associating the
interests of such persons with those of the Company and its Subsidiaries and
stockholders. 

 

2.
DEFINITIONS 

 

As
used in the Plan the following definitions shall apply: 

 

"AWARD"
means any Option or Restricted Stock Award granted hereunder. 

 

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

 

"CAUSE"
means in the case where the Participant does not have an employment, consulting
or similar agreement in effect with the Company or its Subsidiaries or where
there is such an agreement but it does not define "cause" (or words of like
import), conduct related to the Participant's service to the Company or a
Subsidiary for which either criminal or civil penalties against the Participant
may be sought, misconduct, insubordination, material violation of the Company's
or its Subsidiaries policies, disclosing or misusing any confidential
information or material concerning the Company or any Subsidiary or material
breach of any employment, consulting agreement or similar agreement, or in the
case where the Participant has an employment agreement, consulting agreement or
similar agreement that defines a termination for "cause" (or words of like
import), "cause" as defined in such agreement; provided, however, that with
regard to any agreement that defines "cause" on occurrence of or in connection
with change of control, such definition of "cause" shall not apply until a
change of control actually occurs and then only with regard to a termination
thereafter. 

 

"CODE"
means the Internal Revenue Code of 1986, and any amendments thereto.

 

"COMMITTEE"
means the Compensation Committee of the Board ,or such other committee of the
Board that is designated by the Board to administer the Plan, composed of not
less than two members of the Board, all of whom are disinterested persons, as
contemplated by Rule 16b-3 promulgated under the Exchange Act. 

 

"COMMON
STOCK" means the common stock, $0.0001 par value, of the Company. 

 

"COMPANY"
means Fermavir Pharmaceuticals, Inc., a Florida corporation. 

 

"CONSULTANT"
means any person, other than an employee, performing consulting or advisory
services for the Company or any Subsidiary. 

 

 

"CONTINUOUS
SERVICE" means that the Participant's service with the Company or a Subsidiary,
whether as an employee or Consultant, is not interrupted or terminated. A
Participant's Continuous Service shall not be deemed to have been interrupted or
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or a Subsidiary as an employee or Consultant or a
change in the entity for which the Participant renders such service. The
Participant's Continuous Service shall be deemed to have terminated either upon
an actual termination or upon the entity for which the Participant is performing
services ceasing to be a Subsidiary of the Company. The Committee shall
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by the Company, including sick leave, military
leave or any other personal leave. 

 

"CORPORATION
LAW" means the general corporation law of the jurisdiction of incorporation of
the Company. 

 

"DIRECTOR"
means a member of the Board. 

 

"DISABILITY"
means that a Participant covered by a Company or Subsidiary-funded long term
disability insurance program has incurred a total disability under such
insurance program and a Participant not covered by such an insurance program has
suffered a permanent and total disability within the meaning of Section 22(e)(3)
of the Code or any successor statute thereto. 

 

"ELIGIBLE
PERSON" means an employee, officer, director (excluding Outside Directors),
consultant or advisor to the Company or a Subsidiary (including an entity that
becomes a Subsidiary after the adoption of the Plan). 

 

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

 

"FAIR
MARKET VALUE" means, on any given date, the current fair market value of the
shares of Common Stock as determined as follows: 

 

(i)
If the Common Stock is traded on a national securities exchange or on the Nasdaq
National Market System, the closing price for the day of determination as quoted
on such market or exchange which is the primary market or exchange for trading
of the Common Stock or if no trading occurs on such date, the last day on which
trading occurred, or such other appropriate date as determined by the Committee
in its discretion, as reported in The Wall Street Journal or such other source
as the Committee deems reliable; 

 

(ii)
If not so traded on a national securities exchange or on the Nasdaq National
Market System, the average of the closing bid and asked prices thereof on such
day of determination or, if the Common Stock is not traded on the date of
determination, on the last preceding date on which the Common Stock is traded;
or 

 

(iii)
In the absence of an established market for the Common Stock, Fair Market Value
shall be determined by the Committee in good faith. 

 

"INCENTIVE
STOCK OPTION" means an Option (or portion thereof) intended to qualify for
special tax treatment under Section 422 of the Code. 

 

"NONQUALIFIED
STOCK OPTION" means an Option (or portion thereof) which is not intended or does
not for any reason qualify as an Incentive Stock Option. 

 

 

"OPTION"
means any option to purchase shares of Common Stock granted under the Plan.

 

“OUTSIDE
DIRECTOR” means a director who is not an employee or consultant of the
Company.

 

"PARTICIPANT"
means an Eligible Person who is selected by the Committee to receive an Option
or Restricted Stock Award and is party to any Stock Option Agreement or
Restricted Stock Award Agreement required by the terms of such Option or
Restricted Stock Award. 

 

"PLAN"
means this Fermavir Pharmaceuticals, Inc. 2005 Equity Compensation Incentive
Plan. 

 

"RESTRICTED
STOCK AWARD" means an award of Common Stock under Section 7. 

 

"SECURITIES
ACT" means the Securities Act of 1933 as amended. 

 

"STOCK
AWARD AGREEMENT" means a written agreement between the Company and a Participant
setting forth the specific terms and conditions of a Restricted Stock Award
granted to the Participant under Section 7. Each Restricted Stock Award
Agreement shall be subject to the terms and conditions of the Plan and shall
include such terms and conditions as the Committee shall authorize.

 

"STOCK
OPTION AGREEMENT" means a written agreement between the Company and a
Participant setting forth the specific terms and conditions of an Option granted
to the Participant. Each Stock Option Agreement shall be subject to the terms
and conditions of the Plan and shall include such terms and conditions as the
Committee shall authorize. 

