Document:

exh10_42.htm

(PAGE NUMBERS REFER TO PAPER DOCUMENT ONLY)

EXHIBIT 10.42

 

CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT.  PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED ARE DENOTED BY [***].  MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

AMENDMENT TO

AMENDED AND RESTATED LICENSE AGREEMENT

 

THIS AMENDMENT TO AMENDED AND RESTATED LICENSE AGREEMENT (this “Amendment”) is entered into as of this 22nd day of February, 2010 (the “Amendment Date”) by and between TOYS “R” US – DELAWARE, INC., a Delaware corporation with offices located at One Geoffrey Way, Wayne, New Jersey 07470 (“Licensor) and CPI CORP., a Delaware corporation with offices located at 1706 Washington Ave., St. Louis, Missouri  63103 (“Licensee”) and amends  that certain Amended and Restated License Agreement, made and entered into as of December 23, 2005, by and between Licensor and Licensee as assignees from KIDDIE KANDIDS, LLC, (the “Agreement”).    All capitalized terms used in this Amendment and not otherwise defined in this Amendment shall have the meaning set forth in the Agreement.

R E C I T A L S:

WHEREAS, Kiddie Kandids, LLC ceased operating the Departments in all Stores and filed for protection from its creditors under Chapter 7 of the United States Bankruptcy Code in the Bankruptcy Court for the District of Utah in In re Kiddie Kandids, LLC, Case No. 10-20334 (the “Bankruptcy Proceeding”);

WHEREAS, Licensee desires to acquire the Agreement and certain other Kiddie Assets (as defined below) through the Bankruptcy Proceeding;

WHEREAS, Licensee has demonstrated, among other things, the financial and operational abilities to perform under the Agreement, as amended by this Amendment, to Licensor's satisfaction in Licensor's sole discretion; and

WHEREAS, in the event that Licensee acquires the Agreement and the Kiddie Assets through the Bankruptcy Proceeding, and such acquisition of the Agreement and the Kiddie Assets has been approved pursuant to a final, non-appealable order of the presiding bankruptcy court on or before [***], then Licensee and Licensor desire to amend the Agreement pursuant to this Amendment.

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties, covenants and agreements herein contained, the parties hereto agree that Agreement shall be amended as follows:

AMENDMENT

1.           Effect of Amendment.  (a) The obligations of Licensor to consummate the transactions contemplated by this Amendment is subject to the fulfillment, at or before the date that is five (5) Business Days after the satisfaction or waiver of all the conditions set forth in this Section 1(a), to be satisfied simultaneously with the closing (the “Closing Date”), of the following conditions (the “Closing Conditions”), any one or more of which may be waived by Licensor in its sole discretion:  (i) Licensee shall have acquired the Original Agreement and certain assets of Kiddie Kandids, LLC (including any affiliates thereof), including without limitation the Kiddie Kandids trademark and trade name (and any other intellectual property rights associated therewith) (collectively, the “Kiddie Assets”), and (ii) such acquisition of the Kiddie Assets shall be pursuant to a final, non-appealable order of the presiding bankruptcy court on or before  [***].

 

 

 

  

1

 

  

(b)           In the event that Licensee satisfies (or Licensor otherwise waives) the Closing Conditions, then the following shall immediately occur:  (i) this Amendment shall amend the Agreement; (ii) Licensor shall waive and release Licensee from any breach under the Agreement that occurred prior to the Closing Date and from any breach that occurred prior to the Closing Date and is continuing until [***] after the Closing Date; and (iii) License shall open and operate the Departments located in   the Stores set forth on Schedule B attached hereto within [***] of the Closing Date; provided, however, that Licensee shall work in good faith to open all Departments as soon as practicable after the Closing Date.

2.           Amendment to Section 1(e) of the Agreement.  Section 1(e) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(e)           Standalone Studios” means photographic studios operated by Licensee that are not located in Stores, including without limitation studios operated by Licensee in hosted locations.”

3.           Amendment to Sections 3(a), (b) and (c) of the Agreement.  Sections 3 (a), (b) and (c) of the Agreement are hereby deleted in their entirety and replaced with the following:

“3.           License

(a)           Licensor grants to Licensee an exclusive license to operate a Department in each Store listed on Schedule B attached hereto pursuant to the terms and conditions of this Agreement.  With respect to Stores in which a Department is not opened and operated by Licensee (i.e., Stores not listed on Exhibit B attached hereto), Licensor shall as soon as practicable after signing the Amendment but no later than [***] after the Amendment Date deliver to Licensee a list of all Stores (the “Additional Store List”) in which Licensee may choose to open and operate a new Department (i.e., approximately [***] Stores). Within [***] days of Licensor providing Licensee the Additional Store List, Licensee shall provide Licensor a list of Stores where Licensee shall open and operate a new Department.  Licensee shall open and operate new Departments in at least [***] of the Stores on the Additional Store List as follows: (i) [***] new Departments (i.e., Departments located in Stores on the Additional Store List) opened and operating on or before [***] and, in addition, (ii) [***] new Departments opened and operating on or before [***],  (collectively, the “Minimum Build Out Requirement”); provided, however, that such Departments (i) are located in a prominent space in the Store, (ii) are at least [***]  in size, and (iii) are at least [***] miles from any other Stores that have a Department.  Licensor and Licensee shall collaborate to develop a build-out schedule for such new Departments (i.e., Departments to be located in Stores on the Additional Store List), including build-out specifications that are mutually acceptable to Licensor and Licensee.

	
  

	
(b)

	
Intentionally omitted.

 

	
  

	
(c)

	
Except as otherwise provided in this Agreement or agreed in writing by Licensee, Licensor shall not allow any third party to operate a photo studio in any Stores; provided, however, that no provision of this Agreement shall limit Licensor’s right to sell any wares (e.g., picture frames, photo albums, etc.) or to offer any photo finishing services (e.g., photo development kiosks), in Stores in which Licensee operates a photo studio.  Notwithstanding anything herein to the contrary, if Licensee defaults on its commitment to open and operate new Departments in accordance with the Minimum Build Out Requirement and does not cure such default by [***], then as the exclusive remedy for Licensee’s breach of the Minimum Build Out Requirement, commencing on [***] and continuing for each year of the Term thereafter (as further set forth in Item 5 of the Appendix), Licensee shall pay Licensor an annual payment equal to the amount obtained by multiplying [***] times the difference between [***] minus the number of new Departments actually opened by Licensee in accordance with the Minimum Build Out Requirement (the “Build Out Shortfall Amount”); provided, however, that (i) from [***], Licensee shall have the right to cure any default in its commitment to open and operate new Departments in accordance with the Minimum Build Out Requirement and (ii) the Build Out Shortfall Amount payable commencing on [***] shall be reduced by an amount equal to the sum of the number of new Departments (if any) opened by Licensee during the period from [***] through [***] multiplied by [***].   Licensee shall not be deemed to be in default under Section 3(a) for (1) any noncompliance that is due to Licensor’s material interference or breach of its obligations under this Agreement or (2) an event of Force Majeure.”

 

 

  

2

 

  

 

 

4.           Amendment to Section 4 of the Agreement.  Section 4 of the Agreement is hereby amended by adding new sentences at the end of Section 4 as follows:

	
  

	
“Notwithstanding anything to the contrary under this Agreement, during the Term and in perpetuity thereafter, Licensee shall not operate any Standalone Studio branded with or operated under the Kiddie Kandids name or any derivative name or substantially similar name to Kiddie Kandids in third party hosted locations, including without limitation in any store branded as or under common control with stores branded as Sears, Walmart, K-Mart, Target, Buy Buy Baby, Baby Depot or Burlington Coat Factory. For the avoidance of doubt, nothing herein shall restrict Licensee’s ability to operate Standalone Studios under the Kiddie Kandids name in non-hosted venues including, without limitation, malls, shopping centers or freestanding locations; provided, however, that Licensee shall not open any new standalone Kiddie Kandids studio on or after the Closing Date that is located less than or equal to [***] miles from any Department.  This paragraph shall survive expiration or earlier termination of this Agreement.”

5.           Amendment to Section 7(e) of the Agreement.  Section 7(e) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(e)           Subject to Section 1(b)(iii) of the Amendment to the Agreement dated February 22, 2010, and except in an Event of Force Majeure as set forth under Section 27(f) of the Agreement, Licensee shall at all times during the Term keep open and operate the Departments in compliance with Schedule A attached hereto, and provide adequate staffing, employees, equipment and inventory in connection with each Department to satisfy the customer demand for the Wares and Services at the Department during such days and times.  At all times during the Term, Licensee shall use its commercially reasonable efforts to increase Gross Sales.

Notwithstanding anything to the contrary under this Agreement, including without limitation the provisions set forth under Section 22 and Section 23 of this Agreement, subject to Section 1(b)(iii) of the Amendment to the Agreement dated February 22, 2010, in the event that Licensee ceases to conduct operations at [***] Departments for [***] days or more and, in any such case, Licensee does not resume operations at all such Departments within [***] days after written notice is provided to Licensee, except to the extent, if any, that such failure to resume operations is due to (A) a Force Majeure as set forth under Section 27(f) of the Agreement, or (B) a breach by Licensor of its obligations under this Agreement, then Licensor may immediately terminate this Agreement.”

 

 6.           Amendment to Section 8(a) of the Agreement.  Section 8(a) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

“(a) Departments Located in Existing Stores

Licensor shall provide the Departments in each Store listed on Schedule B attached hereto on an AS IS basis.”

 

 

 

  

3

 

  

7.           Amendment to Section 8(b) of the Agreement.  Section 8(b) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

“(b) Departments Located in Stores on the Additional Store List

Licensor and Licensee shall mutually agree upon the location of any new Department to be located in a Store on the Additional Store List.  Licensee shall provide Licensor a copy of Licensee’s construction drawings in connection with any new Department to be located in a Store on the Additional Store List, which construction drawings shall be subject to Licensor’s prior approval, which shall not be unreasonably withheld.  [***].  Licensee shall use contractors recommended or approved by Licensor to construct such Departments, provided the fees and expenses charged by such contractors to Licensee are commercially reasonable.  [***].”

 

8.           Amendment to Section 8(c) of the Agreement.  Section 8(c) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

“(c) Relocation of Departments

 

Licensor may require the relocation of a Department to a different space in the same Store with the prior written consent of the Licensee, such consent not to be unreasonably withheld; provided that it shall not be unreasonable for Licensee to withhold its consent to such relocation if the space to which Licensor proposes to move the Department is not substantially comparable in exposure to the space in which the Department was previously located, the space for the new location is less than [***] in size, or the space for the new location is not reasonably adequate to accommodate the actual sales volume of the Department; provided further that Licensor shall bear the costs and expenses associated with any such relocation, and Licensor shall promptly reimburse Licensee for any out-of-pocket costs and expenses actually incurred by Licensee in connection with any such relocation.”

 

9.           Amendment to Entire Agreement.  The Agreement is hereby amended by inserting Schedule A as attached to this Amendment immediately following Annex III to the Agreement.

 

10.           Amendment to Entire Agreement.  The Agreement is hereby amended by deleting Annex I to the Agreement in its entirety.

11.           Amendment to Section 13(e) of the Agreement.  Section 13(e) of the Agreement is hereby deleted in its entirety and replaced with the following:

***

 

 

 

  

4

 

  

 

12.           Amendment to Section 15 of the Agreement. The Agreement is hereby amended by adding the following sentence as a new sentence at the end of Section 15 of the Agreement:

“If and when requested by Licensee, Licensor shall execute and deliver a collateral access agreement in a form reasonably acceptable to Licensor and Licensor shall execute and deliver to Licensee such other documents in form reasonable acceptable to Licensor as Licensee may reasonably request to confirm Licensee’s sole ownership of all equipment, furniture, fixtures and supplies.”

