Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.5

AURIGA LABORATORIES, INC.

2007 Stock Option Plan

NOTICE OF STOCK OPTION GRANT

Grantee: Philip S. Pesin

You have been granted an option to purchase Common Stock (“Common Stock”) of Auriga
Laboratories, Inc. (the “Company”) as follows:

	 	 	 
	Board Approval Date:

	 	5/4/2007 
	 
	 	 
	Date of Grant:

	 	5/4/2007 
	 
	 	 
	Vesting Commencement Date:

	 	5/9/2007 
	 
	 	 
	Exercise Price Per Share:

	 	$1.57 
	 
	 	 
	Total Number of Shares Granted:

	 	3,000,000 
	 
	 	 
	Type of Option:

	 	NON-STATUTORY STOCK OPTION
	 
	 	 
	Term/Expiration Date:

	 	5/4//2017 
	 
	 	 
	Vesting Schedule:

	 	The shares subject to the Option shall
vest as follows: Twenty-five Percent
(25%) of the shares shall vest on the
first anniversary of the Vesting
Commencement Date; so long as you remain
in Continuous Service with the Company,
1/24th of the total number of
remaining shares subject to the Option
shall vest each month thereafter.
	 
	 	 
	Termination Period:

	 	In accordance with the Employment
Agreement dated May 8, 2007.

By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the 2007 STOCK
OPTION PLAN and the Stock Option Agreement, both of which are attached and made a part of this
document.

	 	 	 	 	 
	GRANTEE	 	AURIGA LABORATORIES, INC.
	 
	 	 	 	 
	/s/ Philip S. Pesin

	 	By:
	 	/s/ Charles R. Bearchell
	 

	 	 	 	 
	Signature
	 	 	 	 
	 

	 	Name:
	 	Charles R. Bearchell
	 

	 	 	 	 
	Philip S. Pesin
	 	 	 	 
	 

	 	 	 	 
	 

	 	Title:
	 	Chief Financial Officer
	 

	 	 	 	 

 

 

 

AURIGA LABORATORIES, INC.

2007 STOCK OPTION PLAN

STOCK OPTION AGREEMENT

1. Grant of Option. Auriga Laboratories, Inc., a Delaware corporation (the
“Company”), hereby grants to GRANTEE (“Optionee”) an option (the “Option”)
to purchase a total number of shares of Common Stock (the “Shares”) set forth in the Notice
of Stock Option Grant, at the exercise price per share set forth in the Notice of Stock Option
Grant (the “Exercise Price”) subject to the terms, definitions and provisions of the Auriga
Laboratories, Inc. 2007 Stock Option Plan (the “Plan”) adopted by the Company, which is
incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan
shall have the same defined meanings in this Option.

If designated an Incentive Stock Option, this Option is intended to qualify as an Incentive
Stock Option as defined in Section 422 of the Code.

2. Exercise of Option. This Option shall be exercisable during its Term in accordance
with the Vesting Schedule set out in the Notice of Stock Option Grant and with the provisions of
Sections 7 and 8 of the Plan as follows:

(a) Right to Exercise.

(i) This Option may be exercised in whole or in part at any time after the Date of Grant, as
to Shares which have not yet vested under the vesting schedule indicated on the Notice of Stock
Option Grant; provided, however, that Optionee shall execute as a condition to such exercise of
this Option, the Early Exercise Notice and Restricted Stock Purchase Agreement attached hereto as
Exhibit A (the “Early Exercise Agreement”). If Optionee chooses to exercise this
Option solely as to Shares which have vested under the vesting schedule indicated on the Notice of
Stock Option Grant, Optionee shall complete and execute the form of Exercise Notice and Restricted
Stock Purchase Agreement attached hereto as Exhibit B (the “Exercise Agreement”).
Notwithstanding the foregoing, the Company may in its discretion prescribe or accept a different
form of notice of exercise and/or stock purchase agreement if such forms are otherwise consistent
with this Agreement, the Plan and then-applicable law.

(ii) This Option may not be exercised for a fraction of a share.

(iii) In the event of Optionee’s death, disability or other termination of employment or
consulting relationship, the exercisability of the Option is governed by Sections 5, 6 and 7 below,
subject to the limitation contained in Section 2(a)(iv) below.

(iv) In no event may this Option be exercised after the Expiration Date of this Option as set
forth in the Notice of Stock Option Grant.

(b) Method of Exercise. This Option shall be exercisable by execution and delivery of
the Early Exercise Agreement or the Exercise Agreement, whichever is applicable, or of any other
written notice approved for such purpose by the Company which shall state the election to exercise
the Option, the number of Shares in respect of which the Option is being

 

 

 

exercised, and such other representations and agreements as to the holder’s investment intent
with respect to such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. Subject to Section 2(c) below, the
written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed
to be exercised upon receipt by the Company of such written notice accompanied by the Exercise
Price.

No Shares will be issued pursuant to the exercise of an Option unless such issuance and such
exercise shall comply with all relevant provisions of applicable law, including the requirements of
any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income
tax purposes the Shares shall be considered transferred to Optionee on the date on which the Option
is exercised with respect to such Shares.

(c) Net Issue Exercise.

(i) In lieu of exercising this Option in the manner provided above in Section 2(b), the
Optionee may elect to receive shares equal to the value of this Option (or the portion thereof
being canceled) by surrender of this Option at the principal office of the Company together with
the Early Exercise Agreement or Exercise Agreement, as the case may be, duly executed by such
Optionee, in which event the Company shall issue to holder a number of shares of Common Stock
computed using the following formula:

X = Y (A – B)

     A

	 	 	 	 	 
	Where

	 	X =
	 	The number of shares of Common Stock to be issued to the Optionee.
	 
	 	 	 	 
	 

	 	Y =
	 	The number of shares of Common Stock purchasable under this Option (at the date of such calculation).
	 
	 	 	 	 
	 

	 	A =
	 	The Fair Market Value of one share of Common Stock (at the date of such calculation).
	 
	 	 	 	 
	 

	 	B =
	 	The Purchase Price (as adjusted to the date of such calculation).

3. Method of Payment. Payment of the Exercise Price shall be by cash, check, or any
other form approved by the Company), or any other method permitted under the Plan; provided however
that the Administrator may refuse to allow Optionee to tender a particular form of payment (other
than cash or check) if, in the Administrator’s sole discretion, acceptance of such form of
consideration would not be in the best interests of the Company at such time.

4. Restrictions on Exercise. This Option may not be exercised until such time as the
Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon
such exercise or the method of payment of consideration for such shares would constitute a
violation of any applicable federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the Federal
Reserve Board. As a condition to the exercise of this Option, the Company may
require Optionee to make any representation and warranty to the Company as may be required by
any applicable law or regulation.

 

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5. Termination of Relationship. In the event of termination of Optionee’s Continuous
Status as an Employee or Consultant, Optionee may, to the extent otherwise so entitled at the date
of such termination (the “Termination Date”), exercise this Option during the Termination
Period set forth in the Notice of Stock Option Grant. To the extent that Optionee was not entitled
to exercise this Option at such Termination Date, or if Optionee does not exercise this Option
within the Termination Period, the Option shall terminate.

6. Disability of Optionee.

(a) Notwithstanding the provisions of Section 5 above, in the event of termination of
Optionee’s Continuous Status as an Employee or Consultant as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within
twelve months from the Termination Date (but in no event later than the Expiration Date set forth
in the Notice of Stock Option Grant and in Section 9 below), exercise this Option to the extent he
or she was entitled to exercise it at such Termination Date. To the extent that Optionee was not
entitled to exercise the Option on the Termination Date, or if Optionee does not exercise such
Option to the extent so entitled within the time specified in this Section 6(a), the Option shall
terminate.

(b) Notwithstanding the provisions of Section 5 above, in the event of termination of
Optionee’s consulting relationship or Continuous Status as an Employee as a result of a disability
not constituting a total and permanent disability (as set forth in Section 22(e)(3) of the Code),
Optionee may, but only within six months from the Termination Date (but in no event later than the
Expiration Date set forth in the Notice of Stock Option Grant and in Section 9 below), exercise the
Option to the extent Optionee was entitled to exercise it as of such Termination Date; provided,
however, that if this is an Incentive Stock Option and Optionee fails to exercise this Incentive
Stock Option within three months from the Termination Date, this Option will cease to qualify as an
Incentive Stock Option (as defined in Section 422 of the Code) and Optionee will be treated for
federal income tax purposes as having received ordinary income at the time of such exercise in an
amount generally measured by the difference between the Exercise Price for the Shares and the Fair
Market Value of the Shares on the date of exercise. To the extent that Optionee was not entitled
to exercise the Option at the Termination Date, or if Optionee does not exercise such Option to the
extent so entitled within the time specified in this Section 6(b), the Option shall terminate.

