Document:

EX-10.30 Employment Agreement

 

EXHIBIT 10.30

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is entered into and shall be effective as of
August 27, 2007, by and between FGX International Inc., a Delaware corporation with a mailing
address of 500 George Washington Highway, Smithfield, Rhode Island 02917 (the “Company”), and
Gerald Kitchen, an individual with a residence in the State of Rhode Island (“Executive”).

RECITALS

     Executive currently is an employee of the Company. The Company and the Executive desire to
enter into this Agreement to set forth the terms and conditions of Executive’s continuing
employment relationship.

AGREEMENT

     In consideration of the premises and mutual promises herein below set forth, the parties
hereby agree as follows:

     1. Employment Period. The term of Executive’s Employment by the Company pursuant to
the terms of this Agreement (the “Employment Period”) shall commence on the date hereof (the
“Effective Date”) and shall continue until terminated as provided herein. For purposes of this
agreement “Termination Date” means the date on which the Employment Period ends.

     2. Employment; Duties. Subject to the terms and conditions set forth herein, the
Executive shall serve as the Executive Vice President, Operations of the Company during the
Employment Period. The duties assigned and authority granted to Executive shall be as set forth in
the By-laws of the Company and those that are typically assigned and/or afforded to an executive
vice president of operations, and such other duties and responsibilities as may otherwise
reasonably be assigned to him by the Chief Executive Officer from time to time. Executive agrees
to perform his duties for the Company diligently, competently and in a good faith manner.
Notwithstanding anything to the contrary set forth herein, the Executive shall be permitted during
the Employment Period to (a) engage in civic and charitable activities to the extent they are not
inconsistent with Executive’s duties hereunder and (b) serve as a member of the board of directors
of not more than two additional for profit corporations.

     3. Salary and Bonus.

          a. Base Salary. Executive shall be entitled to receive a base salary from the Company
during the Employment Period at the rate of Two Hundred Eight Thousand Dollars ($208,000) per annum
(as from time to time, if at all, increased, the “Base Salary”). The Base Salary may be increased
from time to time during the Employment Period, at the same time and under the same circumstances
as other Executive Vice Presidents of the Company. In addition, the Board of Directors, or
Compensation Committee, of the Company or of FGX International Holdings Limited, a British Virgin
Islands corporation and the indirect parent of the Company (“FGX Holdings”) (such Board of
Directors or Compensation Committee of the Company or of FGX Holdings collectively is referred to
herein as the “Board of Directors”), may further
increase Executive’s Base Salary from time to time in their discretion, based upon the
Company’s performance and Executive’s particular contributions.

 

 

          b. Bonus. Executive shall be eligible for and shall receive a cash bonus for the plan
year 2007, and thereafter during each year of Executive’s employment, subject to the discretion of
the Company’s Board of Director’s, of up to thirty percent
(30%) of his Base Salary under the
Company’s Executive Incentive Compensation Plan (“Annual Target Bonus Amount”) on account of the
services rendered by him during each calendar year during the Employment Period and the attainment
of certain performance goals and successful completion of certain initiatives established by the
Company. The cash bonus shall be paid on or before the later of (i) March 15 of the year following
the calendar year for which the bonus was earned and (ii) the date on which the Board of Directors
has been able to determine within a reasonable degree of certainty the amount of the bonus. The
Board of Directors may from time to time increase the Annual Target Bonus Amount.

     4. Other Benefits.

          a. Insurance and Other Benefits. During the Employment Period, Executive shall be
entitled to participate in, and shall receive the maximum benefits available under, the Company’s
insurance programs (including health, supplemental health and life insurance) and any ERISA benefit
plans, as the same may be adopted and/or amended from time to time, and shall receive all other
benefits that are provided by the Company to other senior executives.

          b. Paid Time Off. Executive shall be entitled to twenty (20) days of paid time off
annually in accordance with the Company’s paid time off policies in effect from time to time, to be
taken at such time(s) as shall not, in the reasonable judgment of the Chief Executive Officer of
the Company, interfere with Executive’s fulfillment of his duties hereunder. Executive shall be
entitled to as many holidays, sick days and personal days as are generally provided by the Company
from time to time to its employees in accordance with the Company’s policies as in effect from time
to time.

          c. Automobile Allowance. During the Employment Period, the Company shall provide
Executive with a monthly automobile allowance consistent with the plan adopted or to be adopted by
the Company for other senior executives. As of the Effective Date, the monthly automobile
allowance provided to Executive shall be $800.00.

     5. Termination by the Company With Cause. Upon prior written notice to Executive, the
Company may terminate Executive’s employment if any of the following events shall occur (any of the
following events shall constitute “Cause” for all purposes hereof):

          a. the conviction of Executive for a crime involving fraud or moral turpitude;

          b. deliberate dishonesty of Executive with respect to the Company or any of its subsidiaries
or affiliates; or

          c. the refusal of Executive to follow the reasonable and lawful written instructions of the
Chief Executive Officer of the Company with respect to the services to be rendered and the manner
of rendering such services by Executive, provided such instructions are in accordance with the
duties of the Executive under this Agreement and provided further that
such refusal is material and repetitive and is not justified or excused either by the terms of
this Agreement or by actions taken by the Company in violation of this Agreement.

