Document:

Exhibit 10.23

 

***Confidential Treatment Requested

 

CONFORMED COPY

 

 

Loan
Agreement

 

 

September 10, 2004

 

 

for

 

 

ES
HOLDINGS S.A.S.

 

 

Arranged by

 

 

BNP
PARIBAS

 

 

Concerning firstly, the
partial refinancing of Receivables and a Shareholders’ Loan granted by MEDICOR
Ltd. to ES HOLDINGS S.A.S. within the scope of the latter’s acquisition of all
the shares comprising the capital of LABORATOIRES EUROSILICONE and secondly, to
the financing of the Acquisition Subsequent Payments connected to this
Acquisition

 

 

Confidential Treatment Requested

 

TABLE OF CONTENTS

 

	
  1

  	
  DEFINITIONS –
  INTERPRETATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  
	
   

  	
  1.2

  	
  Principles of
  construction

  	
   

  
	
   

  	
   

  	
   

  
	
  2

  	
  PURPOSE

  	
   

  
	
   

  	
   

  	
   

  
	
  3

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Conditions
  precedent specific to Tranche A1

  	
   

  
	
   

  	
  3.1.1

  	
  Delivery of documents

  	
   

  
	
   

  	
  3.1.2

  	
  Other conditions

  	
   

  
	
   

  	
  3.2

  	
  Conditions
  precedent specific to Tranche A2

  	
   

  
	
   

  	
  3.3

  	
  Conditions
  precedent specific to Tranche A3

  	
   

  
	
   

  	
  3.4

  	
  Conditions
  precedent specific to Tranche A4

  	
   

  
	
   

  	
   

  	
   

  
	
  4

  	
  UTILIZING THE LOAN

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Purpose of the Loan

  	
   

  
	
   

  	
  4.2

  	
  Term and conditions
  of Drawdown

  	
   

  
	
   

  	
  4.3

  	
  Drawdown Requests

  	
   

  
	
   

  	
  4.4

  	
  Paying the Loan

  	
   

  
	
   

  	
   

  	
   

  
	
  5

  	
  REPAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Terms and
  conditions of repayment

  	
   

  
	
   

  	
  5.1.1

  	
  Repayment of Tranche A1

  	
   

  
	
   

  	
  5.1.2

  	
  Repayment of Tranche A2

  	
   

  
	
   

  	
  5.1.3

  	
  Repayment of Tranche A3

  	
   

  
	
   

  	
  5.1.4

  	
  Repayment of Tranche A4

  	
   

  
	
   

  	
  5.2

  	
  Voluntary prepayment

  	
   

  
	
   

  	
  5.3

  	
  Mandatory prepayment

  	
   

  
	
   

  	
   

  	
   

  
	
  6

  	
  INTERESTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Interest rate

  	
   

  
	
   

  	
  6.2

  	
  Reference Index

  	
   

  
	
   

  	
  6.3

  	
  Applicable Margin

  	
   

  
	
   

  	
  6.4

  	
  Interest Periods

  	
   

  
	
   

  	
  6.5

  	
  Calculation Rule

  	
   

  
	
   

  	
  6.6

  	
  Payment of interest

  	
   

  
	
   

  	
  6.7

  	
  Notification of
  the interest rate

  	
   

  
	
   

  	
  6.8

  	
  Late interest

  	
   

  
	
   

  	
   

  	
   

  
	
  7

  	
  CHANGES TO THE
  INTEREST CALCULATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Market disruption

  	
   

  
	
   

  	
  7.2

  	
  Lack of
  a quotation by a Bank of Reference

  	
   

  
	
   

  	
   

  	
   

  
	
  8

  	
  FEES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Agent
  Fee

  	
   

  
	
   

  	
  8.2

  	
  Arrangement Fee

  	
   

  
	
   

  	
  8.3

  	
  Underwriting Fee

  	
   

  
	
   

  	
  8.4

  	
  Commitment Fee for
  Tranche A2

  	
   

  

 

2

 

Confidential Treatment
Requested

 

	
   

  	
  8.5

  	
  Commitment Fee for
  Tranche A3

  	
   

  
	
   

  	
  8.6

  	
  Commitment Fee for
  Tranche A4

  	
   

  
	
   

  	
  8.7

  	
  Participation Fee

  	
   

  
	
   

  	
   

  	
   

  
	
  9

  	
  SUPPLEMENTARY
  PAYMENT OBLIGATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Additional Costs

  	
   

  
	
   

  	
  9.2

  	
  Illegality

  	
   

  
	
   

  	
  9.3

  	
  Costs of execution

  	
   

  
	
   

  	
   

  	
   

  
	
  10

  	
  REPRESENTATIONS AND
  WARANTEES

  	
   

  
	
   

  	
   

  	
   

  
	
  11

  	
  SECURITIES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Financial
  Instrument Account Pledge

  	
   

  
	
   

  	
  11.2

  	
  ‘Key man’ insurance
  delegation

  	
   

  
	
   

  	
   

  	
   

  
	
  12

  	
  BORROWER’S UNDERTAKINGS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Commitment to securities

  	
   

  
	
   

  	
  12.2

  	
  Commitment
  to Interest rate exposure hedges

  	
   

  
	
   

  	
  12.3

  	
  Commitment to
  Financial Ratios

  	
   

  
	
   

  	
  12.4

  	
  Commitment to
  limit investments

  	
   

  
	
   

  	
  12.5

  	
  Commitment to
  limit indebtedness

  	
   

  
	
   

  	
  12.6

  	
  Miscellaneous
  commitments

  	
   

  
	
   

  	
   

  	
   

  
	
  13

  	
  INFORMATION OBLIGATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  14

  	
  EVENT
  OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  15

  	
  RULES FOR
  THE PARTICIPATION OF THE BANKS

  	
   

  
	
   

  	
   

  	
   

  
	
  16

  	
  THE BANK’S
  DECLARATIONS AND COMMITMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  17

  	
  AGENT’S ROLE AND POWERS

  	
   

  
	
   

  	
   

  	
   

  
	
  18

  	
  REPLACEMENT OF THE
  BORROWER

  	
   

  
	
   

  	
   

  	
   

  
	
  19

  	
  SUBSTITUTION OF THE BANKS

  	
   

  
	
   

  	
   

  	
   

  
	
  20

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  20.1

  	
  Terms of payment

  	
   

  
	
   

  	
  20.2

  	
  Attributing payments

  	
   

  
	
   

  	
  20.3

  	
  No
  setoff

  	
   

  
	
   

  	
  20.4

  	
  Currency

  	
   

  
	
   

  	
  20.5

  	
  Annualized percentage
  rate

  	
   

  
	
   

  	
  20.6

  	
  Working Days

  	
   

  
	
   

  	
  20.7

  	
  Waiver of recourse

  	
   

  
	
   

  	
  20.8

  	
  Notifications

  	
   

  
	
   

  	
  20.9

  	
  Instruments – Languages

  	
   

  
	
   

  	
   

  	
   

  
	
  21

  	
  GOVERNING
  LAW

  	
   

  
	
   

  	
   

  	
   

  
	
  22

  	
  JURISDICTION

  	
   

  

 

3

 

Confidential Treatment Requested

 

	
  SCHEDULE 1

  	
  REFERENCE BUSINESS PLAN

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2

  	
  FORM OF DRAWDOWN REQUEST

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 3

  	
  FORM OF CONTRACTOR REPLACEMENT AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 4

  	
  FORM OF FINANCIAL RATIOS CERTIFICATE

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 5

  	
  FRENCH VERSION OF THE LOAN AGREEMENT

  	
   

  

 

4

 

Confidential Treatment Requested

 

BETWEEN THE UNDERSIGNED :

 

(1) ES HOLDINGS SAS, a French company (société par actions
simplifiée) with capital of 37,000 Euros, the registered office of
which is at 112, avenue Kléber - 75116 Paris, registered on the Paris Trade and
Companies’ Register under the number 477 630 172,

 

Represented
by Mr. Theodore MALONEY and Mr. Thomas MOYES, duly authorized to sign
this Agreement,

 

In
the capacity of borrower (hereafter called ‘Borrower’),

 

(2) BNP PARIBAS, a French company (société anonyme)
with capital of 1,757,231,208 Euros, the registered office of which is at 16,
boulevard des Italiens - 75009 Paris, registered on the Paris Trade and
Companies’ Register under the number 662 042 449,

 

Represented by Ms. Valérie BENQUET and Mr. Bertrand MONTFORT,
duly authorized to sign this Agreement, and for BDDF - Financements Structurés
by Ms. Géraldine SALOMON,

 

5

 

Confidential Treatment
Requested

 

RECITALS :

 

(A) The Borrower acquired all the shares in LABORATOIRES
EUROSILICONE’s capital, on July 5, 2004, for a maximum total Acquisition
Price of 41,000,000 Euros including a maximum of 9,000,000 Euros as the
Acquisition Subsequent Payments through Receivables and a Shareholders’ Loan.

 

(B) The Borrower asked the Arranger to set up a loan in its favor
initially intended to partially refinance the Receivables and the Shareholders’
Loan which MEDICOR Ltd. had granted to it, and secondly to finance the
Acquisition Subsequent Payments.

 

(C) The Arranger agreed to grant the Borrower this Loan, under the
terms set out below.

 

1                                        DEFINITIONS - INTERPRETATION

 

1.1                              Definitions

 

The words and expressions below will have the following meaning for the
application of this Agreement (including the recitals) and its Schedules :

 

	
  ‘Acquisition’

  	
   

  	
  means the Borrower’s acquisition of all the shares in LABORATOIRES
  EUROSILICONE’s capital.

  
	
   

  	
   

  	
   

  
	
  ‘Acquisition
  Price’

  	
   

  	
  means
  the price for the Borrower acquiring all the shares in LABORATOIRES
  EUROSILICONE’s share capital, i.e. 32,000,000 Euros increased by the
  Acquisition Subsequent Payments.

  
	
   

  	
   

  	
   

  
	
  ‘Acquisition

  	
   

  	
   

  
	
  Subsequent Payment 1’

  	
   

  	
  means the Acquisition Subsequent Payment of a maximum amount of
  3,000,000 Euros, connected to LABORATOIRES EUROSILICONE’s results for the
  fiscal year closed on December 31, 2004.

  
	
   

  	
   

  	
   

  
	
  ‘Acquisition

  	
   

  	
   

  
	
  Subsequent Payment 2’

  	
   

  	
  means the Acquisition Subsequent Payment of a maximum amount of
  3,000,000 Euros, connected to LABORATOIRES EUROSILICONE’s results for the
  fiscal year closed on December 31, 2005.

  
	
   

  	
   

  	
   

  
	
  ‘Acquisition

  	
   

  	
   

  
	
  Subsequent Payment 3’

  	
   

  	
  means the Acquisition Subsequent Payment of a maximum amount of
  3,000,000 Euros, connected to LABORATOIRES EUROSILICONE’s results for the
  fiscal year closed on December 31, 2006.

  
	
   

  	
   

  	
   

  
	
  ‘Acquisition

  	
   

  	
   

  
	
  Subsequent
  Payments’

  	
   

  	
  means
  Acquisition Subsequent Payment 1, Acquisition Subsequent Payment 2 and the
  Acquisition Subsequent Payment 3 together.

  

 

6

 

Confidential Treatment
Requested

 

	
  ‘Agent’

  	
   

  	
  means BNP PARIBAS [Centre
  d’Affaires Entreprises Méditerranée, Z 02478A, 5, boulevard de Dunkerque, Cap
  Joliette - 13002 Marseille] and its beneficiaries, ex-officio as the Banks’
  agent, under the provisions of Article 17 of this Agreement.

  
	
   

  	
   

  	
   

  
	
  ‘Agent Fee’

  	
   

  	
  means the fee owed to the
  Agent, covering the daily management of the Contractual Documents, excluding
  any exceptionals, payable for the first time on the Drawdown Date of Tranche
  A1, then on each anniversary date

  
	
   

  	
   

  	
   

  
	
  ‘Agreement’

  	
   

  	
  means this agreement
  (including its Schedules).

  
	
   

  	
   

  	
   

  
	
  ‘Arranger’

  	
   

  	
  means
  BNP PARIBAS [BDDF - Financements Structurés, CLD 08B1, 9, boulevard des
  Italiens - 75450 Paris Cedex 09].

  
	
   

  	
   

  	
   

  
	
  ‘Arrangement Fee’

  	
   

  	
  means the management fee owed to the Arranger, payable when the
  Agreement is signed.

  
	
   

  	
   

  	
   

  
	
  ‘Bank(s)’

  	
   

  	
  means,
  on the date that this Agreement is signed, BNP PARIBAS and subsequently, any
  other bank(s) which may totally or partially replace it in accordance with
  Article 19.

  
	
   

  	
   

  	
   

  
	
  ‘Banks of reference’

  	
   

  	
  means the SOCIETE GENERALE and HSBC or any other Banks which are the
  subject of an agreement between the Borrower and the Banks

  
	
   

  	
   

  	
   

  
	
  ‘Chart
  of Accounts’

  	
   

  	
  means
  the Chart of Accounts approved by the Order of June 22 1999 by the
  Justice Ministry, the Economy, Finance and Industry Ministry and the
  Secretary of State for the Budget approving Regulation n° 99-03 of
  April 29 1999 of the Accounting Regulation Committee, as well as the
  accounting practices and uses which are generally accepted in France for the
  application and the interpretation of the Chart of Accounts and any
  subsequent modification, and in particular, the accounting practices and uses
  which are generally accepted to draw up the consolidated accounts, as
  stipulated by the Regulation n° 99-02 of April 29 1999 by the
  Accounting Regulation Committee approved by the Order of June 22 1999 by
  the Justice Ministry.

  
	
   

  	
   

  	
   

  
	
  ‘Commitment Fee for Tranche A2’

  	
   

  	
  

  means the fee calculated at the rate of * * * per year on the
  maximum amount of Tranche A2, payable quarterly in advance to the Agent from
  the date that the Agreement is signed to the Drawdown Date of Tranche 2 (or
  until the date that the Borrower totally surrenders its right to draw down
  the Tranche A2), and paid by the Agent to each Bank pro rata to its
  Participation.

  

 

7

 

Confidential Treatment
Requested

 

	
  ‘Commitment Fee

  for Tranche A3’

  	
   

  	
  

  means the fee calculated at the rate of * * * per year on the
  maximum amount of Tranche A3, payable quarterly in advance to the Agent from
  the date that the Agreement is signed to the Drawdown Date of Tranche 3 (or
  until the date that the Borrower totally surrenders its right to draw down
  the Tranche A3), and paid by the Agent to each Bank pro rata to its
  Participation.

  
	
   

  	
   

  	
   

  
	
  ‘Commitment Fee

  for Tranche A4’

  	
   

  	
  

  means the fee calculated at the rate of * * * per year on the
  maximum amount of Tranche A4, payable quarterly in advance to the Agent from
  the date that the Agreement is signed to the Drawdown Date of Tranche 4 (or
  until the date that the Borrower totally surrenders its right to draw down
  the Tranche A4), and paid by the Agent to each Bank pro rata to its
  Participation.

  
	
   

  	
   

  	
   

  
	
  ‘Contractual Documents’

  	
   

  	
  means the Agreement and the Securities and all documents relating to
  it.

  
	
   

  	
   

  	
   

  
	
  ‘Debt Service’

  	
   

  	
  means on the basis of the Borrower’s consolidated accounts :

  
	
   

  	
   

  	
  (a) Net Financial Cash Expenses,

  
	
   

  	
   

  	
  (b) Plus repayments of principal on Financial Debt (excluding fluctuations
  in the operating overdraft) made over the period in question, excluding any
  early repayment,

  
	
   

  	
   

  	
   

  
	
  ‘Drawdown’

  	
   

  	
  means
  the drawdown of the Loan by the Borrower through Drawdown Requests under
  Article 4.

  
	
   

  	
   

  	
   

  
	
  ‘Drawdown Date(s)’

  	
   

  	
  means each date that the funds are made available to the Borrower in
  Tranches A1, A2, A3 and A4.

  
	
   

  	
   

  	
   

  
	
  ‘Drawdown Request(s)’

  	
   

  	
  means each drawdown request for Tranches A1, A2, A3 and A4 of the
  Loan, in accordance with the model in Schedule 2, and handed to the
  Agent by the Borrower.

  
	
   

  	
   

  	
   

  
	
  ‘Economic Profit’

  	
   

  	
  means, on the basis of the Borrower’s consolidated accounts :

  
	
   

  	
   

  	
  (a) Group consolidated net profit,

  
	
   

  	
   

  	
  (b) Less the proportional share of net profit corresponding to
  the companies carried by the equity method,

  
	
   

  	
   

  	
  (c) Plus amortization charges for goodwill arising on acquisition
  and acquisition costs,

  
	
   

  	
   

  	
  (d) Plus companies tax (payable and deferred),

  
	
   

  	
   

  	
  (e) Less exceptional income and plus exceptional expense
  (including any capital gains or losses realized on asset disposals),

  
	
   

  	
   

  	
  (f) Less financial income and plus financial charges (including
  notably interest charges arising from the restatement on consolidation of
  finance lease agreements and financial rentals).

  

 

8

 

Confidential Treatment
Requested

 

	
  ‘EONIA’

  	
   

  	
  means :

  
	
   

  	
   

  	
  (A) the annual percentage rate fixed by the Federation of
  European banks European Banking Federation from day to day published on
  page 247 of the Telerate screen or, if it is unavailable, on the
  corresponding page on the Reuters screen or any other page which
  could be chosen by mutual agreement between the Agent, the Borrower and the
  Banks ;

  
	
   

  	
   

  	
  or

  
	
   

  	
   

  	
  (B) if none of these services is available, the arithmetic mean
  (rounded up to the four highest decimal points) of the rates offered by the
  Banks of Reference from day to day to the banks of first class credit
  standing on the European interbank market in the Euro zone.

  
	
   

  	
   

  	
  The
  EONIA rate used to calculate the EONIA rate on a date which is not a Working
  Day, will be the rate published for the preceding Working Day.

  
	
   

  	
   

  	
   

  
	
  ‘EURIBOR’

  	
   

  	
  means :

  
	
   

  	
   

  	
  (A) the annual percentage rate fixed by the Federation of
  European Banks for the Interest Period concerned and published two Working
  Days before the start of this Interest period on page 248 of the
  Telerate screen, or, if it is unavailable, on the corresponding page on
  the Reuters screen or any other page which could be chosen by mutual
  agreement between the Agent, the Borrower and the Banks ;

  
	
   

  	
   

  	
  or

  
	
   

  	
   

  	
  (B) if none of these services is available, the arithmetic mean
  (rounded up to the four highest decimal points) of the rates offered by the
  Banks of Reference to the banks of first class credit standing on the
  European interbank market in the Euro zone, for deposits in Euros for a
  period comparable to the Interest Period, two Working Days before the start
  of this Interest Period.

  
	
   

  	
   

  	
   

  
	
  ‘Euro’

  	
   

  	
  means at any time, the currency with legal tender on the territory of
  the States in the European Economic and Monetary Union, having adopted the
  single currency in accordance with the Treaty founding the European Community
  signed in Rome on March 25, 1957, and subsequently amended.

  
	
   

  	
   

  	
   

  
	
  ‘Excess Cash-Flow’

  	
   

  	
  means, on the basis of the Borrower’s consolidated accounts :

  
	
   

  	
   

  	
  (a) Free Cash Flow,

  
	
   

  	
   

  	
  (b) Less Debt Service,

  
	
   

  	
   

  	
  (c) Less any voluntary or mandatory prepayments of the Loan,

  
	
   

  	
   

  	
  (d) Less any investment shortfall, if investment over the period
  is less than the maximum investment permitted.

  
	
   

  	
   

  	
   

  
	
  ‘Event of Default’

  	
   

  	
  means one of the cases of the events stipulated in Article 14.1.