13.           Amendment to Section 22(g) of the Agreement.  Section 22(g) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(g)           If, for any fiscal year running from February 1st through January 31st during the Term of this Agreement other than [***], the Gross Sales from the operation of more than [***] Departments located in Stores that have been in operation for at least [***] shall be less than [***], then the inclusion of such Departments (excluding [***] Departments selected by Licensee) in this Agreement may be terminated by Licensor by giving at least sixty (60) days’ prior written notice of the effective date of such termination to Licensee no later than sixty (60) days following the expiration of the aforementioned fiscal year.”

14.           Amendment to Section 22(h) of the Agreement.  Section 22(h) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(h)           If, for any fiscal year running from February 1st through January 31st during the Term of this Agreement other than [***], the Gross Sales from the operation of any Department shall be less than [***], then the inclusion of such Department in this Agreement may be terminated by Licensee by giving at least sixty (60) days’ prior written notice of the effective date of such termination to Licensor no later than sixty (60) days following the expiration of the aforementioned fiscal year.”

15.           Amendment to Section 22 of the Agreement.  Section 22 of the Agreement is hereby amended by adding a new Section 22(j) immediately after Section 22(i) as follows:

“(j)  Notwithstanding anything to the contrary under this Agreement, including without limitation as set forth under any other subsection of Section 22 and under Section 23, Licensor may upon sixty (60) days prior written notice and without any reason and without any penalty, instruct Licensee to close up to [***] Departments during the Term; provided, however, that Licensor may not instruct Licensee to close more than [***] Departments during any twelve (12) month period or to close any Departments  between September 1 and  December 31 of any calendar year during the Term.  For each Department closed pursuant to this Section 22(j) Licensor shall reimburse Licensee for Licensee’s investment in constructing, opening and operating the Department (the “Investment”), depreciated on a straight-line monthly basis commencing on the Closing Date (for Departments located in Stores on Schedule B) and commencing on the date the Department opens (for Department located in Stores on the Additional Store List) and ending on the expiration of the Term; provided, however, that the Investment shall not exceed (i) [***]  for any Departments located in a Store listed on Schedule B and (ii) [***] for any new Department opened by Licensor in Stores on the Additional Store List.

 In the event that Licensor instructs Licensee to close any Department pursuant to this Section 22 (j), Licensee shall close such Department in accordance with Section 23 of this Agreement.”

16.           Amendment to Section 25 (a) of the Agreement.  Section 25 (a) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(a)  Intentionally omitted.”

17.           Amendment to Sections 27(c) of the Agreement.  Section 27(c) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

 

 

  

5

 

  

“(c)           Notices – Any notice required or permitted to be given hereunder shall be in writing and may be given by confirmed facsimile transmission, express courier, email or overnight mail, or registered or certified mail, return receipt requested, postage prepaid, addressed to the part to whom the notice is to be given at the following addresses (or to such other and further addresses as the parties may hereafter designate by like notice similarly sent):

In the case of Licensor:

Toys “R” Us

One Geoffrey Way

Wayne, New Jersey  07470

Attention:  Alex Goldelman

Facsimile Number: (973) 617 - 4007

With a copy to:

Toys “R” Us

One Geoffrey Way

Wayne, New Jersey  07470

Attention:  General Counsel

Facsimile Number: (973) 617 - 4043

In the case of Licensee:

CPI Corp.

1706 Washington Ave.

St. Louis, Missouri  63103

Attention:  Dale Heins

Facsimile Number:  (314) 231 - 8150

With a copy to: General Counsel”

18.           Amendment to Sections 27(f) of the Agreement.   Section 27(f) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(f)           Force Majeure - If either party is prevented from performing any of its obligations hereunder (other than the payment of money) by reason of fire, flood, windstorm, other act of God, labor dispute, act of government or any other unforeseen cause beyond the reasonable control of such party (any such event or circumstances being hereinafter called an “Event of Force Majeure”) such party shall be excused from performing its obligations hereunder which such Event of Force Majeure prevents it from performing; provided, however, that if the Event of Force Majeure continues for more than thirty (30) days, any party may terminate this Agreement with respect to any Department and Store affected by the Force Majeure by giving thirty (30) days' prior written notice to the non-terminating party or parties, unless the non-terminating party resumes performance within such thirty (30) days. The termination of this Agreement with respect to any location affected by an Event of Force Majeure pursuant to the preceding sentence shall not operate to release either party from any liability, which is attributable to an act, or the failure to act, which occurred prior to the termination date.”

 

 

 

  

6

 

  

19.           Amendment to Item 1 of Appendix to Amended and Restated License Agreement.  Item 1 of Appendix to Amended and Restated License Agreement is hereby deleted in its entirety and replaced with the following:

	
“Item 1

	
  TERM:  The Term of this Agreement shall commence as of the Effective Date and shall continue until January 31, 2016.”

20.           Amendment to Item 4 of Appendix to Amended and Restated License Agreement.  Item 4 of Appendix to Amended and Restated License Agreement is hereby deleted in its entirety and replaced with the following:

“Item 4                        DESCRIPTION OF DEPARTMENT & STORE LOCATIONS:  The Departments will occupy the current amount of space in each of the Stores set forth on Schedule B attached hereto; provided that any new Departments opened after the Amendment Date shall be at [***] in size.  Licensor shall not otherwise impair the visibility or attractiveness of any Department through the placement of its products or other property within any Store.

Licensor and Licensee shall revise Schedule B attached hereto in order to update the list of Stores in which Departments are operating under this Agreement as new Departments are opened or existing Departments are closed.”

21.           Amendment to Entire Agreement.  The Agreement is hereby amended by inserting Schedule B as attached to this Amendment immediately following Schedule A to the Agreement.

22.            Amendment to Item 5 of Appendix to Amended and Restated License Agreement.  Item 5 of Appendix to Amended and Restated License Agreement is hereby deleted in its entirety and replaced with the following:

“Item 5. FEES:  [***].”

23.           Confidentiality.   Except as agreed to by the parties in writing or otherwise required by the court presiding over the Bankruptcy Proceeding (the “Bankruptcy Court”), this Amendment and all terms and conditions set forth herein shall be held in confidence and shall otherwise be subject to the provisions of Section 24 of the Agreement; provided, however, that the parties shall disclose the existence of this Amendment to the Trustee and the Bankruptcy Court; provided, further, either party may request that the Bankruptcy Court authorize the submission of this Amendment to the court under seal, and the parties shall submit this Amendment to the Trustee upon the Trustee’s execution of a non-disclosure agreement reasonably acceptable to the parties.

24.           Except as expressly amended by this Amendment, the Agreement shall remain in full force and effect, and each party reserves all of their rights under the Agreement.  Nothing herein shall be deemed a waiver of any right or obligation of the parties, except as expressly set forth in this Amendment.  References in the Agreement to “this Agreement” shall mean the Agreement as amended hereby.

[Remainder of page intentionally left blank; signature page to follow]

  

7

 

  

IN WITNESS WHEREOF, the parties have signed this Amendment as of the day and year first written above.

TOYS “R” US – DELAWARE, INC.

By:/s/Alex Goldeman

__________________________________________

Alex Goldelman

Vice President - Business Development

 

 

CPI CORP.

By:/s/Renato Cataldo

__________________________________________

Renato Cataldo

President, Chief Executive Officer

                            

  

8

 

  

SCHEDULE A

Licensee shall operate each Department during the following hours of operation and at such additional times (subject to the Store operating hours) as Licensee deems necessary to meet customer demand:  

 

[***Operating hours-proprietary]

  

9

 

  

 

Schedule B

Stores and Departments

Departments as of the Amendment Date:

	  	  
	
Store

	
Property

	
BRU Standalones

	  
	
5669

	
Tustin, CA

	
5693

	
Ontario, CA

	
6546

	
Lake Forest

	
5672

	
Brea, CA

	
5678

	
Cerritos, CA

	
5680

	
Torrance, CA

	
6463

	
Westminister, CA

	
9568

	
Midvale

	
9579

	
Highland Ranch, CO

	
6521

	
Aurora

	
5674

	
Las Vegas, NV

	
9570

	
Tukwila

	
9571

	
Clackamas

	
9572

	
Clackamas

	
9574

	
Tigard

	
6493

	
Tacoma

	
5668

	
W. Covina, CA

	
5675

	
Oxnard, CA

	
5676

	
Calabas, CA

	
5677

	
Van Nuys, CA

	
6431

	
Union City, CA

	
9566

	
Pleasanton, CA

	
9569

	
San Jose

	
5692

	
Fresno, CA

	
6447

	
Folsom, CA

	
9573

	
Modesto CA

	
9580

	
Roseville, CA

	
5670

	
Tempe, AZ

	
5671

	
La Mesa, CA

  

10

 

  

	
6534

	
Chula Vista,CA

	
6557

	
Mira Mesa CA

	
9581

	
Vista, CA

	
6465

	
Scottsdale, AZ

	
9544

	
Sugarland

	
9546

	
Katy

	
9547

	
H - Cypress

	
9555

	
Houston

	
9588

	
Baybrook

	
9586

	
Chesterfield

	
9236

	
Schaumburg

	
9238

	
Naperville

	
9246

	
Burbank

	
9248

	
Orland Park

	
9258

	
Lombard

	
9285

	
Niles

	
9293

	
Vernon Hills

	
9542

	
Lewisville

	
9552

	
Arlington

	
9554

	
Plano

	
9557

	
Austin

	
9562

	
Mesquite, TX

	
9582

	
Hulen, TX

	
7708

	
Hurst

	
9549

	
Ingram, TX

	
9558

	
San Antonio TX

	
9247

	
Sterling Heights

	
9249

	
Northville

	
9250

	
Roseville, MI

	
6545

	
Roseville, MN

	
6551

	
Woodbury, MN

	
9560

	
Richfield, MN

	
9576

	
Maple Grove, MN

	
6547

	
Brookfield, WI

	
6409

	
Boca Raton, FL

	
8826

	
Coral Way

	
8856

	
Orlando

	
8857

	
Kendall

	
8861

	
Pembroke Pines

 

 

  

11

 

  

 

 

 

 

  

	
8865

	
Lauderhill

	
8879

	
West Palm Beach, FL

	
6414

	
Silver Springs, MD

	
6370

	
Deptford, NJ

	
6373

	
Mays Landing, NJ

	
6379

	
Cherry Hill, NJ

	
6376

	
Christiana, DE

	
6428

	
Orange Park, FL

	
8854

	
Kennesaw, GA

	
8864

	
Alpharetta, GA

	
8891

	
Gwinnett, GA

	
8892

	
Dunwoody, GA

	
6380

	
Baileys Crossroads

	
8882

	
Chesapeake

	
8884

	
Chantilly

	
8885

	
Potomac Mills

	
8886

	
Richmond

	
6383

	
Braintree, MA

	
6384

	
Peabody, MA

	
6385

	
Warwick, RI

	
6388

	
N. Attleboro, MA

	
6430

	
Portland ME

	
6443

	
Everett MA

	
6450

	
Framingham MA

	
6459

	
Salem NH

	
6468

	
Millbury MA

	
6492

	
Nashua NH

	
6555

	
Holyoke MA

	
6357

	
Westbury, NY

	
6374

	
Sayville, NY

	
6378

	
Commack, NY

	
6389

	
College Point, NY

	
6410

	
Nanuet, NY

	
6411

	
Yonkers, NY

	
6424

	
Massapequa, NY

	
6444

	
Staten Island, NY

	
6455

	
Brooklyn, NY

	
6538

	
Union Square, NJ

	
6358

	
Eatontown, NJ

 

 

 

 

  

12

 

