Document:

Stipulation and Consent Order

 Exhibit 10.1 
  
 UNITED STATES BANKRUPTCY COURT 
 SOUTHERN
DISTRICT OF NEW YORK 
  

					
	In re:	  	:	  	 
	 	  	:	  	Chapter 11
	TACTICA INTERNATIONAL, INC.	  	:	  	 
	 	  	:	  	Case No. 04-16805 (BRL)
	                                        
           Debtor.
	  	:	  	 

  
 STIPULATION AND
CONSENT ORDER 
 PROVIDING FOR ADEQUATE PROTECTION OF INNOTRAC 
 CORPORATION’S INTEREST IN THE DEBTOR’S INVENTORY 
  
 WHEREAS, on October 21, 2004 (the “Petition Date”), Tactica International, Inc. (the “Debtor”) filed a voluntary
petition for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”); and

  
 WHEREAS, the Debtor remains in possession of its assets
and the management of its property as a debtor in possession under sections 1107 and 1108 of the Bankruptcy Code; and 
  
 WHEREAS, no trustee, examiner, or committee of unsecured creditors has been appointed by the Office of the United States Trustee in this case; and

  
 WHEREAS, the Debtor is a leading marketer and
distributor of proprietary and branded personal care and home care products; and 
  
 WHEREAS, Innotrac Corporation (“Innotrac”) warehouses certain of the Debtor’s products, processes orders of the Debtor’s inventory, ships the Debtor’s products to the
Debtor’s customers and handles various other related services for the Debtor; and 

 WHEREAS, on the Petition Date, Innotrac held, and currently holds, certain inventory, which
constitutes property of the Debtor’s estate under section 541 of the Bankruptcy Code, at Innotrac’s warehouse facility located in Reno, Nevada (the “Inventory”); and 
  
 WHEREAS, the Debtor asserts that the value of the Inventory is approximately $9,000,000 ($9 million); and 

 
 WHEREAS, Innotrac asserts that the value of the Inventory is
substantially less than the value claimed by the Debtor; and 
  
 WHEREAS, Innotrac claims the Debtor owes it $2,753,280.78 in principal for services Innotrac provided to the Debtor, plus to the extent allowable under the Bankruptcy Code or other applicable law, pre-petition interest and
post-petition interest, fees, costs, charges and expenses including attorney’s fees (the “Innotrac Claim”); and 
  
 WHEREAS, the Debtor agrees with the principal amount of the Innotrac Claim, ; and 
  
 WHEREAS, Innotrac claims it possesses a valid warehouseman’s lien against, as well as a consensual security
interest in, the Inventory (the “Innotrac Lien”) to secure the Innotrac Claim; and 
  
 WHEREAS, by the letter dated October 1, 2004, Innotrac informed the Debtor that (i) Innotrac would not permit the Debtor to remove the Inventory
stored with Innotrac, unless the Debtor paid Innotrac all amounts allegedly due and (ii) Innotrac reserved all of its rights as a secured party and holder of the Innotrac Lien; and 
  
 WHEREAS, the Debtor does not have an available source of working capital to continue its normal operation of business
if the Debtor is unable to sell the Inventory to its customers; and 
  

 2 

 WHEREAS, the Debtor desires to have the Inventory shipped and sold to its customers and currently
has outstanding approximately $1.6 million in purchase orders and other indications of interest for purchases (the “Immediate Orders”); and 
  
 WHEREAS, in order to permit the Debtor to continue its business and to facilitate its ability to promulgate and confirm a plan of reorganization,
the Debtor requires that this Stipulation be approved, which will permit the shipment and sale of the Inventory and adequate protection of the interests of Innotrac in the Inventory; and 
  
 WHEREAS, this Stipulation has been negotiated in good faith and at arm’s length between the Debtor and Innotrac
and both parties have been represented by counsel. 
  
