Document:

Exhibit 4.2

 

Execution
Copy

 

STB
BEAUTY, INC.

STOCKHOLDERS
AGREEMENT

Dated as of June 10, 2004

 

TABLE
OF CONTENTS

 

	
  ARTICLE I.

  DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  1.1.

  	
  Certain Matters of Construction

  	
  1

  
	
  1.2.

  	
  Definitions

  	
  2

  
	
   

  	
   

  
	
  ARTICLE II.

  COVENANTS AND CONDITIONS

  	
  10

  
	
   

  	
   

  
	
  2.1.

  	
  Restrictions on Transfers

  	
  11

  
	
  2.2.

  	
  Call by the Company and the Stockholders.

  	
  14

  
	
  2.3.

  	
  Take Along.

  	
  17

  
	
  2.4.

  	
  Right of First Offer; Compelled Sale

  	
  18

  
	
  2.5.

  	
  Corporate Governance.

  	
  20

  
	
  2.6.

  	
  Supermajority Provisions.

  	
  23

  
	
  2.7.

  	
  Rights of Participation.

  	
  24

  
	
  2.8.

  	
  Confidentiality; Non-Solicitation.

  	
  25

  
	
  2.9.

  	
  Financial and Business Information

  	
  26

  
	
   

  	
   

  
	
  ARTICLE III.

  REGISTRATION RIGHTS

  	
  26

  
	
   

  	
   

  
	
  3.1.

  	
  General

  	
  26

  
	
  3.2.

  	
  Demand Registration Initiated by the Berkshire
  Stockholders.

  	
  27

  
	
  3.3.

  	
  Demand Registration Initiated by the JH Stockholders.

  	
  27

  
	
  3.4.

  	
  Piggyback Registration.

  	
  28

  
	
  3.5.

  	
  Obligations of the Company

  	
  29

  
	
  3.6.

  	
  Furnish Information

  	
  31

  
	
  3.7.

  	
  Expenses of Registration

  	
  31

  
	
  3.8.

  	
  Underwriting Requirements

  	
  31

  
	
  3.9.

  	
  Indemnification

  	
  32

  
	
  3.10.

  	
  Registration on Form S-3

  	
  35

  
	
  3.11.

  	
  Reports Under Securities Exchange Act of 1934

  	
  35

  
	
  3.12.

  	
  No Inconsistent Agreements

  	
  35

  
	
  3.13.

  	
  Stock Split

  	
  35

  
	
  3.14.

  	
  Timing and Other Limitations.

  	
  36

  
	
  3.15.

  	
  Lock-up

  	
  36

  
	
   

  	
   

  
	
  ARTICLE IV.

  MISCELLANEOUS

  	
  36

  
	
   

  	
   

  	
   

  
	
  4.1.

  	
  Appointment of Proxies.

  	
  36

  
	
  4.2.

  	
  Regulatory Cooperation

  	
  37

  
	
  4.3.

  	
  Remedies

  	
  37

  
	
  4.4.

  	
  Entire Agreement; Amendment; Waiver

  	
  38

  

 

i

 

	
  4.5.

  	
  Severability

  	
  38

  
	
  4.6.

  	
  Notices

  	
  39

  
	
  4.7.

  	
  Binding Effects Assignment

  	
  40

  
	
  4.8.

  	
  Governing Law

  	
  40

  
	
  4.9.

  	
  Termination

  	
  40

  
	
  4.10.

  	
  Recapitalizations, Exchanges, Etc

  	
  40

  
	
  4.11.

  	
  Action Necessary to Effectuate the Agreement

  	
  40

  
	
  4.12.

  	
  Purchase for Investment; Legend on Certificate

  	
  40

  
	
  4.13.

  	
  Effectiveness of Transfers

  	
  41

  
	
  4.14.

  	
  Other Stockholders

  	
  41

  
	
  4.15.

  	
  No Waiver

  	
  42

  
	
  4.16.

  	
  Counterparts

  	
  42

  
	
  4.17.

  	
  Headings

  	
  42

  
	
  4.18.

  	
  Third Party Beneficiaries

  	
  42

  
	
  4.19.

  	
  Consent to Jurisdiction

  	
  42

  
	
  4.20.

  	
  WAIVER OF JURY TRIAL

  	
  42

  

 

ii

STOCKHOLDERS
AGREEMENT

This Stockholders Agreement (this “Agreement”) is
entered into as of the 10th day of June, 2004 by and among (i) STB Beauty, Inc.,
a Delaware corporation (the “Company”) and (ii) the Stockholders (as defined
herein) party hereto.

WHEREAS, upon consummation of the transactions
contemplated by that certain Agreement and Plan of Merger dated as of May 3,
2004 (the “Merger Agreement”) by and among the Company, MD Beauty, Inc. (“MD
Beauty”), STB Acquisition, Inc., JH Partners, LLC and certain stockholders and
option holders of MD Beauty, the Berkshire Stockholders, the JH Stockholders, the
Mezzanine Stockholders and the Other Stockholders will own the number of shares
of Common Stock of the Company, each as set forth opposite their respective
names on Exhibit A hereto;

WHEREAS, on the date hereof, the Management
Stockholders will receive, pursuant to the 2004 Equity Incentive Plan, options
to purchase shares of Common Stock of the Company, as set forth opposite their
respective names on Exhibit A hereto.

WHEREAS, upon consummation of the transactions
contemplated by the Merger Agreement, the Management Stockholders own the
number of Rollover Options, each as set forth opposite their respective names
on Exhibit A hereto; and

WHEREAS, each of the Stockholders desires to enter
into this Agreement for the purpose of regulating certain relationships of the
Stockholders with regard to the Company and certain restrictions on the Shares
owned by the Stockholders.

NOW, THEREFORE, in consideration of the mutual
promises, representations, warranties, covenants and conditions set forth in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:

ARTICLE
I.

DEFINITIONS

1.1.          Certain Matters of Construction.  In addition to the definitions referred to or
set forth below in this Section 1:

(a)           The words “hereof”, “herein”, “hereunder”
and words of similar import shall refer to this Agreement as a whole and not to
any particular Section or provision of this Agreement, and reference to a
particular Section of this Agreement shall include all subsections thereof;

(b)           Definitions shall be equally
applicable to both nouns and verbs and the singular and plural forms of the
terms defined; and

(c)           The masculine, feminine and neuter
genders shall each include the other.

 

1.2.          Definitions. 
For the purposes of this Agreement, the following terms shall have the
following meanings:

“1933 Act” shall mean the Securities Act of 1933, as
amended.

“1934 Act” shall mean the Securities Exchange Act of
1934, as amended.

“2004 Equity Incentive Plan” shall mean the Company’s
2004 Equity Incentive Plan.