  

 

 

	
6369

	
N. Brunswick, NJ

	
6375

	
Bridgewater, NJ

	
6377

	
Union, NJ

	
6386

	
Paramus, NJ

	
6479

	
Mt. Olive, NJ

	
6481

	
Manalapan, NJ

	
6503

	
East Hanover, NJ

	
6533

	
West Windsor, NJ

	
6539

	
Totowa, NJ

	
6371

	
Bensalem, PA

	
6372

	
Fairless Hills, PA

	
6462

	
Montgomeryville, PA

	
6387

	
Whitehall

	
6454

	
Exton

	
9239

	
Reynoldsburg, OH

	
9241

	
N. Canton, OH

	
9242

	
Dublin, OH

	
9244

	
Forest Park, OH

	
6478

	
Cranberry

	
9284

	
North Olmstead

	
9541

	
St. Louis

	
6449

	
Springfield

	
6392

	
West Hartford

	  	  
	
TRU Superstores

	
6583

	
Redlands

	
8727

	
New Tampa

	
5618

	
Moreno Valley

	
8729

	
Jacksonville

13

  

  

 

  

 

 

CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT.  PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED ARE DENOTED BY [***].  MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

AMENDED AND RESTATED

 

LICENSE AGREEMENT

 

THIS AMENDED AND RESTATED LICENSE AGREEMENT (this "Agreement") is made and entered into as of this 23rd day of December, 2005 (the "Effective Date"), by and among TOYS "R" US - DELAWARE, INC. d/b/a BABIES "R" US ("Licensor") and KIDDIE KANDIDS, LLC, a Delaware limited liability company ("Licensee"), and amends and restates in its entirety that certain Agreement for Licensed Department Operations, made and entered into as of October 3, 2001, as amended, by and between Baby Superstore, Inc. d/b/a Babies "R" Us and RWS Enterprises d/b/a Kiddie Kandids (the "Original Agreement").

 

RECITALS

 

WHEREAS Licensee wishes to license space in one or more Babies "R" Us stores of Licensor as set forth on the Appendix attached hereto;

 

WHEREAS Licensor desires to license such space in one or more Babies "R" Us stores to Licensee in accordance with the terms and conditions of this Agreement; and

 

WHEREAS Licensor and Licensee desire to, and do hereby, amend and restate the Original Agreement in its entirety.

 

NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement, and for other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, Licensor and Licensee hereby agree as follows:

 

AGREEMENT

 

	
1.  

	
Definitions

 

In this Agreement, the following terms have the following meanings:

 

	
(a)  

	
"Department" means the gross floor area in each Store in which Licensee is licensed under this Agreement to sell Wares and Services.

 

	
(b)  

	
"Gross Sales" means all of the gross receipts paid at and through Licensor's point of sale registers pursuant to Section 10, whether for cash, check, credit, exchange or otherwise, from all business conducted in, from or in connection with the operation of a Department by Licensee, including, without limitation, mail and telephone orders, and delivery, shipping insurance, and travel charges received or filled in a Department, but excluding therefrom (1) sales taxes or purchase taxes levied directly on sales or purchases and collected from customers, provided that specific record is made at the time of each sale of the amount of such tax and the amount thereof is separately charged to the customer, and (2) the amount of any cash or credit actually refunded in respect of any sale of Wares or Services, provided that the sale price was included in Gross Sales.

 

 

  

  

 

  

 

 

	
(c)  

	
"Person" means any individual, corporation, limited liability company, partnership, trust, joint stock company, business trust, joint venture, unincorporated association or other entity.

 

	
(d)  

	
"Services" means the services set forth in the Appendix attached hereto and as amended in writing by mutual agreement from time to time and any other services which Licensor permits Licensee to offer for sale to customers.

 

	
(e)  

	
DELETED AND REPLACED BY AMENDMENT

 

	
(f)  

	
"Store" means a Babies "R" Us branded store owned or leased by Licensor.

 

	
(g)  

	
"Wares" means the products and accessories set forth in the Appendix attached hereto and as amended by mutual agreement in writing from time to time and any other goods which Licensor permits Licensee to offer for sale to customers.

 

	
2.  

	
Interpretation

 

In the event of any conflict between the provisions of the Appendix and any other provision of the Agreement, the provisions of the Appendix shall prevail.

 

	
3.  

	
License

 

	
(a)  

	
DELETED AND REPLACED BY AMENDMENT

 

	
(b)  

	
DELETED

 

	
(c)  

	
DELETED AND REPLACED BY AMENDMENT

 

	
4.  

	
Name

 

Each Department is to be operated under the name Kiddie Kandids® or such other name(s) as Licensee may designate in the future, subject to Licensor's approval of any new name(s), which approval may not be unreasonably withheld. Licensor hereby acknowledges and agrees that Licensee shall retain all right, title or interest in or to the Kiddie Kandids® name, and that Licensor shall not acquire any such right, title or interest pursuant to this Agreement or otherwise.

 

SUPPLEMENTED BY AMENDMENT

 

	
5.  

	
License Fee

 

In consideration of the license granted above, Licensee agrees to pay the License Fee set forth in the Appendix.

 

	
6.  

	
Term

 

The term of this Agreement shall be as set forth in the Appendix.

 

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7.  

	
Operation of Department; Department Hours

 

	
(a)  

	
Licensee shall operate each Department in accordance with such policies of Licensor of which Licensor has advised the senior management of Licensee in reasonable detail prior to the date of this Agreement.   Except as set forth in the preceding sentence, Licensee shall operate each Department in accordance with its past custom and practice, as may be modified by Licensee with the approval of Licensor, which approval will not be unreasonably withheld.

 

	
(b)  

	
All Wares must be approved by Licensor in writing before being offered for sale in a Department by Licensee.  Licensee shall submit all requests for additional Wares to Licensor in writing.  Licensor will use its best efforts to approve or disapprove such requests in writing (including via email) within seven (7) days after Licensor's receipt of a written request from Licensee.  In the event that Licensor fails to respond to Licensee within such seven (7) day period, then Licensee may send a second written request to Licensor.  In the event that Licensor fails to respond to such second written request in writing within seven (7) days after Licensor's receipt of such second written request, then the request shall be deemed approved by Licensor.

 

	
(c)  

	
Licensee shall use commercially reasonable efforts to promote, in the aggregate, the Wares and Services of each Department.

 

	
(d)  

	
In the event of a dispute with or complaint from any customer of Licensee regarding a Ware or Service sold at a Department, which complaint is not resolved promptly by Licensee, Licensor's manager of that Store and Licensee's manager of that Department will attempt to resolve the matter on terms acceptable to Licensor, Licensee and the customer.  If they are unable to do so, the director of operations or similarly situated representative of Licensee and the Director or Vice President of Licensor will work in good faith to resolve the dispute on mutually agreeable terms expeditiously.

 

	
(e)  

	
DELETED AND REPLACD BY AMENDMENT

 

	
(f)  

	
With respect to each Store in which a Department is located, Licensee shall only sell its Wares and Services in such Department except as otherwise provided for in this Agreement or agreed to in writing by Licensor and Licensee.

 

	
8.  

	
Preparation of Store: Relocation of Department

 

(a), (b) and (c) DELETED AND REPLACED BY AMENDMENT

 

	
(d)  

	
Remodeling or Redecorating of Existing Departments

 

Licensor shall bear the costs and expenses of any remodeling or redecorating of an existing Department necessitated by the remodeling or redecorating of the Store in which such Department is located; provided, however, that Licensee shall be responsible for costs and expenses required for the normal maintenance and repairs to the Department.

 

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9.  

	
Employees of Licensee

 

	
(a)  

	
Subject to all applicable law, Licensee is and shall continue to be an independent contractor and shall have exclusive control over the operation of its Departments and the conduct of its employees. Licensee shall recruit, employ, train and discipline its employees as it deems appropriate, provided that, to the extent permitted under applicable law, Licensee shall, at its own expense, (i) take commercially reasonable measures to confirm that all new employees assigned to the Departments do not possess felony criminal records; (ii) when commercially reasonable and in accordance with its past custom and practice, drug test employees assigned to the Departments whom Licensee reasonably believes to be abusing illegal drugs during work hours; and (iii) comply with all laws governing the employment practices of Licensee at the Stores. Licensee shall be responsible for the acts and omissions of persons employed by it at the Stores and shall cause such employees to observe such policies of Licensor as are applicable to Licensee and, through it, Licensee's employees, pursuant to Section 7 above.

 

	
(b)  

	
Licensee shall have the right to appoint or hire independent contractors to provide Services or sell Wares in any Department, subject to the following:

 

	
(i)  

	
The appointment or hiring of an independent contractor shall not relieve the Licensee from any of the obligations and duties of Licensee under this Agreement.

 

	
(ii)  

	
The License granted hereunder shall not be assigned in whole or in part to the independent contractor.

 

	
(iii)  

	
The Licensee shall guarantee the performance of the independent contractor under this Agreement, and Licensor shall have the right to look to Licensee for performance hereunder without any notice or proceeding against the independent contractor.

 

	
(iv)  

	
The independent contractor shall otherwise be subject to all the terms and conditions of this Agreement to the same extent that an employee of Licensee would be subject to such terms and conditions.

 

	
10.  

	
Sales Processing. Sales Report and Settlement

 

	
(a)  

	
All payments originating at the Department (whether in cash, check, credit, exchange or otherwise), for sales and services transactions by Licensee resulting from the Department shall be paid at and through the Licensor's point of sales registers (such payments, the "Applicable Payments"). Settlement shall be made by Licensor with the Licensee on the basis of one-week accounting periods beginning each Sunday and ending each Saturday (each a "Payment Period"). Not later than four (4) business days after the end of each Payment Period (i.e. by the Thursday following the Payment Period), Licensor shall make a settlement with Licensee for the immediately preceding Payment Period by paying to Licensee an amount (the "Settlement Amount") equal to (i) the amount of Applicable Payments made during such Payment Period, less (ii) the License Fee owed by Licensee with respect to such Payment Period, and less (iii) all sales taxes arising from the Applicable Payments made during such Payment Period and actually collected from customers and turned over to the applicable taxing authorities by Licensor. Payment of the Settlement Amount shall be by automated clearing house (ACH) of immediately available funds to an account designated in advance by Licensee.

 

4

 

 

  

  

 

  

 

	
(b)  

	
Licensor acknowledges that each Settlement Amount represents a significant portion of the revenues of Licensee and that Licensor's failure to pay a Settlement Amount when due will cause Licensee to suffer immediate and material harm. Licensor also acknowledges that, even while held by Licensor, Licensor will own no interest in any Settlement Amount.  Thus, in addition to all other remedies available to Licensee, if Licensor fails to pay (i) a Settlement Amount within [***] days of its due date, (ii) [***] or more Settlement Amounts during a [***] month period within [***] days of their respective due date, or (iii) [***] or more Settlement Amounts during the Term within [***] of their respective due date, interest at the rate of LIBOR (as announced by the Wall Street Journal from time-to-time) plus [***] percent [***%)] will accrue on all Settlement Amounts not paid by their respective due dates; provided, however, that Licensee shall provide Licensor notice prior to assessing such interest on any Settlement Amounts not paid.  Notwithstanding the foregoing,  the parties acknowledge and agree that the provisions of this Section 10(b) shall not apply to (1) any Settlement Amounts that are the subject of a bona fide dispute between the parties or (2) any failure by Licensor to pay any portion of a Settlement Amount as a result of a cleric or processing error (i.e., an unintentional act or omission of Licensor) which may be discovered during an audit by either party.

 

	
11.  