  

 

9

 

Confidential Treatment
Requested

 

	
  ‘Financial Debt’

  	
   

  	
  means, on the basis of the Borrower’s consolidated accounts :

  
	
   

  	
   

  	
  (a) Total value of short-, medium-, and long-term financial debt,
  (including debt from the restatement on consolidation of finance lease
  agreements and financial rentals)

  
	
   

  	
   

  	
  (b) Plus bond debt and/or shareholders’ current accounts where
  these are not subordinated to the Loan,

  
	
   

  	
   

  	
  (c) Plus off-balance sheet debt, proceeds from the sale of
  “Dailly Law” loans or any other transfers from the debtors item of debts not
  classed as non-recourse.

  
	
   

  	
   

  	
  (For the avoidance of doubt, Financial Debt does not include any item
  listed under the definition of Shareholders’ Funds.)

  
	
   

  	
   

  	
   

  
	
  ‘Financial Instrument Account Pledge’

  	
   

  	
  

  means the financial instrument account pledge concluded between the Borrower
  as constitutor and the Agent, as the beneficiary on behalf of the Banks, as a
  security for the repayment of the Loan, and relating to a minimum of 66.65%
  of the shares comprising LABORATOIRES EUROSILICONE’s capital on the Drawdown
  Date of Tranche A1.

  
	
   

  	
   

  	
   

  
	
  ‘Financial
  Parties’

  	
   

  	
  means
  all the Banks, the Arranger and the Agent.

  
	
   

  	
   

  	
   

  
	
  ‘Financial ratios’

  	
   

  	
  means the following financial ratios :

  
	
   

  	
   

  	
  R2 = Net Financial Debt / Restated EBITDA,

  
	
   

  	
   

  	
  R3 = Free Cash Flow / Debt Service,

  
	
   

  	
   

  	
  R4 = Financial Debt / Shareholders’ Funds.

  
	
   

  	
   

  	
   

  
	
  ‘Free Cash Flow’

  	
   

  	
  means, on the basis of the Borrower’s consolidated accounts :

  
	
   

  	
   

  	
  (a) Restated EBITDA,

  
	
   

  	
   

  	
  (b) Less companies tax payable,

  
	
   

  	
   

  	
  (c) Plus employee profit sharing charges and less employee
  profit-sharing charges disbursed,

  
	
   

  	
   

  	
  (d) Plus (where positive) or less (where negative) exceptional
  cash flows other than those from disposals of assets (exceptional items
  excluding asset sales occasioning a cash inflow or outflow).

  
	
   

  	
   

  	
  (e) Plus (if negative) or less (if positive) the change in
  operating or other working capital required, based on the gross change in the
  relevant items,

  
	
   

  	
   

  	
  (f) Less investment in tangible, intangible and financial fixed
  assets (including own work capitalized and the Acquisition Subsequent
  Payments),

  
	
   

  	
   

  	
  (g) Plus proceeds from the disposal of fixed assets for cash
  except where the sale forms part of an early repayment of the Loan,

  
	
   

  	
   

  	
  (h) Plus the principal value of any medium- and long-term finance
  taken out over the period in question within the permissible limits (for the
  avoidance of doubt, including any funds drawn under Tranche A2, A3 and A4),

  
	
   

  	
   

  	
  (k) Plus new cash inflows to Shareholders’ Funds and less dividends or
  other distributions paid out by the Borrower.

  
	
   

  	
   

  	
   

  
	
  ‘Group’

  	
   

  	
  means the Group formed by the Borrower and its Subsidiaries.

  

 

10

 

Confidential Treatment
Requested

 

	
  ‘Indemnification Claim’

  	
   

  	
  means the indemnification claim granted to the Borrower, for the
  Acquisition.

  
	
   

  	
   

  	
   

  
	
  ‘Interest
  Period’

  	
   

  	
  means
  each Interest Period determined in accordance with Article 6.4 for each
  of the Tranches A1, A2, A3 and A4.

  
	
   

  	
   

  	
   

  
	
  ‘LABORATOIRES EUROSILICONE’

  	
   

  	
  

  means LABORATOIRES EUROSILICONE, a French Société Anonyme
  with capital of 2,000,000 Euros, the registered office of which is at Chemin
  de Peyrolière - 84400 Apt, registered with the Avignon Trade and Companies’
  Register under the number 347 535 296.

  
	
   

  	
   

  	
   

  
	
  ‘Latest
  Drawdown Date’

  	
   

  	
  means
  September 15 2004 for Tranche A1, June 30 2005 for Tranche A2,
  June 30 2006 for Tranche A3, and June 30 2007 for Tranche A4.

  
	
   

  	
   

  	
   

  
	
  ‘Loan’

  	
   

  	
  means
  the loan granted by the Banks to the Borrower, as referred to in
  Article 2.

  
	
   

  	
   

  	
   

  
	
  ‘Majority of the Banks’

  	
   

  	
  means the Banks with cumulated Participations of more than sixty-six
  point sixty-six percent (66.66%) of the total amount of the Loan.

  
	
   

  	
   

  	
   

  
	
  ‘Material Adverse Effect’

  	
   

  	
  means an event or circumstance of combination thereof which is
  materially adverse to (i) the business, financial conditions or
  operations of the Borrower or its Subsidiaries (taken as a whole) and
  (ii) the ability of the Borrower to perform its payment obligations or
  comply with its undertakings under the Agreement.

  
	
   

  	
   

  	
   

  
	
  ‘MEDICOR LTD.’

  	
   

  	
  means MEDICOR Ltd., a corporation governed by the Laws of the State of
  Delaware, the registered office of which is at 4560 S. Decatur Boulevard, Las
  Vegas, Nevada 89103.

  
	
   

  	
   

  	
   

  
	
  ‘Net Financial Cash Expenses’

  	
   

  	
  

  means, on the basis of the Borrower’s consolidated accounts :

  
	
   

  	
   

  	
  (a) Interest and associated charges payable on the whole of the
  Financial Debt, including interest charges arising from the restatement on
  consolidation of finance lease agreements and financial rentals) but
  excluding a proportional share of any capitalized interest payments and
  associated charges,

  
	
   

  	
   

  	
  (b) Plus interest charges payable on bond loans and/or
  shareholder current accounts, excluding any capitalized interest payments and
  associated charges,

  
	
   

  	
   

  	
  (c) Less interest and other similar income (net proceeds on sale
  of investment securities) generated by management of the company’s treasury,

  
	
   

  	
   

  	
  (d) Less net proceeds and plus net charges on rate hedging
  instruments.

  
	
   

  	
   

  	
   

  
	
  ‘Net Financial Debt’

  	
   

  	
  means, on the basis of the Borrower’s consolidated accounts :

  
	
   

  	
   

  	
  (a) Financial Debt,

  
	
   

  	
   

  	
  (b) Less cash, cash equivalents, and investment securities that
  may be used or realized within not more than 30 business days.

  

 

11

 

Confidential Treatment
Requested

 

	
  ‘Participation’

  	
   

  	
  means
  the amount of each Bank’s Participation in the Loan.

  
	
   

  	
   

  	
   

  
	
  ‘Participation Fee’

  	
   

  	
  means the fee payable to the Arranger on the Drawdown Date of Tranche
  A1, and paid by the Arranger to each Bank pro rata to its Participation in
  the Loan.

  
	
   

  	
   

  	
   

  
	
  ‘Receivables’

  	
   

  	
  means
  the two shareholder receivables for a unit amount of * * *, granted
  by MEDICOR Ltd. to the Borrower.

  
	
   

  	
   

  	
   

  
	
  ‘Reference Business Plan’

  	
   

  	
  means the Business Plan
  prepared in USD and according to US GAAP communicated to the Arranger which
  was used as the base for structuring the Loan, as appears in Schedule 1.

  
	
   

  	
   

  	
   

  
	
  ‘Restated EBITDA’

  	
   

  	
  means, on the basis of the Borrowers’ consolidated accounts :

  
	
   

  	
   

  	
  (a) Economic Profit,

  
	
   

  	
   

  	
  (b) Plus allocations (net of writebacks) to operating provisions
  in respect of assets and in respect of provisions for risk and charges,

  
	
   

  	
   

  	
  (c) Plus allocations (net of writebacks) made for depreciation
  and amortization on tangible and intangible assets (including notably
  amortization charges for the restatement on consolidation of finance lease
  agreements and financial rentals),

  
	
   

  	
   

  	
   

  
	
  ‘Schedule, Article, Paragraph’

  	
   

  	
  means a schedule, an,
  article or a paragraph of the Agreement.

  
	
   

  	
   

  	
   

  
	
  ‘Securities’

  	
   

  	
  means
  the Financial Instruments Account Pledge and the delegation of the ‘key man’
  insurance and the guarantees which may be added to it or replace it, by
  mutual agreement between the Borrower and the Banks after the date that the
  Agreement is signed.

  
	
   

  	
   

  	
   

  
	
  ‘Shareholders’
  Loan’

  	
   

  	
  means
  the shareholders’ loan granted by MEDICOR Ltd. to the Borrower of
  * * *.

  
	
   

  	
   

  	
   

  
	
  ‘Shareholder’s Funds’

  	
   

  	
  means, on the basis of the Borrower’s consolidated accounts :

  
	
   

  	
   

  	
  (a) Share capital,

  
	
   

  	
   

  	
  (b) Plus premiums, reserves, profits brought forward and net
  profit for the year,

  
	
   

  	
   

  	
  (c) Plus minority interests,

  
	
   

  	
   

  	
  (d) Plus bonds issued by the Borrower and/or current accounts of
  partners where these are subordinated to the Loan.

  
	
   

  	
   

  	
   

  
	
  ‘Subsidiaries’

  	
   

  	
  means all companies controlled within the meaning of paragraphs I and
  II of Article L 233-3 of the French Commercial Code.

  
	
   

  	
   

  	
   

  
	
  ‘Tax’

  	
   

  	
  means
  any tax, charge, withholding at source, registration or stamp duty or tax or
  parafiscal charge of the same kind.

  
	
   

  	
   

  	
   

  
	
  ‘Tranche(s)’

  	
   

  	
  means tranches A1, A2, A3 and A4 of the Loan, determined in accordance
  with ‘Article 2.

  

 

12

 

Confidential Treatment
Requested

 

	
  ‘Underwriting Fee’

  	
   

  	
  means the fee remunerating BNP PARIBAS’s commitment to pay, firm, 100%
  of the global maximum amount of the Loan.

  
	
   

  	
   

  	
   

  
	
  ‘Working Day’

  	
   

  	
  means any day when an interest rate must be calculated or a payment
  made under the Agreement, and day when the global clearing system known as Automated Real-time  Gross settlement Express
  Transfer System (TARGET) operates.

  

 

1.2                              Principles of construction

 

(A) The
headings of the Articles are for guidance only and will not affect the
construction of this Agreement in any way.

 

(B) Any
definition in the Agreement will have the same meaning, whether it is used in
the singular or the plural.

 

(C) If the Borrower makes any request for any agreement,
authorization, or approval of the Bank(s) under the Agreement, it must send a
written request to the Agent [Centre d’Affaires Entreprises Méditerranée, Z
02478A, 5, boulevard de Dunkerque, Cap Joliette - 13002 Marseille], by recorded
delivery mail with notification of receipt. If the Agent does not reply within
ten (10) Working Days of the receiving the request sent to it, the
Borrower must repeat the request, by recorded delivery mail with notification
of receipt, to the Arranger [BDDF - Financements Structurés, CLD 08B1, 9,
boulevard des Italiens - 75450 Paris Cedex 09]. The Bank’s(s’) agreement,
authorization, or approval will be deemed to have been tacitly given to the
Borrower if it has not received a reply through the Arranger within ten (10) Working
Days of the Arranger receiving the request, including for any event which is
likely to constitute a Event of Default.

 

(D) Unless
otherwise stipulated, the accounting terms used in the Agreement have the
meaning given to them in the Chart of Accounts.

 

(E) The
Schedules form an integral part of the Agreement and have the same legal force
as the other provisions of the Agreement.

 

2                                        PURPOSE

 

Subject to the terms and conditions of this Agreement, and the
performance of the preliminary terms stipulated in Article 3, the Bank(s)
grant(s) the Borrower, which accepts, a Loan of a maximum global amount of * * *.

 

The Loan will be divided into Tranche A1, of * * *, to
partially refinance the Receivables and the Shareholders’ Loan and a Tranche
A2, of a maximum sum of three million (3,000,000) Euros, a Tranche A3, of a
maximum sum of three million (3,000,000) Euros and a Tranche A4, of a maximum
sum of three million (3,000,000) Euros, all three intended to finance the
payment of the Acquisition Subsequent Payments.

 

3                                        CONDITIONS PRECEDENT

 

The
Bank’s(s’) obligations under the Agreement will only take effect on the date
that all of the conditions precedent referred to below are performed, or, if
necessary, on the date the conditions precedent are expressly waived by the
Bank(s).

 

13

 

Confidential Treatment
Requested

 

3.1                              Conditions precedent specific to
Tranche A1

 

3.1.1                    Delivery of documents

 

	
  (1)

  	
  A copy of the Borrower’s
  updated statuts, certified to be a true copy
  by its legal representative ;

  
	
   

  	
   

  
	
  (2)

  	
  A copy of the updated statuts of LABORATOIRES EUROSILICONE, certified to be a
  true copy by its legal representative ;

  
	
   

  	
   

  
	
  (3)

  	
  An original copy of the
  Borrower’s and the LABORATOIRES EUROSILICONE’s, k-bis (business register
  extract) from the relevant Trade and Companies’ Register, dated less than
  three months ;

  
	
   

  	
   

  
	
  (4)

  	
  If necessary, a copy of the
  partners and /or shareholders agreements binding the Borrower’s and
  LABORATOIRES EUROSILICONE’s partners and /or shareholders ;

  
	
   

  	
   

  
	
  (5)

  	
  A copy of the minutes of the
  decisions of the Borrower’s competent corporate bodies, certified by the
  Borrower’s legal representative :

  
	
   

  	
  (i) Authorizing the
  entry into to the Loan, and certifying that the repayment of the Loan is not
  contractually subordinated to the prior repayment of any other debt,

  
	
   

  	
  (ii) the constitution
  of the Securities,

  
	
   

  	
  (iii) the signature of
  the Contractual Documents ;

  
	
   

  	
   

  
	
  (6)

  	
  If LABORATOIRES EUROSILICONE’s
  statuts include an approval clause (clause d’agrément), a copy, certified to conform by
  LABORATOIRES EUROSILICONE’s legal representative, of the minutes of the
  decision of LABORATOIRES EUROSILICONE’s competent corporate bodies
  authorizing the constitution of the Financial Instruments Account Pledge, and
  approving the Agent, on behalf of the Banks, or any other purchaser of the
  pledged shares as a new shareholder if the Financial Instrument Account
  Pledge is enforced ;

  
	
   

  	
   

  
	
  (7)

  	
  A copy, certified to be a
  true copy by LABORATOIRES EUROSILICONE’s legal representative, of
  LABORATOIRES EUROSILICONE’s certified company accounts for the fiscal year
  closing December 31 2003, as well as the Statutory Auditors report
  relating to it ;

  
	
   

  	
   

  
	
  (8)

  	
  A list, certified to be
  correct by LABORATOIRES EUROSILICONE’s legal representative, of LABORATOIRES
  EUROSILICONE’s off balance sheet new commitments made during the period from December 31
  2003 to the Drawdown Date of Tranche A1 ;

  
	
   

  	
   

  
	
  (9)

  	
  A recapitulative list, drawn
  up to the Drawdown Date of Tranche A1 and certified to be correct by LABORATOIRES
  EUROSILICONE’s legal representative, of the short, medium and long term bank
  debts (including any capital lease agreement) set up for LABORATOIRES
  EUROSILICONE, detailing the outstanding amount for the medium and long term
  bank debts, and the amount of the authorizations and the utilizations with
  each bank concerned, for the short term bank debt and including any
  operations concerning the transfer and /or the assignment of all or part of
  LABORATOIRES EUROSILICONE’s customer receivables ;

  
	
   

  	
   

  
	
  (10)

  	
  A copy, certified to be a
  true copy by the Borrower’s legal representative, of the due diligence
  reports relating to the Acquisition ;

  
	
   

  	
   

  
	
  (11)

  	
  The list of the Borrower’s
  shareholders certified to be correct by its legal representative, showing
  that MEDICOR Ltd. directly or indirectly controls 100% of the Borrower’s
  capital and voting rights ;

  
	
   

  	
   

  
	
  (12)

  	
  A copy, certified to be a
  true copy by the Borrower’s legal representative, of an amendment to the
  agreement for the Shareholder’s Loan, concluded between MEDICOR Ltd. and the
  Borrower, stipulating :

  

 

14

 

Confidential Treatment
Requested

 

	
   

  	
  • the partial
  repayment of up to * * * of the Shareholder’s Loan, with the
  Drawdown of Tranche A1 of the Loan,

  
	
   

  	
  • the partial
  repayment of a minimum amount of * * *, of the Shareholder’s Loan,
  simultaneously with the performance of a capital increase for the Borrower,
  which must occur between now and October 11, 2004, the said partial
  repayment being equal to the amount of the capital increase,

  
	
   

  	
  • the
  subordination of the repayment of the balance of the Shareholder’s Loan prior
  to the complete repayment of the Loan,

  
	
   

  	
  • the
  capitalization of the interest relating to the Shareholders’ Loan ;

  
	
   

  	
   

  
	
  (13)

  	
  A copy, certified to be a true copy by the Borrower’s legal
  representative, of the contract(s) relating to the Shareholders’ Loan ;

  
	
   

  	
   

  
	
  (14)

  	
  A certificate by the Borrower’s representative certifying that the
  Receivables have been repaid simultaneously with the Drawdown of Tranche A1 ;

  
	
   

  	
   

  
	
  (15)

  	
  A copy, certified to be a true copy by the Borrower’s representative,
  of the contract relating to the Acquisition stipulating  :

  
	
   

  	
  • an Acquisition
  Price of a maximum amount of 41,000,000 Euros, including a maximum of
  9,000,000 Euros Acquisition Subsequent Payments,

  
	
   

  	
  • the terms and
  conditions for paying the said Acquisition Subsequent Payments,
  * * * ;

  
	
   

  	
   

  
	
  (16)

  	
  A copy, certified to be a true copy by the Borrower’s legal
  representative, of the transfer order(s) relating to the Acquisition ;

  
	
   

  	
   

  
	
  (17)

  	
  The list of the Borrower’s subsidiaries, certified to be correct by
  the Borrower’s representative, showing the percentages of holding capital and
  the voting rights ;

  
	
   

  	
   

  
	
  (18)

  	
  A list, certified to be correct by the Borrower’s representative of
  all collateral and third-party guarantees granted by the Borrower including
  the maximum pledge of 33.33% of LABORATOIRES EUROSILICONE’s share capital in
  favor of the sellers of the shares of LABORATOIRES EUROSILICONE to the
  Borrower, to guarantee the payment of the Acquisition Subsequent
  Payments ;

  

 

15

 

Confidential Treatment
Requested

 

	
  (19)

  	
  A list, certified to be correct by LABORATOIRES EUROSILICONE’s legal
  representative of all collateral and third-party guarantees granted by
  LABORATOIRES EUROSILICONE, that LABORATOIRES EUROSILICONE’s business
  undertaking  (fonds de
  commerce) has not been pledged, or a certificate from LABORATOIRES
  EUROSILICONE’s legal representative certifying the absence of securities and
  guarantees granted by LABORATOIRES EUROSILICONE ;

  
	
   

  	
   

  
	
  (20)

  	
  A list, signed by the Borrower’s legal representative, of the persons
  authorized to sign the Contractual Documents and to give opinions, or
  instructions to the Agent in relation to the Contractual Documents as well as
  the specimen signatures of the said persons.

  

 

3.1.2                    Other conditions

 

	
  (1)

  	
  The simultaneous constitution of the Financial Instruments Account
  Pledge over 66.65% of the shares comprising LABORATOIRES EUROSILICONE’s share
  capital, on behalf of the Banks in the Agent’s favor;

  
	
   

  	
   

  
	
  (2)

  	
  No Event of Default has occurred or will occur due to signing the
  Agreement and /or making the funds for Tranche A1 available;

  
	
   

  	
   

  
	
  (3)

  	
  Payment of the Agent Fee, the Arrangement Fee, the Underwriting Fee as
  well as the Participation Fee.