7. Death of Optionee. In the event of the death of Optionee (a) during the Term of
this Option and while an Employee or Consultant of the Company and having been in Continuous Status
as an Employee or Consultant since the date of grant of the Option, or (b) within 30 days after
Optionee’s Termination Date, the Option may be exercised at any time within six months following
the date of death (but in no event later than the Expiration Date set forth in the Notice of Stock
Option Grant and in Section 9 below), by Optionee’s estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the Termination Date.

 

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8. 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 Optionee only by him or her. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of Optionee.

9. Term of Option. This Option may be exercised only within the Term set forth in the
Notice of Stock Option Grant, subject to the limitations set forth in Section 6 of the Plan.

10. Tax Consequences. Set forth below is a brief summary as of the date of this
Option of certain of the federal and state tax consequences of exercise of this Option and
disposition of the Shares under the laws in effect as of the Date of Grant. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

(a) Exercise of Incentive Stock Option. If this Option qualifies as an Incentive
Stock Option, there will be no regular federal or state income tax liability upon the exercise of
the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject Optionee to the alternative minimum tax in the year of
exercise.

(b) Exercise of Nonstatutory Stock Option. If this Option does not qualify as an
Incentive Stock Option, there may be a regular federal income tax liability and a state income tax
liability upon the exercise of the Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Shares on the date of exercise over the Exercise Price. If Optionee is a
current or former employee, the Company may be required to withhold from Optionee’s compensation or
collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage
of this compensation income at the time of exercise.

(c) Disposition of Shares. In the case of a Nonstatutory Stock Option, if Shares are
held for more than one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal and state income tax purposes. In the case of an Incentive
Stock Option, if Shares transferred pursuant to the Option are held for more than one year after
exercise and are disposed of at least two years after the Date of Grant, any gain realized on
disposition of the Shares will also be treated as long-term capital gain for federal and state
income tax purposes. In either case, the long-term capital gain will be taxed for federal income
tax and alternative minimum tax purposes at a maximum rate of 20% if the Shares are held more than
one year after exercise. If Shares purchased under an Incentive Stock Option are disposed of
within one year after exercise or within two years after the Date of Grant, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary income rates) to the
extent of the difference between the Exercise Price and the lesser of (i) the Fair Market Value of
the Shares on the date of exercise, or (ii) the sale price of the Shares.

 

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(d) Notice of Disqualifying Disposition of Incentive Stock Option Shares. If the
Option granted to Optionee herein is an Incentive Stock Option, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the Incentive Stock Option on or
before the later of (i) the date two years after the Date of Grant, or (ii) the date one year after
the date of exercise, Optionee shall immediately notify the Company in writing of such disposition.
Optionee acknowledges and agrees that he or she may be subject to income tax withholding by the
Company on the compensation income recognized by Optionee from the early disposition by payment in
cash or out of the current earnings paid to Optionee.

11. Withholding Tax Obligations.

(a) General Withholding Obligations. As a condition to the exercise of Option granted
hereunder, Optionee shall make such arrangements as the Administrator may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in
connection with the exercise, receipt or vesting of the Option. The Company shall not be required
to issue any Shares under the Plan until such obligations are satisfied. Optionee understands
that, upon exercising a Nonstatutory Stock Option, he or she will recognize income for tax purposes
in an amount equal to the excess of the then Fair Market Value of the Shares over the Exercise
Price. If Optionee is an employee, the Company will be required to withhold from Optionee’s
compensation, or collect from Optionee and pay to the applicable taxing authorities an amount equal
to a percentage of this compensation income. Additionally, Optionee may at some point be required
to satisfy tax withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. Optionee shall satisfy his or her tax withholding obligation arising upon
the exercise of this Option by one or some combination of the following methods: (i) by cash or
check payment, (ii) out of Optionee’s current compensation, (iii) if permitted by the
Administrator, in its discretion, by surrendering to the Company Shares which (A) in the case of
Shares previously acquired from the Company, have been owned by Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value determined as of the applicable Tax Date
(as defined in Section 11(c) below) on the date of surrender equal to the amount required to be
withheld, or (iv) by electing to have the Company withhold from the Shares to be issued upon
exercise of the Option, or the Shares to be issued in connection with the Stock Purchase Right, if
any, that number of Shares having a Fair Market Value determined as of the applicable Tax Date
equal to the amount required to be withheld.

(b) Stock Withholding to Satisfy Withholding Tax Obligations. In the event the
Administrator allows Optionee to satisfy his or her tax withholding obligations as provided in
Section 11(a)(iii) or (iv) above, such satisfaction must comply with the requirements of this
Section (11)(b) and all applicable laws. All elections by Optionee to have Shares withheld to
satisfy tax withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:

(i) the election must be made on or prior to the applicable Tax Date (as defined in Section
11(c) below);

(ii) once made, the election shall be irrevocable as to the particular Shares of the Option as
to which the election is made; and

 

5

 

(iii) all elections shall be subject to the consent or disapproval of the Administrator.

In the event the election to have Shares withheld is made by Optionee and the Tax Date is
deferred under Section 83 of the Code because no election is filed under Section 83(b) of the Code,
Optionee shall receive the full number of Shares with respect to which the Option is exercised but
Optionee shall be unconditionally obligated to tender back to the Company the proper number of
Shares on the Tax Date.

(c) Definitions. For purposes of this Section 11, the Fair Market Value of the Shares
to be withheld shall be determined on the date that the amount of tax to be withheld is to be
determined under the Applicable Laws (the “Tax Date”).

12. Market Standoff Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing such underwritten
offering of the Company’s securities, Optionee agrees not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180 days) from the
effective date of such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be requested by the
underwriters at the time of the Company’s initial public offering.

[Signature Page Follows]

 

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This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one document.

	 	 	 	 	 
	 	 	AURIGA LABORATORIES, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Charles R. Bearchell
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:
	 	Charles R. Bearchell
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:
	 	Chief Financial Officer
	 

	 	 	 	 

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS
EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT
OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY’S STOCK OPTION PLAN
WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO
CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH
OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S EMPLOYMENT OR CONSULTANCY AT ANY
TIME, WITH OR WITHOUT CAUSE.

Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar
with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had
an opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions arising under the Plan or
this Option.

	 	 	 
	Dated: May 9, 2007

	 	/s/ Philip S. Pesin
	 

	 	 

 

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EXHIBIT A

AURIGA LABORATORIES, INC.

2007 Stock Option Plan

EARLY EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT

This Agreement (“Agreement”) is made as of                                         , by and between
Auriga Laboratories, Inc., a Delaware corporation (the “Company”), and
                                         (“Purchaser”). To the extent any capitalized terms used in this
Agreement are not defined, they shall have the meaning ascribed to them in the 2007 Stock Option
Plan.

1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby
elects to exercise his or her option to purchase                      shares of the Common Stock (the
“Shares”) of the Company under and pursuant to the Company’s 2007 Stock Option Plan (the
“Plan”) and the Stock Option Agreement dated                      (the “Option
Agreement”). Of these Shares, Purchaser has elected to purchase                      of those
Shares which have become vested as of the date hereof under the Vesting Schedule set forth in the
Notice of Stock Option Grant (the “Vested Shares”) and                      Shares which have not
yet vested under such Vesting Schedule (the “Unvested Shares”). The purchase price for the
Shares shall be $                     per Share for a total purchase price of $                    , which
amount shall be paid for by a check in the amount of $                    . The term “Shares”
refers to the purchased Shares and all securities received in replacement of the Shares or as stock
dividends or splits, all securities received in replacement of the Shares in a recapitalization,
merger, reorganization, exchange or the like, and all new, substituted or additional securities or
other properties to which Purchaser is entitled by reason of Purchaser’s ownership of the Shares.

2. Time and Place of Exercise. The purchase and sale of the Shares under this
Agreement shall occur at the principal office of the Company simultaneously with the execution and
delivery of this Agreement in accordance with the provisions of Section 2(b) of the Option
Agreement. On such date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser’s name) against payment of
the purchase price therefor by Purchaser by (a) check made payable to the Company, (b) cancellation
of indebtedness of the Company to Purchaser, (c) delivery of shares of the Common Stock of the
Company in accordance with Section 3 of the Option Agreement, or (d) a combination of the
foregoing.

3. Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Purchaser shall not assign, encumber or dispose of any interest in
the Shares while the Shares are subject to the Company’s Repurchase Option (as defined below).
After any Shares have been released from such Repurchase Option, Purchaser shall not assign,
encumber or dispose of any interest in such Shares except in compliance with the provisions below
and applicable securities laws.

 

A-1

 

(a) Repurchase Option.

(i) In the event of the voluntary or involuntary termination of Purchaser’s employment or
consulting relationship with the Company for any reason (including death or disability), with or
without cause, the Company shall upon the date of such termination (the “Termination Date”)
have an irrevocable, exclusive option (the “Repurchase Option”) for a period of 90 days
from such date to repurchase all or any portion of the Shares held by Purchaser as of the
Termination Date which have not yet been released from the Company’s Repurchase Option at the
original purchase price per Share specified in Section 1 (adjusted for any stock splits, stock
dividends and the like).

(ii) Unless the Company notifies Purchaser within 90 days from the date of termination of
Purchaser’s employment or consulting relationship that it does not intend to exercise its
Repurchase Option with respect to some or all of the Shares, the Repurchase Option shall be deemed
automatically exercised by the Company as of the 90th day following such termination, provided that
the Company may notify Purchaser that it is exercising its Repurchase Option as of a date prior to
such 90th day. Unless Purchaser is otherwise notified by the Company pursuant to the preceding
sentence that the Company does not intend to exercise its Repurchase Option as to some or all of
the Shares to which it applies at the time of termination, execution of this Agreement by Purchaser
constitutes written notice to Purchaser of the Company’s intention to exercise its Repurchase
Option with respect to all Shares to which such Repurchase Option applies. The Company, at its
choice, may satisfy its payment obligation to Purchaser with respect to exercise of the Repurchase
Option by either (A) delivering a check to Purchaser in the amount of the purchase price for the
Shares being repurchased, or (B) in the event Purchaser is indebted to the Company, canceling an
amount of such indebtedness equal to the purchase price for the Shares being repurchased, or (C) by
a combination of (A) and (B) so that the combined payment and cancellation of indebtedness equals
such purchase price. In the event of any deemed automatic exercise of the Repurchase Option
pursuant to this Section 3(a)(ii) in which Purchaser is indebted to the Company, such indebtedness
equal to the purchase price of the Shares being repurchased shall be deemed automatically canceled
as of the 90th day following termination of Purchaser’s employment or consulting relationship
unless the Company otherwise satisfies its payment obligations. As a result of any repurchase of
Shares pursuant to this Section 3(a), the Company shall become the legal and beneficial owner of
the Shares being repurchased and shall have all rights and interest therein or related thereto, and
the Company shall have the right to transfer to its own name the number of Shares being repurchased
by the Company, without further action by Purchaser.

(iii) One hundred percent (100%) of the Shares shall initially be subject to the Repurchase
Option. The Unvested Shares shall be released from the Repurchase Option in accordance with the
Vesting Schedule set forth in the Notice of Stock Option Grant until all Shares are released from
the Repurchase Option. Fractional shares shall be rounded to the nearest whole share.

(b) Right of First Refusal. Before any Shares held by Purchaser or any transferee of
Purchaser (either being sometimes referred to herein as the “Holder”) may be sold or
otherwise transferred (including transfer by gift or operation of law), the Company or its
assignee(s) shall have a right of first refusal to purchase the Shares on the terms and
conditions set forth in this Section 3(b) (the “Right of First Refusal”).

 

A-2

 

(i) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to
sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other
transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each
Proposed Transferee; and (iv) the terms and conditions of each proposed sale or transfer. The
Holder shall offer the Shares at the same price (the “Offered Price”) and upon the same
terms (or terms as similar as reasonably possible) to the Company or its assignee(s).

(ii) Exercise of Right of First Refusal. At any time within 30 days after receipt of
the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect
to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more
of the Proposed Transferees, at the purchase price determined in accordance with subsection (iii)
below.

(iii) Purchase Price. The purchase price (“Purchase Price”) for the Shares
purchased by the Company or its assignee(s) under this Section 3(b) shall be the Offered Price. If
the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in good faith.

(iv) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), by net exercise pursuant to Section 2(c) of the Option Agreement, or by
any combination thereof within 30 days after receipt of the Notice or in the manner and at the
times set forth in the Notice.

(v) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section 3(b), then the Holder may sell or otherwise transfer such Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within 60 days after the date of the Notice and provided further that
any such sale or other transfer is effected in accordance with any applicable securities laws and
the Proposed Transferee agrees in writing that the provisions of this Section 3 shall continue to
apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, or if the Holder proposes
to change the price or other terms to make them more favorable to the Proposed Transferee, a new
Notice shall be given to the Company, and the Company and/or its assignees shall again be offered
the Right of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.

 

A-3

 

(vi) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section 3(b) notwithstanding, the transfer of any or all of the Shares during Purchaser’s
lifetime or on Purchaser’s death by will or intestacy to Purchaser’s Immediate
Family (as defined below) or a trust for the benefit of Purchaser’s Immediate Family shall be
exempt from the provisions of this Section 3(b). “Immediate Family” as used herein shall
mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such Shares except in
accordance with the terms of this Section 3.

(c) Involuntary Transfer.

(i) Company’s Right to Purchase upon Involuntary Transfer. In the event, at any time
after the date of this Agreement, of any transfer by operation of law or other involuntary transfer
(including divorce or death, but excluding, in the event of death, a transfer to Immediate Family
as set forth in Section 3(b)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares transferred at the greater
of the purchase price paid by Purchaser pursuant to this Agreement or the Fair Market Value of the
Shares on the date of transfer. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by the Company of
written notice by the person acquiring the Shares.

(ii) Price for Involuntary Transfer. With respect to any stock to be transferred
pursuant to Section 3(c)(i), the price per Share shall be a price set by the Board of Directors of
the Company that will reflect the current value of the stock in terms of present earnings and
future prospects of the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within 30 days after receipt by it of written notice of the transfer or
proposed transfer of Shares. However, if the Purchaser does not agree with the valuation as
determined by the Board of Directors of the Company, the Purchaser shall be entitled to have the
valuation determined by an independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the Purchaser.

(d) Assignment. The right of the Company to purchase any part of the Shares may be
assigned in whole or in part to any shareholder or shareholders of the Company or other persons or
organizations.

(e) Restrictions Binding on Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interest subject to the provisions of this Agreement,
including, insofar as applicable, the Repurchase Option. In the event of any purchase by the
Company hereunder where the Shares or interest are held by a transferee, the transferee shall be
obligated, if requested by the Company, to transfer the Shares or interest to the Purchaser for
consideration equal to the amount to be paid by the Company hereunder. In the event the Repurchase
Option is deemed exercised by the Company pursuant to Section 3(a)(ii) hereof, the Company may deem
any transferee to have transferred the Shares or interest to Purchaser prior to their purchase by
the Company, and payment of the purchase price by the Company to such transferee shall be deemed to
satisfy Purchaser’s obligation to pay such transferee for such Shares or interest, and also to
satisfy the Company’s obligation to pay
Purchaser for such Shares or interest. Any sale or transfer of the Shares shall be void
unless the provisions of this Agreement are satisfied.

 

A-4

 

(f) Termination of Rights. The Right of First Refusal and the Company’s right to
repurchase the Shares in the event of an involuntary transfer pursuant to Section 3(c) above shall
terminate upon the listing of Common Stock of the Company on a national exchange.

(g) Market Standoff Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing such underwritten
offering of the Company’s securities, Purchaser agrees not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180 days) from the
effective date of such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be requested by the
underwriters at the time of the Company’s initial public offering.

4. Escrow of Unvested Shares. For purposes of facilitating the enforcement of the
provisions of Section 3 above, Purchaser agrees, immediately upon receipt of the certificate(s) for
the Shares subject to the Repurchase Option, to deliver such certificate(s), together with an
Assignment Separate from Certificate in the form attached to this Agreement as Attachment A
executed by Purchaser and by Purchaser’s spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary’s designee, to hold such certificate(s) and Assignment
Separate from Certificate in escrow and to take all such actions and to effectuate all such
transfers and/or releases as are in accordance with the terms of this Agreement. Purchaser hereby
acknowledges that the Secretary of the Company, or the Secretary’s designee, is so appointed as the
escrow holder with the foregoing authorities as a material inducement to make this Agreement and
that said appointment is coupled with an interest and is accordingly irrevocable. Purchaser agrees
that said escrow holder shall not be liable to any party hereof (or to any other party). The
escrow holder may rely upon any letter, notice or other document executed by any signature
purported to be genuine and may resign at any time. Purchaser agrees that if the Secretary of the
Company, or the Secretary’s designee, resigns as escrow holder for any or no reason, the Board of
Directors of the Company shall have the power to appoint a successor to serve as escrow holder
pursuant to the terms of this Agreement.