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     6. Termination by Executive; Termination by the Company Without Cause.

          a. Notice/Events:

     i. Termination by Executive. Executive may terminate his employment at
any time by providing written notice to the Company.

     ii. Termination by the Company Without Cause. The Company may
terminate Executive’s employment at any time, without Cause by providing written
notice to Executive. As used in this Agreement, the term “without Cause” shall mean
termination for any reason not specified in Section 5 or Section 7 hereof.

     b. Executive’s Right-to-Terminate. Executive may terminate Executive’s employment for
Good Reason at any time during the term of this Agreement. For purposes of this Agreement, “Good
Reason” shall mean any of the following (without Executive’s express written consent):

     i. the assignment to Executive by the Company of any duties materially
inconsistent with Executive’s status with the Company or a material alteration in the
nature or status of Executive’s responsibilities from those in effect on the date
hereof, or a material reduction in Executive’s titles as in effect on the date
hereof, or any removal of Executive from, or any failure to reelect Executive to, any
of such positions, except in connection with the termination of his employment for
disability or for any reason specified in Section 5 hereof or as a result of
Executive’s death or by Executive other than for Good Reason;

     ii. a reduction by the Company in Executive’s Base Salary as in effect on the
date hereof or as the same may be increased from time to time during the term of this
Agreement;

     iii. except if such action applies to all senior executive officers of the
Company generally, any failure by the Company to continue in effect its present
Executive Incentive Compensation Plan, any fringe benefits, the taking of any action
by the Company which would, directly or indirectly, materially reduce Executive’s
benefits or deprive Executive of any fringe benefits enjoyed by Executive at the date
hereof, or the failure by the Company to provide Executive with the number of paid
vacation days to which Executive is entitled at the date hereof;

     iv. a relocation of the Company’s principal executive offices to a location
more than 50 miles from their current location in, or the Company’s requiring
Executive to be based anywhere other than the Company’s principal executive offices;
or

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     v. any material breach, which remains uncured for twenty (20) days after
reasonable notice, by the Company of any provisions of this Agreement.

     c. Severance.

     i. Without Cause. If the Company terminates Executive’s employment
without Cause, or if Executive terminates his employment pursuant to Section 6(b)
hereof, then, subject to Section 8, commencing on the date of termination of
employment, the Company shall provide Executive with a severance package which shall
consist of the following: (i) for a period equal to one (1) year after the date of
termination or, if the Company exercises its Non-compete Extension (as defined
below), eighteen (18) months (x) payment on the first business day of each month of
an amount equal to one-twelfth of Executive’s then current Salary under Section 3(a)
hereof; (y) payment on the first business day of each month of an amount equal to
one-twelfth of Executive’s Annual Target Bonus Amount under the Company’s Executive
Incentive Compensation Plan for the year of termination (assuming for purposes of
calculating such amount that the percentage of Salary payable as a bonus to
Executive on account of the year of termination will be the same percentage of
Salary paid as a bonus to Executive on account of the immediately preceding year);
and (z) continuation of all benefits under Section 4(a) hereof; provided, however,
that the amount of any severance payments hereunder shall be reduced by the amount
of income otherwise earned by Executive from alternative employment during the one
year period following termination and provided, further that benefits under Section
4(a) shall be discontinued as of the date on which Executive is provided comparable
benefits from any other source.

     ii. General Release. As a condition precedent to receiving any
severance payment, Executive shall execute a general release of any and all claims
which Executive or his heirs, executors, agents or assigns might have against the
Company, its subsidiaries, affiliates, successors, assigns and its past, present and
future employees, officers, directors, agents and attorneys, except for claims
arising under this Agreement or any employee benefit plan (other than any employee
benefit plan providing a benefit in the nature of a severance benefit) in which
Executive participates or for any right to indemnification to which Executive may be
entitled under this Agreement or as an officer and director of the Company.

     iii. Withholding. All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be withheld by the
Employer under applicable law.

     iv. Certain Reductions of Payments by the Company.

     1. Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company
to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the