 NOW,
THEREFORE, it is hereby ORDERED, and STIPULATED and AGREED, by and between the Debtor and Innotrac Corporation, by their respective attorneys, Piper Rudnick LLP and Kilpatrick Stockton LLP, as follows: 
  
 1. The Debtor and Innotrac agree that the principal amount owed to Innotrac
in connection with Innotrac’s Claim is $2,753,280.78, plus to the extent allowable under the Bankruptcy Code or other applicable law, pre-petition interest and post-petition interest, fees, costs, charges and expenses including attorney’s
fees. 
  
 2. The Debtor confirms that the Innotrac Lien (both as a
warehouseman’s lien and as a consensual security interest) with respect to Inventory is a valid, legal, enforceable, duly perfected and first priority security interest in and lien upon such Inventory. 
  
 3. Innotrac agrees to release the Innotrac Lien with respect to the Inventory
that Innotrac releases pursuant to this Stipulation, at the time such Inventory is released. 
  
 4. As adequate protection of Innotrac’s interest in the Inventory, upon the release by Innotrac of the Innotrac Lien in accordance with paragraph 3 herein and approval of the Stipulation by the Bankruptcy Court,
Innotrac is granted a valid, legal, enforceable, duly 
  

 3 

 perfected and first priority replacement lien upon and security interest in (i) the Inventory and (ii) the accounts
receivable generated by the shipment and sale of the Inventory and the proceeds thereof. No liens or security interests shall be granted in the Inventory, the accounts receivable generated by the shipment and sale of the Inventory and the proceeds
thereof that are senior or equal to the Innotrac Lien or the liens granted hereunder. Such liens and security interests shall at all times be senior to all other liens and security interests arising on or after the Petition Date and shall be
effective and perfected upon the date of entry of this Stipulation without the necessity of taking any further action such as executing security agreements or filing financing statements, although Innotrac and the Debtor may do so. 
  
 5. With respect to the Immediate Orders, the Debtor shall pay to Innotrac the
first $40,000.00 of proceeds received from the Immediate Orders, within five (5) days of the receipt of the funds representing the payment of those proceeds, and thereafter shall pay to Innotrac fifty-five percent (55%) of the proceeds of the sale
of the Immediate Orders (i) within five (5) business days of the receipt of the funds representing the payment of those proceeds; or (ii) immediately, to the extent that any portion of the Immediate Orders has been prepaid by the Debtor’s
customers. Upon receipt by Innotrac of the fifty-five percent (55%) referenced in this paragraph, Innotrac releases its interest in the remaining forty-five percent (45%) of such proceeds. Payment of the balance of any amounts due to Innotrac
pursuant to the Immediate Orders (i.e., a total of fifty-five percent (55%) of the sale price for the Immediate Orders) shall be made by the Debtor to Innotrac no later than sixty-five (65) days after this Stipulation becomes effective. 

 
 6. With respect to the balance of the proceeds received by the Debtor in
connection with the sale of the Inventory (after the sale of the Immediate Orders and prior to the satisfaction of the Innotrac Claim in full), the Debtor shall pay to Innotrac sixty percent (60%) of 
  

 4 

 such proceeds: (i) within the earlier of five (5) business days of the receipt of the funds representing payment of those
proceeds or sixty-five (65) days after the date of the Debtor’s receipt of the bill of lading in connection with the shipment of such Inventory or (ii) immediately, to the extent that the purchase order is prepaid by the Debtor’s
customers. Upon receipt by Innotrac of the sixty percent (60%) referenced in this paragraph, Innotrac releases its interest in the remaining forty percent (40%) of such proceeds. 
  