5. Investment and Taxation Representations. In connection with the purchase of the
Shares, Purchaser represents to the Company the following:

(a) Purchaser is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Shares. Purchaser is purchasing the Shares for investment for his or her own
account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act. Purchaser does not have any present intention to
transfer the Shares to any other person or entity.

 

A-5

 

(b) Purchaser understands that the Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser’s investment intent as expressed herein.

(c) Purchaser understands that the Shares are “restricted securities” under applicable U.S.
federal and state securities laws and that, pursuant to these laws, Purchaser must hold the Shares
indefinitely unless they are registered with the Securities and Exchange Commission and qualified
by state authorities, or an exemption from such registration and qualification requirements is
available. Purchaser acknowledges that the Company has no obligation to register or qualify the
Shares for resale. Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and requirements
relating to the Company which are outside of the Purchaser’s control, and which the Company is
under no obligation and may not be able to satisfy.

(d) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of
Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has
consulted any tax consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.

6. Restrictive Legends and Stop-Transfer Orders.

(a) Legends. The certificate or certificates representing the Shares shall bear the
following legends (as well as any legends required by applicable state and federal corporate and
securities laws):

(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.

(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.

(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the
provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right
to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been
so transferred.

 

A-6

 

(d) Removal of Legend. When all of the following events have occurred, the Shares
then held by Purchaser will no longer be subject to the legend referred to in Section 6(a)(ii):
(i) the termination of the Right of First Refusal; (ii) the expiration or termination of the market
standoff provisions of Section 3(g) (and of any agreement entered pursuant to Section 3(g)); and
(iii) the expiration or exercise in full of the Repurchase Option. After such time, and upon
Purchaser’s request, a new certificate or certificates representing the Shares not repurchased
shall be issued without the legend referred to in Section 6(a)(ii), and delivered to Purchaser.

7. No Employment Rights. Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to
terminate Purchaser’s employment or consulting relationship, for any reason, with or without cause.

8. Section 83(b) Election. Purchaser understands that Section 83(a) of the Internal
Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income for a Nonstatutory
Stock Option and as alternative minimum taxable income for an Incentive Stock Option the difference
between the amount paid for the Shares and the Fair Market Value of the Shares as of the date any
restrictions on the Shares lapse. In this context, “restriction” means the right of the
Company to buy back the Shares pursuant to the Repurchase Option set forth in Section 3(a) of this
Agreement. Purchaser understands that Purchaser may elect to be taxed at the time the Shares are
purchased, rather than when and as the Repurchase Option expires, by filing an election under
Section 83(b) (an “83(b) Election”) of the Code with the Internal Revenue Service within 30
days from the date of purchase. Even if the Fair Market Value of the Shares at the time of the
execution of this Agreement equals the amount paid for the Shares, the election must be made to
avoid income and alternative minimum tax treatment under Section 83(a) in the future. Purchaser
understands that failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional copy of such election
form should be filed with his or her federal income tax return for the calendar year in which the
date of this Agreement falls. Purchaser acknowledges that the foregoing is only a summary of the
effect of United States federal income taxation with respect to purchase of the Shares hereunder,
and does not purport to be complete. Purchaser further acknowledges that the Company has directed
Purchaser to seek independent advice regarding the applicable provisions of the Code, the income
tax laws of any municipality, state or foreign country in which Purchaser may reside, and the tax
consequences of Purchaser’s death.

Purchaser agrees that he or she will execute and deliver to the Company with this executed
Agreement a copy of the Acknowledgment and Statement of Decision Regarding Section 83(b) Election
(the “Acknowledgment”) attached hereto as Attachment B. Purchaser further agrees
that he or she will execute and submit with the Acknowledgment a copy of the 83(b) Election
attached hereto as Attachment C (for tax purposes in connection with the early exercise of
an option) if Purchaser has indicated in the Acknowledgment his or her decision to make such an
election.

 

A-7

 

9. Miscellaneous.

(a) Governing Law. This Agreement and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto shall be governed, construed and interpreted in
accordance with the laws of the State of Georgia, without giving effect to principles of conflicts
of law.

(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing signed by the parties to
this Agreement. The failure by either party to enforce any rights under this Agreement shall not
be construed as a waiver of any rights of such party.

(c) Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of
the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of
the Agreement shall be enforceable in accordance with its terms.

(d) Construction. This Agreement is the result of negotiations between and has been
reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this
Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be
construed in favor of or against any one of the parties hereto.

(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or 48 hours
after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and
addressed to the party to be notified at such party’s address as set forth below or as subsequently
modified by written notice.

(f) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument.

(g) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Purchaser under this Agreement may only be assigned with the prior written consent
of the Company.

(h) Georgia Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE
OF GEORGIA, OR ANY OTHER STATE, AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

 

A-8

 

(i) California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE DEPARTMENT OF CORPORATIONS OF THE STATE
OF CALIFORNIA, OR ANY OTHER STATE, AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

[Signature Page Follows]

 

A-9

 

The parties have executed this Agreement as of the date first set forth above.

	 	 	 	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 	 	 
	 	 	AURIGA LABORATORIES, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Address:
	 	2029 Century Park East, Suite 1130
	 

	 	 	 	 	 	Los Angeles, CA 90067
	 
	 	 	 	 	 	 
	 	 	PURCHASER:
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Signature
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Print Name
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Address
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Address

 

A-10

 

ATTACHMENT A

ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED and pursuant to that certain Early Exercise Notice and Restricted Stock
Purchase Agreement between the undersigned (“Purchaser”) and Auriga Laboratories, Inc. (the
“Company”) dated                     ,       (the “Agreement”), Purchaser hereby sells,
assigns and transfers unto the Company                                          (     ) shares of the Common
Stock of the Company, standing in Purchaser’s name on the books of the Company and represented by
Certificate No.      , and does hereby irrevocably constitute and appoint
                                         to transfer said stock on the books of the Company with full power of
substitution in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND
THE ATTACHMENTS THERETO.

Dated:                                         

Signature:

 
Signature

 
Print Name

Instruction: Please do not fill in any blanks other than the signature line. The purpose
of this assignment is to enable the Company to exercise its Repurchase Option set forth in the
Agreement without requiring additional signatures on the part of Purchaser.

 

A-A-1

 

ATTACHMENT B

ACKNOWLEDGMENT AND STATEMENT OF DECISION

REGARDING SECTION 83(b) ELECTION

The undersigned (which term includes the undersigned’s spouse), a purchaser of                     
shares of Common Stock of Auriga Laboratories, Inc., a Delaware corporation (the “Company”)
by exercise of an option (the “Option”) granted pursuant to the Company’s 2007 Stock Option
Plan (the “Plan”), hereby states as follows:

1. The undersigned acknowledges receipt of a copy of the Plan relating to the offering of such
shares. The undersigned has carefully reviewed the Plan and the option agreement pursuant to which
the Option was granted.

2. The undersigned either [check and complete as applicable]:

	 	(a)                     	 	 has consulted, and has been fully advised by, the
undersigned’s own tax advisor,                     , whose business
address is                     , regarding the federal, state and local tax
consequences of purchasing shares under the Plan, and particularly regarding
the advisability of making elections pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended (the “Code”) and pursuant to the
corresponding provisions, if any, of applicable state law; or

	 
	 	(b)                     	 	 has knowingly chosen not to consult such a tax advisor.

3. The undersigned hereby states that the undersigned has decided [check as applicable]:

	 	(a)                     	 	 to make an election pursuant to Section 83(b) of the Code,
and is submitting to the Company, together with the undersigned’s executed
Early Exercise Notice and Restricted Stock Purchase Agreement, an executed
form entitled “Election Under Section 83(b) of the Internal Revenue Code of
1986;” or

	 
	 	(b)                     	 	 not to make an election pursuant to Section 83(b) of the
Code.

4. Neither the Company nor any subsidiary or representative of the Company has made any
warranty or representation to the undersigned with respect to the tax consequences of the
undersigned’s purchase of shares under the Plan or of the making or failure to make an election
pursuant to Section 83(b) of the Code or the corresponding provisions, if any, of applicable state
law.