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terms of this Agreement or otherwise (a “Payment”), would constitute an
“excess parachute payment” within the meaning of Section 280G(b) of the U.S.
Internal Revenue Code (the “Code”), and thus would result in the Executive
incurring an excise tax under Section 4999 of the Code, then the aggregate
present value of amounts payable or distributable to or for the benefit of
the Executive pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as “Agreement
Payments”) shall be reduced to the Reduced Amount, but only if and to the
extent that the after-tax value to the Executive of reduced Agreement
Payments would exceed the after-tax value to the Executive of the Agreement
Payments received by the Executive without application of such reduction.
The “Reduced Amount” shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing
any Payment to be nondeductible by the Company because of Section 280G of
the Code. Anything to the contrary notwithstanding, if the Reduced Amount
is zero and it is determined further that any Payment which is not an
Agreement Payment would nevertheless be nondeductible by the Company for
Federal income tax purposes because of Section 280G of the Code, then the
aggregate present value of Payments’ which are not Agreement Payments shall
also be reduced (but not below zero) to an amount expressed in present value
which maximizes the aggregate present value of Payments without causing any
Payment to be nondeductible by the Company because of Section 280G of the
Code. For purposes of this Section 6(c)(iv), present value shall be
determined in accordance with Section 280G(d)(4) of the Code. Thus, for
illustrative purposes only, if the Executive’s average W-2 compensation for
the five (5) years prior to the year in which a change in control occurs
(the “Base Amount”) was $500,000, and the value of the payments and benefits
that are contingent upon the change in control (the “Parachute Payments”)
was $1,510,000, the Executive would have an excess parachute payment within
the meaning of Section 280G(b) of the Code since the value of the parachute
payments ($1,510,000) would be greater than three (3) times the Executive’s
Base Amount ($1,500,000). The amount of the excess parachute payment would
be $1,010,000 (the amount by which the value of the parachute payments
exceeds one (1) times the Base Amount), and if the aggregate amount of the
parachute payments was not reduced, the Executive would incur an excise tax
under Section 4999 of the Code equal to 20% of the excess parachute payment
(or $202,000). This excess parachute payment could be avoided if instead,
the value of the parachute payments was reduced by $10,001 to $1,499,999
(since the value of the parachute payments then would be less than three (3)
times the Base Amount). Since the Executive would receive a greater after
tax amount, under the foregoing example, if his parachute payments were
reduced by $10,001 (to $1,499,999) than he would if his parachute payments
were not reduced and the Executive incurred a $202,000 excise tax (reducing
his parachute payments to $1,308,000) on the excess parachute payment, the
Executive’s parachute payments would
be reduced under this provision to $1,499,999 (by $10,001) to avoid any
excess parachute payments.

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     2. All determinations required to be made under this Section 6(c)(iv)
shall be made by the Company’s accountants for the Company’s last fiscal
year or, at the mutual agreement of the Executive and the Company, any other
nationally or regionally recognized firm of independent public accountants
(the “Accounting Firm”), which shall provide detailed supporting
calculations both to the Company and the Executive within twenty (20)
business days of the date of termination or such earlier time as is
requested by the Company and an opinion to the Executive that he has
substantial authority not to report any excise tax on his Federal income tax
return with respect to any Payments. Any such determination by the
Accounting Firm shall be binding upon the Company and the Executive. The
Executive shall determine which and how much of the Payments shall be
eliminated or reduced consistent with the requirements of this Section
6(c)(iv), provided that, if the Executive does not make such determination
within ten business days of the receipt of the calculations made by the
Accounting Firm, the Company shall elect which and how much of the Payments
shall be eliminated or reduced consistent with the requirements of this
Section 6(c)(iv) and shall notify the Executive promptly of such election.
Within five business days thereafter, the Company shall pay to or distribute
to or for the benefit of the Executive such amounts as are then due to the
Executive under this Agreement. All fees and expenses of the Accounting
Firm incurred in connection with the determinations contemplated by this
Section 6(c)(iv) shall be borne by the Company.

     3. As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Payments will have been made by the Company
which should not have been made (“Overpayment”) or that additional Payments
which will not have been made by the Company could have been made
(“Underpayment”), in each case, consistent with the calculations required to
be made hereunder. In the event that the Accounting Firm, based upon the
assertion of a deficiency by the Internal Revenue Service against the
Executive which the Accounting Firm believes has a high probability of
success, determines that an Overpayment has been made, any such Overpayment
paid or distributed by the Company to or for the benefit of the Executive
shall be repaid to the Company; provided, however, that no amount shall be
payable by the Executive to the Company if and to the extent such payment
would not either reduce the amount on which the Executive is subject to tax
under Section 1 and Section 4999 of the Code or generate a refund of such
taxes. In the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an Underpayment
has occurred, any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive together with
interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code.

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     7. Death or Disability. In the event of Executive’s death or disability, the
Employment Period will automatically terminate effective as of the date of such death or
disability. As used in this Agreement, the term “disability” shall mean inability on the part of
Executive for a period of more than six (6) months in the aggregate during any twelve (12)
consecutive month period to perform the services contemplated under this Agreement. A
determination of disability shall be made by a physician satisfactory to both Executive and the
Company, provided that if Executive and the Company do not agree on a physician, Executive and the
Company shall each select a physician and these two physicians together shall select a third
physician, whose determination as to disability shall be binding on all parties.