“Affiliate” shall mean, with respect to any specified
Person, any other Person which, directly or indirectly, through one or more
intermediaries controls, or is controlled by, or is under common control with,
such specified Person (for the purposes of this definition, “control”
(including, with correlative meanings, the terms “controlling,” “controlled by”
and “under common control with”), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise and as used with
respect to the Company or any Subsidiary of the Company, shall include any
holder of at least 5% of the capital stock, or any officer or director, of the
Company); provided that, with respect to each JH Stockholder, for the purposes
of Section 2.8, “Affiliate” shall also include JH Partners, LLC, JH Capital
Partners, LP, Jesse.Hansen CoVe, Siberia Investment Company and any successor
fund controlled by JH Partners, LLC or any of its Affiliates.

“Agreement” shall have the meaning set forth in the
first paragraph of this Agreement.

“Associate” (i) when used to indicate a relationship
with any Person shall mean, (a) any corporation or organization of which such
Person is an officer or partner or is, directly or indirectly, the beneficial
owner of ten percent (10%) or more of any class of equity securities, (b) any
trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as a trustee or in a similar
fiduciary capacity, and (c) any relative of such Person who has the same home as
such Person, is a parent, aunt or uncle, sibling, spouse, in-law, child, niece
or nephew or grandchild of such Person, or the spouse of any of them, or (ii)
when used to indicate a relationship with the Company, shall also mean a
director or officer of the Company or any Subsidiary.  Neither the Company nor any of its
Subsidiaries shall be deemed an Associate of any Stockholder.

“Berkshire Representatives” shall have the meaning as
set forth in Section 2.5(a).

“Berkshire Stockholders” shall mean (i) those Persons
listed as the Berkshire Stockholders on the signature pages hereof, and (ii)
their Permitted Transferees (other than the Company and any transferee
acquiring under clause (viii) of the definition of Permitted Transferee).

“BNP Paribas” means Paribas North America, Inc., a
Delaware corporation or other Permitted Transferee that is an Affiliate of
Paribas North America, Inc., for so long as such entity is a Stockholder.

“Board” or “Board of Directors” shall mean the Board
of Directors of the Company as the same shall be constituted from time to time.

1

“Call Event” shall have the meaning as set forth in
Section 2.2(a).

“Call Group” shall have the meaning as set forth in
Section 2.2(a).

“Call Notice” shall have the meaning as set forth in
Section 2.2(a).

“Call Option” shall have the meaning as set forth in
Section 2.2(a).

“Call Price” shall have the meaning as set forth in
Section 2.2(b).

“Call Securities” shall mean all of the Shares, Rollover
Options, vested Time Options and vested and earned Performance Options which
are owned by the members of the Call Group on the date of a Call Event.

“Cause” shall have the meaning as set forth below,
except with respect to any Management Stockholder who is employed by the
Company or one of its Subsidiaries pursuant to an effective written employment
agreement, if any, between the Company and/or one of its Subsidiaries and such
Management Stockholder in which there is a definition of “Cause”, in which
event the definition of “Cause” as set forth in such employment agreement shall
be deemed to be the definition of “Cause” herein solely for such Management
Stockholder and only for so long as such employment agreement remains
effective.

In all other events, the term “Cause” shall mean that
the Board of Directors of the Company has determined, in its reasonable
judgment, that any one or more of the following has occurred:

(i)           the Management Stockholder shall have
been convicted of, or shall have pleaded guilty or nolo
contendere to, a felony;

(ii)          the Management Stockholder shall have
breached any non-competition agreement between the Management Stockholder and
the Company or its Affiliates; or

(iii)         the Management Stockholder shall have openly
disregarded his or her responsibilities to the Company and/or its Affiliates
and shall have refused to devote substantial time and energy to the business
and affairs of the Company and/or its Affiliates (other than due to Disability
or temporary disability which, in the reasonable judgment of the Board of
Directors, causes the Management Stockholder to be incapable of devoting such
time and energy) within 30 days after written notification by the Board of
Directors that, in their good faith judgment, the Management Stockholder has
consistently failed to do so.

“Common Stock” shall mean the Company’s common stock, $0.01
par value per share, that the Company may be authorized to issue from time to
time, any other securities of the Company into which such Common Stock may
hereafter be changed or for which such Common Stock may be exchanged after
giving effect to the terms of such change or exchange (by way of
reorganization, recapitalization, merger, consolidation or otherwise) and shall
also include any

2

common stock of the Company hereafter authorized and
any capital stock of the Company of any other class hereafter authorized which
is not preferred as to dividends or distribution of assets in liquidation over
any other class of capital stock of the Company and which has ordinary voting
power for the election of directors of the Company.

“Company” shall mean STB Beauty, Inc., a Delaware
corporation, and its successors and assigns.

“Company Note” shall have the meaning as set forth in
Section 2.2(c).

“Company Option Period” shall have the meaning as set
forth in Section 2.1(a).

“Company Sale” shall mean any transaction whether by
sale of stock, sale of assets, merger, recapitalization, reorganization or
otherwise, pursuant to which one or more Third Parties shall own in excess of
50% of the common equity or assets of the Company on a fully diluted basis
(assuming exercise of all Options), in each case in a single transaction or
series of related transactions.

“Compelled Sale” shall mean a Company Sale in which one
hundred percent (100%) of the equity or assets of the Company shall be
transferred to an unaffiliated Third Party, whether by sale of stock, sale of
assets, merger, recapitalization, reorganization or otherwise.

“Compelled Sale Notice” shall have the meaning as set
forth in Section 2.4(b).

“Credit Agreement” shall mean the Credit Agreement
dated as of June 10, 2004 by and among MD Beauty, Inc., the Company, the
Lenders (as defined therein), and BNP Paribas, as administrative agent for the
Lenders, together with all exhibits and schedules thereto.

“Default” shall have the meaning as set forth in
Section 2.2(c).

“Disability” shall mean permanent disability within
the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended, unless otherwise defined in a separate written employment agreement
between the Company and/or one of its Subsidiaries and the person whose
disability is in question in which event the definition of “Disability” as set
forth in such employment agreement shall be deemed to be the definition of “Disability”
herein solely for such person and only for so long as such employment agreement
remains effective.

“Existing Incentive Plans” shall mean each of the MD
Beauty, Inc. 2001 Stock Plan and the Bioceutix Inc. 2001 Stock Option/Stock
Issuance Plan, which plans shall be assumed by the Company effective upon the
consummation of the Merger.

“Fair Market Value” shall mean the fair value per
share of the applicable Shares as of the applicable date on the basis of a sale
of such Shares in an arms length private sale between a willing buyer and a
willing seller, neither acting under compulsion.  In determining such Fair Market Value, no
discount shall be taken for constituting a minority interest or for the
illiquidity of such shares and no upward adjustment or discount shall be taken
relating to the fact that the Shares in question are subject to the
restrictions and entitled to the rights provided hereunder.