 7. Innotrac shall be paid in advance by the Debtor for any services provided to the Debtor in connection with the
postpetition shipping and processing, storage fees, customer care services and other services provided by Innotrac in the ordinary course of business on behalf of Debtor, for the Inventory or any additional inventory, except for first $16,000 of
services provided with respect to the Immediate Orders, which $16,000 is included in the $40,000 referenced in paragraph 5 herein. Innotrac shall provide the Debtor with an estimate of the proposed bill for services to be rendered in connection with
any orders to be fulfilled by Innotrac, including the support services to be provided by Innotrac in conjunction with the fulfillment of any orders. The Debtor shall pay the estimated amount prior to shipment by Innotrac. Innotrac will be under no
obligation to perform any services on behalf of the Debtor until such payment is received. At the end of each bi-weekly (14 day) period following the date that this Stipulation becomes effective, Innotrac shall provide the Debtor with an accounting
of the costs for all services and expenses of Innotrac with regard to services provided to the Debtor during the applicable period. In the event that the Debtor overpaid for services and expenses (including all applicable adjustments and credits)
during a given period, Innotrac shall apply the overpayment to reduce the amount of the Innotrac Claim. In the event that Innotrac was underpaid for services and expenses (including all applicable adjustments and credits), the Debtor shall reimburse
Innotrac for amounts in connection with these services that remain due 
  

 5 

 and owing within seven (7) days of receipt of the accounting. The adequate protection liens granted pursuant to paragraph
4 herein shall attach to any amounts owed to Innotrac pursuant to the preceding sentence. 
  
 8. Upon approval of this Stipulation by the Bankruptcy Court, Innotrac shall immediately begin to process and commence packing the Inventory with regard to the Immediate Orders. Innotrac shall thereafter promptly
(consistent with past practices) ship the Immediate Orders and all subsequent orders received by the Debtor, provided that the Debtor has made the payments required under paragraphs 5 and 7 of this Stipulation. 
  
 9. Innotrac is under no obligation to process or release any order for
shipment unless the Debtor has first paid directly to the freight carrier or prepaid to Innotrac all freight charges in connection with the postpetition shipment of such Inventory. 
  
 10. Nothing contained in this Stipulation shall be deemed to limit or otherwise affect the right of any creditor or the
Official Committee of Unsecured Creditors if one is appointed in the case, or other parties in interest, to object within ninety (90) days of the entry of this Stipulation to the validity and extent of the Innotrac Lien or any other claim or lien
asserted by Innotrac. 
  
 11. All proceeds received by the Debtor
in connection with the sale of the Inventory shall be deposited by the Debtor into a segregated bank account (the “Segregated Account”). The Debtor shall provide to Innotrac within two (2) business days of Innotrac’s request the
Segregated Account bank statements, all orders, invoices, billings and related documents to enable Innotrac to audit the sale of the Inventory. Within three (3) business days of the Debtor’s receipt of each monthly Segregated Account bank
statement, the Debtor shall overnight to Innotrac a copy of the Segregated Account bank statement for such period and information regarding each sale of Inventory during the period covered by the Segregated 
  

 6 

 Account bank statement, including without limitation, copies of all orders, the purchase price for the Inventory, the
credit terms extended in each sale of Inventory and any purchase orders, invoices and billings related to the sale of the Inventory for such period. Innotrac shall have the right to review and reject any orders for shipment of Inventory that are not
commercially reasonable or in accordance with custom in the industry, including those between related parties of the Debtor or not made on an arms length basis (Inventory sold for at least 70% of cost or at a price equal to or greater than a prior
sale of substantially similar Inventory is rebuttably presumed to be a commercially reasonable sale). Upon twenty-four (24) hours notice and during normal business hours, Innotrac may review and inspect, and Tactica shall fully cooperate and grant
Innotrac access to, any of Tactica’s records, documents or systems relating to or arising out of each sale of Inventory, and an accounting of any monies received from the sale of any Inventory to ensure Tactica’s compliance with the terms
and conditions of this Stipulation. 
  
 12. All payments made by
the Debtor to Innotrac pursuant to this Stipulation shall be by wire transfer. 
  
 13. The following shall constitute an “Event of Default” under this Stipulation (“monthly” shall refer to a calendar month and the Petition Date month shall be included as part of the first
calendar month): 
  

	 	a)	The monthly gross sales by the Debtor of the Inventory, excluding freight, during the term of this Stipulation is under $200,000.00. 