     8. Change in Control.

          a. If Executive’s employment is terminated by the Company without Cause or by Executive for
Good Reason within six (6) months before and in anticipation of, or twelve (12) months after, a
Change in Control (as defined in Paragraph (b) of this Section 8), Executive shall be entitled to
receive a supplemental bonus payment (the “Change in Control Payment”) from the Company equal to
one (1) times the sum of Executive’s then current Salary and Executive’s Annual Target Bonus Amount
(assuming for purposes of calculating such amount that the percentage of Salary payable as a bonus
to Executive on account of the year of termination will be the same percentage of Salary paid as a
bonus to Executive on account of the immediately preceding year) under the Company’s Executive
Incentive Compensation Plan for the year of termination. The Change in Control Payment shall be
paid to Executive within fifteen (15) days after: (i) the Change in Control if Executive’s
employment was terminated within six (6) months before the Change in Control; or (ii) the
termination of Executive’s employment by the Company if Executive’s employment terminates within
twelve (12) months after the Change in Control. Executive shall also be entitled to continuation
of all benefits under Section 4(a) hereof, ending on the earlier of (x) the one year anniversary of
the termination date and (v) the date on which Executive is provided comparable benefits from any
other source. In addition, all stock options, restricted stock, restricted stock units and other
equity-based interests held by Executive shall vest and become immediately exercisable. If
Executive is entitled to a Change in Control Payment and benefits under this Section 8(a),
Executive shall not have any rights to receive any severance payments or benefits pursuant to
Section 6(c) hereof. If Executive’s employment by the Company terminates within six (6) months
prior to the Change in Control and Executive received severance payments pursuant to Section 6(c)
hereof, any amounts so paid by the Company to Executive shall be deducted from any Change in
Control Payment otherwise payable to Executive pursuant to this Section 8(a).

          b. A “Change in Control” will be deemed to have occurred if (i) a Takeover Transaction occurs,
or (ii) any election of directors of FGX Holdings takes place (whether by the directors then in
office or by the stockholders at a meeting or by written consent) and a majority of the directors
in the office following such election are individuals who were not nominated by a vote of
two-thirds of the members of the Board of Directors immediately preceding such election, or (iii)
FGX Holdings effectuates a complete liquidation of FGX Holdings or a sale or disposition of all or
substantially all of its assets. A “Change in Control”
shall not be deemed to include, the recapitalization of FGX Holdings or any transactions
related thereto, consummated on or prior to the Effective Date.

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          c. A “Takeover Transaction” shall mean (i) a merger or consolidation of FGX Holdings with, or
an acquisition of FGX Holdings or all or substantially all of either of its assets by, any other
corporation, other than a merger, consolidation or acquisition in which the individuals who were
members of the Board of Directors of FGX Holdings immediately prior to such transaction continue to
constitute a majority of the Board of Directors of the surviving corporation (or, in the case of an
acquisition involving a holding company, constitute a majority of the Board of Directors of the
holding company) for a period of not less than twelve (12) months following the closing of such
transaction, or (ii) when any person, including any “group” as such term is defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), becomes after the date
hereof the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of
FGX Holdings representing more than fifty percent (50%) of the total number of votes that may be
cast for the election of directors of FGX Holdings, as applicable, excluding (i) any person that is
excluded from the definition of “beneficial owner” under Rule 16(a)-1(a)(1) under the Exchange Act
and (ii) any person (including any such group) that consists of or is controlled by (within the
meaning of the definition of “affiliate” in Rule 144 under the Securities Act of 1933, as amended
(an “Affiliate”)) any person that is a shareholder of FGX Holdings on the Effective Date or any
Affiliate of such person.

     9. Non-Competition. During the Employment Period and after termination of Executive’s
employment hereunder, whether or not such termination is without Cause or for Good Reason,
Executive shall not be involved in the Restricted Business Activities, as defined below, for the
period ending twelve (12) months after the date of termination of Executive’s employment (the
“Non-compete Period”) provided that the Company has not otherwise breached its obligations under
the Agreement. As used in this Agreement, the term “Restricted Business Activities” shall mean any
business which markets and sells to customers of a class or category to which FGX Holdings or any
of its subsidiaries, markets and sells at the time Executive’s employment terminated products or
services marketed and sold by FGX Holdings or any of its subsidiaries at such time or products or
services which at such time FGX Holdings or any of its subsidiaries was actively considering
marketing and selling to such customers. During the Non-compete Period, Executive shall not,
without the written approval of the Company, directly or indirectly, either as an individual,
partner, joint venturer, employee or agent for any person, company, corporation or association, or
as an officer, director or stockholder of a corporation or otherwise, enter into or engage in or
have a proprietary interest in the Restricted Business Activities other than the ownership of (a)
the stock of the Company then held by Executive, and (b) no more than five percent (5%) of the
securities of any other publicly-held company. Notwithstanding the foregoing, for so long as a
majority of the issued and outstanding capital stock of the Company is owned directly or indirectly
by Berggruen Holdings, Limited or one or more of its affiliates or a representative of Berggruen
Holdings, Limited or one or more of its affiliates is on the Board (or any entity owning a majority
of the issued and outstanding shares of the Company, whether directly or indirectly), the Company
shall have the right to extend the Non-compete Period for an additional six (6) months for a total
of eighteen (18) months (the “Non-compete Extension”) by delivering to Executive written notice of
such decision prior to termination of the original twelve (12) month Non-compete Period.

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     Executive recognizes and agrees that because a violation by him of his obligations under this
Section 9 will cause irreparable harm to FGX Holdings or any of its subsidiaries that would be
difficult to quantify and for which money damages would be inadequate, any party included in the
definition of FGX Holdings or any of its subsidiaries shall have the right to injunctive relief to
prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete
Period will be extended by the duration of any violation by Executive of any of his obligations
under this Section 9.