3

Such Fair Market Value shall be determined in good
faith by the Board of Directors of the Company

“Federal Bankruptcy Code” means Title 11 of the United
States Code.

“First Offer” shall have the meaning as set forth in
Section 2.4(a).

 “Fund I” shall
mean Gleacher Mezzanine Fund I, L.P.

“Fund P” shall mean Gleacher Mezzanine Fund P, L.P.

“Holder” or “Holders” shall mean the holder or holders
of Registrable Securities.

“Incentive Plans” shall mean the 2004 Equity Incentive
Plan and the Existing Incentive Plans.

“Investment Price” shall mean an amount per Share
equal to the price per Share paid for such Share at the time of initial
purchase thereof (subject to appropriate adjustments for stock splits,
recapitalizations and the like).

“Involuntary Transfer” shall have the meaning as set
forth in Section 2.1(a).

“JH Representatives” shall have the meaning as set
forth in Section 2.5(a).

“JH Stockholders” shall mean (i) those Persons listed
as the JH Stockholders on the signature pages hereof and (ii) their Permitted
Transferees (other than the Company and any transferee acquiring under clause
(viii) of the definition of Permitted Transferee).

“Management Proxy” shall have the meaning as set forth
in Section 4.1(a).

“Management Representative” shall have the meaning as
set forth in Section 2.5(a).

“Management Stockholders” shall mean (i) those Persons
listed as the Management Stockholders on the signature pages hereof and (ii)
their Permitted Transferees (other than the Company).

“Merger Agreement” shall have the meaning as set forth
in the recitals.

“Mezzanine Stockholders” shall mean each of (i) Fund
I, Fund P and York Street for so long as such Person holds Shares and (ii)
their Permitted Transferees (other than the Company) for so long as such
Persons hold such Shares

“New Securities” shall have the meaning as set forth
in Section 2.7(b).

“Non-Requesting Party” shall have the meaning as set
forth in Section 2.4(a).

“Offer Notice” shall have the meaning as set forth in
Section 2.4(a).

“Offer Price” shall have the meaning as set forth in
Section 2.4(a).

4

“Offer Terminate Date” shall have the meaning as set forth
in Section 2.4(a)

“Options” shall mean the Time Options, Performance
Options, and Rollover Options.

“Other Stockholders” shall mean (i) those Persons
listed as the Other Stockholders on the signature pages hereof, (ii) their
Permitted Transferees (other than the Company), and (iii) those Persons
described in Section 4.14(iv) hereof.

“Outside Representatives” shall have the meaning as
set forth in Section 2.5(a).

“Performance Options” shall mean, collectively, the
options, granted to Management Stockholders under the 2004 Equity Incentive
Plan, to purchase shares of the Company’s Common Stock, the number of earned
shares of which is subject to the attainment of certain performance targets as
determined by the requisite vote (as set forth in the 2004 Equity Incentive
Plan) of the Board of Directors, on the terms set forth therein.

“Permitted Transfer” shall mean:

(i)           a Transfer of Shares by any
Stockholder who is a natural person to (A) such Stockholder’s spouse, children
(including legally adopted children and stepchildren) and grandchildren, (B) a
trust for the benefit of the Stockholder and/or any of the persons described in
clause (A), or (C) a limited partnership or limited liability company whose
sole partners or members, as the case may be, are the Stockholder and/or any of
the persons described in clause (A) or clause (B); provided, that the
Stockholder transferring such Shares in any of clauses (A), (B) or (C) retains
exclusive power to exercise all rights under this Agreement;

(ii)          a Transfer of Shares by any
Stockholder to the Company;

(iii)         a Transfer of Shares by a Stockholder
upon death or in capacity to such Stockholder’s estate, executors,
administrators and personal representatives, and then to such Stockholder’s
legal representatives, heirs or legatees (whether or not such recipients are a
spouse, children, grandchildren, parents or siblings of such Stockholder), provided, that, in the case of a Management Stockholder
whose Shares were subject to the provisions of Section 2.2 immediately prior to
such Management Stockholder’s death, the Company has not exercised its Call
Option with respect to such Shares under Section 2.2;

(iv)         a Transfer of Shares (a) by any
Berkshire Stockholder to any Affiliate of Berkshire Partners LLC or any of the
employees, partners, members or Affiliates of such Berkshire Stockholder or any
such Affiliate or (b) between any Berkshire Stockholders;

(v)          a Transfer of Shares (a) by any JH
Stockholder to any Affiliate of JH MDB Investors, L.P. or any of the employees,
partners, members or

5

Affiliates of such JH
Stockholder or any such Affiliate or (b) between any JH Stockholders;

(vi)         a Transfer of Shares from any Other Stockholder
which is a corporation,  partnership or
limited liability company to any Affiliate of such Other Stockholder;

(vii)        a
Transfer of Shares from any Mezzanine Stockholder to (a) any Affiliate of a
Mezzanine Stockholder, which will include one or more newly created funds which
is (A) under common or affiliated management with such Mezzanine Stockholder or
(B) managed by a group of Persons which includes a material number of such
Mezzanine Stockholder professionals and which, in each case, invests in equity
securities and is a “qualified institutional buyer” or “accredited investor”
(as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), so
long as such transfer is made as part of a transaction or series of
transactions pursuant to which such Stockholder transfers a material portion of
its equity investments to any one or more such funds; (b) any member or partner
of a Mezzanine Stockholder, in the case of a Mezzanine Stockholder organized as
a limited liability company, limited partnership or general partnership; (c)
any other Stockholder; (d) any other Mezzanine Stockholder or any of their
respective Affiliates; or (e) in the case of any Mezzanine Stockholder who is
also a holder of any indebtedness of the Company under the Senior Subordinated
Loan Agreement or whose Affiliates are holders of any such indebtedness
thereunder, (X) any transferee (other than a Participant as defined in the
Senior Subordinated Loan Agreement) of any such indebtedness pursuant to and in
connection with a transfer permitted under the Senior Subordinated Loan
Agreement of (I) at least half of the indebtedness held by the Mezzanine
Stockholder as of the date hereof or (II) a proportionate or greater (as
compared to the percentage of such Mezzanine Stockholder’s Shares being
transferred) amount of such indebtedness or (Y) as an equity participation in
connection with a sale of a participating interest under Section 10.12.2 of the
Senior Subordinated Loan Agreement in (I) at least half of the indebtedness
held by the Mezzanine Stockholder as of the date hereof or (II) a proportionate
or greater (as compared to the percentage of such Mezzanine Stockholder’s
equity with respect to which such participation is being granted) amount of
such indebtedness;

(viii)       a Transfer of Shares from any Stockholder
if such Transfer is first approved by a Supermajority Vote or, after the
occurrence of a Trigger Event, by Berkshire Stockholders holding a majority of
the Shares held by all Berkshire Stockholders; and

(ix)  any transfer of Shares made in accordance with
Section 2.3.