 

"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 at least fifty
percent (50%) of the total combined voting power of all classes of stock in one
of the other corporations in such chain. 

 

"TEN
PERCENT OWNER" means any Eligible Person owning at the time an Option is granted
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of a Subsidiary. An individual shall, in accordance with
Section 424(d) of the Code, be considered to own any voting stock owned
(directly or indirectly) by or for his brothers, sisters, spouse, ancestors and
lineal descendants and any voting stock owned (directly or indirectly) by or for
a corporation, partnership, estate, trust or other entity shall be considered as
being owned proportionately by or for its stockholders, partners or
beneficiaries. 

 

3.
ADMINISTRATION 

 

A.
ADMINISTRATION. The Committee shall serve as the administrator of the Plan. If
permitted by the Corporation Law, and not prohibited by the charter or the
bylaws of the Company, the Committee may delegate a portion of its authority to
administer the Plan to an officer or officers of Company designated by the
Committee. 

 

 

B.
POWERS OF THE COMMITTEE. Subject to the provisions of the Plan, and subject at
all times to the terms and conditions of the delegation of authority from the
Board, the Committee shall have the authority to implement, interpret and
administer the Plan. Such authority shall include, without limitation, the
authority: 

 

(i)
To construe and interpret all provisions of the Plan and all Stock Option
Agreements and Restricted Stock Award Agreements under the Plan. 

 

(ii)
To determine the Fair Market Value of Common Stock. 

 

(iii)
To select the Eligible Persons to whom Awards, are granted from time-to-time
hereunder. 

 

(iv)
To determine the number of shares of Common Stock covered by an Option or
Restricted Stock Award; determine whether an Option shall be an Incentive Stock
Option or Nonqualified Stock Option; and determine such other terms and
conditions, not inconsistent with the terms of the Plan, of each Award. Such
terms and conditions include, but are not limited to, the exercise price of an
Option, purchase price of Common Stock subject to a Restricted Stock Award, the
time or times when Options or Restricted Stock Awards may be exercised or Common
Stock issued thereunder, the right of the Company to repurchase Common Stock
issued pursuant to the exercise of an Option or a Restricted Stock Award and
other restrictions or limitations (in addition to those contained in the Plan)
on the forfeitability or transferability of Options, Restricted Stock Awards or
Common Stock issued pursuant to Awards. Such terms may include conditions as
shall be determined by the Committee and need not be uniform with respect to
Participants. 

 

(v)
To amend, cancel, extend, renew, accept the surrender of, modify or accelerate
the vesting of or lapse of restrictions on all or any portion of an outstanding
Option or Restricted Stock Award; and to determine the time at which a
Restricted Stock Award or Common Stock issued under the Plan may become
transferable or nonforfeitable. 

 

(vi)
To prescribe the form of Stock Option Agreements and Restricted Stock Award
Agreements; to adopt policies and procedures for the exercise of Options or
Restricted Stock Awards, including the satisfaction of withholding obligations;
to adopt, amend, and rescind policies and procedures pertaining to the
administration of the Plan; and to make all other determinations necessary or
advisable for the administration of the Plan. 

 

Any
decision made, or action taken, by the Committee or in connection with the
administration of the Plan shall be final, conclusive and binding on all persons
having an interest in the Plan. 

 

4.
ELIGIBILITY 

 

A.
ELIGIBILITY FOR AWARDS. Incentive Stock Options may be granted only to employees
of the Company or Subsidiary. Other Awards may be granted to any Eligible Person
selected by the Committee. 

 

B.
SUBSTITUTION AWARDS. The Committee may make Restricted Stock Awards and may
grant Options under the Plan by assumption, substitution or replacement of stock
awards or stock options, granted by another entity (including a Subsidiary), if
such assumption, substitution or

 

 

replacement
is in connection with an asset acquisition, stock acquisition, merger,
consolidation or similar transaction involving the Company (and/or its
Subsidiary) and such other entity (and/or its Subsidiary). Notwithstanding any
provision of the Plan (other than the maximum number of shares of Common Stock
that may be issued under the Plan), the terms of such assumed, substituted or
replaced Restricted Stock Awards or Options shall be as the Committee, in its
discretion, determines is appropriate. 

 

5.
COMMON STOCK SUBJECT TO PLAN 

 

A.
SHARE RESERVE AND LIMITATIONS ON GRANTS. Subject to adjustment as provided in
Section 9, the maximum aggregate number of shares of Common Stock that may be
(i) issued under the Plan pursuant to the exercise of Options and (ii) issued
pursuant to Restricted Stock Awards is 7,500,000 shares of Common Stock. No
Participant may receive Awards representing more than 400,000 shares in any one
calendar year. This limitation shall be applied as of any date by taking into
account the number of shares available to be made the subject of new Awards as
of such date, plus the number of shares previously issued under the Plan and the
number of shares subject to outstanding Awards as of such date. 

 

B.
REVERSION OF SHARES. If an Option or Restricted Stock Award is terminated,
expires or becomes unexercisable, in whole or in part, for any reason, the
unissued or unpurchased shares of Common Stock which were subject thereto shall
become available for future grant under the Plan. Shares of Common Stock that
have been actually issued under the Plan shall not be returned to the share
reserve for future grants under the Plan; except that shares of Common Stock
issued pursuant to a Restricted Stock Award which are repurchased or reacquired
by the Company at the original purchase price of such shares (including, in the
case of shares forfeited back to the Company, no purchase price), shall be
returned to the share reserve for future grant under the Plan. For avoidance of
doubt, this Section 5.B shall not apply to any per Participant limit set forth
in Section 5.A. 

 

C.
SOURCE OF SHARES. Common Stock issued under the Plan may be shares of authorized
and unissued Common Stock or shares of previously issued Common Stock that have
been reacquired by the Company. 