  

 

3.2                              Conditions precedent specific to
Tranche A2

 

	
  (1)

  	
  Drawdown of Tranche A1 ;

  
	
   

  	
   

  
	
  (2)

  	
  Delivery of any document, duly signed by the Borrower’s legal
  representative, to certify the amount of the Acquisition Subsequent Payment
  1 ;

  
	
   

  	
   

  
	
  (3)

  	
  Delivery of any document to certify the Borrower’s payment of the said
  Acquisition Subsequent Payment 1 ;

  
	
   

  	
   

  
	
  (4)

  	
  Delivery of a copy of the Borrower’s release of the pledge over 11.11%
  of the shares comprising LABORATOIRES EUROSILICONE’s capital to the sellers of the shares of
  LABORATOIRES EUROSILICONE to the Borrower ;

  
	
   

  	
   

  
	
  (5)

  	
  Pledge to the Agent, on behalf of the Banks, of an additional 11.11%
  of the shares comprising LABORATOIRES EUROSILICONE’s share capital increasing
  the percentage of LABORATOIRES EUROSILICONE’s shares pledged to the Agent, on
  behalf of the Banks, to 77.76% of the shares comprising LABORATOIRES
  EUROSILICONE’s share capital ;

  
	
   

  	
   

  
	
  (6)

  	
  No Event of Default has occurred or will occur due to signing the
  Agreement and /or making the funds for Tranche A2 available.

  

 

3.3                              Conditions precedent specific to
Tranche A3

 

	
  (1)

  	
  Drawdown of Tranche A1 ;

  
	
   

  	
   

  
	
  (2)

  	
  Delivery of any document, duly signed by the Borrower’s legal
  representative, to certify the amount of the Acquisition Subsequent Payment
  2 ;

  
	
   

  	
   

  
	
  (3)

  	
  Delivery of any document to certify the Borrower’s payment of the said
  Acquisition Subsequent Payment 2 ;

  
	
   

  	
   

  
	
  (4)

  	
  Delivery of a copy of the Borrower’s release of the pledge over 11.11%
  of the shares comprising LABORATOIRES EUROSILICONE’s capital to the sellers of the shares of
  LABORATOIRES EUROSILICONE to the Borrower;

  

 

16

 

Confidential Treatment Requested

 

	
  (5)

  	
  Pledge to the Agent, on behalf of the Banks, of an additional 11.11%
  of the shares comprising LABORATOIRES EUROSILICONE’s share capital increasing
  the percentage of LABORATOIRES EUROSILICONE’s shares pledged to the Agent, on
  behalf of the Banks, to 88.87% of the shares comprising LABORATOIRES
  EUROSILICONE’s share capital ;

  
	
   

  	
   

  
	
  (6)

  	
  No Event of Default has occurred or will occur due to signing the
  Agreement and /or making the funds for Tranche A3 available.

  

 

3.4                              Conditions precedent specific to
Tranche A4

 

	
  (1)

  	
  Drawdown of Tranche A1 ;

  
	
   

  	
   

  
	
  (2)

  	
  Delivery of any document, duly signed by the Borrower’s legal
  representative, to certify the amount of the Acquisition Subsequent Payment
  3 ;

  
	
   

  	
   

  
	
  (3)

  	
  Delivery of any document to certify the Borrower’s payment of the said
  Acquisition Subsequent Payment 3 ;

  
	
   

  	
   

  
	
  (4)

  	
  Delivery of a copy of the Borrower’s release of the pledge over11.11%
  of the shares comprising LABORATOIRES EUROSILICONE’s capital to the sellers of the shares of
  LABORATOIRES EUROSILICONE to the Borrower;

  
	
   

  	
   

  
	
  (5)

  	
  Pledge to the Agent, on behalf of the Banks, of an additional 11.11%
  of the shares comprising LABORATOIRES EUROSILICONE’s share capital increasing
  the percentage of LABORATOIRES EUROSILICONE’s shares pledged to the Agent, on
  behalf of the Banks, to 99.98% of the shares comprising LABORATOIRES
  EUROSILICONE’s share capital ;

  
	
   

  	
   

  
	
  (6)

  	
  No Event of Default has occurred or will occur due to signing the
  Agreement and /or making the funds for Tranche A4 available.

  

 

4                                        UTILIZING THE LOAN

 

4.1                              Purpose of the Loan

 

(A) The Borrower will use the Loan in accordance with its purpose
to firstly partly refinance the Shareholders’ Loan and the Receivables and
secondly to finance the payment of the Acquisition Subsequent Payments.

 

(B) The
Borrower is prohibited from using the Loan for any other purpose.

 

4.2                              Term and conditions of Drawdown

 

Subject
to the fulfillment of the conditions precedent referred to in Article 3,
each of the Tranche A1, A2, A3 and A4 will be made available to the Borrower in
one payment which must occur no later than the Latest Drawdown Date for the
Tranche in question for an amount of respectively:

 

•                  * * *, for Tranche A1,

•                  the amount of Acquisition Subsequent Payment 1
up to a maximum of 3,000,000 Euros for Tranche A2,

•                  the amount of Acquisition Subsequent Payment 2
up to a maximum of 3,000,000 Euros for Tranche A3,

•                  the amount of Acquisition Subsequent Payment 3
up to a maximum of 3,000,000 Euros for Tranche A4.

 

17

 

Confidential Treatment
Requested

 

It
is expressly agreed that, the Borrower may, if it gives the Agent five (5) Working
Days irrevocable written notice cancel, at any time, the whole or any part of
Tranches A2 and/or A3 and/or A4.

 

4.3                              Drawdown Requests

 

The Borrower will use the Loan by delivering to the Agent Drawdown
Requests: the first for Tranche A1, the second for Tranche A2, the third for
Tranche A3 and the fourth for Tranche A4.

 

4.4                              Paying the Loan

 

Subject to the stipulation of Article 3, after receiving each
Drawdown Request the Agent will credit the amount stipulated in the said
Drawdown Request on the Drawdown Date appearing in it to the Borrower Bank
Account opened in BNP PARIBAS books under the following references:

 

Bank Code: * * *

Branch Code : * * *

Account
number : * * *

RIB
Key : * * *

 

Each
Bank will when requested by the Agent, credit the amount of this Participation
on the correct value date by interbank transfer to the Agent’s account. The
references of this account will be previously communicated to it by the Agent.

 

5                                        REPAYMENT

 

5.1                              Terms and Conditions of repayment

 

5.1.1                    Repayment of Tranche A1

 

Tranche A1 of the Loan will be repayable in seven (7) consecutive
installments, in accordance with the following repayment rate and schedule:

 

Installment of September 15 2005: * * *,

Installment of September 15 2006: * * *,

Installment of September 15 2007: * * *,

Installment of September 15 2008: * * *,

Installment of September 15 2009: * * *,

Installment of September 15 2010: * * *,

Installment of September 15 2011: * * *.

 

5.1.2                    Repayment of Tranche A2

 

Tranche A2 of the Loan will be repayable in six (6) consecutive
installments, in accordance with the following repayment rate and schedule:

 

Installment of September 15 2006: * * *,

Installment of September 15 2007: * * *,

Installment of September 15 2008: * * *,

Installment of September 15 2009: * * *,

Installment of September 15 2010: * * *,

Installment of September 15 2011: * * *.

 

18

 

Confidential Treatment
Requested

 

5.1.3                    Repayment of Tranche A3

 

Tranche A3 of the Loan will be repayable in five (5) consecutive
installments, in accordance with the following repayment rate and schedule:

 

Installment of September 15 2007: * * *,

Installment of September 15 2008: * * *,

Installment of September 15 2009: * * *,

Installment of September 15 2010: * * *,

Installment of September 15 2011: * * *.

 

5.1.4                    Repayment of Tranche A4

 

Tranche A4 of the Loan will be repayable in four (4) consecutive
installments, in accordance with the following repayment rate and schedule:

 

Installment of September 15 2008: * * *,

Installment of September 15 2009: * * *,

Installment of September 15 2010: * * *,

Installment of September 15 2011: * * *.

 

5.2                              Voluntary prepayment

 

(A) The
Borrower will be entitled to prepay all or part of the Loan without a penalty
on an Interest Payment Date provided that it sends the Agent thirty (30)
calendar days irrevocable written notice of this.

 

(B) The
amount of each partial prepayment cannot be below a minimum amount of * * *and
above this, in multiples of * * *.

 

(C) If
the Loan is refinanced by a bank other than one of the Banks by way of a
banking debt (dette bancaire) granted at the
level of the Borrower, the prepayments will result in the payment of a single
penalty, provided that such penalty may not be requested by the Banks if the
prepayment results from Clause 7.1 (E), 9.1 (D), 9.1 (E), 9.2 (B) or is
otherwise permitted hereunder. This penalty will be equal to * * * of
the amount repaid, if the repayments are made within three (3) years of
the date the Agreement is signed and * * * of the amounts repaid if
the repayment occurs more than three years after the date that the Agreement is
signed.

 

(D) Any
sum, which the Borrower prepays, will be applied to reduce the outstanding
installment of Tranches A1 and/or A2 and/or A3 and/or A4, in order of decreasing
maturity, pro rata to the outstanding amount for each Tranche compared to the
total amount outstanding on the Loan.

 

5.3                              Mandatory prepayment

 

The Borrower must prepay all or part of Tranches A1 and/or A2 and/or A3
and/or A4 of the Loan in the cases and under the terms and conditions
stipulated in (1) and (2) below. It is specified that the amount of
the sales of assets and the Excess Cash-Flow will be assessed on the basis of
the Borrower’s consolidated accounts closed on June 30 of each fiscal year
(“the Fiscal Year of Reference”).

 

The repayment will be applied to reduce the outstanding installments in
order of decreasing maturity of Tranches A1 and/or A2 and/or A3 and/or A4, pro
rata to the outstanding amount of each of the Tranches compared to the total
amount outstanding on the Loan.

 

19

 

Confidential Treatment
Requested

 

(1)                                 Excess Cash Flow:

 

On December 15 of the fiscal year following each Fiscal Year of
Reference and for the first time on December 15 2005, on the basis of its
consolidated accounts closed on June 30 2005, the Borrower must annually
repay, the sum set out below.

 

* * * of the portion of Excess Cash
Flow exceeding * * * and below * * *

 

it is specified for the avoidance of doubt that no mandatory prepayment
will be made on the amount of Excess Cash Flow exceeding * * *.

 

(2)                                 Sale of assets:

 

The Borrower must pay annually an amount equal to the proceeds of the
sale of the Borrower’s and its subsidiaries’ fixed assets, net of all tax,
duties and expenses connected to the sales, calculated on the basis of its
consolidated accounts closed on June 30 of the Fiscal Year of Reference,
on December 15 of the fiscal year following each Fiscal Year of Reference,
for the first time on December 15 2005, on the basis of its consolidated
accounts closed on June 30 2005, after deduction, where applicable, of any
amounts reinvested no later than one hundred fifty (150) calendar days after
the end of the Fiscal Year of Reference (being specified that the reinvestment
can only be charged against the sale of assets from a single Fiscal Year of
Reference). An allowance of * * * per year will be applied.

 

6                                        INTEREST

 

6.1                              Interest rate

 

The
interest rate for each of Tranches A1, A2, A3 and A4 of the Loan for any
interest period, determined under Article 6.4, is equal to the annual rate
resulting from the sum of the margin and the reference index for the said
interest period.

 

6.2                              Reference Index

 

6
months EURIBOR.

 

6.3                              Applicable Margin

 

The
margin applicable to Tranches A1, A2, A3 and A4, initially calculated at the
rate of of two point twenty five (2,25)%% per year will be revised yearly
upwards or downwards on sight of the Financial Ratios certificate referred to
in Article 13, based on the Borrower’s annual certified consolidated
accounts.

 

The
margin applicable to Tranches A1, A2, A3 and A4 will be reduced as follows if
no Event of Default has occurred and is continuing and if the two conditions
concerning financial ratios below are simultaneously met.

 

20

 

Confidential Treatment Requested

 

	
  Margin
  revised to:

  	
   

  	
  R2 below or

  equal to:

  	
   

  	
  R3 higher or equal

  to:

  
	
  * * *% a year

  	
   

  	
  * * *

  	
   

  	
  * * *

  
	
  * * *% a year

  	
   

  	
  * * *

  	
   

  	
  * * *

  
	
  * * *% a year

  	
   

  	
  * * *

  	
   

  	
  * * *

  

 

The
margin applicable to each of Tranches A1, A2, A3 and A4 will be revised upwards
once the above conditions relating to any one of the applicable margin level
are no longer satisfied and revised downwards again as soon as the above
conditions are again simultaneously satisfied, if no Event of Default has
occurred and is continuing.

 

Any
adjustment of the margin will apply to the Interest Period which immediately
follows the period during which the Financial Ratios certificate was delivered
to the Agent. If one (or several) Events of Default occur after a reduction of
margin, the applicable margin will be immediately increased to its initial
value of two point twenty five (2.25)% a year. If the said (or all the said)
Event(s) of Default are regularized the applicable margin will be lowered for
the regularized Interest Period to the last value which applied before the
Event(s) of Default occurred.

 

The
margin will be adjusted to any relevant level depending on the fulfillment of
the corresponding ratios.

 

6.4                              Interest Periods

 

(A) Tranches
A1, A2, A3 and A4 will be divided into Interest Periods to calculate the
interest.

 

(B) The
first Interest Period for Tranche A1 will start on the Drawdown Date of Tranche
A1 and will expire on March 15 2005. Subsequent Interest Periods for Tranche
A1 will have duration of six (6) months.

 

(C) The
first Interest Period for Tranche A2 will run from the Drawdown Date of Tranche
A2 to September 15 2005. Subsequent Interest Periods for Tranche A2 will
have duration of six (6) months.

 

(D) The
first Interest Period for Tranche A3 will run from the Drawdown Date of Tranche
A3 to September 15 2006. Subsequent Interest Periods for Tranche A3 will
have duration of six (6) months.

 

(E) The
first Interest Period for Tranche A4 will run from the Drawdown Date of Tranche
A4 to September 15 2007. Subsequent Interest Periods for Tranche A4 will
have duration of six (6) months.

 

(F) Any
interest Period that finishes on a day, which is not a Working Day, will be
deemed on the next Working Day.

 

6.5                              Calculation Rule

 

The
interest, fees and other amounts drawn up annually, payable under the Agreement
will be calculated on the actual number of calendar days in the period in
question on the basis of three hundred and sixty (360) days.

 

21

 

Confidential Treatment
Requested

 

The
interest on each Loan Tranche will calculated using the following formula:

 

I = E * (Reference Index + Margin) * J / 360

 

Formula in which:

I = Amount of interest for the Interest Period in
question,

E = Outstanding amount for the Tranche concerned (A1
or A2 or A3 or A4),

J = Actual Number of days in the period in question.

 

6.6                              Payment of interest

 

The
Borrower will pay the Agent the interest on each of the Tranches of the Loan on
the last day of each Interest Period, on behalf of the Banks.

 

6.7                              Notification of the interest rate

 

The
Agent will inform the Borrower and the Banks of the interest rates applicable
to each Interest Period, as soon as possible and 120 calendar days before the
end of the Interest Period at the latest.

 

6.8                              Late Interest

 

(A) If
any sum whatsoever which is owed under the Agreement is not paid on its due
date, the Borrower will pay the Agent late interest calculated on the unpaid
sum from the due date concerned up until the date of actual payment (whether
this is before or after the pronouncement of a judgment) at the EONIA rate
increased by the applicable margin if the delay of payment involves interest
plus * * *.

 

(B) Any
late interest will be immediately payable by the Borrower, on the Agent’s
request. If it remains unpaid the late interest will be capitalized in every
way authorized by law but will remain immediately due and payable.

 

(C) This
late interest clause cannot adversely affect any payment, which has become due
and consequently, is not a valid agreement for time to pay or a waiver by the
Bank(s) of any right under the Agreement

 

7                                        CHANGES TO THE INTEREST
CALCULATION

 

7.1                              Market disruption

 

(A) If
the Agent establishes after consultation with the Banks of Reference that due
to circumstances affecting the Euro Zone interbank market, it is not possible
to fix the 6 months EURIBOR for a given interest period in accordance with the
provisions of this Agreement, (this decision consequently binding the Borrower
and the Banks), the Agent will immediately inform the Borrower of this.

 

(B) If
the Agent sends the Borrower a notice in accordance with Paragraph 7.1 (A), it
will proceed as follows:

 

(1) The Agent, acting on behalf of the Banks, and
the Borrower will immediately negotiate for a period not exceeding one hundred
twenty (120) calendar days to agree a basis for replacing the 6 months EURIBOR
for calculating the interest rate applicable to Tranches A1 and/or A2 and/or A3
and/or A4;

 

22

 

Confidential Treatment
Requested

 

(2) Any substitution base agreed between the
Agent and the Borrower will be added to the applicable margin and will take
effect immediately for the period during which the Euro zone interbank market
is disrupted.

 

(C) If
the Agent and the Borrower do not succeed in agreeing on a substitution base
under Paragraph 7.1 (B), the Bank (or each Bank) will fix a substitution rate
to maintain its Participation five (5) Working Days at the latest before
the end of Interest Period in question, and this substitution base must reflect
the costs of its refinancing. The said Bank will immediately inform the
Borrower and, if necessary, the Agent of this by recorded delivery mail,
supplying them with the substitution reference index.

 

(D) Each
substitution base, which is fixed, will bind the Borrower and the Bank in
question for the time that the Euro zone interbank market is disrupted.

 

(E) If
the Borrower does not agree to the replacement base set by the Bank (or each
Bank) in accordance with Paragraph 7.1 (C), the Borrower can repay all the
amounts owed to the Bank(s) under the Agreement in principal, late interest,
fees, costs and incidental expenses, provided that it gives fifteen (15)
calendar days written notice. The interest rate applicable to Tranches A1
and/or A2 and/or A3 and/or A4 during the period that the Euro zone Interbank
market is disrupted will be calculated in all cases on the basis of the
replacement index fixed by the Bank (or each Bank) as stipulated in Article 7.1
(C). This repayment will not give rise to the payment of any penalty, including
if the Loan is refinanced by banks which are not Banks.

 

7.2                              Lack of a quotation by a Bank of
Reference

 

Subject
to the provisions of Article 7.1, if the 6 months EURIBOR which must be
fixed by the Banks of Reference and a Bank of Reference cannot give a
quotation, the six months EURIBOR will be determined by the Bank of Reference
(or the Banks of Reference) which are able to make a quotation.

 

8                                        FEES

 

The
Borrower will pay the following fees under the Loan:

 

8.1                              Agent
Fee

 

The
Agent Fee, covering the normal management of the Contractual Documents
excluding exception circumstances will be payable by the Borrower to the Agent,
for the first time on the Drawdown Date of Tranche A1, and then, annually on
each anniversary date. The amount of this fee is the subject of a separate
agreement between the Borrower and the Agent.

 

8.2                              Arrangement Fee

 

The Arrangement Fee will be payable by the Borrower to the Arranger on
the date that the Agreement is signed. The amount of this fee is subject to a
separate agreement between the Borrower and the Arranger.

 

23

 

Confidential Treatment
Requested

 

8.3                              Underwriting Fee

 

The Borrower will pay the Arranger the Underwriting
Fee on the Drawdown Date of Tranche A1. The amount of this fee is subject to a
separate agreement between the Borrower and the Arranger.

 

8.4                              Commitment Fee for Tranche A2

 

The Commitment Fee for Tranche A2, calculated at the
rate of * * *% a year on the maximum amount of Tranche A2, will be
payable quarterly in advance to the Agent from the date that the Agreement is
signed to the Drawdown Date of Tranche A2 (or up until the date that the
Borrower fully surrenders its rights to draw down the Tranche A2). The Agent
will pay each Bank its share in pro rata to its Participation.