  

	 	b)	The monthly paydown of the debt owed by the Debtor to Innotrac in connection with the Innotrac Claim is less than $120,000.00; 

  

	 	c)	The Debtor breaches any payment obligation under this Stipulation; 

  

	 	d)	The Debtor or Innotrac breaches any material term of this Stipulation; or 

  

	 	e)	The Innotrac Claim has not been satisfied in full within 270 days after the entry of this Stipulation. 

  

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 14. Innotrac shall provide to the Debtor written notice of the existence of an Event of Default (the
“Default Notice”). The Debtor shall be permitted five (5) business days from the date that the Debtor receives the Default Notice (the “Cure Period), to cure any Event of Default. Innotrac is under no obligation to process or ship any
Inventory or provide any other services during a default or cure period. 
  
 15. In the Event that the Debtor does not cure an Event of Default during the Cure Period, Innotrac shall be relieved of the automatic stay imposed pursuant to section 362 of the Bankruptcy Code, upon three (3) days
notice to the counsel of the Debtor, the top-20 creditors or the counsel to the creditors committee, and the United States Trustee in this case. In connection with stay relief granted to Innotrac pursuant to this paragraph, the Debtor may raise
objections only to have the Bankruptcy Court determine: (i) whether an Event of Default has occurred; and (ii) whether the Debtor has timely cured an Event of Default. Pursuant to the stay relief granted to Innotrac pursuant to this paragraph,
Innotrac shall be entitled to exercise any and all remedies to dispose of the Inventory in accordance with applicable law as if all default, cure or similar type notices had been issued to all parties entitled to receive such notices and all
applicable cure and notice periods had expired, and the Debtor specifically waives the right to receive any additional notices, including those related to disposition of the collateral. Notwithstanding anything to the contrary herein, from the
effective date of this Stipulation and Order until the expiration of thirty (30) days after Innotrac is granted stay relief pursuant to this paragraph or otherwise, Tactica will be provided access to the internet based CRM, work order and reporting
systems, and upon reasonable notice and during normal business hours, Tactica shall be provided access to Innotrac’s Reno facility to inspect and audit the Inventory to the extent it remains property of the estate. 
  

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 16. This Stipulation shall be of no effect unless it is approved by the Bankruptcy Court. This
Stipulation shall become effective on the day it is approved by the Bankruptcy Court. 
  
 17. The rights provided to Innotrac hereunder are cumulative and not exclusive of any rights or remedies that Innotrac may otherwise have. Nothing herein shall preclude Innotrac from requesting further or different
adequate protection, and the Debtor or any other party reserves the right to contest any such request. 
  
 18. The parties agree that the relief provided to Innotrac herein constitutes adequate protection of Innotrac’s interest in the Inventory under
Section 361 of the Bankruptcy Code. 
  
 19. If any provisions of
this Order is hereafter modified, vacated, reversed, limited or stayed by subsequent order of this Court, an appellate court, or any other court, such modification, vacation, reversal, limitation or stay shall not affect (a) the validity of any
obligations or adequate protection obligations incurred prior thereto, or (b) the validity, enforceability or priority of any lien or security interest or the priority of the obligations or the adequate protection obligations with respect to the
obligations or adequate protection obligations incurred prior thereto. Notwithstanding any such modification, vacation, reversal, limitation or stay, (i) any obligation of Debtor or Innotrac pursuant to this Order arising prior thereto shall be
governed in all respects by the original provisions of this Order and Innotrac and the Debtor shall be entitled to all of the rights, privileges, and benefits granted hereunder with respect to all such obligations and (ii) any adequate protection
obligation of Debtor pursuant to this Order arising prior thereto shall be governed in all respects by the original provisions of this Order and Innotrac shall be entitled to all of the rights, privileges, and benefits granted hereunder with respect
to all such adequate protection obligations. 
  

