Document:

exhibit103sept182008.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT 10.3

     

    TRANSITION SERVICES
AGREEMENT

     

    THIS TRANSITION SERVICES AGREEMENT
(this “Agreement”) is made and entered into as of
__________ ___, 2008, by and between Charming Shoppes of Delaware, Inc., a
Pennsylvania corporation (“Charming”), and
Arizona Mail Order Company, Inc, a Delaware corporation (“AMO”).  Charming
and AMO are at times referred to herein individually as a “Party” and
collectively as the “Parties”.

     

    WHEREAS,
Crosstown Traders, Inc., a Delaware corporation (“Seller”) and Norm
Thompson Outfitters, Inc. (“NTO”) have entered
into that certain Stock Purchase Agreement dated August 25, 2008, as amended on
September ___, 2008 (the “Purchase Agreement”),
pursuant to which NTO has agreed to purchase all of the issued and outstanding
stock of AMO and its subsidiaries as more fully described in the Purchase
Agreement;

     

    WHEREAS,
capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed thereto in the Purchase Agreement; and

     

    WHEREAS,
as a condition to the Seller and NTO’s obligation to consummate the transactions
contemplated by the Purchase Agreement, the Parties have entered into this
Agreement pursuant to which each Party will make available to the other Party
certain transition services for the time periods specified herein.

     

    NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:

     

    ARTICLE
1

     

    SERVICES
PROVIDED

     

    1.01  Transition
Services.  Upon the terms and subject to the conditions set
forth in this Agreement, each Party (in such capacity, the “Provider”) will
provide to the other Party (in such capacity, the “Recipient”) for the
use in the businesses of the Recipient and its Affiliates each of the services
listed in Appendix A,
which is attached to and made part of this Agreement (hereinafter referred to
individually as a “Transition Service”,
and collectively as the “Transition
Services”), during the time period for each Transition Service set forth
on Appendix A
(hereinafter referred to as the “Time Periods” for all
of the Transition Services, and the “Time Period” for each
Transition Service).

     

    1.02  Personnel.  In
providing the Transition Services, the Provider, as it deems necessary or
appropriate in its sole discretion, may (a) use such personnel of the Provider
or its Affiliates and/or (b) employ the services of other third parties (each
such third party, a “Subcontractor”) to
the extent such Subcontractor’s services are routinely used to provide similar
services to the Provider’s business or are reasonably necessary for the
efficient performance of any of such Transition Services. The Provider shall
retain responsibility for the provision of such Transition Services to the
Recipient.  If the Provider elects to commence the provision of
specified Transition Services hereunder through a Subcontractor that is not
engaged with respect to the Transition Services in question by the Provider as
of the date hereof, then the Recipient shall have the right to terminate such
specified Transition Services on 20 days prior written notice to the Provider
and to engage such Subcontractor to perform such specified Transition
Services

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    directly
for the Recipient and the Recipient shall have no further liability or
obligation to the Provider with respect to such terminated Transition
Services.

     

    1.03  Level of Transition
Services.

     

    (a)  The
Provider shall perform the Transition Services exercising the same degree of
care as it exercises in performing the same or similar services for its own
account, with priority equal to that provided to its own businesses or those of
any of its Affiliates.  Subject to the obligations under this
Agreement (including, without limitation, the
other provisions of this Section 1.03(a)), the Provider shall be responsible for
the proper management of and
control over the provision of the Transition Services (including, without
limitation, the determination or designation at any time of the equipment,
employees and other resources of the Provider to be used in connection with the
provision of the Transition Services), it being
expressly acknowledged and agreed that the Parties shall in good faith and shall
reasonably cooperate in the cost-effective transition of each Party’s business
units to stand alone functionality and, in the case of AMO, the integration of
AMO and its business with the businesses operated by AMO and its
Affiliates.  Accordingly, the Recipient may from time to time request
that the Provider implement plans, procedures and other processes relating to
the provision of Transition Services which it in good faith believes will help
achieve such objectives and/or facilitate and expedite the Recipient's
transition to stand-alone functionality as well as such other plans, procedures
and other processes which it in good faith believes will improve the operational
efficiency of the Recipient's business.  The Provider shall consider
in good faith and implement any such commercially reasonable plans, procedures
and other processes requested by the Recipient, so long as the Recipient agrees
to bear capital expenditures and incremental management expenses that the
Parties mutually agree will be required to be made in connection
therewith.

     

    (b)  As more
specifically set forth in Appendix A attached hereto, it is the intention of the
parties that the Recipient’s use of any Transition Service shall not be higher
than the level of use required by the affected business unit prior to the
Closing Date.  In no event shall the Recipient be entitled to any new
service (other than any additional services mutually agreed by the Parties in a
separate writing) or to increase its use of any of the Transition Services above
the level of use prior to the date hereof without the prior written consent of
the Provider.

     

    (c)  In
connection with the provision of Transition Services and subject to Section 5.01
hereof, the Provider may undertake periodic maintenance and other temporary
shutdowns of its information technology system, processing center equipment,
call center services or other system related to any Transition Service as needed
and in accordance with its own practices and procedures (but not more frequently
than one (1) four (4) hour period per month) so long as the Provider makes
commercially reasonable efforts to minimize any disruption to the Recipient’s
business as a result thereof. The Provider shall give notice to the Recipient at
least 72 hours prior to any scheduled maintenance (and such notice shall provide
the estimated time such system is to be shut down for maintenance) and will make
commercially reasonable efforts to give notice to the Recipient 24 hours prior
to any non-scheduled temporary shutdowns but in any event will give notice as
soon as is practicable.  Notice under this subsection shall be given
pursuant to Section 6.04 herein.  

     

    (d)  The
Parties acknowledge that the intent of this Agreement is to provide for the
orderly and efficient transition of each Party’s respective business units to
stand-alone functionality and that the Parties are not in the business of
providing the Transition Services to third parties.  Accordingly, each
Party agrees to use commercially reasonable efforts to make a transition of each
such Transition Service to its own internal organization (or any other third
party suppliers for the Transition Services) as promptly as practicable within
(or at the conclusion of) the Time Period applicable to such
Transition

     

    
      
         

      

      
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    Service
and shall take such commercially reasonable actions (e.g., providing the other
Party reasonable access to operational information) in furtherance of the
foregoing.  Each Party shall assist the other Party’s efforts by (i)
collaborating on changes to operating procedure and third party providers (e.g.
shipping contracts), (ii) dedicating sufficient resources (including, without
limitation, personnel and materials) that are needed for the transition of each
Transition Service to a stand-alone functionality (which shall include, without
limitation, the transition from the Provider’s distribution centers and call
center to the Recipient’s distribution centers and call center), and (iii) other
mutually agreeable practices before termination of the Transition
Service.

     

    (e)  If a
Transition Service expires or is terminated pursuant to this Agreement, but
information  or other support related to such service is still
required to perform another Transition Service that continues, provision of the
continuing Transition Service will be contingent upon the Recipient providing
the information and support needed from the expired or terminated service to
provide the Transition Service that continues.