 

8.5                              Commitment Fee for Tranche A3

 

The Commitment Fee for Tranche A3, calculated at the
rate of * * *% a year on the maximum amount of Tranche A3, will be
payable quarterly in advance to the Agent from the date that the Agreement is
signed to the Drawdown Date of Tranche A3 (or up until the date that the
Borrower fully surrenders its rights to draw down the Tranche A3). The Agent
will pay each Bank its share in pro rata to its Participation.

 

8.6                              Commitment Fee for Tranche A4

 

The Commitment Fee for Tranche A4, calculated at the
rate of * * *% a year on the maximum amount of Tranche A4, will be
payable quarterly in advance to the Agent from the date that the Agreement is
signed to the Drawdown Date of Tranche A4 (or up until the date that the
Borrower fully surrenders its rights to draw down the Tranche A4). The Agent
will pay each Bank its share in pro rata to its Participation.

 

8.7                              Participation Fee

 

The Participation Fee will be payable by the Borrower to the Arranger on
the Drawdown Date of Tranche A1. The Arranger will pay part of this fee to each
Bank, pro rata to its Participation. The amount of this fee is the subject of a
separate agreement between the Borrower and the Arranger.

 

9                                        SUPPLEMENTARY PAYMENT OBLIGATIONS

 

9.1                              Additional costs

 

(A) The
Borrower acknowledges that the terms and conditions of the Agreement have been
determined in accordance with the legal and tax data on the date that the Agreement
is signed. Consequently, if the Bank(s) was (were) legally subject to a tax
(other than income tax and additional contributions) or regulatory, or
prudential measure or any other measure resulting in a significant increase in
the cost of their interests or their obligations under the Loan, following a
new legislative or regulatory provisions another administrative measure, or any
new construction of a legislative or regulatory provision by any competent
authority, of an obligatory nature, or any other measure of an obligatory
nature which has the effect of significantly reducing the net revenue from its
(their) Participation (this increase in cost or any other reduction in revenue,
net of any positive tax impact for the Bank(s) is called ‘the Supplementary
Cost’) the Borrower undertakes, if requested by the Agent acting on behalf of
the Banks, to firstly pay the whole of the Supplementary Costs which the
Bank(s) will have to support, providing that, the Borrower is provided with of
the documents and elements

 

24

 

Confidential Treatment
Requested

 

enabling
it to differentiate and to quantify the said Supplementary Cost, and secondly,
the provisions of Paragraphs (B), (C), (D) and (E) below.

 

(B) It
is expressly agreed that any reasonably foreseeable change in the legislation
on the date of the signature of the Agreement, and any impact of the decision
of the Basle Committee II, as described in the publications of Bale Committee
II before the date that the Agreement is signed, will not give rise to the
application of the provisions of Paragraph (A) above.

 

(C) The
Agent will immediately inform the Borrower in writing of any event which to its
knowledge, would permit the Bank(s) to benefit from the provisions of Paragraph
9.1 (A) and will endeavor to exempt the Borrower from paying such a
Supplementary Cost, in particular by transferring the Bank’s(s’) rights and
obligations under this Agreement to one or more of its (their) branches and to
other banks which may not be affected by this event.

 

(D) If
the Agent requests the Borrower to pay a Supplementary Cost under Paragraph 9.1
(A), after the Agent has informed it that it is impossible to exempt it from
this payment, the Borrower can repay the whole amount owed to the Bank(s) under
the Agreement, in principal, interest, late interest, fee, costs and incidental
expenses, to the exclusion of the Supplementary Cost. No penalty will be
applied to this type of prepayment, including if the Loan is refinanced by third
party banks.

 

(E) If
the Borrower agrees to pay a Supplementary Cost, the Agent and the Borrower
will meet as quickly as possible to decide whether it is necessary to take this
Supplementary Cost into account when calculating the Financial ratios. If an agreement
is not reached, the Borrower can revoke on its agreement to pay the
Supplementary Cost and pay all the sums owed to the Bank(s) under the
Agreement, in principal, late interest, fee, costs and incidental expenses. No
penalty will be applied to this type of prepayment, including if the Loan is
refinanced by third party banks.

 

(F) If the Borrower pays a sum on dates other than those which are
stipulated in the Agreement, apart from cases of voluntary or mandatory
prepayment of the Loan under Articles 5.2, 5.3, 7.1 (E), 9.1
(D), 9.1 (E) and 9.2 (B), the Borrower will indemnify the Agent the
resulting rollover losses, on behalf of the Banks, on ordinary request from it,
providing that it is provided with all documents or elements enabling it to
distinguish and to quantify the said rollover losses.

 

9.2                              Illegality

 

(A) If
the Bank(s) is (are) prevented from maintaining or performing its (their)
obligations stipulated in the Agreement for all or part of the Loan, by a new
legislative or regulatory provision, the Agent will endeavor to find a solution
which is acceptable to all of the parties to continue the Loan. If an agreement
cannot be reached, the Bank(s) will endeavor to transfer the rights and
obligations under the Agreement to other Banks which are not affected by this
new provision.

 

(B) If
it transpires that this transfer is impossible, or results in significant costs
for the Bank(s) (unless these costs are paid for by the Borrower), and if the
Bank(s) was (were) obliged to demand the prepayment of all or part of the Loan
under the above provisions, the Borrower will reimburse and pay the Bank(s) the
whole of the amounts owed to it (them) under the Agreement, in principal,
interest, late interest, fee, costs and incidental expenses by giving thirty
(30) Working Days notice (unless a legislative or regulatory provision
stipulates another period) sent to the Agent by recorded delivery mail with
notification of receipt. This repayment will not result in the payment of any
penalty, including if the Loan is refinanced by third party banks.

 

25

 

Confidential Treatment
Requested

 

9.3                              Costs of execution

 

If
the Borrower does not reimburse or pay any sum owed under the Agreement on its
due date, all the costs and expenses which are reasonably incurred by the Agent
(including the reasonable fees and disbursements of its advisers) connected
with performing the Agreement or the exercise of the Bank’s(s’) rights under
the Agreement will be paid for exclusively by the Borrower, providing that the
Agent supplies all of the substantiating documents relating to this, unless the
failure to repay and/or payment is the result of a breach which is non
exclusively attributable to the Borrower.

 

10                                 REPRESENTATIONS AND WARRANTIES

 

10.1                       Subject to the provisions of Article 10.2, the Borrower makes the
following representations and warranties to the Bank(s) :

 

(A)       The Borrower is a société par actions
simplifiée validly incorporated and registered ;

 

(B)         The Borrower has the legal capacity to conclude and perform its
obligations under each of the Contractual Documents to which it is a party. The
corporate bodies have authorized the execution of each of the Contractual
Documents to which the Borrower is a party. The obligations arising  from the Contractual Documents to which the
Borrower is a party are binding, and shall be performed in accordance with
their terms;

 

(C)         The signature of the Contractual Documents to which the Borrower is a
party and the performance by the Borrower of the obligations resulting from it
do not infringe any legal provision or by-law applicable to the Borrower, nor
any contract or agreement to which the Borrower or its Subsidiaries are
parties, or by which they are bound, nor any law, nor any regulation binding on
them, the breach or the non-respect of which would be likely to affect the
validity of the Contractual Documents ;

 

(D)        The Borrower has provided the Agent with all the material contractual
documents relating to the Acquisition ;

 

(E)          The Borrower and its Subsidiaries will not breach any of their legal
obligations, the non-respect of which would have a material effect on the
Borrower’s capacity to perform its obligations under the Agreement ;

 

(F)          No Material
Adverse Effect affecting the Borrower or its subsidiaries has occurred since
the latest audited financial statements were published ;

 

(G)         There is no judicial, administrative or arbitration litigation
proceedings either in progress, or imminent, (in this last case, after the
Borrower has received a first written notification) which the Borrower or its
Subsidiaries could be a party to, and which to the Borrower’s knowledge, could
affect the Borrower’s capacity to meet its obligations under the
Agreement ;

 

(H)        There are no collateral or third-party guarantees securities existing
over the assets of the Borrower and its Subsidiaries other than those granted
authorized or declared within the framework of the Agreement ;

 

26

 

Confidential Treatment Requested

 

(I)               The Borrower and /or its Subsidiaries do not
have any off balance sheet commitments, other than these, on the Drawdown Date
of Tranche A1 concerning LABORATOIRES EUROSILICONE as appear in its certified
company accounts for the fiscal year closed on December 31 2003, as well
as the schedule referred to in Article 3.1 (8), and secondly, on the
date of the close of each fiscal year, other than those appearing in the
Borrower’s certified consolidated accounts for the said fiscal year ;

 

(J)              The Borrower and its Subsidiaries have
subscribed to all of the damage and civil liability policies to cover the risks
which are generally required in their business sector ;

 

(K)          The obligations made by the Borrower to the
Bank(s) under the Agreement are not subordinated to any undertaking made by it
to other banks and/or lenders;

 

(L)            None of the companies in the Group has
suspended its payments, nor been the subject of voluntary winding up
proceedings, or bankruptcy proceedings ;

 

(M)        None of the companies in the Group has been the subject of restructuring
measures which could affect the Borrower’s ability to satisfy its obligations
under the Agreement ;

 

(N)           No Event of Default has occurred and is continuing.

 

10.2                       Subject to the information which is expressly contained
in the due diligence reports and /or in the Indemnification Claim, relating to
the Acquisition, as disclosed to the Agent, and subject to the operations,
which although making one of the above representations incorrect may have been
previously authorized by the Agent under the Agreement, acting on behalf of the
Banks, the above declarations will be deemed to be correct until the Borrower
has paid all sums owed under the loan in full, in principal, interest, late
interest, fee, costs and incidental expenses. The Borrower shall inform the
Agent of the occurrence of an event calling the accuracy of, these
representation into question, as soon as its is aware of the occurrence of a
such an event.

 

11                                 SECURITIES

 

11.1                       Financial Instrument Account
Pledge

 

The Borrower will constitute the Financial Instrument Account Pledge
over 66.65% of the shares comprising LABORATOIRES EUROSILICONE’s share capital
(all the shares owned by the Borrower less the shares pledged in favor of the sellers
of the shares of LABORATOIRES EUROSILICONE to the Borrower less 6 shares),
in the Agent’s favor, on behalf of the Banks, simultaneously with the Drawdown
of Tranche A1.

 

It is expressly agreed that the Borrower will pledge an additional
11.11% of the shares comprising LABORATOIRES EUROSILICONE’s share capital to
the Agent, on behalf of the Banks, when each of the Tranches A2, A3, and A4 is
drawn down.

 

11.2                       ‘Key men’ insurance delegation

 

The Borrower will enter into and delegate to the Agent, on behalf of the
Banks, a ‘key man’ insurance policy for Messrs. Olivier TOURNIAIRE and
Patrick O’LEARY, or any other person agreed by the Agent and the Borrower in
replacement of any of them, permitting the payment of a minimum of * * *
per person to the Agent on the behalf of the Banks, up until September 15,
2008 inclusive. It is expressly agreed that the Agent will allocate any sum it
receives for the said insurance delegations, on behalf of the Banks, to the
prepayment of the Loan, which

 

27

 

Confidential Treatment
Requested

 

will be applied to reduce the outstanding installments, for Tranches A1
and /or A2 and /or A3 and /or A4 in order of decreasing maturity, pro rata to
the amount outstanding for each Tranche compared to the total amount outstanding
on the Loan.

 

This delegation must be set up within a maximum of four (4) months
from the date that the Agreement is signed. If this deadline is exceeded, the
margin applicable to each Tranche will be immediately increased by * * *%
a year until regularization, apart from the Agent’s prior agreement in writing
acting on behalf of the Banks ; this provision does not prevent Article 14
applying.

 

12                                 BORROWER’s UNDERTAKINGS

 

The
Borrower undertakes to perform the following obligations throughout the term of
the Agreement :

 

12.1                       Commitment to securities

 

The
Borrower undertakes not to grant and to ensure that its Subsidiaries do not
grant collateral or third-party guarantees other than those which may have
already been granted on the Drawdown Date of Tranche A1, or those granted to
secure the Loan, except with the Agent’s prior written agreement acting on
behalf of the Banks, except for the securities granted by the Borrower or its
subsidiaries exclusively within the scope of their normal business.

 

The
Borrower undertakes to make all the necessary arrangements to make the above
commitment effective.

 

12.2                       Commitment to interest rate
exposure hedges

 

The
Borrower undertakes to hedge against interest rate exposure within 5 months at
most following the Drawdown Date of Tranches A1, A2, A3 and A4, so that it is
protected, until September 15 2008, inclusive, against the consequences of
a rise in the 6 month EURIBOR of more than * * *% compared to its
value on the date that the Agreement is signed, on at least * * *% of
the amount of each of the said Tranches.

 

12.3                       Commitment to Financial Ratios

 

The
Borrower undertakes to comply with the following Financial Ratio levels R2, R3
and R4, which are calculated on the basis of the Borrower’s consolidated
accounts certified by the Statutory Auditors on the date of the close of each
fiscal year (i.e. June 30 of each year) :

 

	
  12 month-period

  ending on :

  	
   

  	
  R2

  Lower than :

  	
   

  	
  R3

  Higher than :

  	
   

  	
  R4

  Lower than :

  
	
  30/06/2005 **  

  	
   

  	
  * * *

  	
   

  	
  * * *

  	
   

  	
  * * *

  
	
  30/06/2006  

  	
   

  	
  * * *

  	
   

  	
  * * *

  	
   

  	
  * * *

  
	
  30/06/2007  

  	
   

  	
  * * *

  	
   

  	
  * * *

  	
   

  	
  * * *

  
	
  30/06/2008

  	
   

  	
  * * *

  	
   

  	
  * * *

  	
   

  	
  * * *

  
	
  30/06/2009

  	
   

  	
  * * *

  	
   

  	
  * * *

  	
   

  	
  * * *

  
	
  30/06/2010

  	
   

  	
  * * *

  	
   

  	
  * * *

  	
   

  	
  * * *

  

 

** it is stipulated that the Financial
ratios to June 30 2005 will be calculated on the basis of the Borrower’s
pro forma consolidated accounts drawn up on this same date over a rolling 12
month

 

28

 

Confidential Treatment
Requested

 

If
the said Financial ratios are disputed, the Bank (or the Banks ruling on the
Majority of the Banks pro rata to their respective Participation) and the
Borrower will discuss during 30 calendar days. If they fail to reach an
agreement, the Bank(s) may request the appointment of an expert to verify the
calculations. This expert must be approved by the Borrower. Failing this, he
will be appointed by an Order of the Presiding Judge of the Paris Commercial
Court ruling on the application of one of the Parties. The Expert’s decisions
will not be open to appeal.

 

It
is expressly agreed that the costs of the Expert’s appraisal will be paid half
each by the Borrower and the Bank(s).

 

12.4                       Commitment to limit investments

 

The Borrower undertakes to ensure that the global amount of the
consolidated tangible and intangible investments net of tax (including own work
capitalized) made by the Group during a given fiscal year is limited to an
amount equal to 110% of the amount stipulated in the Business Plan of
Reference, i.e. the following limit for each fiscal year :

 

Fiscal year closed on June 30 2005 : * * *,

Fiscal year closed on June 30 2006 : * * *,

Fiscal year closed on June 30 2007 : * * *,

Fiscal year closed on June 30 2008 : * * *,

Fiscal year closed on June 30 2009 : * * *,

Fiscal year closed on June 30 2010 : * * *.

 

It is expressly agreed that if the amount of the investments made during
a given fiscal year is below the limit fixed above, the investment limit for
the next fiscal year only can be increased by the difference between the
investment limit for the previous fiscal year and the amount of the investments
actually made during the preceding fiscal year.

 

The Borrower undertakes to make all the arrangements to ensure that the
above undertaking is effective.

 

12.5                       Commitment to limit indebtedness

 

The Borrower undertakes not to contract and to ensure that its
Subsidiaries do not contract, throughout the term of the Loan, except with the
Agent’s prior written agreement acting on behalf of the Banks, additional
indebtedness (i) to the indebtedness which may already have been
contracted prior to the Drawdown Date for Tranche A1, (ii) to the Loan and
(iii) to the debt from the interest rate hedge for each of Tranche of the
Loan, beyond a total amount of * * * for the term of the Loan for all
of the Group’s companies. However, it is specified that this additional
indebtedness of * * * can be increased during each of the fourth and
fifth 12 month-periods after the date that the Agreement is signed, by * * *%
of the sums repaid for the Loan during such 12 month-period, and secondly,
during each of the sixth and seventh 12 month-periods after the date that the
Agreement is signed, by * * *% of the sums repaid under the Loan
during such 12 month-period.

 

The Borrower undertakes to make all the arrangements to ensure that the
above undertaking is effective.

 

29

 

Confidential Treatment
Requested

 

12.6                       Miscellaneous commitments

 

The
Borrower undertakes, during the term of the Agreement :

 

1.                         To immediately inform the Agent in writing of
the occurrence of any Event of Default as soon as it is aware of it;

 

2.                         To organize all information meetings, within a
reasonable period and at the Agent’s reasonable request ;

 

3.                         To immediately inform the Agent, in writing, as
soon as it is aware of any Material Adverse Effect ;

 

4.                         To enter into and /or to have its subsidiaries
enter into the damage and legal liability insurance policies necessary to cover
the risks in the Group’s business sector, to ensure that they remain in force
throughout the term of the Loan, and to make all necessary agreements in order
to ensure that this commitment is effective;

 

5.                         To ensure that the Group’s plant and assets are
kept in a condition which complies with the industry standards in force which
are applicable to it, and to take all the necessary measures to make this
undertaking effective ;

 

6.                         To pay all of the taxes due on the correct
date, unless the Borrower and /or the Subsidiaries disputes these sums in good
faith, and in this last case provided the Agent is provided with reasonable information
relating to the said dispute, on behalf of the Banks ;

 

7.                         To conduct all business in compliance with the
laws and regulations in force applying to it, where non-compliance would have a
Materiel Adverse Effect ;

 

8.                         To ensure that its  dividend policy regarding its Subsidiaries is
consistent with the constraints on repayment of the Loan and the payment of the
interest relating to it, and to give priority to any distribution of dividends
to the repayment of  the Loan and payment
of the associated interests ;

 

9.                         To obtain and to renew or to have renewed, as
far as is required any authorization required for the signature, the validity,
the performance or the renewal of any documents relating to the Acquisition as
well as any Contractual Document renewed ;

 

10.                   To opt for the Group’s tax provisions defined
in article 223 A of the French General Tax Code, to perform all the
formalities required to benefit under these tax provisions so that they apply
to the fiscal year starting on October 1 2004, to obtain the agreement of
the French Subsidiaries of which it directly or indirectly holds 95% of the
capital and voting rights to be included in the consolidation and to provide
the Agent on demand with all substantiating documents relating to thereto ;

 

11.                   To ensure that the above Group tax provisions
remain in force during the term of the Loan, and to make all the arrangements
required to ensure that this undertaking is effective ;

 

12.                   To inform the Agent as soon as reasonably if
the Indemnification Claim is made, as well as any payment made in relation to
this claim, and to supply the Agent with related documents evidencing such
claim ;

 

13.                   To refrain from, and to ensure its
Subsidiaries refrain from, any mergers or acquisitions without prior agreement
of the Agent acting on behalf of the Banks, and to take all necessary steps to
ensure this undertaking is complied with;

 

14.                   At all times to retain 100% direct
control of the capital and voting rights of LABORATOIRES EUROSILICONE (except
for 6 (six) shares) unless otherwise agreed in advance with the Agent acting on
behalf of the Banks, except in the case of the

 

30

 

Confidential Treatment
Requested

 

enforcement of the pledge in favour of the
sellers of the shares of LABORATOIRES EUROSILICONE to the Borrower ;

 

15.                   To formalise the payment of any fees
and commissions for services provided either directly or indirectly by the
Borrower’s shareholders in a contractual arrangement approved in advance by the
Agent acting on behalf of the Banks, and to respect the terms of such
contractual arrangements ;

 

16.                   To make no changes to the closing
dates of the fiscal years applying to each Group company except to harmonise
them with the closing date of the Borrower’s fiscal year, that’s to say the end
of June, commencing on June 30 2005, except as disclosed to the Agent on
the date that the Agreement is signed ;

 

17.                   No later than 30 calendar days
following the date that the Agreement is signed, to provide the Agent with a copy
of the minutes of the Extraordinary General Meeting of Shareholders of the
Borrower, at which a cash capital increase of a minimum amount of * * * was approved and
exclusively done by MEDICOR Ltd. or one of its Subsidiary and a documentation
certifying that the aforesaid capital has been subscribed and paid in full,
provided that if the capital increase has been made through by one of MEDICOR
Ltd.’s Subsidiaries, to provide the Agent with a certified copy of the statuts of the aforementioned Subsidiary, a “certificat d’immatriculation” and the list of the
shareholders showing that MEDICOR Ltd. owns directly or indirectly 100% of the
capital and voting rights of the Subsidiary;

 

18.                   To immediately inform the Agent of any change
to the Borrower’s shareholding as referred to in Article 14 Paragraph (H) ;

 

19.                   Not to agree to any contractual subordination
of the repayment of the Loan in any way.

 

13                                 INFORMATION OBLIGATIONS

 

13.1                       The Borrower undertakes to perform the following information obligations
throughout the term of the Agreement :

 

(A) To send the Agent the following documents annually :

 

(i) its consolidated audited accounts certified
by the Statutory Auditors five (5) months at the latest after the close of
each fiscal year,

 

(ii) its audited company accounts as well as the
company accounts of its Subsidiaries, if necessary certified, within the same
time limit as (i) above,

 

it is specified that these accounts will notably
include a balance sheet, an income statement as well as their notes and will,
if necessary, be accompanied by the Statutory Auditors’ report(s) relating to
them,

 

(iii) within the same time limit as (i) above,
the net revenue of any sales of fixed assets net of any duly justified
reinvestments,

 

(iv) within the same time limit as (i) above,
the certificate relating to the Financial Ratios in accordance with the model
in Schedule 4, established on the basis of its annual consolidated
accounts certified and signed by the Statutory Auditors,

 

(v) within the same time limit as (i) above
a recapitulative list, certified to be correct by the Borrower’s legal
representative of the costs, commissions and fees paid by the Borrower during
the past fiscal year for the services performed directly or indirectly by its
shareholders,

 

(vi) as soon as possible and at the latest three (3) months
after the start of each fiscal year, the Group’s annual consolidated
provisional budget for the said fiscal year,

 

31

 

Confidential Treatment
Requested

 

(vii) as soon as possible and at the latest four (4) months
after the end of the first semester of each corporate fiscal year its non
audited consolidated management accounts in a format to be determined with the
Agent.