	
Audit of Records

 

Licensor and Licensee shall each keep full, complete, current and accurate records relating to the business transacted in each Store (including all such business taken into account in the calculation of Gross Sales) in accordance with generally accepted accounting principles consistently applied. Licensor and Licensee shall each be granted access to the others records regarding such business at any reasonable time and from time to time for the purpose of inspection, examination or audit. Licensor and Licensee shall provide each other with any additional information relating to Gross Sales as either party may reasonable request. All records and related information shall be retained for at least one year from the expiration of the accounting period to which they relate, or in the event of an audit or a controversy between the parties regarding amounts payable hereunder, until such audit or controversy is finally determined.

 

	
12.  

	
Fixtures

 

	
(a)  

	
Subject to Section 16 below, Licensee shall, at its own expense, (a) fully furnish and equip the Departments with furniture, fixtures, operating equipment and appliances, which items so furnished by the Licensee shall be owned by the Licensee, and (b) maintain the Department and all such furniture, fixtures, operating equipment and appliances in good condition and repair. For the avoidance of doubt, Licensee shall, at is own expense, be responsible for furnishing and equipping each Department with the following: (i) wood glass wall, (ii) truss system, (iii) subject to Section 16 below, MEO related expenses (i.e., phone and electric lines, lighting and paint), (iv) Kiddie Kandids overhead signage, and (v) all chairs, stools, tables and other furniture; provided that Licensor shall be responsible to order and obtain all such items listed above on behalf of Licensee. Licensee shall be responsible to pay all of the invoices with regard to such items directly and to reimburse Licensor for its reasonable, out-of-pocket costs and expenses actually incurred with regard to such items.

 

 

5

 

  

  

 

  

 

 

	
(b)  

	
The layout of the Departments, and all furniture, fixtures, operating equipment and appliances and all contractors and labor used by Licensee to perform work with respect to the Departments, must at all times be reasonably acceptable to Licensor, and no liens, charges or encumbrances shall be created in connection with the performance of such work.

 

	
13.  

	
Advertising and Customer Data

 

	
(a)  

	
Licensor and Licensee agree to cooperate and collaborate with respect to the advertising and marketing of the Wares and Services, it being understood that such advertising and marketing will serve to increase foot traffic in the Stores, drive sales and otherwise benefit each of the parties hereto. Without limiting the generality of the foregoing. Licensor and Licensee hereby agree to undertake the mutual advertising and marketing activities set forth on Annex II attached hereto.

 

	
(b)  

	
Any marketing or advertising conducted by Licensee in markets where it operates Departments will include references to any such Departments and, at Licensor's request, the Stores in which such Departments are located.  In the event that Licensee offers any discounts, deals, coupons or other promotions in connection with or to customers of Standalone Studios located in the same market as a Store with a Department, then Licensee shall offer the same promotional terms and conditions in connection with or to customers of such Department to the extent the Wares and Services on which the promotion was offered are the same as Wares and Services sold in the Department.

 

	
(c)  

	
Any marketing efforts implemented by Licensee that refer to the Stores or Departments will be at its cost and expense, and any marketing efforts implemented by Licensor that include the Departments will be at its cost and expense.

 

	
(d)  

	
Licensee shall not state in any advertisement or promotional material that refers to a Store the fact that Licensee is going out of business or that Licensee's license under this Agreement has been terminated.

 

	
(e)  

	
DELETED AND REPLACED BY AMENDMENT

 

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(f)  

	
Licensee shall post the disclaimer attached hereto as Annex III (the "Disclaimer") in a visible place near the entrance of each Department, and shall include the Disclaimer on any order forms or other written materials provided at or in connection with the Department that in any way request, solicit or gather customer information or data.

 

	
14.  

	
Name and Display

 

	
(a)  

	
All display material and signs for use in connection with a Department shall be subject to the prior written approval of Licensor and shall be paid for by Licensee. Licensee shall submit all requests for materials and signs to Licensor in writing. Licensor will use its best efforts to approve or disapprove such requests in writing within [***] days after Licensor's receipt of a written request from Licensee. In the event that Licensor fails to respond to Licensee within such [***] day period, then Licensee may send a second written request to Licensor. In the event that Licensor fails to respond to such second written request in writing within [***] days after Licensor's receipt of such second written request, then the request shall be deemed approved by Licensor.

 

	
(b)  

	
Licensee shall not, without Licensor's prior written consent, use in any marketing material, advertisements or for any other purpose, any of Licensor's or its Affiliate's trade names, trademarks or other styles and marks, or other intellectual property ("Licensor's Marks").  Each use by Licensee of Licensor's Marks on display material, signs, specialty supplies, Department cards, stationary, boxes and wrapping paper or other sales paraphernalia ("Sales Material") shall be subject to the prior written approval of Licensor in each instance. Under no circumstances shall Licensor's silence in connection with Licensee's request for use of Licensor's Marks be deemed approval.  Licensee shall, on demand by Licensor, immediately discontinue any use of Licensor's Marks and withdraw any of Licensor's Sales Material that has not received the prior written approval of Licensor. Licensee acknowledges that Licensee owns no right, title and interest in or to the Licensor's Marks, and agrees not to contest Licensor's or Geoffrey, Inc.'s rights therein throughout the world. Licensee further agrees not to cause to be done any act or thing to impair any part of such right, title and interest.  All uses of Licensor's Marks by Licensee shall inure to the benefit of Licensor or Geoffrey, Inc. Licensee shall at no time adopt or use any word or mark which is likely to be similar to or confused with Licensor's Marks. At Licensor's expense, Licensee shall cooperate fully and promptly with Licensor's or Geoffrey, Inc.'s requests for assistance in carrying out the terms of this section including, but not limited to, the signing of any documents that convey to or otherwise confirm Licensor's or Geoffrey, Inc.'s ownership of Licensor's Marks.

 

	
(c)  

	
Licensor shall not, without Licensee's prior written consent, use in any marketing materials, advertisements or for any other purpose, any of Licensee's or its Affiliates' trade names, trademarks or other styles and marks, or other intellectual property ("Licensee's Marks").  Each use by Licensor of Licensee's Marks on Sales Material shall be subject to the prior written approval of Licensee in each instance. Under no circumstances shall Licensee's silence in connection with Licensor's request for use of Licensee's Marks be deemed approval. Licensor shall, on demand by Licensee, immediately discontinue any use of Licensee's Marks and withdraw any of Licensee's Sales Material that has not received the prior written approval of Licensee. Licensor acknowledges that Licensor owns no right, title and interest in or to the Licensee's Marks, and agrees not to contest Licensee's rights therein throughout the world. Licensor further agrees not to cause to be done any act or thing to impair any part of such right, title and interest. All uses of Licensee's Marks by Licensor shall inure to the benefit of Licensee. Licensor shall at no time adopt or use any word or mark which is likely to be similar to or confused with Licensee's Marks. At Licensee's expense, Licensor shall cooperate fully and promptly with Licensee's requests for assistance in carrying out the terms of this section including, but not limited to, the signing of any documents that convey to or otherwise confirm Licensee's ownership of Licensee's Marks.

 

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15.  

	
Liens

 

If any party obtains evidence of a lien filed against a Department or Store relating to services or goods supplied to any of the parties hereto, the party obtaining such evidence shall notify the other parties hereto of such lien within three (3) business days of its receipt of notice of filing. The party whose receipt of goods or services created such lien shall discharge the lien by payment of the amount due the lien claimant within ten (10) days of receipt of notice of filing, unless such party is in good faith contesting such lien through appropriate proceedings.  SUPPLEMENTED BY AMENDMENT

 

	
16.  

	
Utilities, Services, and Telephones

 

	
(a)  

	
Licensor shall be responsible for the cost of water, light, power, heat, air conditioning and janitorial services for each Department as provided to other parts of the Store in which such Department is located.  Licensee shall be responsible for the cost of all additional services including all charges relating to the installation or use of telephones, the payroll of its employees, all bookkeeping and other accounting activities relating to the operation of the Departments for each Department.  Licensee, if it agrees in each instance, shall reimburse Licensor for all other services, facilities, materials and supplies, if any, that may be supplied to Licensee by Licensor.

 

	
(b)  

	
All direct Department telephone numbers are and shall remain identified with Licensee.

 

	
17.  

	
Delivery of Wares

 

Licensee shall be responsible for arranging and paying for the transportation and delivery of its Wares and other property to and from each Department. All Wares returned to a Department shall be processed through the receiving and return facilities of the Store in which such Department is located.

 

8

 

  

  

 

  

	
18.  

	
Insurance

 

	
(a)  

	
Third Party Liability

 

During the term hereof, Licensee shall obtain and maintain at its expense during the term of this Agreement, a policy of Commercial General Liability Insurance, including Contractual Liability and Premises Operations coverages, covering Licensee's operations at each Department from an insurer or insurers reasonably acceptable to Licensor.  The policy of insurance shall insure Licensee and Licensor as an additional insured against all claims, actions or proceedings for sums of money, damages, costs, penalties and losses (hereafter, "Claims"') and all liability which may be imposed by law for loss of life, personal injury or damage to property arising from or in any way connected with the operations of Licensee and including but not limited to Claims:

 

	
(i)  

	
arising from or in connection with the sale of any Wares or the performance of any Services by Licensee whether in the Store, Department or elsewhere;

 

	
(ii)  

	
relating to or asserting a defect or omission in any Wares sold or Services provided by Licensee to any purchaser or user thereof; or

 

	
(iii)  

	
relating to acts, errors, omissions or defaults of Licensee or any of its respective servants, agents, visitors or customers (collectively to "Insurable Matters").

 

The policy of insurance shall provide coverage of at least [***] dollars [***)] for each separate occurrence. Such insurance shall be endorsed to be primary to and not contributory to any similar insurance carried by Licensor, and shall contain a waiver of subrogation in favor of Licensor and severability of interest clause.

 

	
(b)  

	
Fire and Extended Insurance

 

During the term hereof, Licensee shall obtain and maintain at its own expense Property Insurance upon its Wares, personal property, fixtures and equipment in the Store in an amount reasonably satisfactory to Licensor. Such insurance shall contain a waiver of subrogation in a favor of Licensor.

 

	
(c)  

	
Notification to Licensor

 

Upon request from Licensor, Licensee shall furnish to Licensor, Certificates of Insurance meeting the requirements of this Agreement and demonstrating that the required coverages are in full force and effect. Licensee shall not make any material change to such coverages without the prior written consent of Licensor, which consent shall not be unreasonably withheld or delayed. Licensee shall promptly notify Licensor of any material change to or cancellation of such insurance coverages. Each insurance policy obtained and maintained pursuant to the terms of this Agreement shall bear an endorsement or condition by the insurer that the insurance shall be canceled only upon thirty (30) days prior written notice by the insurer to the Licensor.

 

 

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(d)  

	
Employee Fidelity Insurance

 

Licensee shall obtain and maintain during the term of this Agreement at its own expense employee fidelity insurance in accordance with its past custom and practice.

 

	
19.  

	
Indemnity

 

	
(a)  

	
Licensee shall at all times (both during and after the term hereof) indemnify and hold harmless Licensor, its agents and employees, against and from any and all actions, suits, liabilities, settlements, losses, damages, costs, charges, reasonable counsel fees and all other expenses, relating to or arising from any and all claims (whether founded or unfounded) of every nature or character (including, but without limitation, claims for personal injury, death, libel, slander, false arrest, detention or accusation, malicious prosecution, abuse of process, assault and battery, damage to property or invasion or infringement of any patent, trademark, copyright, right of privacy or any other tangible or intangible personal or property right) (collectively, "Losses"), based upon or arising out of Licensee's operation of the Departments, or the Licensee's sale, use or installation of the Wares and Services, or any defect in the Wares and Services or in any ingredient, product or component used in the Wares and Services (or, in the event the Wares and Services shall be a service, used in the performance of such service), or due to any negligence or dishonesty of, or to any act of commission or omission by, Licensee or any of its employees or agents, all except to the extent such Loss is caused by Licensor's negligent actions or omissions or willful misconduct; and in case any action, suit or proceeding shall at any time (either during or after the term hereof) be brought against Licensor by reason of any such claim, the Licensee, if Licensor so requests, shall resist and defend such action, suit or proceeding, at the sole expense of Licensee, by reputable counsel.