     

    1.04  Limitation of Liability and
Warranty.

     

    (a)  In the
absence of gross negligence or reckless or willful misconduct on the Provider’s
part, subject to the indemnity provisions of Article 5 of this Agreement, the
Provider shall not be liable for any claims, liabilities, damages, losses,
costs, expenses (including, but not limited to, settlements, judgments, court
costs and reasonable attorneys’ fees), fines and penalties incurred by the
Recipient, arising out of any actual or alleged injury, loss or damage of any
nature whatsoever by the Recipient in the Provider’s providing or failing to
provide the Transition Services to the Recipient.  Notwithstanding
anything to the contrary contained herein, in the event the Provider commits an
error with respect to or incorrectly performs or fails to perform any Transition
Service, at the Recipient’s request, the Provider shall use reasonable best
efforts to correct such error, re-perform or perform such Transition
Service.

     

    (b)  In no
event shall the Provider be liable for any damages caused by the Recipient’s
failure to perform the Recipient’s responsibilities hereunder.  The
Provider will not be liable to the Recipient for any act or omission of any
other entity that is not an Affiliate or Subcontractor of the Provider
furnishing any Transition Service (other than due to a default or breach by the
Provider or any of its Affiliates or Subcontractors of any agreement between the
Provider or any of its Affiliates or Subcontractors and such third
party).

     

    (c)  NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN OR AT LAW OR IN EQUITY, IN NO EVENT
SHALL THE PROVIDER BE LIABLE FOR PUNITIVE, SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES SUFFERED BY THE RECIPIENT (INCLUDING, WITHOUT LIMITATION,
DAMAGES FOR THE RECIPIENT’S LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION OR
ANY OTHER LOSS) ARISING FROM OR RELATING TO ANY CLAIM MADE UNDER THIS AGREEMENT
OR REGARDING THE PROVISION OF OR THE FAILURE TO PROVIDE THE TRANSITION SERVICES,
EVEN IF THE PROVIDER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.

     

    1.05  Obligation to Continue to
Use Services.

     

    (a)  Unless
terminated pursuant to this Agreement, the Provider shall provide, and the
Recipient shall purchase, the Transition Services for the Time Periods as is
specified with respect to the applicable Transition Service on Appendix
A.  The Recipient may terminate any of the Transition Services
that the Provider is providing to the Recipient by giving the Provider prior
written notice of its

     

    
      
         

      

      
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    desire to
terminate such Transition Services in accordance with the termination notice
periods specified in Appendix
A.  Notwithstanding anything to
the contrary contained in this Agreement, if the Recipient is able to procure
from a third-party source services similar to, and in substitution for, any
particular Transition Service (a “Third Party
Service”) the Recipient shall have the
right to terminate such Transition Service upon the provision of written notice
of termination to the Provider as set forth in Appendix A and shall thereupon
utilize the services of such third-party provider for such Third Party Service
in lieu of the particular Transition Service so terminated without liability or
obligation to the Recipient, including quarterly true-up amounts set forth on
Appendix A (other than the obligation to compensate the Provider for services
performed prior to the effective date of termination). In the event that the Recipient requires the provision
of a Transition Service (other than the Transition Service so terminated and
replaced with such Third Party Service) in order to facilitate its utilization
of and migration to a Third Party Service, the Provider agrees to provide such
Transition Service as promptly as is commercially reasonable following the
Recipient’s request therefor and shall use commercially reasonable means to
prioritize the same so as to expedite the Recipient’s utilization of and
migration to such Third Party Service.

     

    (b)  If any
Transition Service is terminated by the Recipient, the Recipient may not elect
to reinstitute such Transition Service.

     

    1.06  Provider
Access.  To the extent reasonably required for the Provider’s
personnel to perform the Transition Services, the Recipient shall provide the
Provider’s personnel with access to its equipment, office space, plants,
telecommunications and computer equipment and systems, and any other areas and
equipment; provided that such access shall not include the use thereof in the
provision of any Transition Service.

     

    1.07  Title to Assets; Methods,
etc; Ownership of Products.

     

    (a)  All
procedures, methods, systems, strategies, tools, equipment, facilities and other
resources used by Provider in connection with the provision of Transition
Services hereunder (including all intellectual property rights whether existing
or created in connection with the provision of the Transition Services or
otherwise) shall remain the property of Provider and shall at all times be under
the sole direction and control of Provider.

     

    (b)  Notwithstanding
any other provision of this Agreement, and except as otherwise expressly
provided in Appendix A or in a separate written agreement that is not, by its
terms, superseded by this Agreement, title to all products or other materials
that are transported, shipped, warehoused or otherwise held in the custody of
Provider on behalf of Recipient shall at all times remain with Recipient, and
Recipient shall at all times be the owner of record of such products or other
materials, and, subject to Section 5.01, shall be solely responsible for any
matters arising from or relating to such products or other
materials.

     

    1.08  Review
Meetings.  The Parties shall hold review meetings (“Review Meetings”) at
least bi-weekly or as otherwise mutually agreed by the Parties (in each case, at
mutually acceptable dates, times and locations) at which representatives of
Charming and AMO shall review and discuss
any operational, strategic or other issues raised by any participant with
respect to the provision of the Transition Services.  The Parties
intend that the information exchanged at such Review Meetings shall be in
addition to ongoing communication between representatives of Charming and AMO with respect to the provision of Transition
Services hereunder.

     

    
      
         

      

      
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    ARTICLE
2

     

    COMPENSATION

     

    2.01  Consideration.

     

    (a)  As
consideration for the Transition Services, the Recipient shall pay to the
Provider the amount specified for each Transition Service as set forth in Appendix A; provided, however, if a Subcontractor delivers
invoices to Recipient (rather than to the Provider) for Transition Services
rendered under this Agreement, Recipient shall pay such Subcontractor directly
and the Recipient shall have no further liability or obligation to the Provider
with respect to the payment for the Transition Services covered
thereby.
 In such event, the Recipient shall notify Provider that such
invoices have been paid directly by Recipient.  Upon the termination of
any Transition Service in accordance with this Agreement, the compensation to be
paid under this Section 2.01 shall no
longer include the amount specified for such terminated Transition
Service.