provided, however, that
Options may only be transferred in accordance with the terms of the applicable Incentive
Plan; and provided, further, that no Permitted Transfer shall be effective

6

unless and until the transferee of the Shares or
Options so transferred complies with Section 4.13 hereof, including without
limitation, executing and delivering to the Company a counterpart of this
Agreement and agreeing to be bound hereunder in the same manner and to the same
extent as the Stockholder from whom the Shares or Options were
transferred.  Except in the case of a
Permitted Transfer pursuant to clause (ii) above, from and after the date on
which a Permitted Transfer becomes effective, the Permitted Transferee of the
Shares or Options so transferred shall have the same rights, and shall be bound
by the same obligations, under this Agreement as the transferor of such Shares
or Options and shall be deemed for all purposes hereunder (i) a “JH Stockholder”
in the case of a Permitted Transfer from a “JH Stockholder”, (ii) a “Berkshire
Stockholder” in the case of a Permitted Transfer from a “Berkshire Stockholder”,
(iii) a “Management Stockholder” in the case of a Permitted Transfer from a “Management
Stockholder”, (iv) an “Other Stockholder” in the case of a Permitted Transfer
from an “Other Stockholder” and (v) a “Mezzanine Stockholder” in the case of a
Permitted Transfer from a “Mezzanine Stockholder”.  No Permitted Transfer shall conflict with or
result in any violation of a judgment, order, decree, statute, law, ordinance,
rule or regulation.

“Permitted Transferee” shall mean any person or entity
who shall have acquired and who shall hold Shares or Options pursuant to a
Permitted Transfer.

“Person” shall mean any individual, partnership,
corporation, association, limited liability company, trust, joint venture,
unincorporated organization, entity or division, or any government,
governmental department or agency or political subdivision thereof.

“Proportionate Share” shall have the meaning as set
forth in Section 2.1(a).

“Proprietary Information” shall have the meaning as
set forth in Section 2.8.

“Public Offering” shall mean the completion of a sale
of Common Stock pursuant to a registration statement which has become effective
under the 1933 Act (excluding registration statements on Form S-4, S-8 or
similar limited purpose forms).

“Qualified Public Offering” shall mean a Public
Offering in which the aggregate price to the public of all Common Stock sold in
such offering shall exceed $25,000,000.

“register,” “registered” and “registration” shall have
the meaning as set forth in Section 3.1.

“Registrable Securities” shall mean (i) all shares of
Common Stock held by any Stockholder, (ii) all shares of Common Stock issuable
upon the exercise of Options, to the extent exercisable, held by any
Stockholder, and (iii) any other common equity securities of the Company issued
in exchange for, upon a reclassification of, or in a distribution with respect
to, such Common Stock.  As to any
particular Registrable Securities, such securities shall cease to be
Registrable Securities when (a) a registration statement (other than a
registration statement on Form S-8) with respect to the sale of such securities
shall have become effective under the 1933 Act and such securities shall have
been disposed of in accordance with such registration statement, (b) a
registration statement on Form S-8 with respect to such securities shall have
become effective under the 1933 Act, or (c) such securities shall have been
sold under Rule 144 

 

8

 

(or any successor provision) under the 1933 Act and
such securities may be resold by the Holder thereof without registration under
the 1933 Act.

“Requesting Party” shall have the meaning as set forth
in Section 2.4(a).

“Rollover Options” shall mean, collectively, the
vested options retained by certain Management Stockholders under the Existing Incentive
Plan to purchase shares of Common Stock on the terms set forth therein and in
the stock option agreements issued pursuant thereto, in each case as set forth
on Exhibit A under the column headed “Rollover Options”.

“Rollover Shares” shall mean Shares issued after the
date hereof upon the exercise of Rollover Options.

“Sale Request” shall have the meaning as set forth in
Section 2.3(a).

“Schedule” shall refer to the Schedule of Stockholders
attached hereto as Exhibit A.

“Seller” shall have the meaning as set forth in
Section 2.3(a).

“Shares” shall mean all (i) shares of Common Stock
held by Stockholders from time to time or (ii) securities of the Company issued
in exchange for, upon reclassification of, or as a distribution in respect of,
any of the foregoing.

“Stockholders” shall mean, collectively, the Berkshire
Stockholders, the JH Stockholders, the Management Stockholders, the Other
Stockholders and the Mezzanine Stockholders.

“Senior Subordinated Loan Agreement” shall mean the
Senior Subordinated Loan Agreement dated on or around June 10, 2004 among MD
Beauty, Inc., the Company, the Lenders (as defined therein), Gleacher Mezzanine
LLC, as co-arranger, and York Street Capital Partners, L.L.C., as co-arranger,
together with all exhibits and schedules thereto.

“Subsidiary” with respect to any entity (the “parent”)
shall mean any corporation, firm, association or trust of which such parent, at
the time in respect of which such term is used, (i) owns directly or indirectly
more than fifty percent (50%) of the equity or beneficial interest, on a
consolidated basis or (ii) owns directly or controls with power to vote,
indirectly through one or more Subsidiaries, shares of the equity or beneficial
interest having the power to elect more than fifty percent (50%) of the
directors, trustees, managers or other officials having powers analogous to
that of directors of a corporation. 
Unless otherwise specifically indicated, when used herein the term
Subsidiary shall refer to a direct or indirect Subsidiary of the Company.

“Supermajority Vote” shall mean the affirmative vote
of (i) JH Stockholders holding a majority of all Shares held by JH
Stockholders and (ii) Berkshire Stockholders holding a majority of all Shares
held by Berkshire Stockholders.

“Take Along Group” shall have the meaning as set forth
in Section 2.3(a).

“Third Party” shall mean any person other than the
Company, any Berkshire Stockholder, any JH Stockholder, or any Affiliate of any
Berkshire Stockholder or JH Stockholder..

 

9

 

“Time Options” shall mean, collectively, the time
vested options granted to certain Management Stockholders under the 2004 Equity
Incentive Plan, to purchase shares of the Company’s Common Stock on the terms
set forth therein.

“Transfer” shall mean to transfer, sell, assign,
pledge, hypothecate, give, create a security interest in or lien on, place in
trust (voting or otherwise), assign or in any other way encumber or dispose of,
directly or indirectly and whether or not by operation of law or for value, any
Shares or Options.

“Transfer Date” shall have the meaning as set forth in
Section 2.1(a).

“Transferring Stockholder” shall have the meaning as
set forth in Section 2.1(a).