 

	
(b)  

	
Licensor shall at all times (both during and after the term hereof) indemnify and hold harmless Licensee, its agents and employees, against and from any and all Losses, based upon or arising out of Licensor's operations, or the Licensor's sale, use or installation of any products or services (other than the Wares or Services), or any defect in any product or service rendered by Licensor (other than the Wares or Services) or in any ingredient, product or component used in such products or services(other than the Wares or Services), or due to any negligence or dishonesty of, or to any act of commission or omission by, Licensor or any of its employees or agents, all except to the extent such Loss is caused by Licensee's negligent actions or omissions or willful misconduct; and in case any action, suit or proceeding shall at any time (either during or after the term hereof) be brought against Licensee by reason of any such claim, Licensor, if Licensee so requests, shall resist and defend such action, suit or proceeding, at the sole expense of the Licensor, by reputable counsel.

 

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20.  

	
Risk of Loss or Damage

 

It is understood that Licensor will not maintain fire, theft or other insurance covering the Wares and Services or any other property of the Licensee. Neither Licensor, its agents or employees, nor any person to whom Licensor shall be responsible (including the lessor of the property upon which any Store may be located), shall be liable for damage to, or the loss or destruction of, the Wares or other property of Licensee, its agents, employees or affiliates, except to the extent that such damage may be attributable to the gross negligence or willful misconduct of any such Person. Furthermore, neither Licensor, its agents or employees, nor any person to whom Licensor shall be responsible (including the lessor of the property upon which any Store may be located), shall have any liability arising from (i) the interruption of Licensee's use of a Department or (ii) any inability to provide any materials, supplies, services or facilities, to the extent that the circumstances described in the preceding clauses (i) and (ii) result from the performance of customary or necessary maintenance or repairs, so long as such maintenance or repairs were not necessitated by the gross negligence or willful misconduct of the Licensor or its agents or employees.

 

	
21.  

	
Compliance with Laws: Taxes

 

Both Licensor and Licensee shall comply with all legislation, laws, ordinances and orders applicable to each Store and Department, respectively, and shall obtain all permits or certificates required by governmental authorities to operate or maintain any such Store or Department, as applicable. Licensee shall be liable for the payment, when due, of any income or personal property taxes imposed, based or levied on, or allocable to, the Departments or Licensee, and Licensor shall be liable for the payment, when due, of all sales taxes arising from the Applicable Payments.

 

	
22.  

	
Termination of Agreement or Department in Certain Events

 

	
(a)  

	
Licensor or Licensee may terminate this agreement at any time upon at least [***] days' prior written notice stating that the non-terminating party has breached one or more of its obligations hereunder, unless the non-terminating party cures such breach to the terminating party's reasonable satisfaction within [***] days following the non-terminating party's receipt of written notice of such breach; provided that, if Licensor breaches any provision of Section 10 above, Licensee may terminate this agreement with [***] days' prior written notice unless Licensor cures such breach to Licensee's reasonable satisfaction within such [***] day period following Licensor's receipt of written notice of such breach.

 

	
(b)  

	
If, solely as a result of the operation of a Department, Licensor is in violation of the lease between Licensor and the landlord of a Store, Licensor may, at its option, require such Department to cease operating; provided, in such event, Licensor shall reimburse Licensee for Licensee's investment in the construction, opening and operation of the Department, depreciated over the lesser of a seven (7) year period or the amount of time remaining in the Term of the Agreement.

 

 

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(c)  

	
If Licensee's operation of a Department for any reason whatsoever, including, without limitation, consumer protests or other picketing or any strike or lockout, causes a material disruption in the operations of the Store in which the Department is located, and such disruption continues for at least thirty (30) days, then Licensor may, at its option and on thirty (30) days written notice, require Licensee to close that Department immediately; provided, in such event, Licensor shall reimburse Licensee for all costs and expenses incurred by Licensee in constructing, opening and operating the Department (other than operating costs incurred for the sole benefit of periods during which the Department actually was operating (e.g., staff costs for periods during which the Department was operating), plus all costs incurred in connection with the closing of such Department, depreciated over seven (7) years. Notwithstanding any other provision of this Agreement, except to the extent the disruption giving rise to the Department closing arose out of Licensee's violation of law or breach of this Agreement, Licensor may not seek to recover any amounts from, or be indemnified by, Licensee in connection with the closing of the Department or the disruption giving rise to the closing. If a Department is closed pursuant to this Section in the same year it is opened, such Department still be credited against the Minimum for that year.

 

	
(d)  

	
If any Store is destroyed or so substantially damaged as to be, in the opinion of Licensor, inoperable and Licensor decides not to rebuild or repair such Store, it shall notify Licensee of its decision as soon as practicable and the license for the Department in such Store shall terminate on the third (3rd) day after the giving of such notice.

 

	
(e)  

	
If Licensor discontinues its operation of a Store for any reason whatsoever, Licensor may terminate this Agreement with respect to such Store (for so long as such Store remains closed) by providing Licensee with sixty (60) days' prior written notice.

 

	
(f)  

	
If there occurs with respect to Licensee, either directly or indirectly, whether by operation of law or otherwise (a "Competitor Change in Control"), (i) a consolidation with, or merger of Licensee with or into a Competitor (as defined in Section 25 below); (ii) a Transfer or issuance of a controlling equity interests in licensee to a Competitor; (iii) a sale of substantially all of the assets of Licensee to a Competitor or (iv) any other transaction or related series of transactions, and as a result of a transaction set forth in (i), (ii), (iii) and (iv) above, one or more Competitors, individually or acting as a group, acquires control, directly or indirectly, of Licensee, during the [***] days following such transaction, Licensor may terminate this Agreement by providing Licensee with [***] days prior written notice.

 

	
(g)  

	
 DELETED AND REPLACED BY AMENDMENT

 

	
(h)  

	
 DELETED AND REPLACED BY AMENDMENT

 

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(i)  

	
Either party may terminate this Agreement if: (i) the non-terminating party shall declare bankruptcy; (ii) any bankruptcy, reorganization arrangement or other insolvency proceeding shall be commenced (whether with or without the non-terminating party's consent) with respect to the non-terminating party; or (iii) a receiver, trustee or liquidator shall be appointed with respect to the non-terminating party or its properties.

 

	
23.  

	
Effect of Termination

 

Upon the termination or expiry of this Agreement in whole, or with respect to one or more Departments, Licensee shall surrender to Licensor all space then being utilized by the terminated Departments and remove all of its property from the relevant Store within sixty (60) days from the date of such termination or expiry. Upon such termination or expiry, but subject to the terms and conditions of this Agreement, neither party shall be liable to the other for any costs, claims, damages or expenses whatsoever (including without limitation loss of future profits, revenue, cash flow or, generally, goodwill) arising from such termination or expiry. Not withstanding such termination or expiry, the provisions of this Agreement requiring payments to be made, costs or expenses to be assumed or indemnities to be given, as well as the provisions regarding confidentiality and the handling of customer lists and other information shall continue in full force and effect and shall survive the expiration or earlier termination of this Agreement. Termination of this Agreement shall in no way affect the Licensee's continuing liability to customers of the Departments under express or implied warranties with respect to Wares and Services.

 

	
24.  

	
Confidentiality

 

Each of the parties shall, and shall cause its directors, officers, agents, employees, independent contractors, affiliates and subsidiaries to, hold in confidence and, without the prior written consent of the party to whom the information relates, not disclose to any person (except for any prospective or actual partners, investors, lenders or purchasers of each party, provided that the disclosing party requires such individuals or entities to agree to abide by the confidentiality obligations of this Agreement and provided that the disclosing party shall be liable for any breach of the confidentiality obligations by such individuals or entities), or exploit for its own purposes, any information received by it from any other party hereto (or any such party's directors, officers, agents, employees, independent contractors, affiliates and subsidiaries) during the Term of, or related to the subject matter or performance of, this Agreement and any attachment hereto. Each party further agrees that it shall use the information received by it from the other parties hereto (or any such party's directors, officers, agents, employees, independent contractors, affiliates and subsidiaries) only in connection with such party's performance of its obligations under this Agreement and for no other purpose whatsoever. For the avoidance of doubt, the confidential information of a party shall include all information of a business nature relating to the pricing, sales, promotions, marketing, assets, liabilities, processes or other business affairs of such party and its customers, including without limitation any training manuals or policies and the terms and conditions of this Agreement.

 

 

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25.  

	
Exclusivity;

 

	
(a)  

	
 DELETED BY AMENDMENT

 

	
(b)  

	
Following a Permitted Change in Control, Licensee or its successor in interest may Sells Wares and Services in stores owned or operated by the Competitors, so long as Licensee does not in any way use the name "Kiddie Kandids" (or any name that supplants "Kiddie Kandids" in accordance with Section 4 above) in connection with such operations, or otherwise use substantially the same "branding" in the operations in the Competitor's facilities as is used at "Kiddie Kandids."

 

	
26.  

	
Assignments: Successors and Assigns

 

	
(a)  

	
Except in connection with a Permitted Change in Control and as set forth in Section 26(d) below, the rights granted under this Agreement are personal to the Licensee and are not assignable, in whole or in part, and will not inure to the benefit of Licensee's successors or assigns.

 

	
(b)  

	
The consent of Licensor will not be required for a Permitted Change in Control. Without limiting the foregoing, in the event of a Permitted Change in Control, this Agreement will remain in full force and effect.

 

	
(c)  

	
As used in this Agreement, "Permitted Change in Control" means any (x) (i) consolidation with, or merger of Licensee with or into any person or entity other than a Competitor; (ii) a Transfer or issuance of a controlling equity interests in licensee to any person or entity other than a Competitor; (iii) a sale of substantially all of the assets of Licensee to any person or entity other than a Competitor or (iv) any other transaction or related series of transactions, and as a result of a transaction set forth in (i), (ii), (iii) and (iv) above, one or more entities other than Competitors acquire control, directly or indirectly, of Licensee, or (y) any Competitor Change in Control to which Licensor consents.

 

	
(d)  

	
Licensor may assign this Agreement to any of its affiliates, subsidiaries, parent companies or successors, so long as Licensor remains obligated by the terms and liable for any breaches of this Agreement by its assignee.

 

	
27.  

	
General Provisions

 

	
(a)  

	
Severability - All clauses, terms and conditions hereof are severable and the invalidity, illegality or unenforceability of any clause, term or condition shall not affect the validity, enforceability or legality of the remaining clauses, terms and conditions.

 

	
(b)  

	
Waiver - No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

 

 

 

14

 

  

  

 

  

 

	
(c)  

	
 DELETED AND REPLACED BY AMENDMENT

 

	
(d)  

	
Entirety of Agreement and Governing Law - This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understanding both formal and informal. This Agreement shall be construed and enforced in accordance with the laws of the State of New York and the laws of the United States of America applicable therein. The parties irrevocably consent to the exclusive jurisdiction of the state and federal courts located in New York in connection with any action or proceeding brought by  either party which arises  out of or relates to this Agreement.

 

	
(e)  

	
Licensor - Licensee Relationship - This Agreement does not create, and shall not be construed as creating, any relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood that nothing contained herein, or any of the acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of licensor and licensee.