     Executive expressly agrees that the character, duration and scope of his obligations under
this Section 9 are reasonable in light of the circumstances as they exist at the date upon which
this Agreement has been executed. However, should a determination nonetheless be made by a court
of competent jurisdiction at a later date that the character, duration or geographical scope of
such obligations is unreasonable in light of the circumstances as they then exist, then it is the
intention of both Executive and the Company that Executive’s obligations under this Section 9 shall
be construed by the court in such a manner as to impose only those restrictions on the conduct of
Executive which are reasonable in light of the circumstances as they then exist and necessary to
assure the Company of the intended benefit of Executive’s obligations under this Section 9.

     10. Confidentiality Covenants. The Company will not disclose the terms and
conditions of Executive’s employment, unless it is required by law to do so.

     11. Section 409A. To the extent that the Executive otherwise would be entitled to any
payment (whether pursuant to this Agreement or otherwise) during the six (6) months beginning on
the Termination Date that would be subject to the additional tax imposed under Section 409A of the
Code (“Section 409A”), (x) the payment shall not be made to the Executive during such six (6) month
period and (y) the payment, together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code shall be paid to the Executive on the earlier of the six-month
anniversary of the Termination Date or the Executive’s death. Similarly, to the extent that the
Executive otherwise would be entitled to any benefit (other than a payment) during the six months
beginning on the Termination Date that would be subject to the Section 409A additional tax, the
benefit shall be delayed and shall begin being provided (together, if applicable, with an
adjustment to compensate the Executive for the delay) on the earlier of the six-month anniversary
of the Termination Date, or the Executive’s death.

     12. Governing Law/Jurisdiction. This Agreement shall be governed by and interpreted
and governed in accordance with the laws of the State of Rhode Island. The parties agree that this
Agreement was made and entered into in Rhode Island and each party hereby consents to the
jurisdiction of a competent court in Rhode Island to hear any dispute arising out of this
Agreement.

     13. Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels any
and all previous agreements, written and oral, regarding the subject matter hereof between the
parties hereto, with the exception of the Proprietary Rights Agreement, or any agreement of similar
name and content, with the Company signed by Executive, and which is attached incorporated by
reference herein. This Agreement shall not be changed, altered, modified or amended, except by a
written agreement signed by both parties hereto.

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     14. Notices. All notices, requests, demands and other communications required or
permitted to be given or made under this Agreement shall be in writing and shall be deemed to have
been given if delivered by hand, sent by generally recognized overnight courier service, telex or
telecopy, or certified mail, return receipt requested.

	 	 	 
	(a)

	 	to the Company at:
	 

	 	500 George Washington Highway
	 

	 	Smithfield, Rhode Island 02917
	 

	 	Attn: Chief Executive Officer
	 
	 	 
	(b)

	 	to Executive at:
	 

	 	the last home address appearing on the Company’s records

     Any such notice or other communication will be considered to have been given (i) on the date
of delivery in person, (ii) on the third day after mailing by certified mail, provided that receipt
of delivery is confirmed in writing, (iii) on the first business day following delivery to a
commercial over-night courier or (iv) on the date of facsimile transmission (telecopy) provided
that the giver of the notice obtains telephone confirmation of receipt.

     Either party may, by notice given to the other party in accordance with this Section,
designate another address or person for receipt of notices hereunder.

     15. Severability. If any term or provision of this Agreement, or the application
thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable,
the remainder of this Agreement, or the application of such terms to the persons or under
circumstances other than those as to which it is invalid or unenforceable, shall be considered
severable and shall not be affected thereby, and each term of this Agreement shall be valid and
enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall,
to the extent permitted by law, be deemed amended and given such interpretation as to achieve the
economic intent of this Agreement.

     16. Waiver. The failure of any party to insist in any one instance or more upon
strict performance of any of the terms and conditions hereof, or to exercise any right or privilege
herein conferred, shall not be construed as a waiver of such terms, conditions, rights or
privileges, but same shall continue to remain in full force and effect. Any waiver by any party of
any violation of, breach of or default under any provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any
other violation of, breach of or default under any other provision of this Agreement.

     17. Successors and Assigns. This Agreement shall be binding upon the Company and any
successors and assigns of the Company and shall inure to the benefit of Executive and his heirs,
personal representations and assigns.

     18. Indemnification. The Company shall indemnify Executive to the maximum extent
permitted under applicable law against all liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise, or as fines and penalties, and counsel fees, reasonably
incurred by him in connection with the defense or disposition of any civil, criminal,
administrative, or investigative action, suit or other proceeding, whether civil or criminal, in

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which he may be involved or with which he may be threatened, while an officer or director of
the Company or FGX Holdings or any of their direct or indirect subsidiaries or affiliates or
thereafter, by reason of his being or having been an officer or director of the Company or FGX
Holdings or any of the their direct or indirect subsidiaries or affiliates. Expenses (including
attorneys’ fees) incurred by Executive in defending any such action, suit or other proceeding shall
be paid by the Company in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of Executive to repay such amount if it shall be
ultimately determined that he is not entitled to be indemnified by the Company. The right of
indemnification provided herein shall not be exclusive of or affect any other rights to which
Executive may be entitled. The provisions hereof shall survive expiration or termination of this
Agreement for any reason whatsoever.