“Trigger Event” shall mean the occurrence of any of
the following:

i.                                       The
failure (for any reason) of John Hansen (“Hansen”), in his personal capacity
(subject to applicable community property laws) or through trusts for the
benefit of his children, to own at any time, directly or indirectly, at least 4,460,635
shares of the 14,868,783 shares of Common Stock directly owned by JH MDB
Investors, L.P.

ii.                                    The
failure (for any reason) of (x) Hansen to own interests in JHMD Beauty GP, LLC
giving Hansen the right to direct the management and affairs of JHMD Beauty GP,
LLC or (y) JHMD Beauty GP, LLC to have the right to direct the affairs of JH MDB
Investors, L.P. (including, without limitation, the ability to vote and dispose
of any securities held by JH MDB Investors, L.P.).

iii.                                 The
consummation of any Transfer of Shares by a JH Stockholder to any natural
person or entity other than an entity the affairs of which Hansen has the right
to direct, by means of a voting agreement or otherwise (including, without
limitation, the ability to vote and dispose of such Shares on and after such
Transfer); provided that if, prior to such
transfer, such JH Stockholder provides evidence reasonably satisfactory to the Berkshire
Stockholders that the transferee is an entity the affairs of which Hansen has
the right to direct, such Transfer shall be deemed not to be a Trigger Event.

“Voluntary Termination” shall mean any voluntary
termination of employment with the Company by a Management Stockholder.  The term Voluntary Termination shall not
include termination of employment due to death, Disability or retirement.

“York Street” shall mean York Street Mezzanine
Partners, L.P.

 

10

 

ARTICLE
II.

COVENANTS AND CONDITIONS

2.1.          Restrictions on Transfers.  No Stockholder may Transfer all or any part
of the Shares owned by such Stockholder to anyone other than (i) a Permitted
Transferee (subject to Section 2.1(c) below) or (ii) in accordance with the
following procedures.  Any attempted
Transfer of Shares not permitted by this Section 2.1 shall be null and void and
the Company shall not in any way give effect to such impermissible
Transfer.  Any attempted Transfer of
Options not permitted by the applicable Incentive Plan shall be null and void
and the Company shall not in any way give effect to such impermissible
Transfer.

(a)           Involuntary Transfer

(i)           Any Stockholder who
is the subject of an Involuntary Transfer (as defined below) (the “Transferring
Stockholder”), shall notify the Company in writing within ten (10) days of such
Involuntary Transfer (but the failure to give such notice shall not affect the
rights of the parties hereunder).  For
purposes of this Section 2.1(c), the later of receipt of such notice by the
Company and the other Stockholders and the date of such Involuntary Transfer
shall be the “Transfer Date”.

(ii)           For a period of
twenty (20) days after the Transfer Date (the “Company Option Period”), the
Company may, by notice in writing to the Transferring Stockholder, elect in
writing to purchase any or all of the Shares subject to the Involuntary
Transfer at the Fair Market Value of such Shares.

(iii)         If the Company does
not elect to purchase any of the Shares subject to the Involuntary Transfer, or
exercises such right only with respect to a portion of such Shares, then for a
period of twenty (20) days commencing on the earlier of (a) the date, if any,
that the Transferring Stockholder notifies the other Stockholders in writing
that the Company has determined either not to exercise such right of purchase
or to exercise such right only with respect to a portion of the Shares subject
to the Involuntary Transfer, and (b) the expiration of the Company Option
Period, the other Stockholders shall have the right to purchase all or any
portion of such Shares subject to the Involuntary Transfer not so elected to be
purchased by the Company, at the Fair Market Value of such Shares.  The specific number of such Shares subject to
the Involuntary Transfer remaining after the Company has exercised its right
pursuant to clause (ii) to which each other Stockholder shall be entitled to
purchase shall be determined on a pro rata basis
in proportion to the respective number of shares of Common Stock owned
beneficially by each such Stockholder as of the Transfer Date in relation to
the total number of shares of Common Stock owned beneficially by all such
Stockholders (for each such Stockholder, its “Proportionate Share”).  Each such Stockholder shall also be entitled
to indicate a desire to purchase all or a portion of any Shares subject to the
Involuntary Transfer remaining after such pro rata
allocation.  Each such Stockholder shall
be allocated the maximum amount of Shares subject to the Involuntary Transfer
set forth in such Stockholder’s offer to purchase, unless such allocation would
result in the allocation of more securities in the aggregate than are available
for purchase 

 

11

 

by
the other Stockholders, in which case such Shares subject to the Involuntary
Transfer shall be allocated among the Stockholders pro rata
in accordance with each such Stockholder’s Proportionate Share; provided, however, that if the foregoing results in any
Stockholder being allocated more than the maximum amount of Shares subject to
the Involuntary Transfer specified in such Stockholder’s offer to purchase,
such Stockholder will be allocated such maximum amount and the excess will be
allocated as provided in this sentence (including this proviso).

(iv)         Any Shares subject to
the Involuntary Transfer not accepted pursuant to clauses (ii) and (iii) above
shall be Transferred in accordance with the terms and conditions of the
Involuntary Transfer.

(v)          For purposes of this Agreement, the
term “Involuntary Transfer” shall mean any involuntary sale, transfer,
encumbrance or other disposition (other than as a result of the death of the
Stockholder) by or in which any Stockholder shall be deprived or divested of
any right, title or interest in or to any Shares, including without limitation
(I) any levy of execution, transfer in connection with bankruptcy,
reorganization, insolvency or similar proceedings, (II) any transfer to a
public officer or agency pursuant to any abandoned property or escheat law, or
(III) any transfer to the spouse of an individual or change in the record
holder made pursuant to divorce proceedings. 
A Transfer pursuant to Section 2.2 hereof shall not be deemed to be an
Involuntary Transfer.

(b)           Any Transfer of Shares pursuant to
this Section 2.1 shall remain subject to the Transfer restrictions of this
Agreement and each intended transferee pursuant to this Section shall execute
and deliver to the Company a counterpart of this Agreement, which shall
evidence such transferee’s agreement that the Shares intended to be transferred
shall continue to be subject to this Agreement and that as to such Shares the
transferee shall be bound by the restrictions of this Agreement as a
Stockholder hereunder.

(c)           Come Along.   Notwithstanding anything to the contrary
contained herein, no Berkshire Stockholder or JH Stockholder may Transfer
Shares to a person described in subsection (viii) of the definition of “Permitted
Transferee” (a “Covered Transfer”) without complying with the terms and
conditions set forth in this Section 2.1(c).