 

D.
BOOK-ENTRY. Notwithstanding any other provision of the Plan to the contrary, the
Company may elect to satisfy any requirement under the Plan for the delivery of
stock certificates through the use of book-entry. 

 

6.
OPTIONS 

 

A.
AWARD. In accordance with the provisions of Section 4, the Committee will
designate each Eligible Person to whom an Option is to be granted and will
specify the number of shares of Common Stock covered by such Option. The Stock
Option Agreement shall specify whether the Option is an Incentive Stock Option
or Nonqualified Stock Option, the vesting schedule applicable to such Option and
any other terms of such Option. No Option that is intended to be an Incentive
Stock Option shall be invalid for failure to qualify as an Incentive Stock
Option. 

 

B.
EXERCISE PRICE. The exercise price per share for Common Stock subject to an
Option shall be determined by the Committee, but shall comply with the
following: 

 

 

(i)
The exercise price per share for Common Stock subject to a Nonqualified Stock
Option shall be not less than one hundred percent (100%) of the Fair Market
Value on the date of grant. 

 

(ii)
The exercise price per share for Common Stock subject to an Incentive Stock
Option: 

 

	 	
      ·
	
      granted
      to a Participant who is deemed to be a Ten Percent Owner on the date such
      option is granted, shall not be less than one hundred ten percent (110%)
      of the Fair Market Value on the date of grant.

 

	 	
      ·
	
      granted
      to any other Participant, shall not be less than one hundred percent
      (100%) of the Fair Market Value on the date of grant.

 

C.
MAXIMUM OPTION PERIOD. The maximum period during which an Option may be
exercised shall be determined by the Committee on the date of grant, except that
no Option shall be exercisable after the expiration of ten years from the date
such Option was granted. In the case of an Incentive Stock Option that is
granted to a Participant who is or is deemed to be a Ten Percent Owner on the
date of grant, such Option shall not be exercisable after the expiration of five
years from the date of grant. The terms of any Option may provide that it is
exercisable for a period less than such maximum period. 

 

D.
MAXIMUM VALUE OF OPTIONS WHICH ARE INCENTIVE STOCK OPTIONS. To the extent that
the aggregate Fair Market Value of the Common Stock with respect to which
Incentive Stock Options granted to any person are exercisable for the first time
during any calendar year (under all stock option plans of the Company or any of
its Subsidiaries or parent) exceeds $100,000 (or such other amount provided in
Section 422 of the Code), the Options are not Incentive Stock Options. For
purposes of this section, the Fair Market Value of the Common Stock will be
determined as of the time the Incentive Stock Option with respect to the Common
Stock is granted. This section will be applied by taking Incentive Stock Options
into account in the order in which they are granted. 

 

E.
NONTRANSFERABILITY. Options granted under the Plan which are intended to be
Incentive Stock Options shall be nontransferable except by will or by the laws
of descent and distribution and during the lifetime of the Participant shall be
exercisable by only the Participant to whom the Incentive Stock Option is
granted. If the Stock Option Agreement so provides or the Committee so approves,
a Nonqualified Stock Option may be transferred by a Participant through a gift
or domestic relations order to the Participant's family members to the extent in
compliance with applicable securities registration rules. The holder of a
Nonqualified Stock Option transferred pursuant to this section shall be bound by
the same terms and conditions that governed the Option during the period that it
was held by the Participant; provided that unless the Committee approves a
subsequent transfer, such Option shall be nontransferable by the initial
transferee of such Option except by will or by the laws of descent and
distribution. Except to the extent transferability of a Nonqualified Stock
Option is provided for in the Stock Option Agreement or is approved by the
Committee, during the lifetime of the Participant to whom the Nonqualified Stock
Option is granted, such Option may be exercised only by the Participant. No
right or interest of a Participant in any Option shall be liable for, or subject
to, any lien, obligation, or liability of such Participant. 

 

F.
VESTING AND TERMINATION OF CONTINUOUS SERVICE. Except
as provided in a
Stock Option Agreement, the following rules shall apply: 

 

 

(i)
Options will vest as provided in the Stock Option Agreement. An Option will be
exercisable only to the extent that it is vested on the date of exercise.
Vesting of an Option will cease on the date of the Participant's termination of
Continuous Service and the Option will be exercisable only to the extent the
Option is vested on the date of termination of Continuous Service. 

 

(ii)
If the Participant's termination of Continuous Service is for reason of death or
Disability, the right to exercise the Option (to the extent vested) will expire
on the earlier of (a) one (1) year after the date of the Participant's
termination of Continuous Service, or (b) the expiration date under the terms of
the Stock Option Agreement. Until the expiration date, the Participant or, in
the event of the Participant's death (including death after termination of
Continuous Service but before the right to exercise the Option expires)
Participant's heirs, legatees or legal representative may exercise the Option,
except to the extent the Option was previously transferred pursuant to
Section
6.E. 

 

(iii)
If the Participant's termination of Continuous Service is an involuntary
termination without Cause or a voluntary termination (other than a voluntary
termination described in Section 6.F(iv)), the right to exercise the Option (to
the extent that it is vested) will expire on the earlier of (a) three (3) months
after the date of the Participant's termination of Continuous Service, or (b)
the expiration date under the terms of the Stock Option Agreement. If the
Participant's termination of Continuous Service is an involuntary termination
without Cause or a voluntary termination (other than a voluntary termination
described in Section 6.F(iv)) and the Participant dies after his or her
termination of Continuous Service but before the right to exercise the Option
has expired, the right to exercise the Option (to the extent vested) shall
expire on the earlier of (x) one (1) year after the date of the Participant's
termination of Continuous Service or (y) the date the Option expires under the
terms of the Stock Option Agreement, and, until expiration, the Participant's
heirs, legatees or legal representative may exercise the Option, except to the
extent the Option was previously transferred pursuant to Section 6.E.