     19. Counterparts. This Agreement may be executed in counterparts and by facsimile,
each of which shall be an original with the same effect as if the signatures thereto and hereto
were upon the same instrument.

     20. Third Party Beneficiaries. Each of the parties hereto agree that FGX Holdings and
each of its subsidiaries is and shall be deemed an intended third party beneficiary of the
Company’s rights under Section 9 and 10 of this Agreement with full rights to enforce the
provisions thereof as if a signatory hereto.

     21. Attorney’s Fees. In any action or proceeding brought to enforce any provision of
this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees and
costs from the other party to the action or proceeding. For purposes of this Agreement, the
“prevailing party” shall be deemed to be that party who obtains substantially the result sought,
whether by settlement, mediation, judgment or otherwise, and “attorneys’ fees” shall include,
without limitation, the actual attorneys’ fees incurred in retaining counsel for advice,
negotiations, suit, appeal or other legal proceeding, including mediation and arbitration.

[Signatures Appear on Next Page]

-11-

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.

	 	 	 	 	 
	 	FGX INTERNATIONAL INC.

 	 
	 	By:  	/s/ Alec Taylor
 	 
	 	 	Name:  	Alec Taylor 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	EXECUTIVE

 	 
	 	By:  	/s/ Gerald Kitchen
 	 
	 	 	Name:  	Gerald Kitchen 	 
	 	 	 	 
	 

[Signature Page to Executive Employment Agreement]EX-4.1 Form of Common Stock Warrant

 

Exhibit 4.1

FORM OF WARRANT

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE EXERCISEABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.

CELLULAR TECHNICAL SERVICES COMPANY, INC.

Warrant To Purchase Common Stock

Warrant No.:                     

Number of Shares of Common Stock:

Date of Issuance:               , 2007 (“Issuance Date”)

     Cellular Technical Services Company, Inc., a Delaware corporation (the “Company”), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged,                     , the registered holder hereof or its permitted assigns (the
“Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, upon surrender of this Warrant to Purchase Common
Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement
hereof, the “Warrant”), at any time or times on or after the date hereof, but not after 11:59 p.m.,
New York Time, on the Expiration Date (as defined below), (1)                      fully paid
nonassessable shares of Common Stock (as defined below) (the “Warrant Shares”). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in
Section 14. This Warrant is one of the Warrants to purchase Common Stock (the “Warrants”) issued
in connection with the credit facility being provided by the Holder to the Company in connection
with that certain Share Transfer, Exchange and Contribution Agreement, dated as of July 25, 2007 by
and among the Company and the investors (the “Buyers”) referred to therein (the “Share Exchange
Agreement”).

     1. EXERCISE OF WARRANT.

          (a) Mechanics of Exercise. Subject to the terms and conditions hereof (including,
without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by
the Holder on any day on or after the date hereof, in whole or in part, by (i) delivery of a
written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the
Holder’s election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal
to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the “Aggregate Exercise Price”) in cash or wire transfer of

 

 

immediately available funds or (B) by notifying the Company that this Warrant is being
exercised pursuant to a Cashless Exercise (as defined in Section 1(d)). Execution and delivery of
the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect
as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to
purchase the remaining number of Warrant Shares. On or before the first Business Day following the
date on which the Company has received each of the Exercise Notice and the Aggregate Exercise Price
(or notice of a Cashless Exercise) (the “Exercise Delivery Documents”), the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the
Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the second Business
Day following the date on which the Company has received all of the Exercise Delivery Documents
(the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by
overnight courier to the address as specified in the Exercise Notice, a certificate, registered in
the Company’s share register in the name of the Holder or its designee, for the number of shares of
Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the
Exercise Notice and Aggregate Exercise Price referred to in clause (ii)(A) above or notification to
the Company of a Cashless Exercise referred to in Section 1(d), the Holder shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of the certificates
evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise
pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being acquired upon an
exercise, then the Company shall as soon as practicable and in no event later than five Business
Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section
6(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior
to such exercise under this Warrant, less the number of Warrant Shares with respect to which this
Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of
this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded to the
nearest whole number. The Company shall pay any and all taxes which may be payable with respect to
the issuance and delivery of Warrant Shares upon exercise of this Warrant; provided, that the
Company shall not be required to pay any tax or taxes that may be payable in respect of any
transfer involved in the issue or delivery of any Warrant or certificates for Warrant Shares in a
name other than that of the registered holder of such Warrant, and no such issue or delivery shall
be made unless and until the person requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the Company that such tax
has been paid.

          (b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $(2)___,
subject to adjustment as provided herein.

          (c) Cashless Exercise. The Holder may, in its sole discretion, exercise this Warrant
in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to
the Company upon such exercise in payment of the Aggregate Exercise Price, elect

2

 

instead to receive upon such exercise the “Net Number” of shares of Common Stock determined
according to the following formula (a “Cashless Exercise”):

          Net
Number = (A x B) - (A x C)

                                                B

          For purposes of the foregoing formula:

A= the total number of shares with respect to which this Warrant is then being
exercised.