(i)           Any Berkshire
Stockholder or JH Stockholder when desiring to effect a Covered Transfer (the “Transferor”)
shall give not less than thirty (30) days prior written notice of such intended
Transfer to each Mezzanine Stockholder, Other Stockholder and Management
Stockholder and the Company.  Such notice
(the “Participation Notice”) shall set forth the terms and conditions of such
proposed Covered Transfer, including the name of the prospective transferee,
the number of Shares proposed to be transferred (the “Participation Securities”)
by the Transferor, the percentage of the total number of shares of Common Stock
held by the Transferor that the Participation Securities constitutes (the “Come
Along Percentage”), the 

 

12

 

purchase
price per share of Common Stock proposed to be paid therefor, the payment terms
and type of transfer to be effectuated and the proposed time and place of
closing.  Within fifteen (15) days
following the delivery of the Participation Notice by the Transferor to each Mezzanine
Stockholder, Other Stockholder and Management Stockholder and the Company, each
notified Stockholder desiring to participate in such proposed Covered Transfer
(each, a “Participating Offeree”) shall, by notice in writing to the Transferor
and to the Company, have the opportunity and right to sell to the purchasers in
such proposed Covered Transfer (upon the same terms and conditions as the
Transferor) up to that number of shares of Common Stock, as the case may be,
subject to the last sentence of Section 2.1(c)(iii) below, as shall equal the
product of (A) the Come Along Percentage and (B) the number of shares of Common
Stock owned by such Participating Offeree. 
The Transferor shall attempt to obtain inclusion in the proposed Covered
Transfer of the entire number of Shares which the Transferor and the
Participating Offerees desire to have included in the proposed Covered
Transfer.  In the event the Transferor
shall be unable to obtain the inclusion of such entire number of shares of
Common Stock in the proposed Covered Transfer, the number of shares of Common
Stock to be sold in the Covered Transfer by each Participating Offeree and the
Transferor shall be determined in accordance with Section 2.1(c)(iii) below.  The terms and conditions of any sale pursuant
to this Section 2.1(c) shall be the same as set forth in the Participation
Notice, except as is provided in Section 2.1(c)(iii) below and except that the
actual date of the closing of any proposed Covered Transfer may change.

(ii)           At the closing of
any proposed Covered Transfer in respect of which a Participation Notice has
been delivered, the Transferor, together with all Participating Offerees, shall
deliver to the proposed transferee certificates evidencing the Shares to be
sold thereto duly endorsed with stock powers and shall receive in exchange
therefor the consideration to be paid or delivered by the proposed transferee
in respect of such Shares as described in the Participation Notice.

(iii)         In the event that
the Transferor under this Section 2.1(c) fails to complete the proposed
Transfer within 90 days from the date of the Participation Notice, in order to
complete a Transfer after such 90-day period, the Transferor must separately
comply with this Section 2.1(c).

(iv)         The acceptance of
each Participating Offeree shall be irrevocable except as hereinafter provided,
and each such Participating Offeree shall be bound and obligated to sell, on
the same terms and conditions specified in the Participation Notice as the
Transferor (subject to all of the provisions of this Agreement), such number of
Shares as specified in such Participating Offeree’s written commitment; provided, however, that in the case of vested Performance
Options, Time Options and Rollover Options (for which the exercise price is
less than the price per share of Common Stock being paid in the Transfer), the
holders of such securities 

 

13

 

shall
have the opportunity to exercise such Performance Options, Time Options and
Rollover Options (if then exercisable) and participate in such sale as holders
of Common Stock.  In the event the
Transferor shall be unable to obtain the inclusion in the sale of all Shares
which the Transferor and each Participating Offeree desires to have included in
the sale, the number of Shares to be sold in the sale by the Transferor and
each Participating Offeree shall be reduced on a pro rata
basis according to the proportion which the number of Shares which each such
party desires to have included in the sale bears to the total number of Shares
desired by all such parties to have included in the sale.

(v)          In connection with any Covered
Transfer, the Participating Offerees shall be obligated to become liable in
respect of any
representations, warranties, covenants, indemnities or otherwise to the
transferee solely to the extent provided in the immediately following
sentence.  Without limiting the
generality of the foregoing, each Participating Offeree agrees to execute and
deliver such agreements as may be reasonably specified by the Transferor to which
such Transferor will also be party, including, without limitation, agreements
to (A) (1) make individual representations, warranties, covenants and other
agreements as to the unencumbered title to its Shares and its power, authority
and legal right to Transfer such Shares and the absence of any Adverse Claim
with respect to such Shares and (2) be liable without limitation as to such
representations, warranties, covenants and other agreements and (B) be liable
(whether by purchase price adjustment, indemnity payments or otherwise) in
respect of representations, warranties, covenants and agreements in respect of
the Company and its subsidiaries; provided, however, that the aggregate amount
of liability described in this clause (v) in connection with any Covered
Transfer shall not exceed the lesser of (Y) such Participating Offeree ‘s pro
rata portion of any such liability, to be determined in accordance with such
Participating Offeree’s portion of the total number of Shares included in such
Covered Transfer or (Z) the proceeds to such Participating Offeree in
connection with such Covered Transfer.

2.2.          Call by the Company and the Stockholders.

(a)           Upon the termination of the
employment of any Management Stockholder by the Company or any of its
Subsidiaries (a “Call Event”) for any reason, the Company or its designee shall
have the right to purchase (the “Call Option”), by delivery of a written notice
(the “Call Notice”) to such terminated Management Stockholder no later than
ninety (90) days after the date of such Call Event, and such Management Stockholder
and such Management Stockholder’s Permitted Transferees (collectively, the “Call
Group”) shall be required to sell all (but not less than all) of the Call
Securities at a price per share equal to the Call Price (as defined below) of
such Call Securities as of the date the Call Notice is delivered; provided that
for purposes of determining whether all such Call Securities have been
purchased, securities purchased by other Stockholders pursuant to Section
2.2(d) below shall be deemed to have been purchased by the Company.

 

14

 

(b)           For purposes of this Section 2.2, the
term “Call Price” shall mean

(i)           with respect to Shares other than
Rollover Shares, in the event of a termination of a Management Stockholder’s
employment (A) by the Company without Cause, (B) by virtue of death or
Disability, (C) upon retirement in accordance with Company policy, or (D) by
Voluntary Termination, the Fair Market Value of such Shares;

(ii)          with respect to Shares other than
Rollover Shares, in the event of a termination of a Management Stockholder’s
employment by the Company for Cause, the lower of (x) the Investment Price or
(y) the Fair Market Value of all Shares then held by such Management
Stockholder;

(iii)         with respect to any Rollover Options,
in the event of a termination for Cause, the lower of (A) the difference
between (i) $2.6902 and (ii) the exercise price of such Rollover Options and
(B) the difference between (i) the Fair Market Value per share and (ii) the
exercise price of such Rollover Options; provided that
the Call Option shall not apply to Rollover Options if the Management
Stockholder’s employment is terminated other than for Cause;

(iv)         with respect to any Rollover Shares, in
the event of a termination for Cause, the lower of (A) $2.6902 and (B) the Fair
Market Value per share; provided that
the Call Option shall not apply to Rollover Shares if the Management
Stockholder’s employment is terminated other than for Cause;

(v)          with respect to any vested Time Options
and vested and earned Performance Options, (A) upon a termination for Cause, zero,
as such Options shall automatically expire as set forth in the Option
Certificates pursuant to which they were granted and (B) upon any other
termination, the difference between (x) the Call Price for the Shares
underlying such Time Options or Performance Options, as the case may be
(calculated as if the Shares underlying such Time Options or Performance
Options, as the case may be were outstanding and had been called pursuant to
this Section 2.2 and therefore calculated in accordance with the procedures set
forth in clauses 2.2(b)(i) and 2.2(b)(iii) above) minus (y) the exercise price
of such vested Time Options or vested and earned Performance Options, as the
case may be; provided, that such difference
shall not be less than zero; and

(vi)         with respect to any
unvested Time Options or unvested Performance Options, zero, as such options
shall automatically expire as set forth in the Option Certificates pursuant to
which they were granted.