 

(B) To
send to the Agent all information which it could reasonably demand on the Group’s
financial structure, or its business activity and its assets, as well as all
information enabling the Bank(s) to satisfy its (their) statutory or regulatory
obligations with respect to the Loan.

 

The
Agent and the Banks will be bound to respect the confidentiality of the
information disclosed by the Borrower. If the Banks need to be provided with
part or all of the information disclosed, the Agent will ensure, within the
scope of its duty of information to the Banks, that the Banks will, as far as
they are concerned, respect its confidentiality.

 

13.2                       It is expressly agreed that all the information and documents referred
to in Article 13.1 (A) must be established in accordance with the
Chart of Accounts or restated in order to comply with the Chart of Accounts.

 

14                                 EVENT OF DEFAULT

 

14.1                       Each of the following events will constitute an Event of Default,
namely :

 

(A)     The failure to pay any sum owed by the Borrower under the Agreement on
its due date unless this is remedied within five (5) Working Days at the
latest after the due date ;

 

(B)       The material inaccuracy of any declaration referred to in article 10
of the Agreement, apart from the case where such inaccuracy results from
operations which were previously authorized by the Agent acting on behalf of
the Banks, under the Agreement ;

 

(C)       The failure to comply with any of the commitments made in the
Contractual Documents unless agreed by 
the Agent in writing on behalf of the Banks ;

 

(D)      The failure by the Borrower or any of its Subsidiaries to comply with
any significant obligation undertaken towards the Bank (or the Banks either
jointly or individually), outside the terms of the Agreement, after taking into
account any grace periods allowed for remedy of such a failure ;

 

(E)        The failure by the Borrower or any of its
Subsidiaries to make any repayment of 100,000 Euros or more when due on a
financial indebtedness other than the Loan, contracted with third parties other
than the Bank(s), without prior agreement with the creditor concerned (after
taking into account any grace periods) except where the Borrower has lodged a
bona fide objection to the payment in question ;

 

(F)        The occurrence of a Material Adverse Effect unless the Borrower can show
the Agent its capacity to meet its commitments under the Agreement despite the
occurrence of the said Material Adverse Effect or that it can resolve the
problem which gave rise to the Material Adverse Effect ;

 

(G)       The failure to constitute Securities securing the repayment of the Loan
within the contractually stipulated period or the nullity of any of the
securities or the failure to comply with these provisions;

 

(H)      The reduction of MEDICOR Ltd.’s interests (directly and indirectly) in
the Borrower’s capital and below a minimum percentage of 67 % of the capital
and voting rights ;

 

(I)           The distribution of dividends to the Borrower’s shareholders between the date that the Agreement is
signed and December 31, 2005
inclusive ;

 

32

 

Confidential Treatment
Requested

 

(J)            From January 1st, 2006, the
distribution of dividends to the Borrower’s shareholders, when :

 

•                  * * *, and /or

 

•                  the payment of the capital installments of
Tranche A1 and, if necessary, Tranches A2, A3 and A4 for the fiscal year in
question has not yet occurred, and/or

 

•                  an Event of Default occurred which is not
waived or otherwise remedied ;

 

(K)        The reduction, without the prior written agreement of the Agent acting
on behalf of the Banks, of the Borrower’s share capital, with the effect of
paying the proceeds from all or part of the said reduction of capital to its
shareholders;

 

(L)          The performance of a merger, a split-up, of a spin-off affecting the
Borrower or its Subsidiaries, without the prior written agreement of the Agent
acting on behalf of the Banks, which cannot oppose this without justified
reasons;

 

(M)     Any change to the Financial Instruments Account Pledge, resulting from
the reorganization of LABORATOIRES EUROSILICONE, without the prior written
agreement of the Agent acting on behalf of the Banks, with the effect of
transferring all of LABORATOIRES EUROSILICONE’s own resources in particular in
terms of sales forces, of support functions, to a third company, and thereby
compromises LABORATOIRES EUROSILICONE’s ability to conduct its business
independently;

 

(N)        The modification, without the prior written agreement of the Agent
acting on behalf of the Banks, of the Agreement for the Shareholder’s Loan (as
provided to the Agent at the Drawdown Date of Tranche A1) or the failure by the
Borrower to comply with the provisions of this Agreement;

 

(O)        Any insolvency proceedings (procédure collective) against the Borrower or anyone of its
Subsidiaries, subject however, to the powers which the law expressly attributes
by law to the official receiver or to the representative;

 

(P)          The dissolution of the Borrower and/or LABORATOIRES EUROSILICONE with
liquidation;

 

(Q)        The rejection of the Borrowers’ signature or of anyone of its
Subsidiaries by the BANQUE DE FRANCE which is not regularized within a period
of 15 calendar days ;

 

(R)         The Statutory Auditors issuing significant reserves on actions or facts
relating to the Borrower and/or its Subsidiaries likely to reduce the quality
of the Bank’s(s’) receivable under the Loan, or the refusal by the Statutory
Auditors to certify the Borrower’s consolidated and/or company accounts and/or
of one of its Subsidiaries;

 

(S)          The change in the Borrower’s and/or LABORATOIRES EUROSILICONE’s core
business activity as stated in their corporate purpose  on the date that the Agreement is
signed ;

 

(T)         The modification of the date of the close of the Borrower’s fiscal year,
from June 30 2005, without the prior written agreement of the Agent acting
on behalf of the Banks.

 

14.2                       The Agent will
inform the Borrower of the occurrence of an Event of Default, by recorded
delivery mail with notification of receipt. The Borrower will have fifteen (15)
Working Days from the above mentioned notification to remedy any Event of
Default where this is possible, and provided that the said Event of Default is
occurring for the first time (this Event of Default has, not been the subject
of a previous notification by the Agent).

For
any Event of Default where which cannot be remedied, the Borrower and the Bank(s)
will meet on the initiative of one of them, within a maximum period of fifteen
(15) Working Days from the above mentioned notification, to decide on the
possible methods for remedying the Event of Default and to continue the Loan.

 

33

 

Confidential Treatment
Requested

 

Depending on the nature of the Event of Default which has occurred, if
it is not remedied within the prescribed time limit (apart from express written
derogation from the Agent acting on behalf of the Banks) or in the absence of
agreement between the Borrower and the Bank(s) after they have consulted, the
Loan will by repaid in advance, on simple notification by the Agent, by
recorded delivery mail with notification of receipt, without the Bank(s) having
to carry out any other formality nor have the forfeiture of the term pronounced
by a Court. The Borrower will then be obliged to pay all of the sums in
principal, interest, late interests, costs, commission and incidental expenses,
owed to the Bank(s) under the Agreement.

 

15                                 RULES FOR THE PARTICIPATION OF
THE BANKS

 

15.1                       The Banks’ obligations to the Borrower will comprise separate and
distinct legal rights and will not create any link of solidarity between them.

 

15.2                       Each Bank will be personally liable for the non performance of its
obligations under the Agreement. The failure by one or more Banks to perform
its obligations under the Agreement will not affect the Borrower’s rights and
obligations with respect to the other Banks, nor will it release the other
Banks from their own obligations under the Agreement.

 

15.3                       Any information which the Borrower informs the Agent of, will be deemed
to be made to each of the Banks, under the responsibility of the Agent towards
the Borrower.

 

15.4                       If a Bank receives a payment from the Borrower under the Loan, in any
way whatsoever, this Bank will inform the Agent and will retrocede the amount
received to the Agent. The Agent will distribute the amount of this payment
between the Banks pro rata to their participation and up to the amounts of
their payable receivables, as quickly as possible.

 

16                                 THE BANKS’ DECLARATIONS AND
COMMITMENTS

 

16.1                       Each Bank declares that its decision to participate in the Agreement was
taken on the basis of its own appraisal, and that in taking this decision, it
has not based itself on the declarations or information supplied by the Agent
or by the Arranger, or by any Bank, in particular on the validity of the
financing schema or the Borrower’s financial position.

 

16.2                       If the Borrower does not perform its obligations under this Agreement,
each Bank undertakes to indemnify the Agent, on production of substantiating
documents, and in proportion to its Participation, for all the losses and costs
borne by the Agent following this non performance, without however this
indemnification of the Agent exonerating the Borrower from its own liability.

 

17                                 AGENT’S ROLE AND POWERS

 

17.1                       Each Bank appoints the Agent as its representative in order to
regularize the Securities and to execute the legal instruments and materials
which are expressly entrusted to it under the terms of the Agreement and the
other Contractual Documents, in its name and on its behalf. The Banks therefore
give the Agent authority to conserve all of the original instruments and
documents relating to all of the Securities. The Agent is therefore a
sequestrator depository which it expressly accepts.

It
is specified that in the event of the Loan’s accelerated maturity, under Article 14,
as far as is necessary, the Agent will realize the Financial Instruments
Account Pledge on behalf of the Banks and divide the sale price of the pledged
shares between the Banks, pro rata to their Participation

 

34

 

Confidential Treatment
Requested

 

17.2                       The Agent can freely exercise its rights under the Agreement and the
other Contractual Documents, with the obligation to report the performance to
the Banks.

 

However, if there are two (2) Banks in number, the Agent must
obtain the unanimous agreement of the Banks for any modification of the
Borrower’s undertakings, and for any agreement, authorization, or approval by
the Banks which the Borrower claims under the Agreement.

 

If there are more than two (2) Banks, the Agent must obtain the
agreement :

 

(A) of all of the Banks
for the following decisions :

 

(1)          The grant of time to pay for the Loan exceeding five (5) Working
Days ;

 

(2)          Prolonging the duration of any of Tranches A1, A2, A3 or A4 ;

 

(3)          Modifying or abandoning any of the Securities guaranteeing the
Loan ;

 

(4)          Reducing the margin applicable to any of Tranches A1, A2, A3 and A4,
apart from any reduction in the margin in accordance with the provisions of Article 6.3 ;

 

(5)          Modifying the method of calculating interests compared to the provisions
of Article 6.5 ;

 

(6)          Abandoning a debt against the Borrower under the Loan ;

 

(7)          Modifying one of the provisions of this Article 17.2 ;

 

(B) of the Majority of the Banks for all other
decisions by the Banks, and in particular any authorization given to the
Borrower to temporarily waive respecting the Financial ratios or the method of
calculating the Financial Ratios.

 

17.3                       The Agent cannot be held liable on the basis of the actions committed,
whether under this Agreement or not, apart from gross negligence, or fraud.

 

17.4                       The Agent can rely on any document signed by the person(s) authorized to
take the decisions in question, and can follow its Counsel’s advice on any
legal questions.

 

17.5                       Apart from gross negligence or fraud, neither the Agent nor the Arranger
will be liable to the other Banks for the inaccuracy of the Borrower’s
declarations, contained in the Agreement, nor the Contractual Documents, nor
for the Borrower’s or its Subsidiaries’ performance of the provisions of the
Agreement or the Contractual Documents. The Agent or the Arranger will also not
be liable to the Borrower for the non performance by the other Banks of their
obligations under this Agreement. It is expressly agreed that the failure by
the Agent or the Arranger to reply within the deadlines stipulated in Article 1.2
Paragraph (C) to any request for agreement, authorization or approval of
the Banks under the Agreement made by the Borrower, can constitute gross
negligence.

 

17.6                       The Agent will communicate all notifications received by the Borrower in
performance of the Agreement to the Banks as quickly as possible (other than
purely administrative) and will also communicate any decision taken by the
Majority of the Banks as quickly as possible.

 

17.7                       The Agent cannot be liable on the basis of the Agent’s actions under the
provisions of Article 17.2 ; all the Banks will be bound by any
actions performed in these circumstances.

 

17.8                       If the Borrower does not reimburse the Agent all its costs incurred
under this Agreement, including the fees and costs of its counsel, the Banks
will reimburse the Agent the share of their costs pro rata their Participation,
without prejudice to the Agent’s rights and recourse against the Borrower.

 

35

 

Confidential Treatment
Requested

 

17.9                       The Agent is free to terminate the mandate which binds it to the Banks
providing that it gives the Borrower and the Banks at least thirty (30)
calendar days notice.

 

17.10                The
Majority of the Banks, to the exclusion of the Agent, can designate a Bank in
France to succeed the resigning the Agent, providing that it makes this
appointment within twenty (20) calendar days from the Agent’s resignation,
notified by notice. Failing this, the Agent will appoint its successor itself,
by choosing a bank, which is reputedly solvent and established in Paris. The
provisions of this paragraph also presuppose the Borrower’s prior agreement.

 

17.11                The
cessation of the functions of the resigning the Agent will only be effective
after the Agent has received the written acceptance of the designated
successor, which the Agent will inform the Borrower and the Banks of.

 

18                                 REPLACEMENT OF THE BORROWER

 

The
Borrower cannot assign its rights or delegate its obligations under the
Agreement to a third party nor replace itself with a third party to perform its
obligations under this Agreement.

 

19                                 SUBSTITUTION OF THE BANKS

 

19.1                       Each Bank can freely assign or transfer all or part of its rights and
obligations under the Agreement providing it obtains the Borrower’s prior
written agreement which cannot be unreasonably withheld or delayed.

 

19.2                       Such an assignment or transfer by a Bank of its rights and obligations
under the Agreement to a third party will be done through an instrument which
substantially conforms to the model Replacement Agreement appearing in Schedule 3
which the Agent will inform the Borrower of. It is specified that any service
of such an instrument on the Borrower will be made by the Assigning Bank at its
costs.

 

19.3                       Each Bank is therefore free to conclude securitization contracts
throughout the term of the Agreement.

 

19.4                       Each Bank can disclose a copy of any contractual document or any
information which this Bank may have acquired under a Contractual Document or
in relation to it to any Bank with which it is proposing to conclude a
substitution contract by respecting the terms of confidentiality stipulated in
the last paragraph of Article 13.1.

 

20                                 MISCELLANEOUS

 

20.1                       Terms of payment

 

All
the payments owed by the Borrower under this Agreement will be debited by the
Agent, which the Borrower expressly accepts on the due date of value for funds
immediately available on the Borrower’s account opened in the books of BNP
PARIBAS under the following references :

 

36

 

Confidential Treatment Requested

 

Bank Code: * * *

Branch Code : * * *

Account
number : * * *

RIB
Key : * * *

 

The
Agent will pay each Bank on the right value date any amount received from the
Borrower and which is owed to the Bank pro rata to its Participation with
respect to repaying the principal as well as the payment of interests, interest
on arrears, commissions, costs and incidental expenses.

 

20.2                       Attributing payments

 

The
payments made by the Borrower under this Agreement will be attributed in the
following order pro rata to the respective amounts owed to each Financial Party
:

 

(A) firstly,
to the indemnities, commissions, costs and incidental costs of any kind,

 

(B) secondly,
to late interest,

 

(C) thirdly,
to interest,

 

(D) fourthly,
to the principal.

 

20.3                       No
setoff

 

The
Borrower is expressly prohibited from making any setoff between its debts which
are payable under the Agreement and any receivable which it may hold against
the Financial Parties.

 

20.4                       Currency

 

All
payments made by the Borrower will be made in Euros.

 

20.5                       Annualized percentage rate

 

(A) It
is specified that due to the specificity of the provisions of the Agreement,
notably the variability in the interest rate, it is impossible to irrevocably
fix the annualized percentage rate applicable in accordance with the provisions
of articles L 313-4 and following of the French Financial and Monetary
Code on the date that the Agreement is signed.

 

(B) However,
in order to meet legal requirements, it is nevertheless indicated as an example
that the annualized percentage rate for each of the Tranches of the Loan
(notably taking all of the costs and fees into account) on September 9,
2004, for a Drawdown of the latter on this same date, respectfully total :

• * * * % per year, for Tranche A1, on
the basis of a 6-month EURIBOR 2,21 % per year in force on September 9,
2004, the period rate on a semestrial basis working out at 2,62 %,

• * * * % per year, for Tranche A2, on
the basis of a 6-month EURIBOR 2,21 % per year in force on September 9,
2004, the period rate on a semestrial basis working out at 2,66 %,

• * * * % per year, for Tranche A3, on
the basis of a 6-month EURIBOR 2,21 % per year in force on September 9,
2004, the period rate on a semestrial basis working out at 2,69 %,

• * * * % per year, for Tranche A4, on
the basis of a 6-month EURIBOR 2,21 % per year in force on September 9,
2004, the period rate on a semestrial basis working out at 2,71 %.

 

37

 

Confidential Treatment Requested

 

20.6                       Working Days

 

If
a payment has to be made on a day which is not a Working Day, the payment in
question must be made on the next Working Day.

 

20.7                       Waiver of recourse

 

If
one of the parties to this Agreement fails to exercise a right resulting under
this Agreement or any Contractual Document or exercises the said right late,
this will not constitute a waiver of the exercise of this right and will not
prevent the party concerned from exercising this right in the future.

 

20.8                       Notifications

 

(A) All
the notifications concerning this Agreement must be made by fax and will take
effect from receipt of transmission of the fax apart from notification of an
Event of Default or of any agreement authorization or approval request from the
Bank(s) as referred to in Article 1.2 (C) which must be sent by
recorded delivery mail with notification of receipt.

 

(B) The
notifications which are made under this Agreement must be sent to the parties
as follows :

 

	
  Borrower :

  	
   

  	
  ES HOLDINGS S.A.S.