     

    (b)  If the
amount to be paid for any Transition Service is described in Appendix A as “Cost”,
“Cost” shall
mean the Provider’s direct out-of-pocket cash cost to provide that Transition
Service (i.e., direct labor costs, travel and related costs and any direct
third-party costs) and a reasonable and fairly allocated portion of costs and
expenses incurred by Provider and its Affiliates (so long as such allocation is
consistent with historical practice set forth in Charming’s P/L Statement
reviewed by AMO and its representatives) in providing such Transition Service
(including without limitation service-specific overhead costs, rents,
maintenance and utilities).  Such Cost shall be sufficient to permit
the Provider to receive full reimbursement of its Costs in connection with the
provision of the Transition Services but shall not contain any profit-margin or
premium.  The Parties acknowledge and agree that, subject to the
foregoing, (i) the Provider shall bear any and all costs required to permit Provider to provide any such Transition Services
(e.g., the cost of obtaining any third party consent required to enable
Provider to provide any such Transition Service to Recipient) and any and all costs of any kind or nature
incurred by Provider in connection with ceasing to provide any Transition
Service, and (ii) notwithstanding any provision in this
Agreement to the contrary, in no event will any amendment, restatement or other
modification of any contract between Provider and any third party enable
Provider to receive additional compensation for any Transition Service to be
provided under this Agreement (it being agreed that if the Provider is required
to pay additional costs to a third party with respect to a Transition Service
pursuant to any such amendment, restatement or other modification of any
contracts, and Appendix A provides for such costs to be passed through to the
Recipient, the Recipient shall be responsible for such increased pass through
costs).

     

    2.02  Taxes.  Any
taxes (other than income taxes) assessed on the provision of the Transition
Services shall be paid by the Recipient.

     

    2.03  Payments on Behalf of the
Recipient.  If Appendix A specifies that amounts be pre-funded
for the provision of a Transition Service by the Provider, Recipient shall
deposit the amount of such payment into an account designated by Provider as set
forth in Appendix A hereto.  Provider shall have no responsibility to
pay such amounts until Recipient has deposited funds sufficient to pay such
amounts with the Provider.  Any failure by the Provider to timely pay
such amounts due to a failure by the Recipient to pre-fund such items shall not
be considered an Event of Default.

     

    2.04  Invoices.  By
the 15th day
following the end of each month, the Provider will submit one invoice to the
Recipient for all Transition Services provided to the Recipient and its
Affiliates.  Each invoice shall include documentation supporting the
invoiced amounts set forth therein (including the Transition Services provided
and the cost therefor (calculated in accordance with this
Agreement)).  Such

     

    
      
         

      

      
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    invoices
shall contain such billing data, level of detail and such other supporting data
as the Recipient may reasonably request.  All invoices and billing
data shall be sent to Charming and AMO at the addresses for notices specified
herein or to such other address as the Recipient shall have specified by notice
in writing to the Provider.

     

    2.05  Payment of
Invoices.  Payment of all invoices shall be made no later than
30 days after receipt of the invoice in accordance with Section 2.04, unless
otherwise specified in Appendix
A.  All payments shall be made to the account stipulated in the
invoice or otherwise in writing to the Recipient by the Provider and shall be by
wire transfer of immediately available funds payable to the Provider with
written confirmation of payment sent by facsimile to the person stipulated in
the invoice or otherwise in writing to the Recipient by the
Provider.  If the Recipient fails to pay the full amount of any
invoice under this Agreement within 30 days of the relevant due date, the
Recipient shall be obligated to pay, in addition to the amount due on such
payment due date, interest on such amount at a rate of 12% per annum, compounded
monthly, from the relevant payment due date through (but not including) the date
of payment.  All payments made shall be applied first to unpaid
interest and then to amounts invoiced but unpaid.

     

    2.06  Prohibition on
Offsets.  Notwithstanding anything in this Agreement to the
contrary, neither Party shall offset, counterclaim, or otherwise withhold any
amounts due or payable hereunder on account of any amounts owed to such Party or
its Affiliates under this Agreement, the Purchase Agreement or any other
agreement or arrangement.

     

    

     

    ARTICLE
3

     

    CONFIDENTIALITY

     

    3.01  Obligation.

     

    (a)  In
addition to any obligations of confidentiality pursuant to other agreements
between the Parties, without the prior written consent of the other Party, each
Party shall hold in confidence and not disclose to any third party any
confidential information received by it from the other Party during the
provision of the Transition Services; provided however, that the Provider may
disclose confidential information to its Subcontractors to the extent necessary
to provide Transition Services, so long as Provider informs such Subcontractors
of its confidentiality obligations and takes commercially reasonable efforts to
ensure that such Subcontractor maintain the same level of
confidentiality.

     

    (b) 
Each Party agrees that it shall only use the information
received by it from the other Party in connection with the provision or receipt of the Transition Services, and for no other
purpose.

     

    (c)  For
purposes of this Agreement, confidential information shall not include any
information: (i) which is or becomes publicly known without violation of this
Agreement by the receiving Party; (ii) which is or becomes available to the
receiving Party from a source other than the disclosing Party, which source has
no obligation of confidentiality to the disclosing Party in respect thereof;
(iii) which is required to be disclosed by law or governmental order or any rule
or regulation of the Nasdaq Stock Market (“Nasdaq”) (so long as
the receiving Party promptly notifies the disclosing Party of such requirement
and reasonably cooperates with disclosing Party’s efforts to obtain a protective
order or other assurance that confidential treatment will be afforded to such
information); (iv) which is disclosed in

     

    
      
         

      

      
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    connection
with the enforcement of the receiving Party’s rights under this Agreement, the
Purchase Agreement, or the Transaction Documents; or (v) the disclosure of which
is mutually agreed to by the Parties.

     

    3.02  Effectiveness.  The
foregoing obligation of confidentiality shall be in effect during the term of
this Agreement and any extensions thereof and for a period of five years after
the termination or expiration of this Agreement.

     

    3.03  Care and Inadvertent
Disclosure.  With respect to any confidential information, each
Party agrees as follows:

     

    (a)  it shall
use (i) the same degree of care in safeguarding
said information as it uses to safeguard its own information which must be held
in confidence, and (ii) commercially reasonable
methods to ensure its Affiliates and Subcontractors comply with the undertakings
in Section
3.01; provided that, in any event, the receiving Party shall be
responsible for any breach of the terms hereof by any of its Affiliates or
Subcontractors to whom or to which such confidential or proprietary information
was disclosed by the receiving Party, and

     

    (b)  upon the
discovery of any inadvertent disclosure or unauthorized use of said information,
or upon obtaining notice of such a disclosure or use from the other Party, it
shall (i) notify the other Party and (ii) take all necessary actions to prevent
any further inadvertent disclosure or unauthorized use.

     

    3.04  Remedy for
Breach.  Each Party acknowledges and agrees that in the event
of a breach by it of any of the provisions of this Article 3, monetary
damages shall not constitute a sufficient remedy.  Consequently, in
the event of any such breach, the other Party and/or its successors or assigns
may, in addition to other rights and remedies existing in their favor, apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof, in each case without the requirement of posting a bond
or proving actual damages.

     

    ARTICLE
4

     

    TERM AND
TERMINATION

     

    4.01  Term.  Except
as otherwise provided in this Article 4 or as
otherwise agreed in writing by the Parties, this Agreement shall become
effective as of the date hereof and the Provider’s obligation to provide, and
the Recipient’s obligation to purchase, any particular Transition Service
hereunder shall cease as of the first to occur of (a) the date of termination of
this Agreement as determined in accordance with Section 4.03 hereof
or (b) the applicable termination date for any particular Transition Service as
set forth in Appendix
A hereto.