	 	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	Signature

 

A-B-1

 

ATTACHMENT C

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue
Code, to include in taxpayer’s gross income or alternative minimum taxable income, as applicable,
for the current taxable year, the amount of any income that may be taxable to taxpayer in
connection with taxpayer’s receipt of the property described below:

1. The name, address, taxpayer identification number and taxable year of the undersigned are
as follows:

	 	 	 	 	 
	NAME OF TAXPAYER:

	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 
	ADDRESS:

	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 
	IDENTIFICATION NO. OF TAXPAYER:

	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 
	TAXABLE YEAR:

	 	 	 	 
	 

	 	 	 	 

2. The property with respect to which the election is made is described as follows:

                     shares of the Common Stock of Auriga Laboratories, Inc., a
Delaware corporation (the “Company”).

3. The date on which the property was transferred is:                     

4. The property is subject to the following restrictions:

Repurchase option at cost in favor of the Company upon termination of taxpayer’s
employment or consulting relationship.

5. The fair market value at the time of transfer, determined without regard to any restriction
other than a restriction which by its terms will never lapse, of such property is:
$                    

The amount (if any) paid for such property: $                    

The undersigned has submitted a copy of this statement to the person for whom the services were
performed in connection with the undersigned’s receipt of the above-described property. The
transferee of such property is the person performing the services in connection with the transfer
of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent
of the Commissioner.

	 	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	Signature

 

A-C-1

 

RECEIPT AND CONSENT

The undersigned hereby acknowledges receipt of a photocopy of Certificate No.       for
                     shares of Common Stock of Auriga Laboratories, Inc. (the “Company”).

The undersigned further acknowledges that the Secretary of the Company, or his or her
designee, is acting as escrow holder pursuant to the Early Exercise Notice and Restricted Stock
Purchase Agreement Purchaser has previously entered into with the Company. As escrow holder, the
Secretary of the Company, or his or her designee, holds the original of the aforementioned
certificate issued in the undersigned’s name.

	 	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	Name:

 

 

 

EXHIBIT B

AURIGA LABORATORIES, INC.

2007 Stock Option Plan

EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT

This Agreement (“Agreement”) is made as of                     , by and between Auriga
Laboratories, Inc., a Delaware corporation (the “Company”), and                     
(“Purchaser”). To the extent any capitalized terms used in this Agreement are not defined,
they shall have the meaning ascribed to them in the 2007 Stock Option Plan.

1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby
elects to exercise his or her option to purchase                      shares of the Common Stock (the
“Shares”) of the Company under and pursuant to the Company’s 2007 Stock Option Plan (the
“Plan”) and the Stock Option Agreement dated                     , (the “Option
Agreement”). The purchase price for the Shares shall be $                     per Share for a total
purchase price of $                    . The term “Shares” refers to the purchased Shares and
all securities received in replacement of the Shares or as stock dividends or splits, all
securities received in replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other properties to
which Purchaser is entitled by reason of Purchaser’s ownership of the Shares.

2. Time and Place of Exercise. The purchase and sale of the Shares under this
Agreement shall occur at the principal office of the Company simultaneously with the execution and
delivery of this Agreement in accordance with the provisions of Section 2(b) of the Option
Agreement. On such date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser’s name) against payment of
the purchase price therefor by Purchaser by (a) check made payable to the Company, (b) cancellation
of indebtedness of the Company to Purchaser, (c) delivery of shares of the Common Stock of the
Company in accordance with Section 3 of the Option Agreement, or (d) a combination of the
foregoing.

3. Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Purchaser shall not assign, encumber or dispose of any interest in
the Shares except in compliance with the provisions below and applicable securities laws.

(a) Right of First Refusal. Before any Shares held by Purchaser or any transferee of
Purchaser (either being sometimes referred to herein as the “Holder”) may be sold or
otherwise transferred (including transfer by gift or operation of law), the Company or its
assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions
set forth in this Section 3(a) (the “Right of First Refusal”).

(i) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to
sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other
transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each
Proposed Transferee; and (iv) the terms and conditions of each proposed sale or transfer. The
Holder shall offer the Shares at the same price (the “Offered Price”) and upon the same
terms (or terms as similar as reasonably possible) to the Company or its assignee(s).

 

 

 

(ii) Exercise of Right of First Refusal. At any time within 30 days after receipt of
the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect
to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more
of the Proposed Transferees, at the purchase price determined in accordance with subsection (iii)
below.

(iii) Purchase Price. The purchase price (“Purchase Price”) for the Shares
purchased by the Company or its assignee(s) under this Section 3(a) shall be the Offered Price. If
the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in good faith.

(iv) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), by net exercise pursuant to Section 2(c) of the Option Agreement, or by
any combination thereof within 30 days after receipt of the Notice or in the manner and at the
times set forth in the Notice.

(v) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section 3(a), then the Holder may sell or otherwise transfer such Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within 60 days after the date of the Notice and provided further that
any such sale or other transfer is effected in accordance with any applicable securities laws and
the Proposed Transferee agrees in writing that the provisions of this Section 3 shall continue to
apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, or if the Holder proposes
to change the price or other terms to make them more favorable to the Proposed Transferee, a new
Notice shall be given to the Company, and the Company and/or its assignees shall again be offered
the Right of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.

(vi) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section 3(a) notwithstanding, the transfer of any or all of the Shares during Purchaser’s
lifetime or on Purchaser’s death by will or intestacy to Purchaser’s Immediate Family (as defined
below) or a trust for the benefit of Purchaser’s Immediate Family shall be exempt from the
provisions of this Section 3(a). “Immediate Family” as used herein shall mean spouse,
lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to the provisions of
this Section, and there shall be no further transfer of such Shares except in accordance with the
terms of this Section 3.

 

B-2

 

(b) Involuntary Transfer.

(i) Company’s Right to Purchase upon Involuntary Transfer. In the event, at any time
after the date of this Agreement, of any transfer by operation of law or other involuntary transfer
(including divorce or death, but excluding, in the event of death, a transfer to Immediate Family
as set forth in Section 3(a)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares transferred at the greater
of the purchase price paid by Purchaser pursuant to this Agreement or the Fair Market Value of the
Shares on the date of transfer. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by the Company of
written notice by the person acquiring the Shares.

(ii) Price for Involuntary Transfer. With respect to any stock to be transferred
pursuant to Section 3(b)(i), the price per Share shall be a price set by the Board of Directors of
the Company that will reflect the current value of the stock in terms of present earnings and
future prospects of the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within 30 days after receipt by it of written notice of the transfer or
proposed transfer of Shares. However, if the Purchaser does not agree with the valuation as
determined by the Board of Directors of the Company, the Purchaser shall be entitled to have the
valuation determined by an independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the Purchaser.

(c) Assignment. The right of the Company to purchase any part of the Shares may be
assigned in whole or in part to any shareholder or shareholders of the Company or other persons or
organizations.

(d) Restrictions Binding on Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interest subject to the provisions of this Agreement.
Any sale or transfer of the Shares shall be void unless the provisions of this Agreement are
satisfied.

(e) Termination of Rights. The Right of First Refusal and the Company’s right to
repurchase the Shares in the event of an involuntary transfer pursuant to Section 3(b) above shall
terminate upon the listing of Common Stock of the Company on a national exchange.

(f) Market Standoff Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing such underwritten
offering of the Company’s securities, Purchaser agrees not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180 days) from the
effective date of such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be requested by the
underwriters at the time of the Company’s initial public offering.

 

B-3

 

4. Investment and Taxation Representations. In connection with the purchase of the
Shares, Purchaser represents to the Company the following:

(a) Purchaser is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Shares. Purchaser is purchasing the Shares for investment for his or her own
account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act.

(b) Purchaser understands that the Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser’s investment intent as expressed herein.

(c) Purchaser understands that the Shares are “restricted securities” under applicable U.S.
federal and state securities laws and that, pursuant to these laws, Purchaser must hold the Shares
indefinitely unless they are registered with the Securities and Exchange Commission and qualified
by state authorities, or an exemption from such registration and qualification requirements is
available. Purchaser acknowledges that the Company has no obligation to register or qualify the
Shares for resale. Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and requirements
relating to the Company which are outside of the Purchaser’s control, and which the Company is
under no obligation and may not be able to satisfy.

(d) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of
Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has
consulted any tax consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.

5. Restrictive Legends and Stop-Transfer Orders.

(a) Legends. The certificate or certificates representing the Shares shall bear the
following legends (as well as any legends required by applicable state and federal corporate and
securities laws):

(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.

 

B-4

 

(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.

(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

(d) Removal of Legend. When all of the following events have occurred, the Shares
then held by Purchaser will no longer be subject to the legend referred to in Section 5(a)(ii):
(i) the termination of the Right of First Refusal; and (ii) the expiration or termination of the
market standoff provisions of Section 3(f) (and of any agreement entered pursuant to Section 3(f)).
After such time, and upon Purchaser’s request, a new certificate or certificates representing the
Shares not repurchased shall be issued without the legend referred to in Section 5(a)(ii), and
delivered to Purchaser.