  
	
   

  	
   

  	
  112, avenue Kléber

  
	
   

  	
   

  	
  75116 Paris

  
	
   

  	
   

  	
  For the attention of : Mr. Thomas MOYES and Mr. Jean-Claude
  VECCHIATTO

  
	
   

  	
   

  	
  Fax :
  01.44.05.52.00

  
	
   

  	
   

  	
   

  
	
  Agent :

  	
   

  	
  BNP
  PARIBAS

  
	
   

  	
   

  	
  Z 02478A

  
	
   

  	
   

  	
  Centre d’Affaires
  Entreprises Méditerranée

  
	
   

  	
   

  	
  5,
  boulevard de Dunkerque

  
	
   

  	
   

  	
  Cap
  Joliette

  
	
   

  	
   

  	
  13002 Marseille

  
	
   

  	
   

  	
  For the attention of : Mr. Dominique BOUYX

  
	
   

  	
   

  	
  Fax : 04 95 09 43 29

  
	
   

  	
   

  	
  For the current operations

  
	
   

  	
   

  	
   

  
	
  Arranger :

  	
   

  	
  BNP
  PARIBAS - BDDF Financements Structurés

  
	
   

  	
   

  	
  CLD 08B1

  
	
   

  	
   

  	
  9,
  boulevard des Italiens

  
	
   

  	
   

  	
  75450
  Paris Cedex 09

  
	
   

  	
   

  	
  Fax :
  01.55.77.64.80

  
	
   

  	
   

  	
  For any question concerning the construction of this document

  

 

Or
to any other address which the parties may have indicated under this Article.

 

38

 

Confidential Treatment
Requested

 

20.9                       Instruments - Languages

 

This
Agreement sets forth the entire agreement between the parties hereto with
respect to the Loan. It replaces any previous instrument, including the term
sheet signed on July 30 2004. A French version of the Agreement has been
prepared, but is not binding. This French version shall not be used in
interpreting this Agreement in case of litigation; it may be used for the
information of the banks during the syndication process, with the agreement of
the Borrower.

 

21                                 GOVERNING LAW

 

This Agreement is governed by French law.

 

22                                 JURISDICTION

 

Any
dispute concerning the construction or the performance of the Agreement will be
for the exclusive competence of the Paris Commercial Court.

 

	
   

  	
   

  	
  Signed at Paris, September 10, 2004

  In two (2) original copies.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BNP PARIBAS

  	
   

  	
  ES HOLDINGS S.A.S.

  
	
  Centre d’Affaires Méditerranée Entreprises

  	
   

  	
  In the capacity of the Borrower,

  
	
  In the capacity of Bank and Agent,

  	
   

  	
  Represented by :

  
	
  Represented by :

  	
   

  	
  Mr. Theodore MALONEY

  
	
  Ms. Valérie BENQUET

  	
   

  	
  and Mr. Thomas MOYES

  
	
  and Mr. Bertrand MONTFORT

  	
   

  	
   

  

 

 

BNP
PARIBAS

BDDF
- Financements Structurés

In the capacity of Arranger,

Represented
by :

Ms. Géraldine
SALOMON

 

39Exhibit
10.32

 

RIGEL
PHARMACEUTICALS, INC.

 

2000 Equity Incentive Plan

 

Adopted January 27, 2000

Approved By Stockholders March 15, 2000

Amended December 13, 2002

Amended and Restated April 24, 2003

Approved By Stockholders June 20, 2003

Amended and Restated April 22, 2005

Approved By Stockholders June 2, 2005

Termination Date: April 24, 2013

1.             Purposes.

 

(a)           The
Plan is an amendment and restatement of, and is intended to supersede and
replace, the Company’s 1997 Stock Option Plan.

 

(b)           The
persons eligible to receive Stock Awards are the Employees, Directors and
Consultants of the Company and its Affiliates.

 

(c)           The
purpose of the Plan is to provide a means by which eligible recipients of Stock
Awards may be given an opportunity to benefit from increases in value of the
Common Stock through the granting of the following Stock Awards:  (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to acquire
restricted stock.

 

(d)           The
Company, by means of the Plan, seeks to retain the services of the group of
persons eligible to receive Stock Awards, to secure and retain the services of
new members of this group and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.

 

(e)           Any
stock awards granted under the Rigel Pharmaceuticals, Inc. 2001 Non-Officer
Equity Incentive Plan (the “Non-Officer Plan”) prior to April 24, 2003 shall be
governed by the terms of the Non-Officer Plan as in effect immediately prior to
April 24, 2003, as set forth in Appendix A to this Plan.  The Common Stock that was reserved for
issuance under the Non-Officer Plan, including the Common Stock that may be
issued pursuant to outstanding stock awards granted under the Non-Officer Plan
prior to April 24, 2003, shall be included in the aggregate share reserve for
this Plan, as set forth in Section 4(a).

 

2.             Definitions.

 

(a)           “Affiliate” means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.

 

(b)           “Board” means the Board of Directors of the Company.

 

1

 

(c)           “Code” means the Internal Revenue Code of 1986, as
amended.

 

(d)           “Committee” means a committee of one or more members of
the Board appointed by the Board in accordance with subsection 3(c).

 

(e)           “Common Stock” means the common stock of the Company.

 

(f)            “Company” means Rigel Pharmaceuticals, Inc., a Delaware
corporation.

 

(g)           “Consultant” means any person, including an advisor, (i)
engaged by the Company or an Affiliate to render consulting or advisory
services and who is compensated for such services or (ii) who is a member of
the Board of Directors of an Affiliate. 
However, the term “Consultant” shall not include either Directors who
are not compensated by the Company for their services as Directors or Directors
who are merely paid a director’s fee by the Company for their services as
Directors.

 

(h)           “Continuous Service” means that the Participant’s
service with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
The Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that there is no
interruption or termination of the Participant’s service.  For example, a change in status without
interruption from an Employee of the Company to a Consultant of an Affiliate or
a Director will not constitute an interruption of Continuous Service.  The Board or the chief executive officer of
the Company, in that party’s sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by that party, including sick leave, military leave or any other
personal leave.

 

(i)            “Covered Employee” means the chief executive officer and
the four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

 

(j)            “Director” means a member of the Board of Directors of
the Company.

 

(k)           “Disability” means the permanent and total disability of
a person within the meaning of Section 22(e)(3) of the Code.

 

(l)            “Employee” means any person employed by the Company or
an Affiliate.  Mere service as a Director
or payment of a director’s fee by the Company or an Affiliate shall not be
sufficient to constitute “employment” by the Company or an Affiliate.

 

(m)          “Exchange Act” means the Securities Exchange Act of
1934, as amended.

 

(n)           “Fair Market Value” means, as of any date, the value of
the Common Stock determined as follows:

 

2

 

(i)            If
the Common Stock is listed on any established stock exchange or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of
a share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common
Stock) on the last market trading day prior to the day of determination, as
reported in The Wall Street Journal or
such other source as the Board deems reliable.

 

(ii)           In
the absence of such markets for the Common Stock, the Fair Market Value shall
be determined in good faith by the Board.

 

(o)           “Incentive Stock Option” means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of
the Code and the regulations promulgated thereunder.

 

(p)           “Non-Employee Director”  means a Director who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K
promulgated pursuant to the Securities Act (“Regulation S-K”)), does not
possess an interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of
Regulation S-K; or (ii) is otherwise considered a “non-employee director” for
purposes of Rule 16b-3.

 

(q)           “Nonstatutory Stock Option” means an Option not intended
to qualify as an Incentive Stock Option.

 

(r)           “Officer” means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.

 

(s)           “Option” means an Incentive Stock Option or a
Nonstatutory Stock Option granted pursuant to the Plan.

 

(t)            “Option Agreement” means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of an
individual Option grant.  Each Option
Agreement shall be subject to the terms and conditions of the Plan.

 

(u)           “Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

 

(v)            “Outside Director” means a Director who either (i) is
not a current employee of the Company or an “affiliated corporation” (within
the meaning of Treasury Regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an “affiliated corporation”
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an “affiliated
corporation” at any time and is not currently receiving direct or indirect
remuneration from the Company or an

 

3

 

“affiliated corporation” for services in any capacity
other than as a Director or (ii) is otherwise considered an “outside director”
for purposes of Section 162(m) of the Code.

 

(w)           “Participant” means a person to whom a Stock Award is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

 

(x)           “Performance Criteria”
means the one or more criteria that the Board shall select for purposes of
establishing the Performance Goals for a Performance Period.  The Performance Criteria that shall be used
to establish such Performance Goals may be based on any one of, or combination
of, the following: (i) earnings per share; (ii) earnings before interest, taxes
and depreciation; (iii) earnings before interest, taxes, depreciation and
amortization (EBITDA); (iv) net earnings; (v) total shareholder return; (vi)
return on equity; (vii) return on assets, investment, or capital employed;
(viii) operating margin; (ix) gross margin; (x) operating income; (xi) net
income (before or after taxes); (xii) net operating income; (xiii) net operating
income after tax; (xiv) pre- and after-tax income; (xv) pre-tax profit; (xvi)
operating cash flow; (xvii) sales or revenue targets; (xviii) increases in
revenue or product revenue; (xix) expenses and cost reduction goals; (xx)
improvement in or attainment of expense levels; (xxi) improvement in or
attainment of working capital levels; (xxii) economic value added (or an
equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash flow per
share; (xxvi) share price performance; (xxvii) debt reduction; (xxviii)
implementation or completion of projects or processes; (xxix) customer
satisfaction; (xxx) total stockholder return; (xxxi) stockholders’ equity; and
(xxxii) other measures of performance selected by the Board.  Partial achievement of the specified criteria
may result in the payment or vesting corresponding to the degree of achievement
as specified in the Stock Award Agreement. 
The Board shall, in its sole discretion, define the manner of calculating
the Performance Criteria it selects to use for such Performance Period.

 

(y)           “Performance Goals”
means, for a Performance Period, the one or more goals established by the Board
for the Performance Period based upon the Performance Criteria. The Board is
authorized at any time in its sole discretion, to adjust or modify the
calculation of a Performance Goal for such Performance Period in order to
prevent the dilution or enlargement of the rights of Participants, (a) in the
event of, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event or development; (b) in recognition of, or in anticipation
of, any other unusual or nonrecurring events affecting the Company, or the
financial statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business
conditions; or (c) in view of the Board’s assessment of the business strategy
of the Company, performance of comparable organizations, economic and business
conditions, and any other circumstances deemed relevant.  Specifically, the Board is authorized to make
adjustment in the method of calculating attainment of Performance Goals and
objectives for a Performance Period as follows: (i) to exclude the dilutive effects
of acquisitions or joint ventures; (ii) to assume that any business divested by
the Company achieved performance objectives at targeted levels during the
balance of a Performance Period following such divestiture; and (iii) to
exclude the effect of any change in the outstanding shares of common stock of
the Company by reason of any stock dividend or split, stock repurchase,
reorganization, recapitalization, merger, consolidation, spin-off, combination
or exchange of shares or other similar corporate change, or any distributions
to common shareholders other than regular cash dividends.  In addition, the Board is authorized to make
adjustment in the method of calculating attainment of Performance Goals and
objectives for a Performance Period as follows:

 

4

 

(i) to exclude restructuring and/or other nonrecurring
charges; (ii) to exclude exchange rate effects, as applicable, for non-U.S.
dollar denominated net sales and operating earnings; (iii) to exclude the
effects of changes to generally accepted accounting standards required by the
Financial Accounting Standards Board; (iv) to exclude the effects to any
statutory adjustments to corporate tax rates; (v) to exclude the impact of any “extraordinary
items” as determined under generally accepted accounting principles; and (vi)
to exclude any other unusual, non-recurring gain or loss or other extraordinary
item.

 

(z)           “Performance Period”
means the one or more periods of time, which may be of varying and overlapping
durations, as the Board may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participant’s
right to and the payment of a Stock Award.

 

(aa)         “Plan” means this Rigel Pharmaceuticals, Inc. 2000
Equity Incentive Plan.

 

(bb)         “Rule 16b-3” means Rule 16b-3 promulgated under the
Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

 

(cc)         “Securities Act” means the Securities Act of 1933, as
amended.

 

(dd)         “Stock Award” means any right granted under the Plan, including
an Option, a stock bonus, a right to acquire restricted stock, a stock unit
award and a stock appreciation right.

 

(ee)         “Stock Award Agreement” means a written agreement
between the Company and a holder of a Stock Award evidencing the terms and conditions
of an individual Stock Award grant.  Each
Stock Award Agreement shall be subject to the terms and conditions of the Plan.

 

(ff)           “Ten Percent Stockholder” means a person who owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any of its Affiliates.

 

3.             Administration.

 

(a)           Administration
by Board.  The Board shall administer
the Plan unless and until the Board delegates administration to a Committee, as
provided in subsection 3(c).

 

(b)           Powers
of Board.  The Board shall have the
power, subject to, and within the limitations of, the express provisions of the
Plan:

 

(i)            To
determine from time to time which of the persons eligible under the Plan shall
be granted Stock Awards; when and how each Stock Award shall be granted; what
type or combination of types of Stock Award shall be granted; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive Common Stock pursuant to a
Stock Award; and the number of shares of Common Stock with respect to which a
Stock Award shall be granted to each such person.

 

(ii)           To
construe and interpret the Plan and Stock Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration.  The Board, in the

 

5

 

exercise of this power, may correct any defect,
omission or inconsistency in the Plan or in any Stock Award Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

 

(iii)         To
amend the Plan or a Stock Award as provided in Section 12.

 

(iv)          To
terminate or suspend the Plan as provided in Section 13.

 

(v)            Generally,
to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company which are not in
conflict with the provisions of the Plan.

 

(c)           Delegation
to Committee.

 

(i)            General.  The Board may delegate administration of the
Plan to a Committee or Committees of one (1) or more members of the Board, and
the term “Committee” shall apply to any person or persons to whom such
authority has been delegated.  If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any
of the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.  The Board may abolish the Committee at any
time and revest in the Board the administration of the Plan.

 

(ii)           Committee
Composition when Common Stock is Publicly Traded.  At such time as the Common Stock is publicly
traded, in the discretion of the Board, a Committee may consist solely of two
or more Outside Directors, in accordance with Section 162(m) of the Code,
and/or solely of two or more Non-Employee Directors, in accordance with Rule
16b-3.  Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.

 

(d)           Effect of Board’s Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.

 

(e)           Cancellation and Re-Grant of Stock Awards.  Notwithstanding anything to the contrary in
the Plan, neither the Board nor any Committee shall have the authority to: (i)
reprice any outstanding Stock Awards under the Plan, (ii) cancel and re-grant
any outstanding Stock Awards under the Plan, or (iii) effect any other action
that is treated as a repricing under generally accepted accounting principles unless,
in each case, the stockholders of the Company have approved such an action
within twelve (12) months prior to such an event.

 

6

 

4.             Shares Subject
to the Plan.

 

(a)           Share
Reserve.  Subject to the provisions
of Section 11(a) relating to adjustments upon changes in Common Stock, the
shares of Common Stock that may be issued pursuant to Stock Awards shall not
exceed in the aggregate Five Million Three Hundred Twenty-Two Thousand Two Hundred Twenty-Two (5,322,222) shares of Common Stock.

 

(b)           Reversion
of Shares to the Share Reserve.  If
any (i) Stock Award, including any stock awards granted under the Non-Officer
Plan prior to April 24, 2003, shall for any reason expire or otherwise terminate,
in whole or in part, without having been exercised in full, (ii) shares of
Common Stock issued to a Participant pursuant to a Stock Award, including any
shares of Common Stock issued pursuant to stock awards under the Non-Officer
Plan prior to April 24, 2003, are forfeited to or repurchased by the Company,
including any repurchase or forfeiture caused by the failure to meet a
contingency or condition required for the vesting of such shares, or (iii)
Stock Award is settled in cash, then the shares of Common Stock not issued
under such Stock Award, or forfeited to or repurchased by the Company, shall
revert to and again become available for issuance under the Plan.  If any shares subject to a Stock Award are
not delivered to a Participant because the Stock Award is exercised through a
reduction of shares subject to the Stock Award (i.e.,
“net exercised”), the number of shares that are not delivered to the
Participant shall remain available for issuance under the Plan.  If any shares subject to a Stock Award are
not delivered to a Participant because such shares are withheld in satisfaction
of the withholding of taxes incurred in connection with the exercise of an
Option or stock appreciation right, or the issuance of shares under a stock
bonus award, restricted stock award or stock unit award, the number of shares
that are not delivered to the Participant shall remain available for subsequent
issuance under the Plan.  If the exercise
price of any Stock Award is satisfied by tendering shares of Common Stock held
by the Participant (either by actual delivery or attestation), then the number of
shares so tendered shall remain available for subsequent issuance under the
Plan.

 

(c)           Source
of Shares.  The shares of Common
Stock subject to the Plan may be unissued shares or reacquired shares, bought
on the market or otherwise.

 

5.             Eligibility.

 

(a)           Eligibility
for Specific Stock Awards.  Incentive
Stock Options may be granted only to Employees. 
Stock Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants.

 

(b)           Ten
Percent Stockholders.   A Ten Percent
Stockholder shall not be granted an Incentive Stock Option unless the exercise
price of such Option is at least one hundred ten percent (110%) of the Fair
Market Value of the Common Stock at the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant.

 

(c)           Section
162(m) Limitation.  Subject to the
provisions of Section 11 relating to adjustments upon changes in the shares of
Common Stock, no Employee shall be eligible to be granted Options covering more
than one hundred sixty-six thousand six hundred sixty-six (166,666) shares of
Common Stock during any calendar year.

 

7

 

(d)           Consultants.

 

(i)            A
Consultant shall not be eligible for the grant of a Stock Award if, at the time
of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”)
is not available to register either the offer or the sale of the Company’s securities
to such Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form
S-3 Registration Statement) or (B) does not require registration under the
Securities Act in order to comply with the requirements of the Securities Act,
if applicable, and (ii) that such grant complies with the securities laws of
all other relevant jurisdictions.

 

(ii)           Form
S-8 generally is available to consultants and advisors only if (i) they are
natural persons; (ii) they provide bona fide services to the issuer, its
parents, its majority-owned subsidiaries or majority-owned subsidiaries of the
issuer’s parent; and (iii) the services are not in connection with the offer or
sale of securities in a capital-raising transaction, and do not directly or
indirectly promote or maintain a market for the issuer’s securities.

 

6.             Option
Provisions.

 

Each Option shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate.  All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant,
and, if certificates are issued, a separate certificate or certificates will be
issued for shares of Common Stock purchased on exercise of each type of Option.  The provisions of separate Options need not
be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of
each of the following provisions:

 

(a)           Term.  Subject to the provisions of subsection 5(b)
regarding Ten Percent Stockholders, no Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.

 

(b)           Exercise
Price of an Incentive Stock Option. 
Subject to the provisions of subsection 5(b) regarding Ten Percent
Stockholders, the exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the Common
Stock subject to the Option on the date the Option is granted.  Notwithstanding the foregoing, an Incentive
Stock Option may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.

 

(c)           Exercise
Price of a Nonstatutory Stock Option. 
The exercise price of each Nonstatutory Stock Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Option on the date the Option is granted.  Notwithstanding the foregoing, a Nonstatutory
Stock Option may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an

 

8

 

assumption or substitution for another option in a
manner satisfying the provisions of Section 424(a) of the Code.

 

(d)           Consideration.  The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash at the time the Option is
exercised or (ii) at the discretion of the Board (1) by delivery to the Company
of other Common Stock; (2) according to a deferred payment or other similar
arrangement with the Optionholder; (3) by a “net exercise” arrangement pursuant
to which the Company will reduce the number of shares of Common Stock issued
upon exercise by the largest whole number of shares with a Fair Market Value
that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or
other payment from the Participant to the extent of any remaining balance of
the aggregate exercise price not satisfied by such holding back of whole
shares; provided, further, however,
that shares of Common Stock will no longer be outstanding under an Option and
will not be exercisable thereafter to the extent that (i) shares are used to
pay the exercise price pursuant to the “net exercise,” (ii) shares are
delivered to the Participant as a result of such exercise, and (iii) shares are
withheld to satisfy tax withholding obligations; or (4) in any other form of
legal consideration that may be acceptable to the Board.  Unless otherwise specifically provided in the
Option, the purchase price of Common Stock acquired pursuant to an Option that
is paid by delivery to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock
of the Company that have been held for more than six (6) months (or such longer
or shorter period of time required to avoid a charge to the Company’s earnings
for financial accounting purposes).  At
any time that the Company is incorporated in Delaware, payment of the Common
Stock’s “par value,” as defined in the Delaware General Corporation Law, shall
not be made by deferred payment.