 9 

			
	Dated: October 21, 2004	 	Dated: October 22, 2004
		
	KILPATRICK STOCKTON LLP	 	PIPER RUDNICK LLP
		
	 /s/ Paul M. Rosenblatt

	 	 /s/ John P. McNicholas

	Paul M. Rosenblatt (PR 6300)	 	Timothy W. Walsh (TW 7409)
	Suite 2800	 	John P. McNicholas (JM 0694)
	1100 Peachtree Street	 	1251 Avenue of the Americas
	Atlanta, Georgia 30309-4530	 	New York, NY 10020-1104
	Tel: (404) 815-6321	 	Tel: (212) 835-6000
	Facsimile: (404) 541-3373	 	Facsimile: (212) 835-6001
		
	Attorneys for Innotrac Corporation	 	Proposed Attorneys for Debtor

  

			
	Dated:	 	New York, New York
	 	 	October     , 2004

  
  

			
	SO ORDERED:	 	 
	 	 	
 UNITED STATES BANKRUPTCY JUDGE

  

 10 

 UNITED STATES BANKRUPTCY COURT 
 SOUTHERN DISTRICT OF NEW YORK 
  

					
	In re:	  	:	  	 
	 	  	:	  	Chapter 11
	TACTICA INTERNATIONAL, INC.,	  	:	  	 
	 	  	:	  	Case No. 04-16805 (BRL)
	                                        
           Debtor.
	  	:	  	 

  
 INTERIM ORDER (i)
GRANTING DEBTOR’S MOTION FOR AN ORDER PURSUANT 
 TO SECTIONS 102, 105, 361, 362 AND 363 OF THE BANKRUPTCY CODE AND 

RULES 4001(d), 9006, 9007, AND 9019 OF THE FEDERAL RUELS OF BANKRUPTCY 
 PROCEDURE APPROVING STIPULATION AND CONSENT ORDER PROVIDING, 
 AMONG OTHER
THINGS, ADEQUATE PROTECTION TO INNOTRAC  
 CORPORATIONN; AND (ii) SCHDULING FINAL HEARING  
  
 UPON THE MOTION (the “Motion”) of Tactica International, Inc., the
above-captioned debtor and debtor in possession (the “Debtor”), by and through its proposed attorney, Piper Rudnick LLP, for an order pursuant to sections 102, 105, 361, 362, and 363 of title 11 of the United States Code (the
“Bankruptcy Code”) and Rules 4001(d), 9006, 9007, and 9019 of the Federal Rules of Bankruptcy Procedure: (i) approving a stipulation and consent order (the “Stipulation”) between the Debtor and Innotrac Corporation
(Innotrac”), on an interim and final basis, providing for the release and shipment of Debtor’s inventory maintained by Innotrac at its warehouse facility in Reno, Nevada (the “Inventory”) and for adequate protection of
Innotrac’s interest in the Inventory; and (ii)shortening the time period for consideration and limiting notice for the interim relief requested in the Motion based on the exigent circumstances set forth in the Motion, it is hereby 

 
 ORDERED that the Stipulation, a copy of which is annexed to the Motion as Exhibit
A, is approved, on an interim basis pending the Final Hearing (as defined below); and it is further 
  
 ORDERED that a final hearing (the “Final Hearing”) on the Motion is schedule for November 10, 2004, at 10:00 A.M. before this Court; and it is further 
  
 ORDERED that the Debtor be, and hereby is, authorized to execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or advisable to effectuate the terms of the Stipulation and this Order; and it is further 
  
 ORDERED that the Debtor shall serve a copy of this Order and the Stipulation by overnight courier, hand delivery, electronic mail, or
facsimile transmission upon (i) counsel to Innotrac, (ii) the United States Trustee, (iii) the twenty (20) largest unsecured creditors of the Debtors, excluding insiders; and (iv) its secured creditors and shall promptly file proof of service
thereof’ and it is further 
  
 ORDERED that sworn service and notice
be deemed good and sufficient in all respects; and it is further 
  