 

	
(f)  

	
 DELETED AND REPLACED BY AMENDMENT

 

	
(g)  

	
Non-Solicitation - During the Term of this Agreement and for one (1) year following the expiration of such Term, neither Licensor or any of its subsidiaries or affiliates, on the one hand, nor Licensee or any of its subsidiaries, on the other hand, shall directly or indirectly through another Person (i) induce or attempt to induce any employee of the other party to leave the employ of such other party, or otherwise solicit the employment of any such employee or (ii) hire or employ any person who is or was an employee of such other party.

 

	
(h)  

	
Licensor Operating and Employee Manuals - Licensor and Licensee shall work together to review, and update as necessary, Licensor's training materials and operations manuals insofar as such materials and handbooks deal with the interaction between the respective employees of Licensor and Licensee.

 

	
(i)  

	
Counterparts - This Agreement may be executed in one or more counterparts, each of which shall be deemed an original.

 

[Remainder of page intentionally left blank; signature page to follow]

 

 

15

  

  

 

  

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the Effective Date.

 

Toys "R" Us - Delaware, Inc.

(Licensor)

By:/s/Richard Markee

                         _________________________________________                                                     

                         Richard Markee

                         Presisdent/CEO                                                     

 

Kiddie Kandids, LLC

(Licensee)

By:/s/C. Wayne Fox

                         ________________________________________

                         C. Wayne Fox

                         Co-CEO                                                     

 

 

16

  

  

 

  

APPENDIX TO AMENDED AND RESTATED LICENSE AGREEMENT

 

	
Item 1  

	
DELETED AND REPLACED BY AMENDMENT

 

	
Item 2  

	
WARES TO BE SOLD:

 

Customized photographic pictures and packages in connection with the Services and customized photographic accessories in connection therewith, as well as additional photographic accessories as approved by Licensor, which approval will not be unreasonably withheld; provided, however, that such photographic accessories shall be sold solely in connection with such customized photographic pictures and shall not be sold or offered for sale separately from such customized photographic pictures.

 

	
Item 3  

	
SERVICES TO BE PERFORMED:

 

Photography of babies, children, individuals and groups in accordance with Licensee's past custom and practice.

 

	
Item 4  

	
DELETED AND REPLACED BY AMENDMENT

 

Item 5             DELETED AND REVISED BY AMENDMENT

 

 

 

 

17

  

  

 

  

                                                           ANNEX I   DELETED

 

 

 

 

 

ANNEX II

 

Collaborative Advertising and Marketing Activities

 

	
1.  

	
Licensee would like to be included in the Licensor's Baby Fest events with advertising, sponsorship and special portrait offers.

 

	
2.  

	
Licensee would like to be included in some of Licensor's advertising space, which would include an ad for Licensee with special offers, at Licensee's cost.

 

	
3.  

	
Licensee shall have a single point of contact at Licensor's for marketing, advertising, partnerships and signage discussions and approvals.

 

	
4.  

	
Licensee shall have a designated location in Licensor's studios for the 22x28 signage which has been already approved by Licensor.

 

	
5.  

	
Ensure that all Licensor's managers are aware of signage designation for Licensee in their studio. Have documentation given to all Managers and DM in both organizations.

 

	
6.  

	
All Licensor's studios, which have a vestibule area, allow our Licensee sign to be displayed at all times.

 

	
7.  

	
Have a semi-annual meeting with marketing and operations teams from Licensee and Licensor.

 

	
8.  

	
Work together to enhance cooperation and collaboration between Licensor and Licensee on the Baby Registry Program.

 

	
9.  

	
Work together to enhance cooperation and collaboration between Licensor and Licensee on local promotion programs.

 

	
10.  

	
Work together to enhance cooperation and collaboration between Licensor and Licensee local management teams within each Store.

 

	
11.  

	
Licensor will provide a merchandising fixture and a space to display the fixture in each Licensor store adjacent to Licensee's photography studio.

 

18

  

  

 

  

ANNEX III

 

 

KIDDIE KANDIDS ASKS YOU FOR YOUR TELEPHONE NUMBER AND OTHER INFORMATION TO PROVIDE BETTER SERVICE TO YOU

 

Kiddie Kandids is not affiliated with Babies "R" Us. Kiddie Kandids may ask you for your home telephone number or other information. Kiddie Kandids may share this information with its affiliates or third parties in accordance with Kiddie Kandids' privacy policy, as it may be amended from time to time. For more information about how we use this information, please call (    ) to request a copy of Kiddie Kandids' privacy policy.  You will have no recourse against Babies "R" Us, any of its affiliates or any of their respective directors, managers, officers or employees for Kiddie Kandids use or sharing of your information.

 

If you prefer not to volunteer this information, just tell us that you would rather not. Thank you for being a valued customer of Kiddie Kandids.

 

DETROIT.3915832.1exe4-1_0410.htm

EXEHIBIT 4.1

 

 

 

3COM CORPORATION

 

2003 STOCK PLAN, AS AMENDED AND RESTATED

 

 

1. Purposes of the Plan.  The purposes of this 2003 Stock Plan are:

 

	
·  

	
to attract and retain the best available personnel for positions of substantial responsibility,

 

	
·  

	
to provide additional incentive to Employees and Consultants, and

 

	
·  

	
to promote the success of the Company’s business.

 

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock and Stock Appreciation Rights.  In addition, the Plan provides for automatic option grants to Independent Directors.

 

2. Definitions.  As used herein, the following definitions shall apply:

 

(a) “Administrator”  means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.

 

(b) “Applicable Laws”  means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.

 

(c) “Award”  means, individually or collectively, a grant under the Plan of Options, SARs or Restricted Stock.

 

(d) “Award Agreement”  means the written agreement setting forth the terms and provisions applicable to each Award granted under the Plan.  The Award Agreement is subject to the terms and conditions of the Plan.

 

(e) “Cause”  means (i) an act of personal dishonesty taken by the Participant in connection with his or her responsibilities as an employee and intended to result in substantial personal enrichment of the Participant, (ii) Participant being convicted of or pleading nolo contendere to a felony, (iii) a willful act by the Participant which constitutes gross misconduct and which is injurious to the Company, (iv) following delivery to the Participant of a written demand for performance from the Company which describes the basis for the Company’s reasonable belief that the Participant has not substantially performed his or her duties, continued violations by the Participant of the Participant’s obligations to the Company which are demonstrably willful and deliberate on the Participant’s part.

 

(f) “Change in Control”  means the occurrence of any of the following events:

 

  

1

  

(i) Any Person becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities; or

 

(ii) The consummation of the sale or change in ownership of a substantial portion of the Company’s assets (i.e., the total gross fair market value of the Company’s assets acquired during the twelve (12) month period ending on the date of the most recent acquisition equals more than fifty percent (50%) of the total gross fair market value of all of the Company’s assets (without regard to associated liabilities) immediately before such acquisition or acquisitions) other than a transfer of assets to a related person as described in Treasury Regulation Section 1.409A-3(i)(5)(vii)(B); or

 

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

 

(iv) A change in the composition of the Board occurring within a twelve (12) month period, as a result of which fewer than a majority of the directors are Incumbent Directors.  “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date upon which this Agreement was entered into, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of those directors whose election or nomination was not in connection with any transaction described in subsections (i), (ii), or (iii) above, or in connection with an actual or threatened proxy contest relating to the election of directors to the Company.

 

(g) “Code”  means the U.S. Internal Revenue Code of 1986, as amended.

 

(h) “Committee”  means a committee, which may consist of one or more persons whom may or may not be Board members, as is consistent with Applicable Laws, appointed by the Board in accordance with Section 4 of the Plan.

 

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

 

(j) “Company”  means 3Com Corporation.

 

(k) “Consultant”  means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.

 

(l) “Director”  means a member 3Com’s Board of Directors.

 

(m) “Disability”  means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

 

  

2

  

(n) “Discretionary Options”  means Incentive Stock Options and Nonstatutory Stock Options that are not issued pursuant to the Independent Director option grant provisions of Section 11.

 

(o) “Employee”  means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company.  A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or any leave for which a return to employment is guaranteed under Applicable Laws, or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor.  For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract.  If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.  Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

 

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

 

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

 

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

 

(iii) in the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

 

(r) “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.

 

(s) “Independent Director”  means a Director who is not an Employee.

 

(t) “Inside Director”  means a Director who is an Employee.

 

  

3

  

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

 

(v) “Notice of Grant”  means a written or electronic notice evidencing certain terms and conditions of an individual Award.  The Notice of Grant is part of the Award Agreement.

 

(w) “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.

 

(x) “Option”  means a stock option granted pursuant to the Plan.

 

(y) “Optioned Stock” means the Common Stock subject to an Option or SAR.

 

(z) “Parent”  means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

(aa) “Participant”  means the holder of an outstanding Award granted under the Plan.

 

(bb) “Plan”  means this 2003 Stock Plan, as from time to time amended and in effect.

 

(cc) “Qualifying Board Retirement”  means an Independent Director’s termination from Board membership, including pursuant to the Independent Director’s death or Disability, if such termination follows ten full years of Board service or five full years of Board service and attainment of age 62 or greater.

 

(dd) “Restricted Stock”  means shares of Common Stock or units/rights to acquire shares of Common Stock granted pursuant to Section 9 of the Plan that are subject to vesting.

 

(ee) “Rule 16b-3”  means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

 

(ff) “Section 16(b)”  means Section 16(b) of the Exchange Act.

 

(gg) “Service Provider”  means an Employee, Director or Consultant.

 

(hh) “Share”  means a share of the Common Stock, as adjusted in accordance with Section 14 of the Plan.

 

(ii) “Stock Appreciation Right” or “SAR”  means an Award, granted alone or in connection with a related Option, that pursuant to Section 10 is designated as an SAR.

 

(jj) “Subsidiary”  means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code and also include partnerships, limited liability companies and other entities that are at least 30% owned by the Company.

 

  

4

  

3. Stock Subject to the Plan. 

 

(a) Maximum Shares.  Subject to the provisions of Section 14 of the Plan, the maximum aggregate number of Shares which may be issued under the Plan is 73,000,000 Shares.  The Shares may be authorized, but unissued, or reacquired Common Stock.

 

(b) Full Value Awards.  This Section 3(b) is effective upon stockholder approval, after Board approval on June 18, 2008, for new Awards granted under the Plan after such stockholder approval effective date.  Any Shares subject to Options or SARs shall be counted against the numerical limits of this Section 3 as one Share for every Share subject thereto.  Any Shares subject to Restricted Stock with a per share purchase price lower than 100% of the Fair Market Value on the date of grant shall be counted against the numerical limits of this Section 3 as 1.43 Shares for every one Share subject thereto.  If any Shares acquired pursuant to an Award of Restricted Stock are forfeited or repurchased by the Company and would otherwise return to the Plan pursuant to Section 3(c), 1.43 times the number of Shares so forfeited or repurchased will return to the Plan and will again become available for future grant or sale under the Plan.

 

(c) Lapsed Awards.  If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to Restricted Stock, is forfeited back to or repurchased by the Company, the unpurchased Shares (or for Restricted Stock, the forfeited or repurchased shares) which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated).  With respect to SARs, all shares which are the subject of an issued SAR shall cease to be available under the Plan, except for SARs which expire or become unexercisable without having been exercised in full.  Shares that have actually been issued under the Plan under any Award shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price or are forfeited to the Company, such Shares shall become available for future grant under the Plan.  For the avoidance of doubt, except for Awards which expire or become unexercisable without having been exercised in full, the following Shares shall not become available for issuance under the Plan: (i) Shares tendered by Participants as full or partial payment to the Company upon exercise of Options granted, or shares repurchased using cash proceeds upon exercise of Options granted, under the Plan; (ii) Shares reserved for issuance upon the grant of SARs, to the extent the number of reserved Shares exceeds the number of Shares actually issued upon exercise of the SARs; and (iii) Shares withheld by, or otherwise remitted to, the Company to satisfy a Participant’s tax withholding obligations upon the lapse of restrictions on Restricted Stock or the exercise of options or SARs granted under the Plan or upon any other payment or issuance of Shares under the Plan.