 

(iv)
If the Participant's termination of Continuous Service is for Cause or is a
voluntary termination at any time after an event which would be grounds for
termination of the Participant's Continuous Service for Cause, the right to
exercise the Option shall expire as of the date of the Participant's termination
of Continuous Service. 

 

G.
EXERCISE. An Option, if exercisable, shall be exercised by completion, execution
and delivery of notice (written or electronic) to the Company of the Option
which states (i) the Option holder's intent to exercise the Option, (ii) the
number of shares of Common Stock with respect to which the Option is being
exercised, (iii) such other representations and agreements as may be required by
the Company and (iv) the method for satisfying any applicable tax withholding as
provided in Section 10. Such notice of exercise shall be provided on such form
or by such method as the Committee may designate, and payment of the exercise
price shall be made in accordance with Section 6.H. Subject to the provisions of
the Plan and the applicable Stock Option Agreement, an Option may be exercised
to the extent vested in whole at any time or in part from time to time at such
times and in compliance with such requirements as the Committee shall determine.
A partial exercise of an Option shall not affect the right to exercise the
Option from time to time in accordance with the Plan and the applicable Stock
Option Agreement with respect to the remaining shares subject to the Option. An
Option may not be exercised with respect to fractional shares of Common Stock.

 

H.
PAYMENT. 

 

(i)
Unless otherwise provided by the Stock Option Agreement, payment of the exercise
price for an Option shall be made in cash or a cash equivalent acceptable to the
Committee. Payment of all or part of the exercise price of an Option may also be
made (a) by surrendering shares of Common Stock to the Company, or (b) if the
Common Stock is traded on an established securities market, payment of the
exercise price by a broker-dealer or by the Option holder with cash advanced by
the broker-dealer if the exercise notice is accompanied by the Option holder's
written irrevocable instructions to deliver the Common Stock acquired upon
exercise of the Option to the broker-dealer. 

 

(ii)
If Common Stock is used to pay all or part of the exercise price, the sum of the
cash or cash equivalent and the Fair Market Value (determined as of the date of
exercise) of the shares surrendered must not be less than the exercise price of
the shares for which the Option is being exercised. 

 

(iii)
On or after the date any Option other than an Incentive Stock Option is granted,
the Committee may determine that payment of the exercise price may also be made
in whole or part in the form of Restricted Stock or other Common Stock that is
subject to a risk of forfeiture or restrictions on transfer. Unless otherwise
determined by the Committee, whenever the exercise price is paid in whole or in
part in accordance with this Section 6.H(iii), the Stock received by the
Participant upon such exercise shall be subject to the same risks of forfeiture
or restrictions on transfer as those that applied to the consideration
surrendered by the Participant, provided that such risks of forfeiture and
restrictions on transfer shall apply only to the same number of shares received
by the Participant as applied to the forfeitable or restricted shares
surrendered by the Participant. 

 

I.
STOCKHOLDER RIGHTS. No Participant shall have any rights as a stockholder with
respect to shares subject to an Option until the date of exercise of such Option
and the certificate for shares of Common Stock to be received on exercise of
such Option has been issued by the Company. 

 

J.
DISPOSITION. A Participant shall notify the Company of any sale or other
disposition of Common Stock acquired pursuant to an Incentive Stock Option if
such sale or disposition occurs (i) within two years of the grant of an Option
or (ii) within one year of the issuance of the Common Stock to the Participant.
Such notice shall be in writing and directed to the Secretary of the Company.

 

7.
RESTRICTED STOCK AWARDS 

 

Each
Restricted Stock Award Agreement for a Restricted Stock Award shall be in such
form and shall contain such terms and conditions as the Committee shall deem
appropriate. The terms and conditions of the Restricted Stock Award Agreements
for Restricted Stock Awards may change from time to time, and the terms and
conditions of separate Restricted Stock Awards need not be identical, but each
Restricted Stock Award shall include (through incorporation of the provisions
hereof by references in the agreement or otherwise) the substance of each of the
following provisions. 

 

(I)
PURCHASE PRICE. The Committee may establish a purchase price for Common Stock
subject to a Restricted Stock Award. 

 

 

(II)
CONSIDERATION. The purchase price, if any, of Common Stock acquired pursuant to
the Restricted Stock Award shall be paid either: (a) in cash at the time of
purchase, or (b) in any other form of legal consideration that may be acceptable
to the Committee in its discretion. 

 

(III)
VESTING. Shares of Common Stock acquired under a Restricted Stock Award may, but
need not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Committee. Any grant
or the vesting thereon may be further conditioned upon the attainment of
Performance Objectives established by the Committee. 

 

(IV)
PARTICIPANT'S TERMINATION OF SERVICE OR FAILURE OF VESTING. In the event of a
Participant's termination of Continuous Service before vesting or other failure
of the Common Stock to vest, then, unless otherwise provided in the Restricted
Stock Award Agreement, the Participant shall forfeit shares of Common Stock held
by a Participant under the terms of a Restricted Stock Award which have not
vested and for which no purchase price was paid by the Participant and the
Company may repurchase or otherwise reacquire (including by way of forfeiture by
the Participant) any or all of the shares of Common Stock held by the
Participant which have not vested under the terms of the Restricted Stock Award
Agreement for such Restricted Stock Award and for which a purchase price was
paid by the Participant at such purchase price. 