     

    4.02  Extension.  Subject
to the earlier termination of this Agreement in accordance with Section 4.03, the
Recipient may request an extension of the Time Period for any Transition Service
for any period the Recipient deems necessary by giving the Provider at least 30
days prior written notice prior to the end of the Time Period in
question.  Provider may agree to extend such Transition Service solely
at its discretion.  If the Provider
agrees to provide such Transition Service beyond the Time Period, the fees
therefor shall be as set forth in Appendix A.  Notwithstanding
anything to the contrary contained herein, for the avoidance of doubt, the
foregoing shall not limit or impair the Recipient’s right to extend the Time
Period with respect to a Transition Service if Appendix A provides for such an
extension (i.e., if such Appendix A provides the Recipient with the right to
seek an extension and the Recipient exercises such right, the Provider shall be
obligated to grant such extension).

     

    
      
         

      

      
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    4.03  Termination.

     

    (a)  Recipient
may terminate individual Transition Services as outlined on Appendix
A.  Any Transition Service on Appendix A that does not expressly
provide for early termination may not be terminated prior to the end of the
given Time Period.

     

    (b)  If either
Party (hereinafter, the “Defaulting Party”)
shall fail to perform or default in the performance of any of its material
obligations under this Agreement, the other Party (hereinafter, the “Non-Defaulting
Party”) may give written notice to the Defaulting Party specifying the
nature of such failure or default and stating that the Non-Defaulting Party
intends to terminate this Agreement if such failure or default is not cured
within 30 days of such written notice; provided that if such failure to perform
or default relates to a specific Transition Service, the Non-Defaulting Party
may elect to terminate only such specific Transition Service under this Section 4.03 and the
written notice will specify such Transition Service.  If any failure
or default so specified is not cured within such 30-day period, the
Non-Defaulting Party may elect to immediately terminate this Agreement or the
specific Transition Service as set forth above; provided that if the failure or
default relates to a dispute made in good faith by the Defaulting Party, the
Non-Defaulting Party may not terminate this Agreement pending the resolution of
such dispute.  Such termination shall be effective upon receipt of a
written notice of termination from the Non-Defaulting Party to the Defaulting
Party and shall be without prejudice to any other remedy which may be available
to the Non-Defaulting Party against the Defaulting Party.

     

    4.04  Certain
Acknowledgements.

     

    (a)  The
Recipient agrees and acknowledges that all obligations of the Provider to
provide each Transition Service shall cease upon the expiration of the Time
Period (and any extension thereof in accordance with Section 4.02) for
such Transition Service, and the Provider’s obligations to provide all of the
Transition Services shall immediately cease upon the termination of this
Agreement.  Upon the cessation of the Provider’s obligation to provide
any Transition Service, the Recipient shall immediately cease using, directly or
indirectly, such Transition Service.

     

    (b)  THE
PROVIDER SHALL HAVE NO LIABILITY OF ANY KIND OR NATURE WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR PUNITIVE
DAMAGES) TO THE RECIPIENT FOR THE PROVIDER’S CEASING TO PROVIDE ANY TRANSITION
SERVICE UPON THE EXPIRATION OF THE APPLICABLE TIME PERIOD (AND ANY EXTENSION
THEREOF IN ACCORDANCE WITH SECTION 4.02) FOR
SUCH TRANSITION SERVICE OR UPON THE VALID TERMINATION OF THIS AGREEMENT OR
TERMINATION OF SUCH TRANSITION SERVICE PURSUANT TO THIS AGREEMENT.

     

    4.05 
Survival of Certain
Obligations.  Without prejudice to the survival of the other
agreements of the Parties, the following obligations shall survive the
termination of this Agreement: (a) for the periods set forth therein, the
obligations of each Party under Articles 3, 4 and 5, and (b) the
Provider’s right to receive the compensation for the Transition Services as
provided in Section
2.01 prior to the effective date of termination of each such Transition
Service.

     

    ARTICLE
5

     

    INDEMNITIES

     

    5.01  Indemnity by the
Provider.  Without affecting any provision of the Purchase
Agreement or the Parties’ respective rights or obligations set forth therein,
and subject to the limitations set forth in

     

    
      
         

      

      
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    Section 1.04 above,
the Provider shall indemnify, defend, and hold the Recipient harmless against
any and all claims, liabilities, damages, losses, costs, expenses (including,
but not limited to, settlements, judgments, court costs and reasonable
attorney’s fees), fines and penalties arising out of any injury, loss or damage
of any nature whatsoever to the Recipient (collectively, “Losses”) due or
relating to the provision of or failure to provide the Transition Services,
only to the
extent that such Losses are a direct result of the gross negligence or reckless
or willful misconduct of the personnel of the Provider and/or its Affiliates
and/or Subcontractors.  At all times, each Provider is and shall
remain the sole employer of the employees who perform the Transition
Services.  As such, subject to Section 1.04(b), the
Provider acknowledges its obligation to comply with all legal and contractual
obligations with respect to such employees, and will indemnify, defend and hold
harmless the Recipient from any breach by the Provider of such obligations and
all Losses arising therefrom.

     

    5.02  Indemnity by the
Recipient.  Without affecting any provision of the Purchase
Agreement or the Parties’ respective rights or obligations set forth therein,
the Recipient shall indemnify, defend and hold the Provider harmless against any
and all Losses arising out of the operations and activities of the Recipient,
except to the extent that such Losses are a direct result of the negligence,
gross negligence or reckless or willful misconduct of the personnel of the
Provider and/or its Affiliates and/or Subcontractors.

     

    5.03  Indemnification
Procedures.  The matters set forth in Section 14.3 of the
Purchase Agreement are incorporated by reference into and deemed a part of this
Agreement.

     

    5.04  Term of
Indemnity.  The indemnities contained in this Article 5 shall
survive for a period of five years after the termination of this Agreement for
any reason.

     

    ARTICLE
6

     

    MISCELLANEOUS

     

    6.01  Amendment, Modification and
Waiver.  No provision of this Agreement shall be amended,
modified or waived except in writing signed by the Parties.  The
waiver by a Party of any breach of any provision of this Agreement shall not
constitute or operate as a waiver of any other breach of such provision or of
any other provision hereof, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision
hereof.

     

    6.02  Successors and
Assignment.  This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns including any subsequent purchaser
of AMO, the Subsidiaries or any of their divisions or any material portion of
their assets (whether such sale is structured as a sale of stock, sale of
assets, merger, recapitalization or otherwise); provided that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any Party without the prior written consent of the other
Party.  Notwithstanding the foregoing, without the prior written
consent of any Party, each of the Recipient
and its permitted assigns may at any time, in their sole discretion, assign, in
whole or in part, (a) their rights and obligations pursuant to this Agreement to
one or more of their Affiliates (provided that no such assignment shall release
the Recipient of its obligations
hereunder) and (b) the limited right to receive payments hereunder, for
collateral security purposes to any lender providing financing to the Recipient or its Affiliates.