 

4. Administration of the Plan. 

 

(a) Procedure. 

 

(i) Multiple Administrative Bodies.  The Plan may be administered by different Committees with respect to different groups of Service Providers.

 

(ii) Section 162(m).  To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Compensation Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code.

 

  

5

  

(iii) Rule 16b-3.  To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.

 

(iv) Other Administration.  Other than as provided above, the Plan shall be administered by (A) the Compensation Committee, or (B) a different Committee, in either case which shall be constituted to satisfy Applicable Laws. Grants to Independent Directors under Section 11 of the Plan shall be administered by the Company’s Inside Directors.

 

(b) Powers of the Administrator.  Subject to the provisions of the Plan the Administrator shall have the authority, in its discretion:

 

(i) to determine the Fair Market Value;

 

(ii) to select the Service Providers to whom Awards may be granted hereunder;

 

(iii) to determine the number of shares of Common Stock to be covered by each Award granted hereunder;

 

(iv) to approve forms of agreement for use under the Plan;

 

(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder.  Such terms and conditions include, but are not limited to, the exercise or purchase price, the time or times when Awards may be vested, exercised, purchased or granted (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions or repurchase rights, and any restriction or limitation regarding any Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

 

(vi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan, including, but not limited to, a determination of a Participant’s date of termination with respect to any Award granted under the Plan;

 

(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws, satisfying foreign securities law or achieving other foreign legal compliance objectives;

 

(viii) to modify or amend each Award (subject to Section 16 of the Plan), including the discretionary authority to extend the post-termination vesting or exercisability of Awards longer than is otherwise provided for in the Plan;

 

  

6

  

(ix) to allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or SAR or upon the vesting or earlier tax recognition of Restricted Stock that number of Shares having a Fair Market Value equal to the amount required to be withheld.  The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined.  All elections by a Participant to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable;

 

(x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator; and

 

(xi) to make all other determinations deemed necessary or advisable for administering the Plan.

 

(c) Effect of Administrator’s Decision.  The Administrator’s decisions, determinations and interpretations shall be final and binding on all Participants and any other holders of Awards.

 

5. Eligibility. 

 

(a) Awards and Discretionary Stock Options.  Awards and Discretionary Options may be granted to Service Providers.  Incentive Stock Options may be granted only to Employees.

 

(b) Automatic Independent Director Option Grants.  Automatic Option grants under Section 11 hereof shall only be made to Independent Directors.

 

6. Limitations. 

 

(a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.  However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or subsidiary as defined in Code Section 424(f)) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options.  For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted.  The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

 

(b) Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing their relationship as a Service Provider, nor shall they interfere in any way with the right of the Participant or the right of the Company or its Parent or Subsidiaries to terminate such relationship at any time, with or without cause.

 

(c) The following limitations shall apply to grants of Options and SARs with an exercise price equal to or exceeding 100% of Fair Market Value on the grant date:

 

(i) No Service Provider shall be granted, in any fiscal year of the Company, Option or SARs to purchase more than 1,750,000 Shares.

 

  

7

  

(ii) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 1,750,000 Shares which shall not count against the limit set forth in subsection (i) above.

 

(iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 14(a).

 

(iv) If an Option is cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 14(c)), the cancelled Option will be counted against the limits set forth in subsections (i) and (ii) above.

 

7. Term of Plan.  The Plan shall become effective upon the date of stockholder approval of the Plan in 2003.  It shall continue in effect for a term of ten (10) years from the date upon which the Board approved the Plan subject to obtaining stockholder approval, namely July 15, 2013.

 

8. Stock Options. 

 

(a) Term of Option.  The term of each Option shall be stated in the Option Agreement and shall be no more than seven (7) years from the date of grant.  Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or subsidiary that qualifies under Code Section 424(f), the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.

 

(b) Option Exercise Price, Waiting Period and Consideration. 

 

(i) Exercise Price.  The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:

 

(1) In the case of an Incentive Stock Option

 

a) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Code Section 424(f) subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

 

b) granted to any Employee other than an Employee described in paragraph a) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

 

(2) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator, with a minimum per Share exercise price equal to 100% of the Fair Market Value per Share on the date of grant.

 

  

8

  

(ii) Waiting Period and Exercise Dates.  At the time an Option is granted, the Administrator shall fix the period within which the Option may become vested or be exercised and shall determine any conditions which must be satisfied before the Option may vest or be exercised.

 

(iii) Form of Consideration.  The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment.  In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant.  Such consideration, subject to Applicable Laws, may consist entirely of:

 

(1) cash;

 

(2) check;

 

(3) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;

 

(4) consideration received by the Company under a broker-assisted cashless exercise program acceptable to the Company, in its sole discretion;

 

(5) any combination of the foregoing methods of payment; or

 

(6) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

 

(iv) Exercise of Option; Rights as a Stockholder.  Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement.

 

An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised.  Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan.  Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse.  Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option.  The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised.  No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 14 of the Plan.

 

Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.  An Option may not be exercised for a fraction of a Share.

 

  

9

  

(c) Termination of Relationship as a Service Provider.  If an Optionee ceases to be a Service Provider, other than upon the Optionee’s death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested and exercisable on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement).  In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee’s termination.  If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan.  If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

         

                                     Notwithstanding the above, in the event of an Optionee’s change in status from Consultant, Employee or Director to Employee, Consultant or Director (e.g., an Inside Director becoming an Independent Director), an Optionee’s status as a Service Provider shall continue notwithstanding the change in status.  However, in such event, an Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option three months and one day following such change of status.

 

(d) Disability of Optionee.  If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested and exercisable on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement).  In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination.  If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan.  If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

 

(e) Death of Optionee.  If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested and exercisable on the date of death.  In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination.  If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan.  The Option may be exercised by the executor or administrator of the Optionee’s estate or, if none, by the person(s) entitled to exercise the Option under the Optionee’s will or the laws of descent or distribution.  If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

 

  

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9. Restricted Stock. 

 

(a) Grant of Restricted Stock.  Subject to the terms and conditions of the Plan, Restricted Stock may be granted to Service Providers at any time and from time to time as shall be determined by the Administrator, in its sole discretion.  The Administrator shall have complete discretion to determine (i) the number of Shares subject to a Restricted Stock award granted to any Participant, (ii) whether the form of the award shall be Shares or units/rights to acquire Shares, and (iii) the conditions that must be satisfied, including performance-based milestones, upon which is conditioned the grant or vesting of Restricted Stock.  For Restricted Stock granted in the form of units/rights to acquire Shares, each such unit/right shall be the equivalent of one Share of Common Stock for purposes of determining the number of Shares subject to an Award.  Until the Shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the units/rights to acquire Shares.

 

(b) Exercise Price and other Terms.  The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Restricted Stock granted under the Plan.  Restricted Stock grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded, which may include such performance-based milestones as are determined appropriate by the Administrator.  The Administrator may require the recipient to sign a Restricted Stock Agreement as a condition of the award.  Any certificates representing the shares of Stock awarded shall bear such legends as shall be determined by the Administrator.

 

(c) Restricted Stock Award Agreement.  Each Restricted Stock grant shall be evidenced by an Award Agreement that shall specify the purchase price (if any) and such other terms and conditions as the Administrator, in its sole discretion, shall determine; provided; however, that if the Restricted Stock grant has a purchase price, such purchase price must be paid no more than seven (7) years following the date of grant.

 

10. Stock Appreciation Rights. 

 

(a) Grant of SARs.  Subject to the terms and conditions of the Plan, SARs may be granted to Service Providers at any time and from time to time as shall be determined by the Administrator, in its sole discretion.  The Administrator shall have complete discretion to determine the number of SARs granted to any Participant.

 

(b) Exercise Price and other Terms.  The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of SARs granted under the Plan; provided, however, that (i) a SAR must have a minimum exercise price equal to 100% of the Fair Market Value per Share on the date of grant and (ii) no SAR may have a term of more than seven (7) years from the date of grant.

 

(c) Payment of SAR Amount.  Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

 

(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

 

  

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(ii) The number of Shares with respect to which the SAR is exercised.

 

(d) Payment upon Exercise of SAR.  At the discretion of the Administrator, payment for a SAR may be in cash, Shares or a combination thereof.

 

(e) Settlements and Plan Share Allocation.  Cash payments of Stock Appreciation Rights as well as Common Stock issued upon exercise of Stock Appreciation Rights shall be applied against the maximum number of shares of Common Stock that may be issued pursuant to the Plan.  The number of shares to be applied against such maximum number of shares in such circumstances shall be counted as one (1) share for every Stock Appreciation Right subject thereto, regardless of the number of shares or amount of cash used to settle the Stock Appreciation Right.

 

(f) SAR Agreement.  Each SAR grant shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, shall determine.

 

(g) Expiration of SARs.  A SAR granted under the Plan shall expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement.

 

(h) Termination of Relationship as a Service Provider.  If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability, the Participant may exercise his or her Stock Appreciation Right within such period of time as is specified in the Stock Appreciation Right Agreement to the extent that the Stock Appreciation Right is vested and exercisable on the date of termination (but in no event later than the expiration of the term of such Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement).  In the absence of a specified time in the Stock Appreciation Right Agreement, the Stock Appreciation Right shall remain exercisable for three (3) months following the Participant’s termination.  If, on the date of termination, the Participant is not vested as to his or her entire Stock Appreciation Right, the Shares covered by the unvested portion of the Stock Appreciation Right shall revert to the Plan.  If, after termination, the Participant does not exercise his or her Stock Appreciation Right within the time specified by the Administrator, the Stock Appreciation Right shall terminate, and the Shares covered by such Stock Appreciation Right shall revert to the Plan.  Notwithstanding the above, in the event of a Participant’s change in status from Consultant, Employee or Director to Employee, Consultant or Director (e.g., an Inside Director becoming an Independent Director), a Participant’s status as a Service Provider shall continue notwithstanding the change in status.

 

(i) Disability of Participant.  If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Stock Appreciation Right within such period of time as is specified in the Stock Appreciation Right Agreement to the extent the Stock Appreciation Right is vested and exercisable on the date of termination (but in no event later than the expiration of the term of such Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement).  In the absence of a specified time in the Stock Appreciation Right Agreement, the Stock Appreciation Right shall remain exercisable for twelve (12) months following the Participant’s termination.  If, on the date of termination, the 

 

  

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Participant is not vested as to his or her entire Stock Appreciation Right, the Shares covered by the unvested portion of the Stock Appreciation Right shall revert to the Plan.  If, after termination, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein, the Stock Appreciation Right shall terminate, and the Shares covered by such Stock Appreciation Right shall revert to the Plan.

 

(j) Death of Participant.  If a Participant dies while a Service Provider, the Stock Appreciation Right may be exercised within such period of time as is specified in the Stock Appreciation Right Agreement (but in no event later than the expiration of the term of such Stock Appreciation Right as set forth in the Notice of Grant), by the Participant’s estate or by a person who acquires the right to exercise the Stock Appreciation Right by bequest or inheritance, but only to the extent that the Stock Appreciation Right is vested and exercisable on the date of death.  In the absence of a specified time in the Stock Appreciation Right Agreement, the Stock Appreciation Right shall remain exercisable for twelve (12) months following the Participant’s termination.  If, at the time of death, the Participant is not vested as to his or her entire Stock Appreciation Right, the Shares covered by the unvested portion of the Stock Appreciation Right shall immediately revert to the Plan.  The Stock Appreciation Right may be exercised by the executor or administrator of the Participant’s estate or, if none, by the person(s) entitled to exercise the Stock Appreciation Right under the Participant’s will or the laws of descent or distribution.  If the Stock Appreciation Right is not so exercised within the time specified herein, the Stock Appreciation Right shall terminate, and the Shares covered by such Stock Appreciation Right shall revert to the Plan.