 

(V)
TRANSFERABILITY. Rights to acquire shares of Common Stock under a Restricted
Stock Award shall be transferable by the Participant only upon such terms and
conditions as are set forth in the Restricted Stock Award Agreement for such
Restricted Stock Award, as the Committee shall determine in its discretion, so
long as Common Stock granted under the Restricted Stock Award remains subject to
the terms of the Restricted Stock Award Agreement. 

 

(VI)
ADDITIONAL RIGHTS. Any grant may require that any or all dividends or other
distributions paid on the shares acquired under a Restricted Stock Award during
the period of such restrictions be automatically sequestered and reinvested on
an immediate or deferred basis in additional shares of Common Stock which may be
subject to the same restrictions as the underlying Award or such other
restrictions as the Committee shall determine. Unless provided otherwise in the
Restricted Stock Award Agreement, Participants holding shares of Common Stock
subject to restrictions under a Restricted Stock Award Agreement may exercise
full voting rights with respect to the shares. 

 

8.
CHANGES IN CAPITAL STRUCTURE 

 

A.
NO LIMITATIONS OF RIGHTS. The existence of outstanding Options or Restricted
Stock Awards shall not affect in any way the right or power of the Company or
its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issuance of
bonds, debentures, preferred or prior preference stock ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise. 

 

B.
CHANGES IN CAPITALIZATION. If the Company shall effect (i) any stock dividend,
stock split, subdivision or consolidation of shares, recapitalization
or other
capital readjustment, (ii) any merger, consolidation, separation of the Company
(including a spin-off or split-up), reorganization, partial or complete
liquidation or other distribution of assets (other than ordinary

 

 

dividends
or distributions) without receiving consideration therefore in money, services
or property, or (iii) any other corporate transaction having a similar effect,
then (iv) the number, class, and per share price or base amount of shares of
Common Stock subject to outstanding Options and Restricted Stock Awards shall
be equitably
adjusted by the Committee as it in good faith determines is required in order to
prevent enlargement, dilution, or diminishment of rights, (v) the number and
class of shares of Common Stock then reserved for issuance under the Plan and
the maximum number of shares for which Awards may be granted to a Participant
during a specified time period shall be adjusted as the Committee deems
appropriate to reflect such transaction, and (vi) the Committee shall make such
modifications to the Performance Objectives for each outstanding Restricted
Award as the Committee determines are appropriate in accordance with Section 2,
"Performance Objectives." The conversion of convertible securities of the
Company shall not be treated as effected "without receiving consideration." The
Committee shall make such adjustments, and its determinations shall be final,
binding and conclusive. 

 

C.
MERGER, CONSOLIDATION OR ASSET SALE. If the Company (i) is dissolved,
liquidated, merged or consolidated with another entity, (ii) sells or otherwise
disposes of substantially all of its assets to another entity or (iii) engages
in any transaction (including without limitation a merger or reorganization in
which the Company is the surviving entity) that results in any person or entity
(other than persons who are stockholders or Subsidiaries immediately prior to
the transaction) owning fifty percent (50%) or more of the combined voting power
of all classes of stock of the Company, while Options or Restricted Stock Awards
remain outstanding under the Plan, unless provisions are made in connection with
such transaction for the continuance of the Plan and/or the assumption or
substitution of such Options or Restricted Stock Awards with new options or
stock awards covering the stock of the successor entity, or parent or Subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and
prices, then all outstanding Options and Restricted Stock Awards which have not
been continued, assumed or for which a substituted award has not been granted
shall become exercisable immediately prior to and terminate immediately as of
the effective date of any such merger, consolidation, sale, or other applicable
transaction. In the alternative, the Board may elect, in its sole discretion, to
cancel any outstanding Options and Restricted Stock Awards and pay or deliver,
or cause to be paid or delivered, to the holder thereof an amount in cash or
securities having a value (as determined by the Board acting in good faith), in
the case of Restricted Stock Awards, equal to the formula or fixed price per
share paid to holders of shares of Stock and, in the case of Options, equal to
the product of the number of shares of Stock subject to the Option multiplied by
the amount, if any, by which (A) the formula or fixed price per share paid to
holders of shares of Stock pursuant to such transaction exceeds (B) the exercise
price applicable to such Option. 

 

D.
LIMITATION ON ADJUSTMENT. Except as previously expressly provided, neither the
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, nor the increase
or decrease of the number of authorized shares of stock, nor the addition or
deletion of classes of stock, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number, class or price of shares of Common
Stock then subject to outstanding Options or Restricted Stock Awards.

 

 

9.
WITHHOLDING OF TAXES 

 

The
Company or a Subsidiary shall have the right, before any certificate for any
Common Stock is delivered, to deduct or withhold from any payment owed to a
Participant any amount that is necessary in order to satisfy any withholding
requirement that the Company or Subsidiary in good faith believes is imposed
upon it in connection with Federal, state, or local taxes, including transfer
taxes, as a result of the issuance of, or lapse of restrictions on, such Common
Stock, or otherwise require such Participant to make provision for payment of
any such withholding amount. Subject to such conditions as may be established by
the Committee, the Committee may permit a Participant to (i) have Common Stock
otherwise issuable under an Option or Restricted Stock Award withheld to the
extent necessary to comply with minimum statutory withholding rate requirements
for supplemental income, (ii) tender back to the Company shares of Common Stock
received pursuant to an Option or Restricted Stock Award to the extent necessary
to comply with minimum statutory withholding rate requirements for supplemental
income, (iii) deliver to the Company previously acquired Common Stock, (iv) have
funds withheld from payments of wages, salary or other cash compensation due the
Participant, or (v) pay the Company or its Subsidiary in cash, in order to
satisfy part or all of the obligations for any taxes required to be withheld or
otherwise deducted and paid by the Company or its Subsidiary with respect to the
Option or Restricted Stock Award. 