(c)           The closing of any purchase of Call
Securities by the Company pursuant to Section 2.2(a) shall take place at the
principal office of the Company no later than the 180th day after the Call
Event.  At such closing, the Company
shall deliver to the Call 

 

15

 

Group consideration (as set
forth below) in an amount equal to the aggregate Call Price payable in respect
of such Call Securities against delivery of (i) original stock certificates and
stock powers duly endorsed in favor of the Company representing the Call
Securities, and (ii) an executed agreement, in form reasonably satisfactory to
the Company, evidencing the cancellation of any Rollover Options, vested Time
Options and vested and earned Performance Options purchased at such closing.
The Company shall pay the Call Price by (i) paying the Call Group in cash, (ii)
if required to maintain compliance under any loan or credit agreement or
promissory note to which the Company or any subsidiary is a party, issuing a
subordinated promissory note in a principal amount equal to the purchase price
which note shall be subordinated on terms satisfactory to the respective
lenders and/or purchasers under each such agreement or note who are contractually
entitled to such subordination or (iii) a combination of (i) and (ii).  The principal of such note (the “Company Note”)
will be due and payable in five equal annual installments, the first such
installment becoming due and payable on the first anniversary of the issuance
of such note, and interest will accrue thereon at a rate equal to the
applicable federal rate on the date of issuance of the Company Note plus 3% and
be payable annually in arrears.  Such
Company Note may be prepaid by the Company in whole at any time or in part from
time to time without premium or penalty and shall otherwise be in the form
approved by the Board.  The Company shall
not be obligated to make any payment pursuant to this Section 2.2(c) or any
payment of principal or interest due under a Company Note if such payment would
cause the Company or any Subsidiary to be in violation of applicable law or in
default under or otherwise in violation of the terms of, or limited by the
ceiling in the availability or credit advances under, any loan, credit or
investment agreement or promissory note to which the Company or any Subsidiary
is a party (a “Default”).  In the event
the Company cannot make the payments of principal and interest due under a
Company Note because it is in Default, the Company will undertake to make such
payments at such time as the Company is no longer in Default and would not be
so in Default (i) by virtue of the delivery of any payments, (ii) by delivery
of such Company Note or (iii) by any payment of principal and interest due
under such Company Note, as contemplated herein.

(d)           Notwithstanding anything set forth in
this Section 2.2 to the contrary, if the Company does not elect to exercise the
Call Option or exercises the Call Option with respect to only a portion of the
Call Securities, the Board shall delegate the right to exercise the Call Option
to the Stockholders, and shall notify the Stockholders of such delegation
within 45 days of the Call Event, and the Stockholders shall have the right,
but not the obligation to exercise the Call Option and to acquire such Call
Securities at the Call Price and on the same terms and conditions as set forth
in Section 2.2(c) which apply to the purchase of Call Securities by the
Company, except all payments pursuant to this Section 2.2(d) shall be made in
immediately available funds.  The
specific number of Call Securities remaining after the Company has exercised the
Call Option which each Stockholder shall be entitled to acquire shall equal
such Stockholder’s Proportionate Share of such Call Securities.  Each such Stockholder shall also be entitled
to indicate within 30 days of receiving notice a desire to purchase all or a
portion of any available Call Securities above such amount.  Each such Stockholder shall be allocated the
maximum amount of Call Securities set forth in such Stockholder’s offer to
purchase, unless such allocation would result in the allocation of more Call Securities
in the

 

16

 

aggregate than are available
for purchase by the Stockholders, in which case such Call Securities shall be
allocated among the Stockholders pro rata in
accordance with each such Stockholders’ Proportionate Shares; provided, however, that if the foregoing results in any
Stockholder being allocated more than the maximum amount of Call Securities
specified in such Stockholder’s offer to purchase, such Stockholder will be
allocated such maximum amount and the excess will be allocated as provided in
this sentence (including this proviso).

2.3.          Take Along.

(a)           If (i) at any time JH Stockholders
holding a majority of the Shares held by all JH Stockholders and Berkshire
Stockholders holding a majority of the Shares held by all Berkshire
Stockholders or (ii) at any time after the occurrence of a Trigger Event, Stockholders
holding a majority of all Shares (which majority includes Berkshire
Stockholders holding a majority of the Shares held by all Berkshire
Stockholders) (such Stockholders being referred to herein as the “Take Along
Group”) elect to consummate, or cause the Company to consummate, a Company
Sale, then upon ten (10) business days written notice by the Take Along Group
to each other Stockholder, which notice shall set forth the terms and
conditions of such proposed Company Sale or exchange, including the name of the
prospective transferee, the number of Shares proposed to be sold or exchanged
by the Take Along Group, if any, in the Company Sale, the percentage of Shares
held by the Take Along Group which are being sold in such Company Sale (the “Take
Along Percentage”), the consideration to be received by the Take Along Group
and the proposed time and place of closing (such notice being referred to as
the “Sale Request”), each other Stockholder (each, a “Seller”), in the event
the Company Sale is consummated, shall be obligated to consummate, consent to
and raise no objection to the proposed Company Sale and take all other actions
reasonably necessary or desirable to consummate the proposed Company Sale on
the terms proposed by the Take Along Group as set forth in the Sale
Request.  Without limiting the generality
of the foregoing, (i) if the Company Sale is structured as a merger,
consolidation or sale of assets, each Seller will vote or cause to be voted all
Shares that he holds or with respect to which he has the power to direct the
voting and which he is entitled to vote on such proposed Company Sale in favor
of such proposed Company Sale and will waive all appraisal and dissenters
rights and hereby grants a proxy in favor of the Take Along Group to vote the
Seller’s Shares in accordance with this Section 2.3(a) and (ii) if the Company
Sale is structured as a sale or redemption of Shares, each Seller will agree to
sell the Take Along Percentage of its Shares on the same terms and conditions
as the Take Along Group.  Each proxy
granted in the foregoing sentence is irrevocable, coupled with an interest and
shall survive until the expiration of the provisions of this Section 2.3(a).  If required, each Seller shall deliver
certificates for all of its Shares being Transferred pursuant to this Section
2.3(a) at the closing of the proposed Transfer, free and clear of all claims,
liens and encumbrances.  The terms and
conditions of any sale pursuant to this Section 2.3(a) shall be no less favorable
than those set forth in the Sale Request and shall result in each holder
receiving the same form and amount of consideration per share; provided,
however, that in the case of Options, the holders of such securities shall have
the opportunity to either (i) exercise such Options (if then exercisable) and
participate in such sale as holders of Common Stock issuable upon such
exercise, or (ii) upon the

 

17

consummation of the sale,
receive in exchange for such Options the amount determined by multiplying (1)
the same amount of consideration per share received by the Stockholders for
which the Option is then exercisable less the exercise price or conversion price
per share of such Option by (2) the number of shares of Common Stock of such
class represented by such Option.