B= the average Closing Sale Price of the shares of Common Stock (as reported by
Bloomberg) during the 20 trading-day period ending on the date immediately preceding
the date of the Exercise Notice.

C= the Exercise Price then in effect for
the applicable Warrant Shares at the time of such
exercise.

          (d) Disputes. In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder
the number of Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 11.

     2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and
the number of Warrant Shares shall be adjusted from time to time as follows:

          (a) Adjustment upon Subdivision or Combination of shares of Common Stock. If the
Company at any time on or after the Subscription Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common
Stock into a greater number of shares, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of Warrant Shares will be
proportionately increased. If the Company at any time on or after the Subscription Date combines
(by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to
such combination will be proportionately increased and the number of Warrant Shares will be
proportionately decreased. Any adjustment under this Section 2(b) shall become effective at the
close of business on the date the subdivision or combination becomes effective.

          (b) Other Events. If any event occurs of the type contemplated by the provisions of
this Section 2 but not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company’s Board of Directors will make an appropriate adjustment in the
Exercise Price and the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease
the number of Warrant Shares as otherwise determined pursuant to this Section 2.

3

 

     3. FUNDAMENTAL TRANSACTIONS. The Company shall not enter into or be party to a
Fundamental Transaction unless the Successor Entity assumes in writing (with the purchase of at
least a majority of the outstanding shares of the Company’s Common Stock automatically constituting
an assumption in writing) all of the obligations of the Company under this Warrant in accordance
with the provisions of this Section 3 pursuant to written agreements, including agreements to
deliver to each holder of Warrants in exchange for such Warrants a security of the Successor Entity
evidenced by a written instrument substantially similar in form and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value for the shares of
Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a
corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after
the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company”
shall refer instead to the Successor Entity), and may exercise every right and power of the Company
and shall assume all of the obligations of the Company under this Warrant with the same effect as
if such Successor Entity had been named as the Company herein. Upon consummation of the
Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there
shall be issued upon exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other securities, cash, assets or other
property) purchasable upon the exercise of the Warrant prior to such Fundamental Transaction, such
shares of stock, securities, cash, assets or any other property whatsoever (including warrants or
other purchase or subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had this Warrant been converted immediately prior to
such Fundamental Transaction, as adjusted in accordance with the provisions of this Warrant. In
addition to and not in substitution for any other rights hereunder, prior to the consummation of
any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of Common Stock (a
“Corporate Event”), the Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant at any time after the
consummation of the Fundamental Transaction but prior to the Expiration Date, in lieu of the shares
of the Common Stock (or other securities, cash, assets or other property) purchasable upon the
exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities,
cash, assets or any other property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening of such Fundamental
Transaction had the Warrant been exercised immediately prior to such Fundamental Transaction. The
provisions of this Section shall apply similarly and equally to successive Fundamental Transactions
and Corporate Events and shall be applied without regard to any limitations on the exercise of this
Warrant.

     4. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities,
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, and will at all times in good faith carry out all the provisions of this
Warrant and take all action as may be required to protect the rights of the Holder. Without
limiting the generality of the foregoing, the Company (i) shall not increase the

4

 

par value of any shares of Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the Warrants are
outstanding, take all action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrants,
the number of shares of Common Stock as shall from time to time be necessary to effect the exercise
of the SE Warrants then outstanding (without regard to any limitations on exercise).

     5. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a shareholder
of the Company or any right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to
receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant
shall be construed as imposing any liabilities on the Holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities
are asserted by the Company or by creditors of the Company.

     6. REISSUANCE OF WARRANTS.

          (a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new Warrant (in accordance with Section 6(d)), registered as the Holder
may request, representing the right to purchase the number of Warrant Shares being transferred by
the Holder and, if less then the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 6(d)) to the Holder representing the
right to purchase the number of Warrant Shares not being transferred.

          (b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 6(d)) representing the right to purchase the Warrant Shares then underlying
this Warrant.

          (c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new Warrant or
Warrants (in accordance with Section 6(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the
right to purchase such portion of such Warrant Shares as is

5

 

designated by the Holder at the time of such surrender; provided, however, that no Warrants
for fractional shares of Common Stock shall be given.

          (d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant
pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase
the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued
pursuant to Section 6(a) or Section 6(c), the Warrant Shares designated by the Holder which, when
added to the number of shares of Common Stock underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is
the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

     7. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with Section 9.2 of the Share
Exchange Agreement. The Company shall provide the Holder with prompt written notice of all actions
taken pursuant to this Warrant, including in reasonable detail a description of such action and the
reason therefore. Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon any adjustment of the Exercise Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen
days prior to the date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the shares of Common Stock, or (B) for determining rights to vote
with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction with such notice
being provided to the Holder.

     8. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended and the Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if the Company has obtained the written consent
of the Required Holders; provided that no such action may increase the exercise price of any
Warrant or decrease the number of shares or class of stock obtainable upon exercise of any Warrant
without the written consent of the Holder. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the SE Warrants then outstanding.