 

10.
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES 

 

A.
GENERAL REQUIREMENTS. No Option or Restricted Stock Award shall be exercisable,
no Common Stock shall be issued, no certificates for shares of Common Stock
shall be delivered, and no payment shall be made under the Plan except in
compliance with all applicable federal and state laws and regulations
(including, without limitation, withholding tax requirements), any listing
agreement to which the Company is a party, and the rules of all domestic stock
exchanges or quotation systems on which the Company's shares may be listed. The
Company shall have the right to rely on an opinion of its counsel as to such
compliance. Any share certificate issued to evidence Common Stock when a
Restricted Stock Award is granted or for which an Option or Restricted Stock
Award is exercised may bear such legends and statements as the Committee may
deem advisable to assure compliance with federal and state laws and regulations.
No Option or Restricted Stock Award shall be exercisable, no Restricted Stock
Award shall be granted, no Common Stock shall be issued, no certificate for
shares shall be delivered, and no payment shall be made under the Plan until the
Company has obtained such consent or approval as the Committee may deem
advisable from regulatory bodies having jurisdiction over such matters.

 

B.
PARTICIPANT REPRESENTATIONS. The Committee may require that a Participant, as a
condition to receipt or exercise of a particular award, execute and deliver to
the Company a written statement, in form satisfactory to the Committee, in which
the Participant represents and warrants that the shares are being acquired for
such person's own account, for investment only and not with a view to the resale
or distribution thereof. The Participant shall, at the request of the Committee,
be required to represent and warrant in writing that any subsequent resale or
distribution of shares of Common Stock by the Participant shall be made only
pursuant to either (i) a registration statement on an appropriate form under the
Securities Act of 1933, which registration statement has become effective and is
current with regard to the shares being sold, or (ii) a specific exemption from
the registration requirements of the Securities Act of 1933, but in claiming
such exemption the Participant shall, prior to any offer of sale or sale of such
shares, obtain a prior favorable written opinion of counsel, in form and
substance satisfactory to counsel for the Company, as to the application of such
exemption thereto. 

 

 

11.
GENERAL PROVISIONS 

 

A.
EFFECT ON EMPLOYMENT AND SERVICE. Neither the adoption of the Plan, its
operation, nor any documents describing or referring to the Plan (or any part
thereof) shall (i) confer upon any individual any right to continue in the
employ or service of the Company or a Subsidiary, (ii) in any way affect any
right and power of the Company or a Subsidiary to change an individual's duties
or terminate the employment or service of any individual at any time with or
without assigning a reason therefor, or (iii) except to the extent the Committee
grants an Option or Restricted Stock Award to such individual, confer on any
individual the right to participate in the benefits of the Plan. 

 

B.
USE OF PROCEEDS. The proceeds received by the Company from the sale of Common
Stock pursuant to the Plan shall be used for general corporate purposes.

 

C.
UNFUNDED PLAN. The Plan, insofar as it provides for grants, shall be unfunded,
and the Company shall not be required to segregate any assets that may at any
time be represented by grants under the Plan. Any liability of the Company to
any person with respect to any grant under the Plan shall be based solely upon
any contractual obligations that may be created pursuant to the Plan. No such
obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company. 

 

D.
FURTHER RESTRICTIONS ON TRANSFER. Any Award made under the Plan may expressly
provide that all or any part of the shares of Common Stock that are:

(i)
to be issued or transferred by the Company upon the exercise of an Option , or
(ii) no longer subject to a substantial risk of forfeiture and restrictions on
transfer referred to in Section 7 of the Plan, shall be subject to further
restrictions on transfer. 

 

E.
FRACTIONAL SHARES. The Company shall not be required to issue fractional shares
pursuant to the Plan. The Committee may provide for elimination of fractional
shares or the settlement of such fraction shares in cash. 

 

F.
RULES OF CONSTRUCTION. Headings are given to the Sections of the Plan solely as
a convenience to facilitate reference, and shall not be used in interpreting,
construing or enforcing any provision hereof. The reference to any statute,
regulation, or other provision of law shall be construed to refer to any
amendment to or successor of such provision of law. To the extent that any
provision of the Plan would prevent any Option that was intended to qualify
under particular provisions of the Code from so qualifying, such provision of
the Plan shall be null and void with respect to such Option, provided that such
provision shall remain in effect with respect to other Options, and there shall
be no further effect on any provision of the Plan. 

 

G.
FOREIGN EMPLOYEES. In order to facilitate the making of any grant or combination
of grants under the Plan, the. Committee may provide for such special terms for
Awards to Participants who are foreign nationals, or who are employed by the
Company or any subsidiary outside of the United States, as the Committee may
consider necessary or appropriate to accommodate differences in local law, tax
policy or custom. Moreover, the Committee may approve such supplements to, or
amendments, restatements or alternative versions of, the Plan as it may consider
necessary or appropriate for such purposes without thereby affecting the terms
of the Plan, as then in effect, unless the Plan could have been amended to
eliminate such inconsistency without further approval by the Stockholders of the
Company. 

 

 

H.
CHOICE OF LAW. The Plan and all Stock Option Agreements and Restricted Stock
Award Agreements entered into under the Plan (except to the extent that any such
Stock Option Agreement or Restricted Stock Award Agreement otherwise provides)
shall be governed by and interpreted under the laws of the jurisdiction of
incorporation of the Company excluding (to the greatest extent permissible by
law) any rule of law that would cause the application of the laws of any
jurisdiction other than the laws of the jurisdiction of incorporation of the
Company. 