     

    6.03  Integration.  This
Agreement and the documents referred to herein contain the entire agreement
between the Parties regarding the Transition Services and supersede any prior
understandings, agreements or representations by or between the Parties, written
or oral, which may have related to the subject matter hereof in any
way.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    6.04  Notices.  All
notices, demands and other communications given or delivered under this
Agreement shall be in writing and shall be deemed to have been given when
personally delivered, mailed by first class mail, return receipt requested, or
delivered by express courier service or telecopied (with hard copy to
follow).  Notices, demands and communications to the Charming and AMO
shall, unless another address is specified in writing, be sent to the
following:

     

    To AMO:

     

    c/o Orchard Brands Corporation

    30 Tozer Road

    Beverly, MA 01915

    Attention:  Dave Walde

    Facsimile:  (978) 922-7001

    Email: dave@orchardbrands.com

     

    With a copy to:

    Kirkland & Ellis LLP

    200 East Randolph Drive

    Chicago, Illinois 60601-6636

    Attention:  Gary Holihan

    Facsimile:  312-861-2200

    Email: gholihan@kirkland.com

     

    To
Charming:

     

    Charming
Shoppes of Delaware, Inc.

    3750
State Road

    Bensalem,
PA 19020

    Attention:  Steven
Wishner

    Email:
steven.wishner@charming.com

    

    With a
copy to:

    Colin D.
Stern, General Counsel

    Email:  colin.stern@charming.com

    

    6.05  Governing
Law.  All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York, without giving
effect to any choice of law or conflict of law provision (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.

     

    6.06  Captions.  The
captions used in this Agreement are for convenience of reference only and do not
constitute a part of this Agreement and shall not be deemed to limit,
characterize or in any way affect any provision of this Agreement, and all
provisions of this Agreement shall be enforced and construed as if no caption
had been used in this Agreement.

     

    6.07  Severability.  Wherever
possible, each provision of this Agreement shall be interpreted in such a manner
as to be effective and valid under applicable law.  If any portion of
this Agreement is declared invalid for any reason in any jurisdiction, such
declaration shall have no effect upon the remaining portions of this Agreement,
which shall continue in full force and effect as if this Agreement had been
executed with the invalid portions thereof deleted.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    6.08  Counterparts.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, and all of which shall constitute one and the same
instrument.

     

    6.09  Rights of the
Parties.  Nothing expressed or implied in this Agreement is
intended or will be construed to confer upon or give any person or entity, other
than the Parties and their respective Affiliates, any rights or remedies under
or by reason of this Agreement or any of the transactions contemplated
hereby.

     

    6.10  Reservation of
Rights.  Either Party’s waiver of any of its remedies afforded
hereunder or at law is without prejudice and shall not operate to waive any
other remedies which that Party shall have available to it, nor shall such
waiver operate to waive any Party’s rights to any remedies due to a future
breach, whether of a similar or different nature.

     

    6.11  Force
Majeure.  Any failure or omission by a Party in the performance
of any obligation under this Agreement shall not be deemed a breach of this
Agreement or create any liability, if the same arises from any cause or causes
beyond the control of such Party, including, but not limited to, the following,
which, for purposes of this Agreement shall be regarded as beyond the control of
each of the Parties hereto: acts of God, fire, storm, flood, earthquake,
governmental regulation or direction, acts of the public enemy, war, rebellion,
insurrection, riot, invasion, strike or lockout (collectively, “Force Majeure”);
provided that such Party shall resume the performance whenever such causes are
removed.  If the Provider is unable to provide any Transition Services
due to Force Majeure, both Parties shall use commercially reasonable efforts to
cooperatively seek a solution that is mutually satisfactory, such as the
subcontracting of all or part of the provision of the Transition Services under
the supervision of the Provider for the period of time during or affected by the
Force Majeure; provided, if such Force Majeure continues for a period of six
months, the Recipient will have the right to terminate the Transition Services
affected by the Force Majeure.

     

    6.12  Relationship of the
Parties.  It is expressly understood and agreed that in
rendering the Transition Services hereunder, each Party is acting as an
independent contractor and that this Agreement does not constitute either Party
as an employee, agent or other representative of the other Party for any purpose
whatsoever.  Neither Party has the right or authority to enter into
any contract, warranty, guarantee or other undertaking in the name or for the
account of the other Party, or to assume or create any obligation or liability
of any kind, express or implied, on behalf of the other Party, or to bind the
other Party in any manner whatsoever, or to hold itself out as having any right,
power or authority to create any such obligation or liability on behalf of the
other or to bind the other Party in any manner whatsoever (except as to any
actions taken by either Party at the express written request and direction of
the other Party).  It is the understanding and intention of the
Parties hereto that execution of and performance under this Agreement shall
create no “joint employer” relationship between them.

     

    6.13  Conflict.  In
case of conflict between the terms and conditions of this Agreement and any
Appendix, the terms and conditions of such Appendix shall control and govern as
it relates to the Transition Service to which those terms and conditions
apply.

     

    6.14  WAIVER OF JURY
TRIAL.  THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     

    *     *     *

     

    
      
         

      

      
        11  

        
          

        

      

      
         

      

    

    

    IN WITNESS WHEREOF, the
parties hereto have caused this Transition Services Agreement to be executed as
of the day and year first above written.

     

    
      	 
      	
              CHARMING
      SHOPPES OF DELAWARE, INC.

            
	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	 
      
	 
      	 
      
	 
      	 
      
	 
      	
              ARIZONA
      MAIL ORDER COMPANY, INC.

            
	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	 
      
	 
      	 
      

    

    

     

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    APPENDIX
A

    

    

    TRANSITION
SERVICES

    

    See
attachedstock_optionplan1999.htm

    
 

    EXHIBIT 4.1

    
 

    COMMUNICATION
INTELLIGENCE CORPORATION

     

    

     

    1999
STOCK OPTION PLAN

     

    
      	
              1.  

            	
              Purpose

            

    

     

    The
purpose of this plan (the "Plan") is to secure for COMMUNICATION INTELLIGENCE
CORPORATION (the "Company") and its stockholders the benefits arising from
capital stock ownership by employees, officers, directors, consultants and other
service providers of the Company or an Affiliate (as that term is defined in the
Plan) who are expected to contribute to the Company's future growth and
success.  The Plan is also designed to attract and retain other
persons who will provide services to the Company.  Those provisions of
the Plan which make express reference to Section 422 of the Internal
Revenue Code of 1986, as amended or replaced from time to time (the "Code"),
shall apply only to Incentive Stock Options (as that term is defined in the
Plan).

     

    
      	
              2.  