6. No Employment Rights. Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to
terminate Purchaser’s employment or consulting relationship, for any reason, with or without cause.

7. Miscellaneous.

(a) Governing Law. This Agreement and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto shall be governed, construed and interpreted in
accordance with the laws of the State of Georgia, without giving effect to principles of conflicts
of law.

(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing signed by the parties to
this Agreement. The failure by either party to enforce any rights under this Agreement shall not
be construed as a waiver of any rights of such party.

(c) Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of
the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of
the Agreement shall be enforceable in accordance with its terms.

 

B-5

 

(d) Construction. This Agreement is the result of negotiations between and has been
reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this
Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be
construed in favor of or against any one of the parties hereto.

(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or 48 hours
after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and
addressed to the party to be notified at such party’s address as set forth below or as subsequently
modified by written notice.

(f) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument.

(g) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Purchaser under this Agreement may only be assigned with the prior written consent
of the Company.

(h) Georgia Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE
OF GEORGIA, OR ANY OTHER STATE, AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

(i) California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE DEPARTMENT OF CORPORATIONS OF THE STATE
OF CALIFORNIA, OR ANY OTHER STATE, AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

[Signature Page Follows]

 

B-6

 

The parties have executed this Agreement as of the date first set forth above.

	 	 	 	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 	 	 
	 	 	AURIGA LABORATORIES, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Address:
	 	2029 Century Park East, Suite 1130
	 

	 	 	 	 	 	Los Angeles, CA 90067
	 
	 	 	 	 	 	 
	 	 	PURCHASER:
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Signature
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Print Name
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Address
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Address

 

B-7

 

RECEIPT

Auriga Laboratories, Inc. (the “Company”) hereby acknowledges receipt of (check as
applicable):

			
	                              	 	A check in the amount of $                    

			
	                              	 	The cancellation of indebtedness in the amount of $                    

			
	                              	 	                     shares of (or cancellation of the right to exercise)
the Company’s Common Stock with a fair market value of $                    

given by                      as consideration for Certificate No.       for                      shares of Common
Stock of the Company.

Dated:                                         

	 	 	 	 	 
	 	AURIGA LABORATORIES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:AMENDED AND RESTATED BYLAWS

 

OF

 

FELCOR LODGING TRUST INCORPORATED

 

* * * * *

 

ARTICLE I 

OFFICES 

 

Section 1.1.Offices.  The corporation may have offices at such places both within and without the State of Maryland as the Board of Directors may from time to time determine or the business of the corporation may require.

 

ARTICLE II 

MEETINGS OF STOCKHOLDERS 

 

	
             
 	
            Section 2.1.
 	
            Annual Meetings.  
 

 

 (a)         Annual meetings of stockholders shall be held in the month of May of each year or at such other date and time as may be designated from time to time by the Board of Directors and stated in the notice of the meeting, at any place within the United States for the purpose of electing a Board of Directors, and transacting such other business as properly may be brought before the meeting.

 

 (b)         Only such business shall be conducted at an annual meeting of stockholders as shall have been properly brought before the meeting.  For business to be properly brought before the meeting, it must be (i) authorized by the Board of Directors and specified in the notice, or a supplemental notice, of the meeting, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors or the chairman of the meeting, or (iii) otherwise properly brought before the meeting by a stockholder.  For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given written notice thereof to the Secretary, delivered or mailed to and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the
first anniversary of the date on which the Corporation first mailed its proxy materials for the prior year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the annual meeting is called for a date that is not within 30 days from the anniversary date of the preceding year’s annual meeting date, written notice by a stockholder in order to be timely must be received not later than the close of business on the later of the tenth day following the day on which the first public disclosure of the date of the annual meeting was made or the ninetieth day before the date of the meeting.  Delivery shall be by hand or by certified or registered mail, return receipt requested.  In no event shall the public disclosure of an 

adjournment of an annual meeting commence a new time period for the giving of stockholder’s notice as described above.  A stockholder’s notice to the Secretary shall set forth as to each item of business the stockholder proposes to bring before the meeting: (1) a description of such item and the reasons for conducting such business at the meeting, (2) the name and address, as they appear on the Corporation’s records, of the stockholder proposing such business, (3) a representation that the stockholder is a holder of record of shares of stock of the Corporation entitled to vote with respect to such business and intends to appear in person or by proxy at the meeting to move the consideration of such business, (4) the class and number of shares of stock of the Corporation which are beneficially owned by the stockholder (for purposes of the regulations under Sections 13 and 14 of
the Securities Exchange Act of 1934, as amended), and (5) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business.  No business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph (b).  The chairman of the meeting at which any business is proposed by a stockholder shall, if the facts warrant, determine and declare to the meeting that such business was not properly brought before the meeting in accordance with the provisions of this paragraph (b), and, in such event, the business not properly before the meeting shall not be transacted.

 

Section 2.2.      Special Meetings.  Special meetings of the stockholders, for any purpose or purposes, unless otherwise provided by statute or by the Charter, may be called at any time by the Chairman, the Chief Executive Officer or the President and shall be called by the Secretary at the request in writing of a majority of the Board of Directors, a majority of the “Independent Directors” (as defined in Section E of Article VI of the Charter), or at the request in writing of stockholders entitled to cast not less than 25% of the votes entitled to be cast at the meeting.  Such request shall state the purpose or purposes of the proposed meeting.  Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

 

Section 2.3.      Notice of Meetings.  Whenever stockholders are required or permitted to take action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.  Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten (10) nor more than ninety (90) days before the date of the meeting, to each stockholder entitled to vote at the meeting and to each other stockholder entitled to notice of the meeting.

 

Section 2.4.      Quorum; Vote Required for Action.  A director shall be elected by a majority of the votes cast with respect to the director at a meeting of stockholders duly called at which a quorum is present; provided that, if the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of all votes cast for election of directors at the meeting.  For purposes of this Section 2.4, a majority of the votes cast with respect to a director means that the number of votes cast “for” a director must exceed the number of votes cast “against” that director.  There shall be no cumulative voting.  Each share of stock shall be voted for as many individuals as there are directors to be elected and for whose
election the share is entitled to be voted.  Except as otherwise provided by law or by the Charter or these Bylaws, the presence in person or by proxy of the holders of a majority of the outstanding shares of stock of the 

 

2

corporation entitled to vote thereat shall constitute a quorum at each meeting of the stockholders and all questions shall be decided by a vote of the holders of a majority of the shares so represented in person or by proxy at the meeting and entitled to vote thereat.  The stockholders present at any duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.  

 

Section 2.5.      Adjournments.  Notwithstanding any other provisions of these Bylaws, the holders of a majority of the shares of stock of the corporation entitled to vote at any meeting, present in person or represented by proxy, whether or not a quorum is present, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, to a date not more than 120 days after the original record date.  At any such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting originally called; provided, however, that if a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the adjourned meeting and to each other stockholder entitled to notice of the meeting.

 

Section 2.6.      Voting Rights; Proxies.  Unless otherwise provided by law or by the Charter, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be valid for more than eleven (11) months from its date, unless the proxy provides for a longer period.  Each proxy shall be revocable unless it is expressly provided therein to be irrevocable and it is coupled with an interest.  The notice of every meeting of the stockholders may be accompanied by a form of proxy approved by the Board of Directors in favor of such person or persons as the Board of Directors may select.

 

	
             
 	
            Section 2.7.
 	
            Consent of Stockholders in Lieu of Meeting.  
 

 

(a)          Any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents setting forth the action so taken shall be (i) given in writing or by electronic transmission by each stockholder entitled to vote on the matter and (ii) filed in paper or electronic form with the records of stockholders meetings.  

 

(b)          The holders of any class of stock of the corporation, other than common stock, may take action or consent to any action, that would otherwise be required or permitted to be taken at a meeting of the stockholders, by delivering a consent or consents in writing or by electronic transmission of the stockholders entitled to cast not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting, provided that the corporation shall give notice of the action to each holder of the class of stock not later than ten days after the effective time of the action.  

 

(c)          Any consent given by stockholders in accordance with this Section 2.7 may not take effect unless consents be given by a sufficient number of stockholders to take action are delivered to the corporation within 60 days after the date on which the earliest consent is dated 

 

3

and delivered to the corporation.  