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 ORDERED that objections, if any, to the relief sought in the Motion must be in writing and filed with the Clerk of
the Court and served so as to be received by (i) Piper Rudnick LLP, proposed counsel for the Debtor, 1251 Avenue of the Americas, New York, New York 10020-1104, Attention: Timothy W. Walsh, Esq.; (ii) Kilpatrick Stockon LLP, 110 Peachtree Street,
Atlanta, GA 30309-4530, counsel for Innotrac, Attn: Paul Rosenblatt, Esq.; and (iii) the Office fo the United Stated Trustee, no later than three (3) days prior to the date of the Final Hearing; and it is further 
  
 ORDERED that, pursuant to Fed. R. Bank. P. 9006 (c)(1), the notice periods for hearing
the Motion shall be and hereby are reduced and shortened to the extend necessary to effectuate the terms of this Order; and it is further 
  
 ORDERED that the automatic stay provisions of section 362 of the Bankruptcy Code are modified to the extend necessary to implement the terms of the Stipulation;
and it is further 
  
 ORDERED that paragraph 10 of the Stipulation is
modified by adding the words “unless otherwise ordered by the Court” after the words “ninety (90) days” and that paragraph 15 of the Stipulation is modified by striking the words “three (3) days” and inserting in their
place “five (5) business days.” 
  
 Dated: New York, New York

  
 October 25, 2004 
  

	
	 /s/ Arthur J. Gonzalez

	 UNITED STATES BANKRUPTCY JUDGE

  

 12Employment Agreement

 Exhibit 10.1 
  
 EMPLOYMENT AGREEMENT 
  
 This Employment Agreement (the “Agreement”) is entered into effective October 21, 2004, by and between Mark H. Perry (the
“Employee”) and Netopia, Inc. (the “Company”), a Delaware corporation, headquartered at 6001 Shellmound Street, 4th Floor, Emeryville, California 94608 (the “Company”). 
  
 1. Term of Employment. 
  
 (a) Basic Rule. The Company agrees to employ the Employee and the Employee agrees to remain in employment with the Company, from October 21, 2004 until April 30, 2005. After April 30, 2005, the Employee’s employment will
continue until it terminates pursuant to Subsections (b), (c) and (d) below. 
  
 (b) Termination by Company Without Cause. The Company may terminate the Employee’s employment effective on or at any date after April 30, 2005 without Cause and for any reason or no reason whatsoever by
giving the Employee thirty (30) days’ advance notice in writing. 
  
 (c) Termination by Company for Cause. The Company may terminate the Employee’s employment at any time for Cause. For all purposes under this Agreement, “Cause” shall mean: 
  
 (i) An intentional failure or omission of the Employee to
substantially perform his duties hereunder, other than as a result of the death or disability of the Employee; 
  
 (ii) An intentional act by the Employee that constitutes gross misconduct or fraud; 
  
 (iii) The Employee’s conviction of, or plea of “guilty” or “no contest” to, a felony;

  
 (iv) The Employee’s disobedience of orders and
directives of the Chief Executive Officer or the Chairman of the Audit Committee of the Board of Directors; or 
  
 (v) any material breach by the Employee of his obligations under any Code of Ethics, Code of Business Conduct or lawful policies or procedures of
the Company. 
  
 (d) Resignation by Employee. The Employee
may terminate his employment effective on or at any date after April 30, 2005 for any reason or no reason whatsoever by giving the Company thirty (30) days’ advance notice in writing. 
  
 (e) Termination of Agreement. This Agreement shall terminate when all
obligations of the parties hereunder have been satisfied. 

 2. Duties and Scope of Employment. 
  
 (a) Position. The Company agrees to employ the Employee in an executive position of Interim Senior Vice President and
Chief Financial Officer. The Employee shall report to the President and CEO of the Company. The Employee will update the Audit Committee of the Board of Directors on a regular basis. 
  