 

12.
AMENDMENT AND TERMINATION 

 

The
Board may amend or terminate the Plan from time to time; provided, however, that
with respect to any amendment that (i) increases the aggregate number of shares
of Common Stock that may be issued under the Plan, (ii) changes the class of
employees eligible to receive Incentive Stock Options or (iii) stockholder
approval is required by the terms of any applicable law, regulation, or rule,
including, without limitation, any rule of any national securities exchange or
national market on which the Common Stock is publicly traded, each such
amendment shall be subject to the approval of the stockholders of the Company.
Except as specifically permitted by a provision of the Plan (other than Section
3.B.), the Stock Option Agreement or Restricted Stock Award Agreement or as
required to comply with applicable law, regulation or rule, no amendment to the
Plan or a Stock Option Agreement or Restricted Stock Award Agreement shall,
without a Participant's consent, adversely affect any rights of such Participant
under any Option or Restricted Stock Award outstanding at the time such
amendment is made; provided, however, that an amendment that may cause an
Incentive Stock Option to become a Nonqualified Stock Option, and any amendment
that is required to comply with the rules applicable to Incentive Stock Options,
shall not be treated as adversely affecting the rights of the Participant.

 

13.
EFFECTIVE DATE AND DURATION OF PLAN 

 

A.
The Plan became effective upon adoption by the Board, subject to approval within
twelve (12) months by vote of the holders of a majority of the outstanding
shares of the Company present, or represented, and entitled to vote at a meeting
to be duly held in accordance with the applicable laws of the State of
[Delaware]. Unless and until the Plan has been approved by the stockholders of
the Company, no Option or Restricted Stock Award may be exercised, and no shares
of Common Stock may be issued under the Plan. In the event that the stockholders
of the Company shall not approve the Plan within such twelve (12) month period,
the Plan and any previously granted Option or Restricted Stock Award shall
terminate. 

 

B.
Unless previously terminated, the Plan will terminate ten (10) years after the
earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the
Plan is approved by the stockholders, except that Options and Stock Awards that
are granted under the Plan prior to its termination will continue to be
administered under the terms of the Plan until the Options and Stock Awards
terminate or are exercised.Form of 6% Promissory Note of Venus Beauty Supply, Inc.

 

 

Exhibit 4.3

 

 

VENUS
BEAUTY SUPPLY, INC.

6%
PROMISSORY NOTE

DUE
NOVEMBER 15, 2005

 

	Principal:  	 
      $350,000	 
	 	 	 	 
	Original
      Issue Date:	 August 16, 2005 	 
	 	 	 	 
	Registered
      Holder:	  Panetta
      Partners, Ltd.	 
	 	                   (name)	 

   

 

Venus
Beauty Supply, Inc., a Florida corporation (the “Company”) with principal
offices at 31-51 Steinway Street, Long Island City, NY 11103, for value
received, hereby promises to pay the registered holder hereof (the “Holder”) the
principal sum set forth above on November 15, 2005 (the “Maturity Date”), in
such coin or currency of the United States of America as at the time of payment
shall be the legal tender for the payment of public and private debts, and to
pay interest, less any amounts required by law to be deducted or withheld,
computed on the basis of a 365-day year, on the unpaid principal balance hereof
from the date hereof (the “Original Issue Date”), at the rate of 6% per year,
until such principal sum shall have become due and payable. Interest shall be
paid, on Maturity, or if prepaid in accordance with Section 2 below, upon such
conversion or redemption. All references herein to dollar amounts refers to U.S.
dollars.

By
acceptance and purchase of this Note, the registered holder hereof agrees with
the Company that the Note shall be subject to the following terms and
conditions:

1.        
Transfer
or Exchange. Prior
to due presentation to the Company for transfer of this Note, the Company and
any agent of the Company may treat the person in whose name this Note is duly
registered on the Company’s Note Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes.

2.        
Prepayment.
 

 

2.1     
Optional
Prepayments. The
Company shall have the right, at its sole option and election, to prepay the
Note, in whole or in part, without penalty.

 

2.2.     
Mandatory
Prepayments. The
Company shall make mandatory prepayment of the outstanding principal balance at
the rate of 45% of all net proceeds received from the Company’s sale of
securities or borrowings following the Original Issue Date, within three
business days of the company’s receipt of such proceeds. 

 

3.        
Replacement
of Note Certificate. Upon
receipt of evidence satisfactory to the Company of the certificate loss, theft,
destruction or mutilation of the Note certificate and, in the case of any such
loss, theft or destruction, upon delivery of a bond of indemnity satisfactory to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of the Note

 

1

 

certificate,
the Company will issue a new Note certificate, of like tenor, in lieu of such
lost, stolen, destroyed or mutilated Note certificate.

4.        
Covenants
of the Company. So long
as the Note remains outstanding, the Company shall:

	 	
      (a)
      
	
      Not
      pay any dividends in cash and/or property or other assets of the Company
      in respect of its Common Stock or otherwise; and

	 	
      (b)
      
	
      Not
      enter into any transaction with (i) any director, officer or 5%
      stockholder of the Company, (ii) any entity in which a director, officer
      or 5% stockholder has an interest as an officer, director, partner,
      beneficiary of a trust or is a 5% or more equity holder of such entity, or
      (iii) any parent, spouse, child or grandchild of an officer, director or
      5% stockholder of the Company upon terms no less favorable to the Company
      than those which could be obtained from an “arms-length”
      lender.