 

(d)          Any consent given by a stockholder in accordance with this Section 2.7 shall be delivered to the corporation by delivery to its principal office in Maryland, its resident agent, or the officer or agent of the corporation that has custody of the book in which proceedings of minutes of stockholders meetings are recorded.  A stockholder may deliver the consent, if in paper form, by hand, by certified or registered mail, return receipt requested, or by electronic transmission. 

 

 (e)         Any stockholder of record seeking to have stockholders take any action or consent to any action in writing or by electronic transmission may, by written notice to the Secretary, request that the Board of Directors fix a record date for determining the stockholders for that purpose.  The Board of Directors may then fix a record date in accordance with Section 2.9 of these Bylaws.  If no record date has been fixed by the Board of Directors within ten days of the date on which the stockholder request is received, the record date will be determined in accordance with Section 2.9 of these Bylaws as if no record date has been fixed by the Board of Directors.

 

Section 2.8.       Record Date.  In order that the corporation may determine the stockholders entitled to notice or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date, if relating to a meeting of stockholders, shall not be more than 90 nor less than ten days before the date of the meeting of stockholders, nor more than 90 days prior to the time for such other action as hereinbefore described; provided,
however, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the later of the close of business on the day on which notice is mailed or the thirtieth day before the meeting, and the record date for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights shall not be prior to the close of business on the day on which the Board of Directors fixes the record date, and the record date for determining stockholders entitled to take any action or consents to any action in writing or by electronic transmission without a meeting shall be the first date on which a consent in writing or by electronic transmission setting forth the action taken or proposed to be taken is delivered to the corporation in accordance with Section 2.7 of these Bylaws.  

 

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting if the meeting is adjourned to a date not more than 120 days after the original record date; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.  

 

Section 2.09.    Inspectors.  The Board of Directors may, and the Board of  Directors shall if required by statute, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof.  If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the 

 

4

chairman of the meeting may, appoint one or more inspectors.  Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability.  The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the validity of ballots and proxies and the existence of a quorum, and shall receive votes, ballots or consents, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, count all votes, ballots or consents, determine the results, certify their determination of the number of shares of capital stock represented at the meeting and their count of all votes and ballots and do
such acts as are required by statute or are proper to conduct the election or vote with fairness to all stockholders.  The inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them.  No director or candidate for the office of director shall act as an inspector of an election of directors.  Inspectors need not be stockholders.

 

ARTICLE III 

BOARD OF DIRECTORS 

 

	
             
 	
            Section 3.1.
 	
            Number; Election.  
 

 

(a)           Subject to the provisions set forth in the Charter, the number of directors shall be fixed in such manner as may be determined by the vote of a majority of the directors then in office.  The directors of the corporation shall be classified as set forth in the Charter and the directors of each such class shall be elected at the annual meeting of stockholders held for the same year in which the term of such class expires as set forth in the Charter.   A majority of the directors may elect from its members a chairman.  The chairman, if any, shall hold this office until his successor shall have been elected and qualified.

(b)           Only persons who are nominated in accordance with the procedures set forth in this paragraph (b) shall be eligible for election as directors of the corporation.  Nominations of persons for election to the Board of Directors may be made at a meeting of stockholders by the Board of Directors or by any stockholder of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (b).  Any nomination by a stockholder must be made by written notice to the Secretary delivered or mailed to and received at the principal executive offices of the Corporation: (i) with respect to an election to be held at an annual meeting of stockholders, not less than 90 days nor more than 120 days prior to the first anniversary of the date
on which the Corporation first mailed its proxy materials for the prior year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the annual meeting is called for a date that is not within 30 days from the anniversary date of the preceding year’s annual meeting date, written notice by the stockholder in order to be timely must be so received not later than the close of business on the later of the tenth day following the day on which public disclosure of the date of the annual meeting was made or the ninetieth day before the date of the meeting, and (ii) with respect to an election to be held at a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the later of the tenth day following the day on which the first public disclosure of the date of the special meeting was made or the ninetieth day 

 

5

before the date of the meeting.  Delivery shall be by hand, or by certified or registered mail, return receipt requested.  In no event shall the public announcement of an adjournment of any annual or special meeting commence a new time period for giving of a stockholder notice as described above.  A stockholder’s notice to the Secretary shall set forth (x) as to each person whom the stockholder proposes to nominate for election or re-election as a director:  (1) the name, age, business address and residence address of such person, (2) the principal occupation or employment of such person, (3) the class and number of shares of stock of the Corporation which are beneficially owned by such person (for the purposes of the regulations under Sections 13 and 14 of the Securities Exchange Act of 1934, as amended), (4) any other information relating to such person that would be
required to be disclosed in solicitations of proxies for the election of such person as a director of the Corporation pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, had the nominee been nominated by the Board of Directors, and (5) such person’s written consent to being named in any proxy statement as a nominee and to serving as a director if elected; and (y) as to the stockholder giving notice: (1) the name and address, as they appear on the Corporation’s records, of such stockholder, (2) the class and number of shares of stock of the Corporation which are beneficially owned by such stockholder (determined as provided in clause (x)(3) above), (3) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote on the election of directors at such meeting and that such stockholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the
notice, and (4) a description of all agreements, arrangements or understandings between the stockholder and each nominee of the stockholder and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder.  At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee.  The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation.  The chairman of the meeting at which a stockholder nomination is presented shall, if the facts warrant, determine and declare to the meeting that such nomination was not made in accordance with the procedures
prescribed by this paragraph (b), and, in such event, the defective nomination shall be disregarded.

 

Section 3.2.  Independent Directors.  Notwithstanding anything to the contrary herein, the majority of the Board of Directors shall be comprised of “Independent Directors” as set forth in Section E of Article VI of the Charter.

 

Section 3.3.     Vacancies.  Any vacancy on the Board of Directors shall be filled in accordance with Section D of Article VI of the Charter and Section 2-407 of the Maryland General Corporation Law.

 

Section 3.4.      Powers. The Board of Directors shall be vested with the powers set forth in Article X of the Charter.

 

Section 3.5.      Resignations.  Any director may resign at any time by written notice to the corporation.  Any such resignation shall take effect at the date of receipt of such notice or at any 

 

6

later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

Section 3.6.      Regular Meetings.  Regular meetings of the Board of Directors shall be held at such place or places within or without the State of Maryland, at such hour and on such day as may be fixed by resolution of the Board of Directors, without further notice of such meetings.  The time and place of holding regular meetings of the Board of Directors may be changed by the Chairman, the Chief Executive Officer or the President by giving written notice thereof as provided in Article III, Section 3.8 hereof.

 

Section 3.7.      Special Meetings.  Special meetings of the Board of Directors may be held whenever called by (i) the Chairman, the Chief Executive Officer or the President; (ii) the Chairman, the Chief Executive Officer, the President or the Secretary on the written request of a majority of the Board of Directors or a majority of the Independent Directors then in office; or (iii) resolution adopted by the Board of Directors.  Special meetings may be held within or without the State of Maryland as may be stated in the notice of the meeting.

 

Section 3.8.      Notice of Meetings.  Written notice of the time, place and general nature of the business to be transacted at all special meetings of the Board of Directors, and written notice of any change in the time or place of holding the regular meetings of the Board of Directors, must be given by written notice delivered personally, telegraphed or mailed to each director at his business or resident address.  Personally delivered or telegraphed notices shall be given at least two days prior to the meeting.  Notice by mail shall be given at least five days prior to the meeting.  If mailed, such notice shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid.  If given by telegram, such notice shall be deemed to be given
when the telegram is delivered to the telegraph company; provided, however, that notice of any meeting need not be given to any director if waived by him in writing, or if he shall be present at such meeting, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the meeting is not lawfully called or convened.

 

Section 3.9.      Quorum; Vote Required for Action.  At all meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business and, except as otherwise provided by law or these Bylaws, the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors; but a lesser number may adjourn the meeting from day to day, without notice other than announcement at the meeting, until a quorum shall be present.

 

Section 3.10.  Action by Unanimous Consent of Directors.  Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board of Directors or the committee of the Board of Directors, as the case may be, consent thereto in writing or by electronic transmission, and the consents are filed in paper or electronic form with the minutes of proceedings of the Board of Directors or the committee thereof.  Effect shall be given to consent transmitted by telegraph, telex, telecopy or similar means of visual data transmission or by electronic transmission not involving the physical transmission of paper provided that the electronic transmission creates a 

 

7

record that may be retained, retrieved and reviewed by the recipient and may be reproduced in paper form.  

 

Section 3.11.    Telephonic Meetings Permitted.  Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation in a meeting pursuant to this Bylaw shall constitute presence in person at such meeting.