 (b) Special Circumstances. It is understood that the Company is presently involved in an internal review by the Audit
Committee of the Company’s accounting and reporting practices. In addition, the Company has been advised by the Securities and Exchange Commission that it has commenced an informal inquiry to determine whether the federal securities laws have
been violated. Furthermore, the Company and certain of its directors and current and former officers have been named in various purported class action lawsuits and purported derivative actions. As a consequence, it may take a longer period of time
than expected in the normal course of business, to complete the preparation of the Company’s restated financial statements and to provide certification of the accuracy of the Company’s financial statements and the adequacy of its system of
internal controls in compliance with generally accepted accounting principles and the Sarbanes-Oxley Act of 2002. 
  
 3. Base Compensation. 
  
 During the term of his employment under this Agreement, the Company agrees to pay the Employee as compensation for his services a base salary of Twenty
Thousand Dollars ($20,000) per month. Such salary shall be paid by the Company on a bi-monthly basis on the same dates as it makes salary payments generally to its employees based in the United States. 
  
 4. Employee Benefits and Stock Options. 
  
 During the term of his employment under this Agreement, the Employee shall
be eligible to participate in those employee benefit plans and programs as are offered from time to time by the Company to executive officers based in the United States in accordance with the terms of such plans and programs. The Company will
recommend to the Compensation Committee of the Board of Directors that it grant to the Employee a stock option to purchase 30,000 shares of the Company’s common stock, which will vest and become exercisable at the rate of 5,000 shares per month
on the last day of each month of completed employment commencing November 30, 2004, such that all 30,000 stock options will be vested and exercisable on April 30, 2005, provided that vesting will cease in the event that the Employee’s
employment ceases. Such stock options will be granted at the fair market value of the Company’s common stock on the date of grant and will be subject to all terms and conditions of the Company’s stock option plan. 
  
 5. Business Expenses. 
  
 During the term of his employment under this Agreement, the Employee shall be authorized to incur necessary and reasonable
travel, entertainment and other business expenses in connection with his duties hereunder in accordance with the Company’s generally applicable policies related to such business expenses. The Company also agrees to pay the Employee Two Hundred
Dollars ($200) per month for transportation expenses to the Company’s headquarters location from his home without documentation, subject to applicable withholding taxes. The Company will reimburse the Employee for a legal review of this
Agreement in an amount not to exceed $500. 
  

 2 

 6. Indemnification. 
  
 The Company will indemnify and defend the Employee with respect to any claims made or threatened against him which arises out of the performance of his
duties to the Company to the extent permitted by law. The Employee and the Company will enter into an Indemnification Agreement in the same form as existing indemnification agreements between the Company and its current directors and officers.

  
 7. Proprietary Information and Inventions Agreement. 
  
 Like all Company employees, the Employee will be required, as a condition of
his employment with the Company, to sign the Company’s standard Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A. 
  
 8. Withholding Taxes. 
  
 All forms of compensation referred to in this letter agreement are subject to reduction to reflect applicable withholding and payroll taxes and other
deductions required by law. 
  
 9. Interpretation, Amendment and Enforcement.

  
 This letter agreement and Exhibit A constitute the
complete agreement between the Employee and the Company, contain all of the terms of the Employee’s employment with the Company and supersede any prior agreements, representations or understandings (whether written, oral or implied) between
Employee and the Company. This letter agreement may not be amended or modified, except by an express written agreement signed by both the Employee and a duly authorized officer of the Company. The terms of this letter agreement and the resolution of
any disputes as to the meaning, effect, performance or validity of this letter agreement or arising out of, related to, or in any way connected with, this letter agreement, the Employee’s employment with the Company or any other relationship
between the Employee and the Company (the “Disputes”) will be governed by California law, excluding law relating to conflicts or choice of law. 
  
 As required by law, the Employee’s employment with the Company is contingent upon Employee providing legal proof of his identity and authorization to
work in the United States. 
  

 3 

 In Witness Whereof, each of the parties has executed this Agreement, in the case of the Company by its
duly authorized President and Chief Executive Officer, as of the date set forth below. 
  

	
	 /s/ Mark H. Perry

	 Mark H. Perry

	 Date: October 21, 2004

	
	 /s/ Alan B. Lefkof

	 Alan B. Lefkof

	 President and CEO

	 Date: October 21, 2004

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