 

In the case of any deferred payment arrangement,
interest shall be compounded at least annually and shall be charged at the
minimum rate of interest necessary to avoid (1) the treatment as interest,
under any applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement and (2) the
treatment of the Option as a variable award for financial accounting purposes.

 

(e)           Transferability
of an Incentive Stock Option.  An
Incentive Stock Option shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. 
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.

 

(f)            Transferability
of a Nonstatutory Stock Option.  A
Nonstatutory Stock Option shall be transferable to the extent provided in the
Option Agreement.  If the Nonstatutory
Stock Option does not provide for transferability, then the Nonstatutory Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. 
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

 

9

 

(g)           Vesting
Generally.  The total number of
shares of Common Stock subject to an Option may, but need not, vest and
therefore become exercisable in periodic installments that may, but need not,
be equal.  The Option may be subject to
such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Board may deem
appropriate.  The vesting provisions of
individual Options may vary.  The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option
may be exercised.

 

(h)           Termination
of Continuous Service.  In the event
an Optionholder’s Continuous Service terminates (other than upon the
Optionholder’s death or Disability), the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination) but only within such period of time
ending on the earlier of (i) the date three (3) months following the
termination of the Optionholder’s Continuous Service (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term
of the Option as set forth in the Option Agreement.  If, after termination, the Optionholder does
not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate.

 

(i)            Extension
of Termination Date.  An Optionholder’s
Option Agreement may also provide that if the exercise of the Option following
the termination of the Optionholder’s Continuous Service (other than upon the
Optionholder’s death or Disability) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option
Agreement or (ii) the expiration of a period of three (3) months after the
termination of the Optionholder’s Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.

 

(j)            Disability
of Optionholder.  In the event that
an Optionholder’s Continuous Service terminates as a result of the Optionholder’s
Disability, the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement) or (ii) the expiration of the
term of the Option as set forth in the Option Agreement.  If, after termination, the Optionholder does
not exercise his or her Option within the time specified herein, the Option
shall terminate.

 

(k)           Death
of Optionholder.  In the event (i) an
Optionholder’s Continuous Service terminates as a result of the Optionholder’s
death or (ii) the Optionholder dies within the period (if any) specified in the
Option Agreement after the termination of the Optionholder’s Continuous Service
for a reason other than death, then the Option may be exercised (to the extent
the Optionholder was entitled to exercise such Option as of the date of death)
by the Optionholder’s estate, by a person who acquired the right to exercise
the Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder’s death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement) or (2) the expiration of the term of such Option as
set forth in the Option

 

10

 

Agreement.  If,
after death, the Option is not exercised within the time specified herein, the
Option shall terminate.

 

(l)            Early
Exercise.  The Option may, but need
not, include a provision whereby the Optionholder may elect at any time before
the Optionholder’s Continuous Service terminates to exercise the Option as to
any part or all of the shares of Common Stock subject to the Option prior to
the full vesting of the Option.  Any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.  The Company will not
exercise its repurchase option until at least six (6) months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following exercise of the Option unless the
Board otherwise specifically provides in the Option.

 

7.             Provisions of
Stock Awards other than Options.

 

(a)           Stock
Bonus Awards.  Each stock bonus
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.  The
terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:

 

(i)            Consideration.  A stock bonus may be awarded in consideration
for past services actually rendered to the Company or an Affiliate for its
benefit.

 

(ii)           Vesting.  Shares of Common Stock awarded under the
stock bonus agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.

 

(iii)         Termination
of Participant’s Continuous Service. 
In the event a Participant’s Continuous Service terminates, the Company
may reacquire any or all of the shares of Common Stock held by the Participant
which have not vested as of the date of termination under the terms of the
stock bonus agreement.  The Company will
not exercise its repurchase option until at least six (6) months (or such
longer or shorter period of time required to avoid a change to earnings for
financial accounting purposes) have elapsed following receipt of the stock
bonus unless otherwise specifically provided in the stock bonus agreement.

 

(iv)          Transferability.  Rights to acquire shares of Common Stock
under the stock bonus agreement shall be transferable by the Participant only
upon such terms and conditions as are set forth in the stock bonus agreement,
as the Board shall determine in its discretion, so long as Common Stock awarded
under the stock bonus agreement remains subject to the terms of the stock bonus
agreement.

 

(b)           Restricted
Stock Awards.  Each restricted stock
purchase agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. 
The terms and conditions of the restricted stock purchase agreements may
change from time to time, and the terms and conditions of separate restricted
stock purchase agreements need not be identical, but each restricted stock
purchase agreement shall include (through incorporation of

 

11

 

provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

 

(i)            Purchase
Price.  The purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement.  The purchase price shall not be less than
eighty-five percent (85%) of the Common Stock’s Fair Market Value on the date
such award is made or at the time the purchase is consummated.

 

(ii)           Consideration.  The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either:  (i) in cash at the time of purchase; (ii) at
the discretion of the Board, according to a deferred payment or other similar
arrangement with the Participant; or (iii) in any other form of legal
consideration that may be acceptable to the Board in its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock’s “par value,” as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.

 

(iii)         Vesting.  Shares of Common Stock acquired under the
restricted stock purchase agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a vesting schedule
to be determined by the Board.

 

(iv)          Termination
of Participant’s Continuous Service. 
In the event a Participant’s Continuous Service terminates, the Company
may repurchase or otherwise reacquire any or all of the shares of Common Stock
held by the Participant that have not vested as of the date of termination
under the terms of the restricted stock purchase agreement.  The Company will not exercise its repurchase
option until at least six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) have
elapsed following the purchase of the restricted stock unless otherwise
provided in the restricted stock purchase agreement.

 

(v)            Transferability.  Rights to acquire shares of Common Stock
under the restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase agreement.

 

(c)           Stock Unit Awards.  Each stock unit award agreement shall be
in such form and shall contain such terms and conditions as the Board shall
deem appropriate.  The terms and
conditions of stock unit award agreements may change from time to time, and the
terms and conditions of separate stock unit award agreements need not be
identical, provided, however, that
each stock unit award agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

 

(i)            Consideration.  At the time of grant of a stock unit award,
the Board will determine the consideration, if any, to be paid by the
Participant upon delivery of each share of Common Stock subject to the stock
unit award. The consideration to be paid (if any) by the Participant for each
share of Common Stock subject to a stock unit award may be paid in any

 

12

 

form of legal consideration that may be acceptable to
the Board in its sole discretion and permissible under applicable law.

 

(ii)           Vesting. 
At the time of the grant of a stock unit award, the Board may
impose such restrictions or conditions to the vesting of the stock unit award
as it, in its sole discretion, deems appropriate.

 

(iii)         Payment.  A stock unit award may be settled by the
delivery of shares of Common Stock, their cash equivalent, any combination
thereof or in any other form of consideration, as determined by the Board and
contained in the stock unit award agreement.

 

(iv)          Additional Restrictions.  At the time of the grant of a
stock unit award, the Board, as it deems appropriate, may impose such
restrictions or conditions that delay the delivery of the shares of Common
Stock (or their cash equivalent) subject to a stock unit award after the
vesting of such stock unit award.

 

(v)            Dividend Equivalents.  Dividend equivalents may be
credited in respect of shares of Common Stock covered by a stock unit award, as
determined by the Board and contained in the stock unit award agreement.  At the sole discretion of the Board, such
dividend equivalents may be converted into additional shares of Common Stock
covered by the stock unit award in such manner as determined by the Board.  Any additional shares covered by the stock
unit award credited by reason of such dividend equivalents will be subject to
all the terms and conditions of the underlying stock unit award agreement to
which they relate.

 

(vi)          Termination of Participant’s Continuous
Service.  Except as otherwise
provided in the applicable stock unit award agreement, such portion of the
stock unit award that has not vested will be forfeited upon the Participant’s
termination of Continuous Service.

 

(d)           Stock Appreciation Rights.  Each stock appreciation right agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate.  The terms and
conditions of stock appreciation right agreements may change from time to time,
and the terms and conditions of separate stock appreciation right agreements
need not be identical; provided, however,
that each stock appreciation right agreement shall include (through
incorporation of the provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

 

(i)            Strike Price and Calculation of Appreciation.  Each stock appreciation right will be
denominated in shares of Common Stock equivalents.  The appreciation distribution payable on the
exercise of a stock appreciation right will be not greater than an amount equal
to the excess of (i) the aggregate Fair Market Value (on the date of the
exercise of the stock appreciation right) of a number of shares of Common Stock
equal to the number of shares of Common Stock equivalents in which the
Participant is vested under such stock appreciation right, and with respect to
which the Participant is exercising the stock appreciation right on such date,
over (ii) an amount (the strike price) that will be determined by the Board at
the time of grant of the stock appreciation right.

 

13

 

(ii)           Vesting. 
At the time of the grant of a stock appreciation right, the
Board may impose such restrictions or conditions to the vesting of such stock
appreciation right as it, in its sole discretion, deems appropriate.

 

(iii)         Exercise.  To exercise any outstanding stock
appreciation right, the Participant must provide written notice of exercise to
the Company in compliance with the provisions of the stock appreciation right
agreement evidencing such stock appreciation right.

 

(iv)          Payment.  The appreciation distribution in respect to a
stock appreciation right may be paid in Common Stock, in cash, in any
combination of the two or in any other form of consideration, as determined by
the Board and contained in the stock appreciation right agreement evidencing
such stock appreciation right.

 

(v)            Termination of Continuous Service.  In the event that a Participant’s Continuous
Service terminates, the Participant may exercise his or her stock appreciation
right (to the extent that the Participant was entitled to exercise such stock
appreciation right as of the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months following the
termination of the Participant’s Continuous Service (or such longer or shorter
period specified in the stock appreciation right agreement), or (ii) the
expiration of the term of the stock appreciation right as set forth in the stock
appreciation right agreement.  If, after
termination, the Participant does not exercise his or her stock appreciation
right within the time specified herein or in the stock appreciation right
agreement (as applicable), the stock appreciation right shall terminate.

 

8.             Covenants of
the Company.

 

(a)           Availability
of Shares.  During the terms of the
Stock Awards, the Company shall keep available at all times the number of
shares of Common Stock required to satisfy such Stock Awards.

 

(b)           Securities
Law Compliance.  The Company shall
seek to obtain from each regulatory commission or agency having jurisdiction
over the Plan such authority as may be required to grant Stock Awards and to
issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require
the Company to register under the Securities Act the Plan, any Stock Award or
any Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such
Stock Awards unless and until such authority is obtained.

 

9.             Use of Proceeds
from Stock.

 

Proceeds from the sale of Common Stock pursuant to
Stock Awards shall constitute general funds of the Company.

 

14

 

10.          Miscellaneous.

 

(a)           Acceleration
of Exercisability and Vesting.  The
Board shall have the power to accelerate the time at which a Stock Award may
first be exercised or the time during which a Stock Award or any part thereof
will vest in accordance with the Plan, notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised or the time
during which it will vest.

 

(b)           Stockholder
Rights.  No Participant shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Stock Award unless and
until such Participant has satisfied all requirements for exercise of the Stock
Award pursuant to its terms.

 

(c)           No
Employment or other Service Rights. 
Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or without notice
and with or without cause, (ii) the service of a Consultant pursuant to the
terms of such Consultant’s agreement with the Company or an Affiliate or (iii)
the service of a Director pursuant to the Bylaws of the Company or an
Affiliate, and any applicable provisions of the corporate law of the state in
which the Company or the Affiliate is incorporated, as the case may be.

 

(d)           Incentive
Stock Option $100,000 Limitation.  To
the extent that the aggregate Fair Market Value (determined at the time of
grant) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionholder during any calendar year
(under all plans of the Company and its Affiliates) exceeds one hundred
thousand dollars ($100,000), the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.

 

(e)           Investment
Assurances.  The Company may require
a Participant, as a condition of exercising or acquiring Common Stock under any
Stock Award, (i) to give written assurances satisfactory to the Company as to
the Participant’s knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (ii) to give written assurances satisfactory to the Company stating that
the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s
own account and not with any present intention of selling or otherwise
distributing the Common Stock.  The
foregoing requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (1) the issuance of the shares of Common Stock upon the
exercise or acquisition of Common Stock under the Stock Award has been
registered under a then currently effective registration statement under the
Securities Act or (2) as to any particular requirement, a determination is made
by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to
the Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with

 

15

 

applicable securities laws, including, but not limited
to, legends restricting the transfer of the Common Stock.

 

(f)            Withholding
Obligations.  To the extent provided
by the terms of a Stock Award Agreement, the Participant may satisfy any
federal, state or local tax withholding obligation relating to the exercise or
acquisition of Common Stock under a Stock Award by any of the following means
(in addition to the Company’s right to withhold from any compensation paid to
the Participant by the Company) or by a combination of such means:  (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided,
however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law (or such
lesser amount as may be necessary to avoid variable award accounting); or (iii)
delivering to the Company owned and unencumbered shares of Common Stock of the
Company that have been held for more than six (6) months (or such longer or
shorter period of time required to avoid a charge to the Company’s earnings for
financial accounting purposes).

 

(g)           Performance Stock Awards.  A Stock Award may be granted, may vest, or
may be exercised based upon service conditions, upon the attainment during a
Performance Period of certain Performance Goals, or both.  The length of any Performance Period, the
Performance Goals to be achieved during the Performance Period, and the measure
of whether and to what degree such Performance Goals have been attained shall
be conclusively determined by the Board in its sole discretion.  The maximum benefit to be received by any
individual in any calendar year attributable to Stock Awards described in this
Section 10(g) shall not exceed the value of one hundred sixty-six thousand six
hundred sixty-six (166,666) shares of Common Stock.

 

11.          Adjustments upon Changes in Stock.

 

(a)           Capitalization
Adjustments.  If any change is made
in the Common Stock subject to the Plan, or subject to any Stock Award, without
the receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan will be
appropriately adjusted in the class(es) and maximum number of securities
subject to the Plan pursuant to subsection 4(a) and the maximum number of
securities subject to award to any person pursuant to subsection 5(c) and 10(g),
and the outstanding Stock Awards will be appropriately adjusted in the
class(es) and number of securities and price per share of Common Stock subject
to such outstanding Stock Awards.  The
Board shall make such adjustments, and its determination shall be final,
binding and conclusive.  (The conversion
of any convertible securities of the Company shall not be treated as a
transaction “without receipt of consideration” by the Company.)

 

(b)           Dissolution
or Liquidation.  In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event, and shares of Common Stock
subject to the Company’s repurchase option may be repurchased by the Company
notwithstanding the fact that the holder of such stock is still in Continuous

 

16

 

Service. 
Notwithstanding the foregoing, Options granted under the 1997 Stock
Option Plan shall be subject to Section 11(c) below in the event of a
dissolution or liquidation of the Company.

 

(c)           Corporate
Transaction.  In the event of (i) a
sale, lease or other disposition of all or substantially all of the securities
or assets of the Company, (ii) a merger or consolidation in which the Company
is not the surviving corporation or (iii) a reverse merger in which the Company
is the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then any
surviving corporation or acquiring corporation may assume any Stock Awards
outstanding under the Plan or may substitute similar stock awards (including an
award to acquire the same consideration paid to the stockholders in the
transaction described in this subsection 11(c)) for those outstanding under the
Plan.  In the event any surviving
corporation or acquiring corporation does not assume such Stock Awards or
substitute similar stock awards for those outstanding under the Plan, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full,
and the Stock Awards shall terminate if not exercised (if applicable) at or
prior to such event.  With respect to any
other Stock Awards outstanding under the Plan, such Stock Awards shall
terminate if not exercised (if applicable) prior to such event.

 

12.          Amendment of the Plan and Stock
Awards.

 

(a)           Amendment
of Plan.  The Board at any time, and
from time to time, may amend the Plan. 
However, except as provided in Section 11 relating to adjustments upon
changes in Common Stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq
or securities exchange listing requirements.

 

(b)           Stockholder
Approval.  The Board may, in its sole
discretion, submit any other amendment to the Plan for stockholder approval,
including, but not limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to certain executive officers.

 

(c)           Contemplated
Amendments.  It is expressly
contemplated that the Board may amend the Plan in any respect the Board deems
necessary or advisable to provide eligible Employees with the maximum benefits
provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or to bring the
Plan and/or Incentive Stock Options granted under it into compliance therewith.

 

(d)           No
Impairment of Rights.  Rights under
any Stock Award granted before amendment of the Plan shall not be impaired by
any amendment of the Plan unless (i) the Company requests the consent of the
Participant and (ii) the Participant consents in writing.

 

(e)           Amendment
of Stock Awards.  The Board at any
time, and from time to time, may amend the terms of any one or more Stock
Awards; provided, however, that the rights under

 

17

 

any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

 

13.          Termination or Suspension of the
Plan.

 

(a)           Plan
Term.  The Board may suspend or
terminate the Plan at any time.  Unless
sooner terminated, the Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan is approved by the stockholders of the
Company.  No Stock Awards may be granted
under the Plan while the Plan is suspended or after it is terminated.

 

(b)           No
Impairment of Rights.  Suspension or
termination of the Plan shall not impair rights and obligations under any Stock
Award granted while the Plan is in effect except with the written consent of
the Participant.

 

14.          Effective Date of Plan.

 

The Plan shall become
effective upon its adoption by the Board, but no Stock Award shall be exercised
(or, in the case of a stock bonus, shall be granted) unless and until the Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the Board.

 

15.          Choice of Law.

 

The law of the State of Delaware shall govern all
questions concerning the construction, validity and interpretation of this
Plan, without regard to such state’s conflict of laws rules.

 

18

 

Appendix A

 

 

Rigel
Pharmaceuticals, Inc.

 

2001
Non-Officer Equity Incentive Plan

 

Adopted
July 19, 2001

Amended
December 13, 2002

Stockholder
Approval Not Required

 

1.             Purposes.

 

(a)           Eligible
Stock Award Recipients.  The persons
eligible to receive Stock Awards are the Employees (other than Officers) and
Consultants of the Company and its Affiliates.

 

(b)           Available
Stock Awards.  The purpose of the
Plan is to provide a means by which eligible recipients of Stock Awards may be
given an opportunity to benefit from increases in value of the Common Stock
through the granting of the following Stock Awards: (i) Nonstatutory Stock
Options, (ii) stock bonus awards and (iii) rights to acquire restricted stock.

 

(c)           General
Purpose.  The Company, by means of
the Plan, seeks to retain the services of the group of persons eligible to
receive Stock Awards, to secure and retain the services of new members of this
group and to provide incentives for such persons to exert maximum efforts for
the success of the Company and its Affiliates.

 

2.             Definitions.

 

(a)           “Affiliate” means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.

 

(b)           “Board” means the Board of Directors of the Company.

 

(c)           “Code” means the Internal Revenue Code of 1986, as
amended.

 

(d)           “Committee” means a committee of one or more members of
the Board appointed by the Board in accordance with Section 3(c).

 

(e)           “Common Stock” means the common stock of the Company.

 

(f)            “Company” means Rigel Pharmaceuticals, Inc., a Delaware
corporation.

 

(g)           “Consultant” means any person, including an advisor,
engaged by the Company or an Affiliate to render consulting or advisory
services and who is compensated for such services.  However, the term “Consultant” shall not
include either Directors who are not

 

1

 

compensated by the Company for their services as
Directors or Directors who are merely paid a director’s fee by the Company for
their services as Directors.

 

(h)           “Continuous Service” means that the Participant’s
service with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
The Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the
Participant’s Continuous Service.  For
example, a change in status from an Employee of the Company to a Consultant of
an Affiliate or a Director will not constitute an interruption of Continuous
Service.  The Board or the chief
executive officer of the Company, in that party’s sole discretion, may
determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including sick leave,
military leave or any other personal leave.