 

Section 3.12.    Compensation.  Independent Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved by resolution of the Board of Directors, a fixed sum and expenses of attendance at each regular or special meeting or any committee thereof.  No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

 

Section 3.13.    Removal.  Subject to the provisions set forth in the Charter regarding rights of holders of any class of stock separately entitled to elect one or more directors, any director or the entire Board of Directors may be removed only by the holders of shares entitled to cast a majority of the votes entitled to be cast generally for the election of directors.  The stockholders may elect a successor to fill a vacancy on the Board of Directors which results from removal of a director.    

 

Section 3.14.  Policies and Resolutions.  The purchase, sale, retention and disposal of the corporation’s assets, the investment policies and the borrowing policies of the corporation and the limitations thereon or amendment thereof should at all times be in compliance with the restrictions applicable to real estate investment trusts pursuant to the Internal Revenue Code of 1986, as amended.

 

Section 3.15.    Committees.  The Board of Directors may appoint from among its members an executive committee and other committees comprised of one or more directors. A majority of the members of any committee so appointed, other than the executive committee, shall be Independent Directors and the executive committee, if appointed, shall be composed of any two or more directors. The Board of Directors shall appoint an audit committee comprised of not less than two members, a majority of whom are Independent Directors.  The Board of Directors may delegate to any committee any of the powers of the Board of Directors except the power to elect directors, declare dividends or distributions on stock, recommend to the stockholders any action which requires stockholder approval, amend or repeal these
Bylaws, approve any merger or share exchange which does not require stockholder approval, or issue stock.  However, if the Board of Directors has given general authorization for the issuance of stock, a committee of the Board of Directors, in accordance with a general formula or method specified by the Board of Directors by resolution or by adoption of a stock option plan, may fix the terms of stock, subject to classification or reclassification, and the terms on which any stock may be issued.

 

Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors.

 

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One-third, but not less than two (except in the case of a committee composed of one director), of the members of any committee shall be present in person at any meeting of such committee in order to constitute a quorum for the transaction of business at such meeting, and the act of a majority present shall be the act of such committee.  The Board of Directors may designate a chairman of any committee, and such chairman or any two members of any committee may fix the time and place of its meetings unless the Board of Directors shall otherwise provide.  In the absence or disqualification of any member of any such committee, the members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of such absent or disqualified members; provided, however, that in the event
of the absence or disqualification of an Independent Director, such appointee shall be an Independent Director.

 

Each committee shall keep minutes of its proceedings and shall report the same to the Board of Directors at the meeting next succeeding, and any action by the committees shall be subject to revision and alteration by the Board of Directors, provided that no rights of third persons shall be affected by any such revision or alteration.

 

Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternative members to replace any absent or disqualified member, or to dissolve any such committee.

 

ARTICLE IV 

NOTICES 

 

Section 4.1.      Notices.  Except as otherwise provided herein, or in the Charter, whenever, under the provisions of the Charter or these Bylaws, notice is required to be given to any person, such notice may be in writing and given in person, in writing or by mail, telegram, telecopy or other similar means of visual communication or may, to the extent permitted by Maryland law, be by electronic transmission, in either case addressed to such person, at his address as it appears on the records of the corporation, with postage or other transmittal charges thereon prepaid.  Such notice shall be deemed to be given (i) if by mail, one day following the day when the same shall be deposited in the United States mail, and (ii) otherwise, when such notice is transmitted.

 

Section 4.2.      Waiver of Notice.  Whenever any notice is required to be given under the provisions of the Charter or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

 

ARTICLE V 

OFFICERS 

 

Section 5.1.     Election; Qualifications; Term of Office; Resignation; Removal; Vacancies.  The officers of the corporation shall include a President, a Treasurer and a Secretary and may also include, at the discretion of the Board of Directors, a Chairman, a Chief Executive Officer, one or 

 

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more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant Secretaries and Assistant Treasurers.  Officers of the corporation shall be elected by the Board of Directors; provided, however, that the duly elected Chief Executive Officer and/or President may appoint any Executive Vice President, Senior Vice President, Vice President, Assistant Secretary or Assistant Treasurer, subject to the right of the Board of Directors to remove such appointee in accordance with this Section 5.1. Any number of offices may be held by the same person; provided that no person may serve concurrently as both President and Vice President.  Any officer may resign at any time by written notice to the corporation.  The Board of
Directors may remove any officer at any time at its discretion with or without cause, and the Chief Executive Officer and/or President, respectively, may remove any officer appointed thereby at any time at his or her discretion with or without cause.  Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise may be filled by the Board of Directors or by the Chief Executive Officer and/or President of the corporation in accordance with this Section 5.1.

 

Section 5.2.      Powers and Duties.  The officers of the corporation shall have such powers and duties as generally pertain to their offices, except as modified herein or by the Board of Directors, as well as such powers and duties as shall be determined from time to time by the Board of Directors or, with respect to officers appointed by the President, by the President.  The Chairman, if one is elected, and otherwise the President (or Chief Executive Officer), if he or she is a director, shall preside at all meetings of the Board of Directors.  The President (or Chief Executive Officer) shall preside at all meetings of the stockholders.

 

ARTICLE VI 

STOCK

 

Section 6.1.       Certificates.  Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, (i) the Chairman, the Chief Executive Officer, the President or a Vice President, and (ii) the Treasurer or an assistant treasurer, or the Secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation.  If the corporation shall be authorized to issue more than one class of stock, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 2-211 of the Maryland General Corporation Law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

 

Section 6.2.       Certificates.  A stock certificate may not be issued until the stock represented by it is fully paid.

 

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Section 6.3.      Facsimile Signatures.  Any of or all the signatures on the certificate may be facsimile.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

 

Section 6.4.    Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates.  The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed.  When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in
such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

 

Section 6.5.  Transfer Agents and Registrars.  At such time as the corporation lists its securities on a national securities exchange or qualifies for trading in the over-the-counter market, the Board of Directors shall appoint one or more banks or trust companies in such city or cities as the Board of Directors may deem advisable, from time to time, to act as transfer agents and/or registrars of the shares of stock of the corporation; and, upon such appointments being made, no certificate representing shares shall be valid until countersigned by one of such transfer agents and registered by one of such registrars.

 

Section 6.6.      Transfer of Stock.  No transfers of shares of stock of the corporation shall be made if (i) void ab initio pursuant to any provision of the corporation’s Charter or (ii) the Board of Directors, pursuant to any provision of the corporation’s Charter, shall have refused to permit the transfer of such shares.  Permitted transfers of shares of stock of the corporation shall be made on the stock records of the corporation only upon the instruction of the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and upon surrender of the certificate or
certificates, if issued, for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon.  Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, as to any transfers not prohibited by any provision of the corporation’s Charter or by action of the Board of Directors thereunder, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto cancel the old certificate and record the transaction upon its books.

 

ARTICLE VII 

GENERAL PROVISIONS 

 

Section 7.1.      Dividends.  Dividends upon the capital stock of the corporation, subject to the provisions of the Charter, if any, may be declared by resolution adopted by the Board of 

 

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Directors at any regular or special meeting, pursuant to law; provided, however, as permitted by law, it shall be the duty of the Board of Directors to declare such dividends as may be necessary to cause the corporation to satisfy the requirements for qualification as a Real Estate Investment Trust (“REIT”) under the Internal Revenue Code of 1986, as amended from time to time (“Code”).  Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Charter.

 

Before payment of any dividend, subject to the provisions of the Charter and continued qualification as a REIT under the Code, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

 

Section 7.2.       Fiscal Year.  The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

 

Section 7.3.      Amendments.  These Bylaws may be altered, amended or repealed or new Bylaws may be adopted from time to time in the manner prescribed in the Charter.

 

ARTICLE VIII

INDEMNIFICATION 

 

Section 8.1.      Indemnification.  To the maximum extent permitted  by Maryland law in effect from time to time, the corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or elected officer of the corporation and who is made a party to the proceeding by reason of his or her service in that capacity or (b) any individual who, while a director or officer of the corporation and at the request of the corporation, serves or has served as director, officer, partner or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other entity
or enterprise and who is made a party to the proceeding by reason of his or her service in that capacity.  The corporation may, with the approval of the Board of Directors, provide such indemnification and advance of expenses to a person who served a predecessor of the corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the corporation or a predecessor of the corporation.  Neither the amendment nor repeal of this Section 8.1, nor the adoption or amendment of any other provision of the Bylaws or Charter of the corporation inconsistent with this Section 8.1, shall apply or affect the applicability of this Section 8.1 with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

 

As amended and restated by resolution of the Board of Directors May 3, 2007

 

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