            	
              Type of Options and
      Administration

            

    

     

    (a) Types of
Options.  Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors (the "Board") of the Company (or
the committee appointed by the Board in accordance with Section 2(b) below)
and may be either incentive stock options ("Incentive Stock Options") intended
to meet the requirements of Section 422 of the Code or non-statutory
options which are not intended to meet the requirements of Section 422 of
the Code ("Non-Qualified Options").

     

    (b) Administration.  The
Plan will be administered by the Board or by a committee consisting of two or
more directors each of whom shall be a "non-employee director," within the
meaning of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any successor Rule
("Rule 16b-3"), and an "outside director", within the meaning of Treasury
Regulation Section 1.162-27(e)(3) promulgated under Section 162(m) of
the Code, (the "Committee") appointed by the Board, in each case whose
construction and interpretation of the terms and provisions of the Plan shall be
final, conclusive and binding upon the optionee and all other persons interested
or claiming interests under the Plan.  If the Board determines to
create a Committee to administer the Plan, the delegation of powers to the
Committee shall be consistent with applicable laws or regulations (including,
without limitation, applicable state law and Rule 16b-3).  The
Board or the Committee may in its sole discretion grant options to purchase
shares of the Company's Common Stock, $0.01 par value per share ("Common
Stock"), and issue shares upon exercise of such options as provided in the
Plan.  The Board or the Committee shall have authority, subject to the
express provisions of the Plan, to construe the respective option agreements and
the Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the respective option agreements,
which need not be identical; and to make all other determinations in the
judgment of the Board or the Committee necessary or desirable for the
administration of the Plan.  The Board or the Committee may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any option agreement 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      in the
manner and to the extent it shall deem expedient to carry the Plan into effect
and it shall be the sole and final judge of such expediency.  No
director or person acting pursuant to authority delegated by the Board shall be
liable for any action or determination under the Plan made in good
faith.

    

     

    
      	
              3.  

            	
              Eligibility

            

    

     

    Options
may be granted to persons who are, at the time of grant, employees, officers,
directors, consultants or other service providers of the Company or any parent
or subsidiary of the Company as defined in Sections 424(e) and 424(f) of
the Code ("Affiliate"), provided that Incentive Stock Options may only be
granted to individuals who are employees (within the meaning of
Section 3401(c) of the Code) of the Company or any
Affiliate.  Options may also be granted to other persons, provided
that such options shall be Non-Qualified Options.  A person who has
been granted an option may, if he or she is otherwise eligible, be granted
additional options if the Board or the Committee shall so
determine.  Notwithstanding anything in the Plan to the contrary, no
employee of the Company or an Affiliate shall be granted options with respect to
more than 2,000,000 shares of Common Stock during any calendar
year.

     

    
      	
              4.  

            	
              Stock Subject to
      Plan

            

    

     

    The stock
subject to options granted under the Plan shall be shares of authorized but
unissued or reacquired Common Stock.  Subject to adjustment as
provided in Section 15 below, the maximum number of shares of Common Stock
of the Company which may be issued and sold under the Plan is
4,000,000.  If an option granted under the Plan shall expire,
terminate or is cancelled for any reason without having been exercised in full,
the unpurchased shares subject to such option shall again be available for
subsequent option grants under the Plan.

     

    
      	
              5.  

            	
              Forms of Option
      Agreements

            

    

     

    As a
condition to the grant of an option under the Plan, each recipient of an option
shall execute an option agreement in such form not inconsistent with the Plan
and as may be approved by the Board or the Committee.  The terms of
such option agreements may differ among recipients.

     

    
      	
              6.  

            	
              Purchase
      Price

            

    

     

    (a) General.  The
purchase price per share of Common Stock issuable upon the exercise of an option
shall be determined by the Board or the Committee at the time of grant of such
option, provided, however, that such exercise price (i) in the case of
Incentive Stock Options, shall not be less than 100% of the Fair Market Value
(as hereinafter defined) of such Common Stock at the time of grant of such
option, and for Incentive Stock Options granted to a "10% Shareholder" (as
defined in Section 11(b)), shall not be less than 110% of such Fair Market
Value, and (ii) in the case of Non-Qualified Options, shall not be less
than 85% of such Fair Market Value.  "Fair Market Value" of a share of
Common Stock of the Company as of a specified date for purposes of the Plan
shall mean the closing price of a share of the Common Stock on the principal
securities exchange (including but not limited to the Nasdaq 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

      SmallCap
Market or the Nasdaq National Market) on which such shares are traded on the day
immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which such shares are traded if no
shares were traded on such immediately preceding day, or if the shares are not
traded on a securities exchange, Fair Market Value shall be deemed to be the
average of the high bid and low asked prices of the shares in the
over-the-counter market on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such high bid and low asked prices were recorded.  If the shares are
not publicly traded, Fair Market Value of a share of Common Stock (including, in
the case of any repurchase of shares, any distributions with respect thereto
which would be repurchased with the shares) shall be determined in good faith by
the Board.  In no case shall Fair Market Value be determined with
regard to restrictions other than restrictions which, by their terms, will never
lapse.

    

     

    (b) Payment of Purchase
Price.  Options granted under the Plan may provide for the
payment of the exercise price by delivery of cash or a check to the order of the
Company in an amount equal to the exercise price of such options, or by any
other means which the Board determines are consistent with the purpose of the
Plan and with applicable laws and regulations (including, without limitation,
the provisions of Rule 16b-3).

     

    
      	
              7.  

            	
              Exercise Option
      Period

            

    

     

    Subject
to earlier termination as provided in the Plan, each option and all rights
thereunder shall expire on such date as determined by the Board or the Committee
and set forth in the applicable option agreement, provided that such date shall
not be later than ten (10) years after the date on which the option is granted,
or as prescribed by Section 11(b) hereinbelow.

     

    
      	
              8.  

            	
              Exercise of
      Options

            

    

     

    Each
option granted under the Plan shall be exercisable either in full or in
installments at such time or times and during such period as shall be set forth
in the option agreement evidencing such option, subject to the provisions of the
Plan.  Subject to the requirements in the immediately preceding
sentence, if an option is not at the time of grant immediately exercisable, the
Board or the Committee may (i) in the agreement evidencing such option,
provide for the acceleration of the exercise date or dates of the subject option
upon the occurrence of specified events and/or (ii) at any time prior to
the complete termination of an option, accelerate the exercise date or dates of
such option.

     

    
      	
              9.  

            	
              Nontransferability of
      Options

            

    

     

    No option
granted under this Plan shall be assignable or otherwise transferable by the
optionee, except by will or by the laws of descent and
distribution.  An option may be exercised during the lifetime of the
optionee only by the optionee.

     

    
      	
              10.  

            	
              Effect of Termination
      of Employment or Other
Relationship

            

    

     

    (a) Except as
provided in Section 11(d) with respect to Incentive Stock Options and
except as may otherwise be determined by the Board or the Committee at the date
of grant of an option, and subject to the provisions of the Plan, an optionee
may exercise an option at any time within three (3) months following the
termination of the optionee's employment or other relationship with the Company
and its Affiliates or within one (1) year if such 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

      termination
was due to the death or disability (within the meaning of Section 22(e)(3)
of the Code or any successor provisions thereto) of the optionee (to the extent
such option is otherwise exercisable at the time of such termination) but in no
event later than the expiration date of the option.