 

11. Option Grants to Independent Directors.  All grants of Options to Independent Directors pursuant to this Section shall be made strictly in accordance with the following provisions:

 

(a) Nonstatutory Stock Options.  All Options granted pursuant to this Section shall be Nonstatutory Stock Options and, except as otherwise provided herein, shall be subject to the other terms and conditions of the Plan.

 

(b) Administration.  Option grants under this Section 11 shall be administered by a committee consisting of the Company’s Inside Directors; provided, however, that such committee shall not have any discretion to select which Independent Directors shall be granted Options under this Section 11.

 

(c) Guidelines.  The committee of Inside Directors shall establish guidelines (the "Guidelines") that determine the number of shares to be subject to the options granted under this Section 11, subject to the per option limits set forth in Sections 11(d) and 11(f).  The Guidelines must provide that on each grant date, the number of shares of Common Stock subject to each option automatically granted pursuant to Section 11(d) or 11(f), as the case may be, shall be equal for each eligible participant, subject to distinctions based on the outside director's position as Chairman of the Board, designation as the "lead" outside director, and service on Board committees, including service as chairman of such committees.

 

  

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(d) Initial Grant.  Each person who first becomes an Independent Director following the effective date of this Plan shall be automatically granted an Option to purchase that number of shares as may be specified in the Guidelines then currently in effect (the "Guideline Amount") for service on the Board, not to exceed 120,000 shares of Common Stock (or 160,000 shares if the participant is the lead director or Chairman of the Board on the date of grant), as of the date that is the fifth (5th) trading day of the month that immediately follows the month in which that individual first becomes an Independent Director and commences service on the Board whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy (the “Initial Grant”); provided, however, that an Inside Director who ceases to be an Inside Director and thereby becomes an Independent Director shall not receive an Initial Grant. Subject to accelerated vesting upon certain Change of Control transactions as specified in Section 14(c)(iii), the Initial Grant shall vest as to 25% of the shares subject thereto on each anniversary of the date of grant, so as to be 100% vested on the fourth anniversary of the date of grant, subject to the Optionee remaining a director through such vesting dates.

 

(e) Pro-Rata Grant.  Additionally, at the time an Initial Grant is made to a new director, he or she shall receive an option grant with the number of shares subject thereto equal to the Guideline Amount multiplied by a fraction, the numerator of which is the number of full months of service remaining prior to the next annual stockholder meeting and the denominator of which is 12 (the “Pro-Rata Grant”).  Subject to accelerated vesting upon a Change of Control as specified in Section 14(c)(iii), the Pro-Rata Grant will vest as to 50% of the shares subject thereto on each anniversary of the date of grant, so as to be 100% vested on the second anniversary of the date of grant, subject to the Optionee remaining a director through such vesting dates.

 

(f) Annual Grant.  On the date of each regularly scheduled Company annual stockholder meeting, each Independent Director shall be automatically granted an Option to purchase that number of shares equal to the Guideline Amount for service on the Board, not to exceed 120,000 shares of Common Stock, or 160,000 shares if the participant is the lead director or Chairman of the Board on the date of grant (the “Annual Grants”).  Subject to accelerated vesting upon certain Change of Control transactions as specified in Section 14(c)(iii), Annual Grants shall vest as to 50% of the shares subject thereto on the day prior to the next year’s regularly scheduled Company annual stockholder meeting and as to the balance of the shares subject thereto on the day prior to the next year’s regularly scheduled Company annual stockholder meeting, so as to be 100% vested on the day prior to the Company annual stockholder meeting held approximately two years following the grant date, subject to the Optionee remaining a director through such vesting dates.

 

(g) Other Option Terms.  The other terms of each option granted pursuant to this Section 11 shall be as follows:

 

(i) The option term shall be seven (7) years.

 

(ii) The exercise price per Share shall be no less than 100% of the Fair Market Value per Share on the date of grant.

 

  

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(iii) In the event an Optionee’s service as a Director terminates more than six (6) months following the commencement of service as an Independent Director, then the Option shall immediately accelerate as to one year’s additional vesting or, with respect to an Annual Grant, as to the number of shares that would have vested on the day prior to the next regularly scheduled meeting of the stockholders.  The Option shall remain exercisable, to the extent vested and exercisable on the date of termination of Board service, for one year following such termination date (but in no event longer than the original term of the Option); provided, however, that in the event of a Qualifying Board Retirement, the Option shall vest as to 100% of the Shares and shall remain exercisable for three years following such termination (but in no event longer than the original term of the Option); provided, further that in the event of the termination of service as an Independent Director due to the death or Disability of the Optionee while an Independent Director, the Option shall immediately accelerate as to one year’s additional vesting or, with respect to an Annual Grant, as to the number of shares that would have vested on the day prior to the next regularly scheduled meeting of the stockholders (or more, in any event, if the cessation of Board Service would have been a Qualifying Retirement) even if such termination of service is within six (6) months following the commencement of service as an Independent Director.

 

(iv) The permissible forms of consideration for exercising the option shall be the same as for discretionary options as specified in Section 8(b)(iii) hereof.

 

(v) The provisions of Section 8(b)(iv) hereof relating to stockholder rights shall also apply to options granted under this Section 11.

 

(vi) The options granted under this Section 11 shall be subject to the other terms and conditions set forth in the form of option agreement selected by the committee of Inside Directors, in their sole discretion.

 

12. Leaves of Absence.  Unless the Administrator provides otherwise or as otherwise required by Applicable Laws, vesting of Awards granted hereunder shall cease commencing on the 91st day of any unpaid leave of absence and shall only recommence upon return to active service.

 

13. Non-Transferability of Awards.  An Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant.

 

14. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation or Change of Control. 

 

(a) Changes in Capitalization.  Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Award, the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Award, as well as the price per share of Common Stock covered by each such outstanding Award and the 162(m) annual share issuance limits under Section 6(c) shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.”  Such adjustment shall be made by the Compensation Committee, whose determination in that respect shall be final, binding and conclusive.  Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Award.

 

  

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(b) Dissolution or Liquidation.  In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction.  The Administrator in its discretion may provide for a Participant to have the right to exercise his or her Award until ten (10) days prior to such transaction as to all of the stock covered thereby, including Shares as to which the Award would not otherwise be vested or exercisable.  In addition, the Administrator may provide that any Company repurchase option or forfeiture applicable to any Shares covered by an Award shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated.  To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.

 

(c) Change of Control. 

 

(i) SARs and Discretionary Options.  In the event of a Change of Control, each outstanding SAR and Discretionary Option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or subsidiary of the successor corporation.  In the event that the successor corporation refuses to assume or substitute for the SAR and Discretionary Option, the Participant shall fully vest in and have the right to exercise the SAR or Discretionary Option as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable.  If a SAR or Discretionary Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change of Control, the Administrator shall notify the Participant in writing or electronically that the SAR or Discretionary Option shall be fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and the SAR or Discretionary Option shall terminate upon the expiration of such period.  For the purposes of this paragraph, the SAR or Discretionary Option shall be considered assumed if, following the Change of Control, the SAR or option confers the right to purchase or receive, for each Share of Optioned Stock subject to the SAR or Discretionary Option immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change of Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the SAR or Discretionary Option, for each Share of Optioned Stock subject to the SAR or Discretionary Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control.

 

(ii) Restricted Stock.  In the event of a Change of Control, each outstanding Restricted Stock award shall be assumed or an equivalent award substituted by the successor corporation or a Parent or subsidiary of the successor corporation.  In the event that the successor corporation refuses to assume or substitute for the Restricted Stock, the Participant shall fully vest in 

 

  

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the Restricted Stock, including Shares as to which it would not otherwise be vested.  In such event, payment shall be made as soon as administratively practicable but in no event later than the sixtieth (60th) day following vesting.  For the purposes of this paragraph, the Restricted Stock shall be considered assumed if, following the Change of Control, the Restricted Stock confers the right to receive, for each Share and each unit/right to acquire a Share that is subject to the Restricted Stock award immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock for each Share and each unit/right to acquire a Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change of Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received, for each Share and each unit/right to acquire a Share subject to the Restricted Stock award, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control.

 

(iii) Automatic Independent Director Options.  In the event of a Change of Control in which the Independent Directors are terminated or asked to resign either upon the Change of Control or within one year following the Change of Control, their Options granted under Section 11 hereof shall vest 100% immediately prior to such Change in Control.  In the event of a Change of Control in which the Independent Directors are not terminated or asked to resign, their Options granted under Section 11 hereof shall be treated the same as Discretionary Options hereunder.

 

(iv) Certain Terminations Within Twelve Months Following a Change of Control.  In the event that, within twelve (12) months following a Change of Control a Participant’s employment with the Company, its Parent, or a Subsidiary is terminated involuntarily by his or her employer other than for Cause, then such Participant’s Awards shall have their vesting accelerated as to fifty percent (50%) of the Shares that are unvested as of the date of such termination of employment.  Any Award that becomes vested pursuant to this paragraph shall be payable as follows:

 

(a)  Awards Exempt from Code Section 409A:

 

(1)  Stock Options:  Underlying shares to be delivered to Participant as soon as administratively practicable following Participant's exercise of such options.

 

(2)  Restricted stock awards:  all restrictions placed upon the shares of stock shall lapse upon Participant's termination of employment.

 

(3)  Restricted stock units:  shares underlying those restricted stock units that are exempt from Code Section 409A shall be transferred to Participant as soon as administratively practicable, but in no event later than the sixtieth (60th) day following Participant's termination of employment.

 

(4)  Stock Appreciation Rights: cash or Company stock of equivalent value to be delivered to Participant as soon as administratively practicable following Participant's exercise of such right.

 

  

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(b)  Restricted Stock Units Subject to Code Section 409A:  Shares underlying those restricted stock units that are subject to Code Section 409A and payable to a "specified employee" (as determined pursuant to Treasury Regulation Section 1.409A-1(i) and as applied according to procedures of the Company) shall be transferred to the Participant on the first market day following the six (6) month anniversary of the Participant's termination of employment (as determined pursuant to Treasury Regulation Section 1.409A-1(h)).

 

15. Award Date of Grant.  Other than as set forth in Section 11 hereof as to automatic grants to Independent Directors, the date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator.  Notice of the determination shall be provided to each Participant within a reasonable time after the date of such grant.

 

16. Amendment and Termination of the Plan. 

 

(a) Amendment and Termination; No Repricing.  The Committee may at any time amend, alter, suspend or terminate the Plan, provided that the Board may not amend the Plan to permit the repricing, including by way of exchange, or acquisition for cash or other consideration of any Award without receiving prior stockholder approval.

 

(b) Stockholder Approval.  The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

 

(c) Effect of Amendment or Termination.  No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company.  Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

 

17. Conditions Upon Issuance of Shares. 

 

(a) Legal Compliance.  Shares shall not be issued pursuant to the exercise or vesting of an Award unless the exercise or vesting of such Award and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

(b) Investment Representations.  As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

 

18. Inability to Obtain Authority.  The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

 

  

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19. Reservation of Shares.  The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

20. Stockholder Approval.  The Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted.  Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws.

 

21. Compliance With Code Section 409A.  Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A, except as otherwise determined in the sole discretion of the Administrator.  The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator.  To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A.

 

 

                                                                         

  

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