 

5.        
Default. If any
of the following events (herein called “Events of Default”) shall
occur:

	 	
      (a)
      
	
      if
      the Company shall default in the payment or prepayment of any part of the
      principal of the Note after the same shall become due and payable, whether
      at maturity or at a date fixed for prepayment or by acceleration or
      otherwise, and such default shall continue for more than five days;
      or

 

	 	
      (b)
      
	
      if
      the Company shall default in the payment of any installment of interest on
      the Note for more than five days after the same shall become due and
      payable; or

 

	 	
      (c)
      
	
      if
      the Company shall make an assignment for the benefit of creditors;
      or

 

	 	
      (d)
      
	
      if
      the Company shall dissolve; terminate its existence; become insolvent on a
      balance sheet basis; commence a voluntary case under the federal
      bankruptcy laws or under any other federal or state law relating to
      insolvency or debtor’s relief; permit the entry of a decree or order for
      relief against the Company in an involuntary case under the federal
      bankruptcy laws or under any other applicable federal or state law
      relating to insolvency or debtor’s relief; permit the appointment or
      consent to the appointment of a receiver, trustee, or custodian of the
      Company or of any of the Company’s property; make an assignment for the
      benefit of creditors; or

	 	
      (e)
      
	
      if
      the Company shall default in the performance of or compliance with any
      material agreement, condition or term contained in this Note or any of the
      other agreements between the Company and the Holder or an affiliate of the
      Holder and such default shall not have been cured within 30 days after
      such default; 

 

2

 

then and
in any such event the Holder of this Note shall have the option (unless the
default shall have theretofore been cured) by written notice to the Company to
declare the Note to be due and payable, whereupon the Note shall forthwith
mature and become due and payable, at the applicable prepayment price on the
date of such notice, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived, anything contained in this
Note to the contrary notwithstanding. Upon the occurrence of an Event of
Default, the Company shall promptly notify the Holder of this Note in writing
setting out the nature of the default in reasonable detail.

 

6.        
Remedies
on Default.

6.1     
Acceleration
of Maturity. If any
Event of Default shall have occurred and be continuing, the Holder may, by
notice to the Company, declare the entire outstanding principal balance of the
Notes, premium, if any, and all accrued and unpaid interest thereon, to be due
and payable immediately, and upon any such declaration the entire outstanding
principal balance of the Notes, premium, if any, and said accrued and unpaid
interest shall become and be immediately due and payable, without presentment,
demand, protest or other notice whatsoever, all of which are hereby expressly
waived, anything in the Notes to the contrary notwithstanding. 

6.2     
Conduct
no Waiver, Collection Expenses. No
course of dealing on the part of any Holder, nor any delay or failure on the
part of any Holder to exercise any of its rights, shall operate as a waiver of
such right or otherwise prejudice such Holder’s rights, powers and remedies. If
the Company fails to pay, when due, the principal or the premium, if any, or the
interest on any Note, the Company will pay to each Holder, to the extent
permitted by law, on demand, all costs and expenses incurred by such Holder in
the collection of any amount due in respect of any Note hereunder, including
reasonable legal fees incurred by such Holder in enforcing its rights
hereunder.

 

7.        
Changes,
Waivers. etc. Neither
this Note nor any provisions hereof may be changed, waived, discharged or
terminated orally, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.

8.        
Entire
Agreement. This
Note embodies the entire agreement and understanding between the Holder and the
Company and supersedes all prior agreements and understandings relating to the
subject matter hereof.

9.        
Governing
Law, Jurisdiction, etc.

	 	
      (a)
	
      GOVERNING
      LAW.
      THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
      WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE
      STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
      STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION
      OTHER THAN SUCH STATE.

3

	 	
      (b)
      
	
      Submission
      to Jurisdiction.
      Each of the parties hereto hereby irrevocably and unconditionally consents
      to submit to the exclusive jurisdiction of the courts of the State of New
      York and of the United States of America, in each case located in the
      County of New York, for any action, proceeding or investigation in any
      court or before any governmental authority (“Litigation”) arising out of
      or relating to the Note and the transactions contemplated thereby (and
      agrees not to commence any Litigation relating thereto except in such
      courts), and further agrees that service of any process, summons, notice
      or document by U.S. registered mail to its respective address set forth in
      the Letter Subscription Agreement shall be effective service of process
      for any Litigation brought against it in any such court. Each of the
      parties hereto hereby irrevocably and unconditionally waives any objection
      to the laying of venue of any Litigation arising out of the Note or the
      transactions contemplated hereby in the courts of the State of New York or
      the United State of America, in each case located in the County of New
      York, and hereby further irrevocably and unconditionally waives and agrees
      not to plead or claim in any such court that any such Litigation brought
      in any such court has been brought in an inconvenient
    forum.

	 	
      (c)
      
	
      Service
      of Process.
      Nothing herein shall affect the right of any holder of a Note to serve
      process in any other manner permitted by law or to commence legal
      proceedings or otherwise proceed against the Company in any other
      jurisdiction.

	 	
      (d)
	
      WAIVER
      OF JURY TRIAL.
      THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
      RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY
      ARISING OUT OF, UNDER OR IN CONNECTION WITH ANY OF THE
    NOTES.

	 	
      (e)
	
      In
      the event of any dispute, question, controversy or claim arising among the
      parties hereto which shall arise out of or in connection with this Note,
      the parties shall keep the proceeding related to such controversy in
      strict confidence and shall not disclose the nature of said dispute, the
      status of the proceeding or any testimony, documents or information
      obtained or exchanged in the course of said proceeding without the express
      written consent of all parties to such
dispute.

[SIGNATURE
PAGE FOLLOWS]

 

4

 

IN
WITNESS WHEREOF, the
parties hereto have caused this Note to be duly executed as of the date
below.

 

	 	 	 
	 	
      VENUS
      BEAUTY SUPPLY, INC.

	 
 	 
 	 
 
		By:  	/s/
      Sarah Boothe
	 	
      

    
	 	Sarah Boothe, President
	Date: August 16, 2005	 

 

 

5

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