    

     

    (b) Notwithstanding
the foregoing and except as may otherwise be determined by the Board or the
Committee, if the termination of the optionee's employment or other relationship
with the Company and/or its Affiliate is for cause, the option shall expire
immediately upon such termination.  The Board or the Committee shall
have the power to determine, in its sole discretion, what constitutes a
termination for cause, whether an optionee has been terminated for cause, and
the date upon which such termination for cause occurs.  Any such
determinations shall be final and conclusive and binding upon the optionee and
all other persons interested or claiming interests under the Plan.

     

    
      	
              11.  

            	
              Incentive Stock
      Options

            

    

     

    Options
granted under the Plan which are intended to be Incentive Stock Options shall be
subject to the following additional terms and conditions:

     

    (a) Express
Designation.  All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.

     

    (b) 10%
Shareholder.  If any employee to whom an Incentive Stock Option
is to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:

     

    (i) the
purchase price per share of the Common Stock subject to such Incentive Stock
Option shall not be less than 110% of the Fair Market Value of one share of
Common Stock at the time of grant; and

     

    (ii) the
option exercise period shall not exceed five (5) years from the date of
grant.

     

    (c) Dollar
Limitation.  For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate Fair Market Value, as of the
respective date or dates of grant, of more than $100,000.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (d) Termination of Employment,
Death or Disability.  No Incentive Stock Option may be
exercised unless, at the time of such exercise, the optionee is, and has been
continuously since the date of grant of his or her option, employed by the
Company or an Affiliate, except that:

     

    (i) an
Incentive Stock Option may be exercised within the period of three (3) months
after the date the optionee ceases to be an employee of the Company or an
Affiliate (or within such lesser period as may be specified in the applicable
option agreement), to the extent it is otherwise exercisable at the time of such
cessation,

     

    (ii) if the
optionee dies while in the employ of the Company or an Affiliate, or within
three (3) months after the optionee ceases to be such an employee, the Incentive
Stock Option may be exercised by the person to whom it is transferred by will or
the laws of descent and distribution within the period of one (1) year after the
date of death (or within such lesser period as may be specified in the
applicable option agreement), to the extent it is otherwise exercisable at the
time of the optionee's death, and

     

    (iii) if the
optionee becomes disabled (within the meaning of Section 22(e)(3) of the
Code or any successor provisions thereto) while in the employ of the Company or
an Affiliate, the Incentive Stock Option may be exercised within the period of
one (1) year after the date the optionee ceases to be such an employee because
of such disability (or within such lesser period as may be specified in the
applicable option agreement), to the extent it is otherwise exercisable at the
time of such cessation.

     

    For all
purposes of the Plan and any option granted hereunder, "employment" shall be
defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor
regulations).  Notwithstanding the foregoing provisions, no Incentive
Stock Option may be exercised after its expiration date.

     

    
      	
              12.  

            	
              Additional
      Provisions

            

    

     

    (a) Additional Option
Provisions.  The Board or the Committee may, in its sole
discretion, include additional provisions in option agreements covering options
granted under the Plan, including without limitation, restrictions on transfer,
repurchase rights, rights of first refusal, commitments to pay cash bonuses or
to make, arrange for or guaranty loans or to transfer other property to
optionees upon exercise of options, or such other provisions as shall be
determined by the Board or the Committee, provided that such additional
provisions shall not be inconsistent with the requirements of applicable law and
such additional provisions shall not cause any Incentive Stock Option granted
under the Plan to fail to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Code.

     

    (b) Acceleration, Extension,
Etc.  The Board or the Committee may, in its sole discretion
(i) accelerate the date or dates on which all or any particular option or
options granted under the Plan may be exercised, or (ii) extend the dates
during which all, or any particular, option or options granted under the Plan
may be exercised, provided, however, that no such acceleration or extension
shall be permitted if it would (i) cause any Incentive Stock Option granted
under the Plan to fail to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Code, or (ii) cause the Plan or any
option granted under the Plan to fail to comply with Rule 16b-3 (if
applicable to the Plan or such option).

     

    
      	
              13.  

            	
              General
      Restrictions

            

    

     

    (a) Investment
Representations.  The Board or the Committee may require any
person to whom an option is granted, as a condition of exercising such option or
award, to give written assurances in substance and form satisfactory to the
Board or the Committee to the effect that such person is acquiring the Common
Stock subject to the option or award for his or her own account for investment
and not with any present intention of selling or otherwise distributing the
same, and to such other effects as the Board or the Committee deems necessary or
appropriate in order to comply with applicable federal and state securities
laws, or with covenants or representations made by the Company in connection
with any public offering of its Common Stock, including any "lock-up" or other
restriction on transferability.

     

    (b) Compliance With Securities
Law.  Each option shall be subject to the requirement that if,
at any time, counsel to the Company shall determine that the listing,
registration or qualification of the shares subject to such option or award upon
any securities exchange or automated quotation system or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
or that the disclosure of non-public information or the satisfaction of any
other condition, is necessary as a condition of, or in connection with the
issuance or purchase of shares thereunder, except to the extent expressly
permitted by the Board, such option or award may not be exercised, in whole or
in part, unless such listing, registration, qualification, consent or

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

      approval
or satisfaction of such condition shall have been effected or obtained on
conditions acceptable to the Board or the Committee.  Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration, qualification, consent or approval, or to satisfy such
condition.  In addition, Common Stock issued upon the exercise of
options may bear such legends as the Company may deem advisable to reflect
restrictions which may be imposed by law, including, without limitation, the
Securities Act of 1933, as amended, any state "blue sky" or other applicable
federal or state securities law.

    

     

    
      	
              14.  

            	
              Rights as a
      Stockholder

            

    

     

    The
holder of an option shall have no rights as a stockholder with respect to any
shares covered by the option (including, without limitation, any right to vote
or to receive dividends or non-cash distributions with respect to such shares)
until the effective date of exercise of such option and then only to the extent
of the shares of Common Stock so purchased.  No adjustment shall be
made for dividends or other rights for which the record date is prior to the
date of exercise.

     

    
      	
              15.  

            	
              Adjustment
      Provisions for Recapitalizations,

            

    

     

    
      	
               
      

            	
              Reorganizations and
      Related Transactions

            

    

     

    (a) Recapitalizations and
Related Transactions.  If, through or as a result of any
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction (i) the outstanding shares of Common
Stock are increased, decreased or exchanged for a different number or kind of

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

      shares or
other securities of the Company, or (ii) additional shares or new or
different shares or other non-cash assets are distributed with respect to such
shares of Common Stock or other securities, an appropriate and proportionate
adjustment shall be made in (x) the maximum number and kind of shares
reserved for issuance under or otherwise referred to in the Plan, (y) the
number and kind of shares or other securities subject to any then-outstanding
options under the Plan, and (z) the price for each share subject to any
then-outstanding options under the Plan, without changing the aggregate purchase
price as to which such options remain exercisable.  Notwithstanding
the foregoing, no adjustment shall be made pursuant to this Section 15 if
such adjustment (A) would cause any Incentive Stock Option granted under
the Plan to fail to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code, (B) would cause the Plan or any option
granted under the Plan to fail to comply with Rule 16b-3 (if applicable to
the Plan or such option), or (C) would be considered as the adoption of a
new plan requiring stockholder approval.