     9. GOVERNING LAW. This Warrant shall be governed by and construed and enforced in
accordance with, and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State of Delaware,
without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Delaware.

     10. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and all the Buyers and shall not be construed against any person as the drafter hereof.
The headings of this Warrant are for convenience of reference and shall not form part of, or affect
the interpretation of, this Warrant.

6

 

     11. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If
the Holder and the Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within five Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall, within two Business
Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent,
reputable investment bank selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The
Company shall cause the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the results no later than
ten Business Days from the time it receives the disputed determinations or calculations. Such
investment bank’s or accountant’s determination or calculation, as the case may be, shall be
binding upon all parties absent demonstrable error. The cost of any proceeding (including the fees
and expenses of the investment bank or accountant and reasonable attorney fees and expenses of the
parties) pursuant to this Section 11 shall be borne by Holder and the Company in inverse proportion
as they may prevail on matters resolved by the investment bank or the accountant.

     12. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other remedies available under
this Warrant, at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right to pursue actual
damages for any failure by the Company to comply with the terms of this Warrant. The Company
acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Holder and that the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction restraining any breach,
without the necessity of showing economic loss and without any bond or other security being
required.

     13. TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company.

     14. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings:

          (a) “Bloomberg” means Bloomberg Financial Markets.

          (b) “Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.

          (c) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or last trade price, respectively, of

7

 

such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for such security, the
last closing bid price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask
prices, respectively, of any market makers for such security as reported in the “pink sheets” by
Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or the
Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on
such date shall be the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 11. All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during
the applicable calculation period.

          (d) “Common Stock” means (i) the Company’s shares of Common Stock, par value $.001 per share,
and (ii) any share capital into which such Common Stock shall have been changed or any share
capital resulting from a reclassification of such Common Stock.

          (e) “Eligible Market” means the Principal Market, the New York Stock Exchange, Inc., the
Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market.

          (f) “Expiration Date” means the 10th anniversary of the Issuance Date or, if such
date falls on a day other than a Business Day or on which trading does not take place on the
Principal Market (a “Holiday”), the next date that is not a Holiday.

          (g) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or
more related transactions, (i) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose
of all or substantially all of the properties or assets of the Company to another Person, or (iii)
allow another Person to make a purchase, tender or exchange offer that is accepted by the holders
of more than the 50% of either the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock
purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase agreement or other
business combination), or (v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any
“person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by
issued and outstanding Common Stock.

8

 

          (h) “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

          (i) “Principal Market” means the American Stock Exchange.

          (j) “Required Holders” means the holders of the SE Warrants representing at least a majority
of shares of Common Stock underlying the SE Warrants then outstanding.

          (k) “Successor Entity” means the Person formed by, resulting from or surviving any Fundamental
Transaction or the Person with which such Fundamental Transaction shall have been entered into.

[Signature Page Follows]

9

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly
executed as of the Issuance Date set out above.

	 	 	 	 	 	 	 
	 	 	CELLULAR TECHNICAL SERVICES COMPANY, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 

10

 

EXHIBIT A

EXERCISE
NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

CELLULAR TECHNICAL SERVICES COMPANY, INC.

     The undersigned holder hereby exercises the right to purchase                      of the shares
of Common Stock (“Warrant Shares”) of Cellular Technical Services Company, Inc., a Delaware
corporation (the “Company”), evidenced by the attached Warrant to Purchase Common Stock (the
“Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective
meanings set forth in the Warrant.

     1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be
made as:

                              
a “Cash Exercise” with respect to                      Warrant
Shares; and/or

                              
a “Cashless Exercise” with respect to                      Warrant
Shares.

     2. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the
Aggregate Exercise Price in the sum of $                     to the Company in accordance with the
terms of the Warrant.

     3. Delivery of Warrant Shares. The Company shall deliver to the holder                      Warrant
Shares in accordance with the terms of the Warrant.

Date: _______________ __, ______

	 	 	 
	 

Name of Registered Holder

	 	 

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

 

 

ACKNOWLEDGMENT

     The Company hereby acknowledges this Exercise Notice and hereby directs Continental Stock
Transfer & Trust Company to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated                     , 2007 from the Company and
acknowledged and agreed to by Continental Stock Transfer & Trust Company.

	 	 	 	 	 	 	 
	 	 	CELLULAR TECHNICAL SERVICES COMPANY, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 

 

 

	(1)	 	10 years.
	 
	(2)	 	The exercise price shall be the per share dollar amount equal to the quotient of the CTSC
Valuation divided by the total number of fully-diluted shares of CTSC after the purchase of
Safestitch, LLC. “CTSC Valuation” means the Stockholders’ Equity of the Company plus
$1,250,000. “Stockholder’s Equity” means the amount determined by subtracting the
liabilities of the Company at the Closing Date from the assets of the Company at the Closing
Date, all as determined in accordance with generally accepted accounting principles applied on
a consistent basis. Liabilities shall include all accrued and contingent liabilities incurred
by the Company in connection with the transactions contemplated by the Share Exchange
Agreement and related documents and agreements, including all legal, accounting, investment
banking and other expenses of the Company as a result of the foregoing transactions.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]