 

(i)            “Director” means a member of the Board of Directors of
the Company.

 

(j)            “Disability” means the inability of a person, in the
opinion of a qualified physician acceptable to the Company, to perform the
major duties of such person’s position with the Company or with an Affiliate
because of the sickness or injury of such person.

 

(k)           “Employee” means any person employed by the Company or
an Affiliate.  Mere service as a Director
or payment of a director’s fee by the Company or an Affiliate shall not be
sufficient to constitute “employment” by the Company or an Affiliate.

 

(l)            “Exchange Act” means the Securities Exchange Act of
1934, as amended.

 

(m)          “Fair Market Value” means, as of any date, the value of
the Common Stock determined as follows:

 

(i)            If
the Common Stock is listed on any established stock exchange or traded on the
Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of
a share of Common Stock shall be the closing sales price for such stock (or the
closing bid if no sales were reported) as quoted on such exchange or market (or
the exchange or market with the greatest volume of trading in the Common Stock)
on the day before the date of grant (the “determination date”, or if the
determination date is not a market trading day, then the last market trading
day prior to the determination, as reported in The Wall
Street Journal or such other source
as the Board deems reliable.

 

(ii)           In
the absence of such markets for the Common Stock, the Fair Market Value shall
be determined in good faith by the Board.

 

(n)           “Non-Employee Director”  means a Director who either (i)
is not a current Employee or Officer of the Company or its parent or a subsidiary,
does not receive compensation (directly or indirectly) from the Company or its
parent or a subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would not
be required under Item 404(a) of Regulation S-K promulgated under the federal
securities laws (“Regulation S-K”)), does not possess an interest in any other
transaction

 

2

 

as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

 

(o)           “Nonstatutory Stock Option” means an Option not intended
to qualify as an “incentive stock option” within the meaning of Section 422 of
the Code and the regulations promulgated thereunder.

 

(p)           “Officer” means a person who possesses the authority of
an “officer” as that term is used in Rule 4460(i)(1)(A) of the Rules of the
National Association of Securities Dealers, Inc.  For purposes of the Plan, a person employed
by the Company in the position of “Vice President” or higher shall be
classified as an “Officer” unless the Board or Committee expressly finds that
such person does not possess the authority of an “officer” as that term is used
in Rule 4460(i)(1)(A) of the Rules of the National Association of Securities
Dealers, Inc.

 

(q)           “Option” means a Nonstatutory Stock Option granted
pursuant to the Plan.

 

(r)           “Option Agreement” means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of an
individual Option grant.  Each Option
Agreement shall be subject to the terms and conditions of the Plan.

 

(s)           “Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

 

(t)            “Participant” means a person to whom a Stock Award is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

 

(u)           “Plan” means this Rigel Pharmaceuticals, Inc. 2001
Non-Officer Equity Incentive Plan.

 

(v)            “Rule 16b-3” means Rule 16b-3 promulgated under the
Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

 

(w)           “Securities Act” means the Securities Act of 1933, as
amended.

 

(x)           “Stock Award” means any right granted under the Plan,
including an Option, a restricted stock purchase award and a stock bonus award.

 

(y)           “Stock Award Agreement” means a written agreement
between the Company and a holder of a Stock Award evidencing the terms and
conditions of an individual Stock Award grant. 
Each Stock Award Agreement shall be subject to the terms and conditions
of the Plan.

 

3.             Administration.

 

(a)           Administration
by Board.  The Board shall administer
the Plan unless and until the Board delegates administration to a Committee, as
provided in Section 3(c).

 

3

 

(b)           Powers
of Board.  The Board shall have the
power, subject to, and within the limitations of, the express provisions of the
Plan:

 

(i)            To
determine from time to time which of the persons eligible under the Plan shall
be granted Stock Awards; when and how each Stock Award shall be granted; what
type or combination of types of Stock Award shall be granted; the provisions of
each Stock Award granted, including the time or times when a person shall be
permitted to receive Common Stock pursuant to a Stock Award; and the number of
shares of Common Stock with respect to which a Stock Award shall be granted to
each such person.

 

(ii)           To
construe and interpret the Plan and Stock Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration.  The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient to
make the Plan fully effective.

 

(iii)         To
effect, at any time and from time to time, with the consent of any adversely
affected Optionholder, (1) the reduction of the exercise price of any
outstanding Option under the Plan, (2) the cancellation of any outstanding
Option under the Plan and the grant in substitution therefor of (A) a new
Option under the Plan covering the same or a different number of shares of
Common Stock, (B) a stock bonus, (C) the right to acquire restricted stock,
and/or (D) cash, or (3) any other action that is treated as a repricing under
generally accepted accounting principles.

 

(iv)          To
amend the Plan or a Stock Award as provided in Section 12.

 

(v)            Generally,
to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company which are not in
conflict with the provisions of the Plan.

 

(c)           Delegation
to Committee.

 

(i)            General.  The Board may delegate administration of the
Plan to a Committee or Committees of one (1) or more members of the Board, and
the term “Committee” shall apply to any person or persons to whom such
authority has been delegated.  If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any
of the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.  The Board may abolish the Committee at any
time and revest in the Board the administration of the Plan.

 

(ii)           Committee
Composition when Common Stock is Publicly Traded.  At such time as the Common Stock is publicly
traded, in the discretion of the Board, a Committee may consist solely of two
or more Non-Employee Directors, in accordance with Rule 16b-3.  Within the scope of such authority, the Board
or the Committee may delegate to a committee of

 

4

 

one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.

 

(d)           Effect
of Board’s Decision.  All
determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.

 

4.             Shares Subject to the Plan.

 

(a)           Share
Reserve.  Subject to the provisions
of Section 11 relating to adjustments upon changes in Common Stock, the Common
Stock that may be issued pursuant to Stock Awards shall not exceed in the
aggregate three million five hundred thousand (3,500,000) shares of Common
Stock.

 

(b)           Reversion
of Shares to the Share Reserve.  If
any Nonstatutory Stock Option shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in full, the
shares of Common Stock not acquired under such Nonstatutory Stock Option shall
revert to and again become available for issuance under the Plan.

 

(c)           Source
of Shares.  The shares of Common
Stock subject to the Plan may be unissued shares or reacquired shares, bought
on the market or otherwise.

 

5.             Eligibility.

 

(a)           Eligibility
for Specific Stock Awards.  Stock
Awards may be granted to Employees, who are not Officers, and Consultants; provided, however, that Officers who are not previously
employed by the Company may be granted Stock Awards as an inducement essential
to such individuals entering into employment contracts with the Company.

 

(b)           Consultants.

 

(i)            A
Consultant shall not be eligible for the grant of a Stock Award if, at the time
of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”)
is not available to register either the offer or the sale of the Company’s
securities to such Consultant because of the nature of the services that the
Consultant is providing to the Company, or because the Consultant is not a
natural person, or as otherwise provided by the rules governing the use of Form
S-8, unless the Company determines both (i) that such grant (A) shall be
registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration
under the Securities Act in order to comply with the requirements of the
Securities Act, if applicable, and (ii) that such grant complies with the
securities laws of all other relevant jurisdictions.

 

(ii)           Form
S-8 generally is available to consultants and advisors only if (i) they are
natural persons; (ii) they provide bona fide services to the issuer, its
parents, its majority-owned subsidiaries or majority-owned subsidiaries of the
issuer’s parent; and (iii) the services are not in connection with the offer or
sale of securities in a capital-raising transaction, and do not directly or
indirectly promote or maintain a market for the issuer’s securities.

 

5

 

6.             Option Provisions.

 

Each Option shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate.  The provisions of separate Options shall
include (through incorporation of provisions hereof by reference in the Option
or otherwise) the substance of each of the following provisions:

 

(a)           Term.  The term of an Option shall not exceed 10
years, either at the time of grant of the Option or as the Option may be
amended thereafter.

 

(b)           Exercise
Price of a Nonstatutory Stock Option. 
The exercise price of each Nonstatutory Stock Option shall be not less
than the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted.

 

(c)           Consideration.  The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash or by check at the time the Option
is exercised or (ii) at the discretion of the Board at the time of the grant of
the Option or at any time prior to the time of exercise in the case of a
Nonstatutory Stock Option (1) by delivery to the Company of other Common Stock,
(2) according to a deferred payment or other similar arrangement with the
Optionholder or (3) in any other form of legal consideration that may be
acceptable to the Board.  Unless
otherwise specifically provided in the Option, the purchase price of Common
Stock acquired pursuant to an Option that is paid by delivery to the Company of
other Common Stock acquired, directly or indirectly from the Company, shall be
paid only by shares of the Common Stock of the Company that have been held for
more than six (6) months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes).  At any time that the Company is incorporated
in Delaware, payment of the Common Stock’s “par value,” as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.

 

In the case of any deferred payment arrangement,
interest shall be compounded at least annually and shall be charged at the
market rate of interest necessary to avoid a charge to earnings for financial
accounting purposes.

 

(d)           Transferability
of a Nonstatutory Stock Option. A Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Optionholder only by the
Optionholder.  Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company,
in a form satisfactory to the Company, designate a third party who, in the
event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.

 

(e)           Vesting
Generally.  Each Option shall be
evidenced by an Option Agreement executed by the Company and the
Optionholder.  The total number of shares
of Common Stock subject to an Option may vest and therefore become exercisable
as set-forth in the Option Agreement. The Option may be subject to such other
terms and conditions on the time or times when it may be exercised (which may
be based on performance or other criteria) as the Board may deem
appropriate.   The provisions of this
Section 6(e) are subject to any Option provisions

 

6

 

governing the minimum number of shares of Common Stock
as to which an Option may be exercised.

 

(f)            Termination
of Continuous Service.  In the event
an Optionholder’s Continuous Service terminates for any reason other than upon
the Optionholder’s death or Disability, the Optionholder may exercise his or
her Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination or as otherwise permitted by the Company)
but only within such period of time ending on the earlier of (i) the three (3)
months following such termination (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement.  If,
after termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.

 

(g)           Extension
of Termination Date.  An Optionholder’s
Option Agreement may also provide that if the exercise of the Option following
the termination of the Optionholder’s Continuous Service (other than upon the
Optionholder’s death or Disability) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act or similar requirements of applicable law
of another jurisdiction to which the Option is subject, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in the Option Agreement, or (ii) the expiration of a period of three (3)
months after the termination of the Optionholder’s Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements or similar requirements.

 

(h)           Disability
of Optionholder.  In the event that
an Optionholder’s Continuous Service terminates as a result of the Optionholder’s
Disability, the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination or as otherwise permitted by the Company), but only within such
period of time ending on the earlier of (i) the twelve (12) months following
such termination (or such longer or shorter period specified in the Option
Agreement) or (ii) the expiration of the term of the Option as set forth in the
Option Agreement.  If, after termination,
the Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.

 

(i)            Death
of Optionholder.  In the event (i) an
Optionholder’s Continuous Service terminates as a result of the Optionholder’s
death or (ii) the Optionholder dies within the period (if any) specified in the
Option Agreement after the termination of the Optionholder’s Continuous Service
for a reason other than death, then the Option may be exercised (to the extent
the Optionholder was entitled to exercise such Option as of the date of death
or as otherwise permitted by the Company) by the Optionholder’s estate, by a
person who acquired the right to exercise the Option by bequest or inheritance
or by a person designated to exercise the Option upon the Optionholder’s death
pursuant to Section 6(d), but only within the period ending on the earlier of
(1) the date eighteen (18) moths following the date of death (or such longer or
shorter period specified in the Option Agreement) or (2) the expiration of the
term of such Option as set forth in the Option Agreement.  If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

 

7

 

(j)            Early
Exercise.  The Option may include a
provision whereby the Optionholder may elect at any time before the
Optionholder’s Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option.  Any unvested
shares of Common Stock so purchased may be subject to a repurchase option in
favor of the Company or to any other restriction the Board determines to be
appropriate.

 

7.             Provisions of Stock Awards other than Options.

 

(a)           Stock
Bonus Awards.  Each stock bonus
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.  The terms
and conditions of stock bonus agreements may change from time to time, and the
terms and conditions of separate stock bonus agreements shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

 

(i)            Consideration.  A stock bonus award may be awarded in
consideration for past services actually rendered to the Company or an
Affiliate for its benefit.

 

(ii)           Vesting.  Shares of Common Stock awarded under the
stock bonus agreement may be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the
Board.

 

(iii)         Termination
of Participant’s Continuous Service. 
In the event a Participant’s Continuous Service terminates, the Company
shall automatically reacquire any or all of the shares of Common Stock held by
the Participant which have not vested as of the date of termination under the
terms of the stock bonus agreement.

 

(iv)          Transferability.  Rights to acquire shares of Common Stock
under the stock bonus agreement shall be transferable by the Participant only
upon such terms and conditions as are set forth in the stock bonus agreement,
as the Board shall determine in its discretion, so long as Common Stock awarded
under the stock bonus agreement remains subject to the terms of the stock bonus
agreement.

 

(b)           Restricted
Stock Purchase Awards.  Each
restricted stock purchase agreement shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate.  The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

 

(i)            Purchase
Price.  The purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement.

 

(ii)           Consideration.  The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either:  (i) in cash at the time of

 

8

 

purchase; (ii) at the discretion of the Board,
according to a deferred payment or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be
acceptable to the Board in its discretion; provided, however, that at any time
that the Company is incorporated in Delaware, then payment of the Common Stock’s
“par value,” as defined in the Delaware General Corporation Law, shall not be
made by deferred payment.

 

(iii)         Vesting.  Shares of Common Stock acquired under the
restricted stock purchase agreement may be subject to a share repurchase option
in favor of the Company in accordance with a vesting schedule to be determined
by the Board.

 

(iv)          Termination
of Participant’s Continuous Service. 
In the event a Participant’s Continuous Service terminates, the Company
may repurchase or otherwise reacquire any or all of the shares of Common Stock
held by the Participant which have not vested as of the date of termination
under the terms of the restricted stock purchase agreement.

 

(v)            Transferability.  Rights to acquire shares of Common Stock
under the restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement.

 

8.             Covenants of the Company.

 

(a)           Availability
of Shares.  During the terms of the
Stock Awards, the Company shall keep available at all times the number of
shares of Common Stock required to satisfy such Stock Awards.

 

(b)           Securities
Law Compliance.  The Company shall
seek to obtain from each regulatory commission or agency having jurisdiction
over the Plan such authority as may be required to grant Stock Awards and to
issue and sell shares of Common Stock upon exercise of the Stock Awards;
provided, however, that this undertaking shall not require the Company to
register under the Securities Act the Plan, any Stock Award or any Common Stock
issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
Common Stock under the Plan, the Company shall be relieved from any liability
for failure to grant Stock Awards in compliance with applicable law or to issue
and sell Common Stock upon exercise of such Stock Awards unless and until such
authority is obtained.

 

9.             Use of Proceeds from Stock.

 

Proceeds from the sale of Common Stock pursuant to
Stock Awards shall constitute general funds of the Company.

 

10.          Miscellaneous.

 

(a)           Stockholder
Rights.  No Participant shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such

 

9

 

Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

 

(b)           No
Employment or other Service Rights. 
Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or without notice
and with or without cause, (ii) the service of a Consultant pursuant to the
terms of such Consultant’s agreement with the Company or an Affiliate or (iii)
the service of a Director pursuant to the Bylaws of the Company or an
Affiliate, and any applicable provisions of the corporate law of the state in
which the Company or the Affiliate is incorporated, as the case may be.

 

(c)           Investment
Assurances.  The Company may require a
Participant, as a condition of exercising or acquiring Common Stock under any
Stock Award, (i) to give written assurances satisfactory to the Company as to
the Participant’s knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (ii) to give written assurances satisfactory to the Company stating that
the Participant is acquiring Common Stock subject to the Stock Award for the
Participant’s own account and not with any present intention of selling or otherwise
distributing the Common Stock.  The
foregoing requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (1) the issuance of the shares of Common Stock upon the
exercise or acquisition of Common Stock under the Stock Award has been
registered under a then currently effective registration statement under the
Securities Act or (2) as to any particular requirement, a determination is made
by counsel for the Company that such requirement need not be met in the circumstances
under the then applicable securities laws. 
The Company may, upon advice of counsel to the Company, place legends on
stock certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.

 

(d)           Withholding
Obligations.  To the extent provided
by the terms of a Stock Award Agreement, the Participant may satisfy any
federal, state or local tax withholding obligation relating to the exercise or
acquisition of Common Stock under a Stock Award by any of the following means
(in addition to the Company’s right to withhold from any compensation paid to
the Participant by the Company) or by a combination of such means:  (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that
no shares of Common Stock are withheld with a value exceeding the minimum
amount of tax required to be withheld by law; or (iii) delivering to the
Company owned and unencumbered shares of Common Stock.

 

10

 

11.          Adjustments upon Changes in Stock.

 

(a)           Capitalization
Adjustments.  If any change is made
in the Common Stock subject to the Plan, or subject to any Stock Award, without
the receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction not
involving the receipt of consideration by the Company), the Plan will be
appropriately adjusted in the type, class(es) and maximum number of securities
subject to the Plan pursuant to Section 4(a), and the outstanding Stock Awards
will be appropriately adjusted in the type, class(es) and number of securities
and price per share of securities subject to such outstanding Stock
Awards.  The Board shall make such
adjustments, and its determination shall be final, binding and conclusive.  (The conversion of any convertible securities
of the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.)

 

(b)           Dissolution
or Liquidation.  In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.

 

(c)           Asset
Sale, Merger, Consolidation or Reverse Merger.  In the event of (i) a sale, exchange, lease
or other disposition of all or substantially all of the assets of the Company,
(ii) a merger or consolidation in which the Company is not the surviving
corporation or (iii) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding
the merger are converted by virtue of the merger into other property, whether
in the form of securities, cash or otherwise (individually, a “Corporate
Transaction”), then any surviving corporation or acquiring corporation shall
assume or continue any Stock Awards outstanding under the Plan or shall
substitute similar stock awards (including an award to acquire the same
consideration paid to the stockholders in the Corporate Transaction) for those
outstanding under the Plan.  In the event
any surviving corporation or acquiring corporation refuses to assume or
continue such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting of such
Stock Awards (and, if applicable, the time during which such Stock Awards may
be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to the Corporate
Transaction.  With respect to any other
Stock Awards outstanding under the Plan, such Stock Awards shall terminate if
not exercised (if applicable) prior to the Corporate Transaction.

 

12.          Amendment of the Plan and Stock Awards.

 

(a)           Amendment
of Plan.  The Board at any time, and
from time to time, may amend the Plan. However, except as provided in Section
11 relating to adjustments upon changes in stock, no amendment shall be
effective unless approved by the stockholders of the Company to the extent
stockholder approval is necessary for the Plan to satisfy any Nasdaq or securities
exchange listing requirements.  The Board
may in its sole discretion submit such amendment to the Plan for stockholder
approval.

 

11

 

(b)           No
Impairment of Rights.  Rights under
any Stock Award granted before amendment of the Plan shall not be materially
impaired by any amendment of the Plan unless (i) the Company requests the
consent of the Participant and (ii) the Participant consents in writing.

 

(c)           Amendment
of Stock Awards.  The Board at any
time, and from time to time, may amend the terms of any one or more Stock
Awards; provided, however, that the rights under any Stock Award shall not be
materially impaired by any such amendment unless (i) the Company requests the
consent of the Participant and (ii) the Participant consents in writing.

 

13.          Termination or Suspension of the Plan.

 

(a)           Plan
Term.  The Board may suspend or
terminate the Plan at any time.  No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.

 

(b)           No
Impairment of Rights.  Suspension or
termination of the Plan shall not impair rights and obligations under any Stock
Award granted while the Plan is in effect except with the written consent of
the Participant.

 

14.          Effective Date of Plan.

 

The Plan shall become
effective immediately upon its adoption by the Board.

 

15.          Choice of Law.

 

The law of the State of California shall govern all
questions concerning the construction, validity and interpretation of this
Plan, without regard to such state’s conflict of laws rules.

 

12

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