    

     

    (b) Board Authority to Make
Adjustments.  Any adjustments under this Section 15 will
be made by the Board or the Committee, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive.  No fractional shares will be issued under the Plan on
account of any such adjustments.

     

    
      	
              16.  

            	
              No Employment
      Rights

            

    

     

    Nothing
contained in the Plan or in any option agreement shall confer upon any optionee
any right with respect to the continuation of his or her employment or other
relationship with the Company or an Affiliate or interfere in any way with the
right of the Company or an Affiliate at any time to terminate such employment or
relationship or to increase or decrease the compensation of the
optionee.

     

    
      	
              17.  

            	
              Amendment,
      Modification or Termination of the
Plan

            

    

     

    (a) The Board
may at any time modify, amend or terminate the Plan, provided that to the extent
required by applicable law, any such modification, amendment or termination
shall be subject to the approval of the stockholders of the
Company.

     

    (b) The
modification, amendment or termination of the Plan shall not, without the
consent of an optionee, affect his or her rights under an option previously
granted to him or her.  With the consent of the optionee affected, the
Board or the Committee may amend or modify outstanding option agreements in a
manner not inconsistent with the Plan.  Notwithstanding the foregoing,
the Board shall have the right (but not the obligation), without the consent of
the optionee affected, to amend or modify (i) the terms and provisions of
the Plan and of any outstanding Incentive Stock Option agreements to the extent
necessary to qualify any or all such options for such favorable federal income
tax treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, (ii) the terms
and provisions of the Plan and the option agreements entered into in connection
with any outstanding options to the extent necessary to ensure the qualification
of the Plan and such options under Rule 16b-3 (if applicable to

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

      the Plan
and such options), and (iii) the terms and provisions of the Plan and the
option agreements entered into in connection with any outstanding options to the
extent that the Board determines necessary to preserve the deduction of
compensation paid to certain optionees who are "covered employees," within the
meaning of Treasury Regulation Section 1.162-27(c)(2), as a result of the
grant or exercise of options under the Plan.

    

     

    
      	
              18.  

            	
              Withholding

            

    

     

    (a) The
Company shall have the right to deduct and withhold from payments or
distributions of any kind otherwise due to the optionee any federal, state or
local taxes of any kind required by law to be so deducted and withheld with
respect to any shares issued upon exercise of options under the
Plan.  Subject to the prior approval of the Company, which may be
withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part by (i) causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option, (ii) delivering to the Company shares of Common Stock already
owned by the optionee, or (iii) delivering to the Company cash or a check
to the order of the Company in an amount equal to the amount required to be so
deducted and withheld.  The shares delivered in accordance with method
(ii) above or withheld in accordance with method (i) above shall have a Fair
Market Value equal to such withholding obligation as of the date that the amount
of tax to be withheld is to be determined.  An optionee who has made
(with the Company's approval) an election pursuant to method (i) or (ii) of this
Section 18(a) may only satisfy his or her withholding obligation with
shares of Common Stock which are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.

     

    (b) The
acceptance of shares of Common Stock upon exercise of an Incentive Stock Option
shall constitute an agreement by the optionee (i) to notify the Company if
any or all of such shares are disposed of by the optionee within two (2) years
from the date the option was granted or within one (1) year from the date the
shares were issued to the optionee pursuant to the exercise of the option, and
(ii) if required by law, to remit to the Company, at the time of and in the
case of any such disposition, an amount sufficient to satisfy the Company's
federal, state and local withholding tax obligations with respect to such
disposition, whether or not, as to both (i) and (ii), the optionee is in the
employ of the Company or an Affiliate at the time of such
disposition.

     

    
      	
              19.  

            	
              Cancellation and New
      Grant of Options, etc.

            

    

     

    The Board
or the Committee shall have the authority to effect, at any time and from time
to time, with the consent of the affected optionee(s) the (i) cancellation
of any or all outstanding options under the Plan and the grant in substitution
therefor of new options under the Plan (or any successor stock option plan of
the Company) covering the same or different numbers of shares of Common Stock
and having an option exercise price per share which may be lower or higher than
the exercise price per share of the cancelled options, or (ii) amendment of
the terms of the option agreements entered into in connection with any and all
outstanding options under the Plan to provide an option exercise price per share
which is higher or lower than the then-current exercise price per share of such
outstanding options.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	
              20.  

            	
              Effective Date and
      Duration of the Plan

            

    

     

    (a) Effective
Date.  The Plan shall become effective when adopted by the
Board, but no Incentive Stock Option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
stockholders.  If such stockholder approval is not obtained within
twelve (12) months after the date of the Board's adoption of the Plan, no
options previously granted under the Plan shall be deemed to be Incentive Stock
Options and no Incentive Stock Options shall be granted
thereafter.  Amendments to the Plan shall become effective as of the
latest of (i) the date of adoption by the Board, (ii) the date set
forth in the amendments or (iii) in the case of any amendment requiring
stockholder approval (as set forth in Section 17), the date such amendment
is approved by the Company's stockholders.  Notwithstanding the
foregoing, no Incentive Stock Option granted on or after the effective date of
such amendment shall become exercisable unless and until such amendment shall
have been approved by the Company's stockholders.  If such stockholder
approval is not obtained within twelve (12) months of the Board's adoption of
such amendment, no options granted on or after the effective date of such
amendment shall be deemed Incentive Stock Options and no Incentive Stock Options
shall be granted thereafter.  Subject to above limitations, options
may be granted under the Plan at any time after the effective date of the Plan
and before the date fixed for termination of the Plan.

     

    (b) Termination.  Unless
sooner terminated by the Board, the Plan shall terminate upon the close of
business on the day next preceding the tenth anniversary of the date of its
adoption by the Board.  After termination of the Plan, no further
options may be granted under the Plan; provided, however, that such termination
will not affect any options granted prior to termination of the
Plan.

     

    
      	
              21.  

            	
              Governing
      Law

            

    

     

    The
provisions of this Plan shall be governed and construed in accordance with the
laws of the State of California without regard to the principles thereof
relating to the conflicts of laws.

     

    
      	
              22.  

            	
              Provision of
      Information to Award
Recipients

            

    

     

    The
Company shall annually provide each holder of an Award with the information
required by Section 260.140.46 of the Regulations of  the
California Commissioner of Corporations.

     

     

     

     

     

     

     

    9

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