(b)           Each Stockholder, whether in his
capacity as a Seller, Stockholder, officer or director of the Company, or
otherwise, shall take or cause to be taken all such commercially reasonable
actions in order expeditiously to consummate any Company Sale and any related
transactions, including, without limitation, executing, acknowledging and
delivering consents, assignments, waivers and other documents or instruments as
may be reasonably requested and otherwise cooperating with the Take Along Group
and any prospective buyer; provided, however,
that Stockholders shall be obligated to become liable in respect of any
representations, warranties, covenants, indemnities or otherwise to the Third
Party solely to the extent provided in the immediately following sentence.  Without limiting the generality of the
foregoing, each Stockholder agrees to execute and deliver such agreements as
may be reasonably specified by the Take Along Group to which such Take Along
Group will also be party, including, without limitation, agreements to (i) (1)
make individual representations, warranties, covenants and other agreements as
to the unencumbered title to its Shares and its power, authority and legal
right to Transfer such Shares and the absence of any Adverse Claim with respect
to such Shares and (2) be liable without limitation as to such representations,
warranties, covenants and other agreements and (ii) be liable (whether by
purchase price adjustment, indemnity payments or otherwise) in respect of
representations, warranties, covenants and agreements in respect of the Company
and its subsidiaries; provided, however, that the aggregate amount of liability
described in this clause (b) in connection with any Company Sale shall not
exceed the lesser of (i) such Stockholder’s pro rata portion of any such
liability, to be determined in accordance with such Stockholder’s portion of
the total number of Shares included in such Company Sale or (ii) the proceeds
to such Stockholder in connection with such Company Sale.

(c)           The Take Along Group shall not be
permitted to consummate a transaction under this Section 2.3 unless its members
have delivered a Sale Request to all other Stockholders.

(d)           No member of the Take Along Group
shall be entitled to receive fees in connection with the consummation of a
transaction under this Section 2.3 in excess of the fees described in the
Management Agreements (as defined in the Merger Agreement).

2.4.          Right of First Offer; Compelled Sale

(a)           Right of First Offer.  Subject to Section 2.4(c), (i) at any time
after May 30, 2008, either the Berkshire Stockholders or, provided that no
Trigger Event shall have occurred, the JH Stockholders or (ii) at any time
during the 60-day period immediately following the occurrence of a Trigger
Event other than a Trigger Event resulting from the death or disability of
Hansen, the Berkshire Stockholders (such Stockholders referred to herein as the
“Requesting Party”), may offer to sell all (but not less than all) of the
Shares

18

held by such Requesting
Party to whichever of the Berkshire Stockholders or the JH Stockholders is not
the Requesting Party (the “Non-Requesting Party”) by delivery of a notice,
stating such Stockholders’ desire to sell such Shares, the number of Shares
proposed to be transferred and the price (the “Offer Price”) and other terms on
which such Stockholders are offering such Shares (an “Offer Notice”).  Each Offer Notice shall constitute an
irrevocable offer by the Requesting Party to sell to the Non-Requesting Party
the Shares described in the Offer Notice on the terms set forth in the Offer
Notice.

(i)           No later than the 30th day following
the delivery of the Offer Notice (the “Offer Termination Date”), the
Non-Requesting Party may elect to offer to purchase the Shares described in the
Offer Notice for the Offer Price on the terms set forth in the Offer Notice
(any such offer, a “First Offer”).  If
the Non-Requesting Party fails to elect to purchase all the shares offered in
the Offer Notice, the Requesting Party shall be under no obligation to sell the
Shares offered in the Offer Notice to the Non-Requesting Party and may demand
that the Company pursue and consummate a Compelled Sale pursuant to Section
2.4(b).

(ii)          If the Non-Requesting Party elects to acquire the Shares pursuant to this
Section 2.4(a), then promptly after notifying the Requesting Party of such
election (but in no event more than 5 business days after) the Non-Requesting
Party shall notify the Mezzanine Stockholders and the Other Stockholders in
writing of such election, and each Mezzanine Stockholder and Other Stockholder
shall have the right to sell all (but not less than all) of their Shares to the
Non-Requesting Party upon the same terms (including the Offer Price) set forth
in the Offer Notice.  Such election to
participate in the First Offer must be exercised by notifying the Non-Requesting
Party in writing of such election no later than 30 days following notification
by the Non-Requesting Party pursuant to this Section 2.4(a)(ii).  In connection with any Transfer under this
section, the participating Stockholders shall be obligated to become liable in
respect of any representations, warranties, covenants, indemnities or otherwise
to the transferee solely to the extent provided in the immediately following
sentence.  Without limiting the
generality of the foregoing, each participating Stockholder agrees to execute
and deliver such agreements as may be reasonably specified by the
Non-Requesting Party to which the Requesting Party will also be party,
including, without limitation, agreements to (A) (1) make individual
representations, warranties, covenants and other agreements as to the
unencumbered title to its Shares and its power, authority and legal right to
Transfer such Shares and the absence of any Adverse Claim with respect to such
Shares and (2) be liable without limitation as to such representations,
warranties, covenants and other agreements and (B) be liable (whether by
purchase price adjustment, indemnity payments or otherwise) in respect of
representations, warranties, covenants and agreements in respect of the Company
and its subsidiaries; provided, however, that the aggregate amount of liability
described in this clause (ii) in connection with any Transfer under this
Section shall not exceed the lesser of (Y) such participating Stockholder’s pro
rata portion of any such

19

liability, to be determined in accordance with such
participating Stockholder’s portion of the total number of Shares included in
such Transfer or (Z) the proceeds to such participating Stockholder in
connection with such Transfer.

(iii)         The closing of the purchase and sale of
any Shares to be acquired by the Non-Requesting Party pursuant to this Section
2.4(a) shall be held at the offices of the Company on such dates and times as
the parties may agree but in all events within ninety (90) days of the Offer
Termination Date.

(iv)         At any such closing, the Non-Requesting
Party  shall deliver to the Requesting
Party (and any other Stockholders who elect to participate pursuant to Section
2.4(a)(ii)) against delivery of certificates duly endorsed and stock powers
representing the Shares being acquired by the Non-Requesting Party, the
consideration on the same terms as set forth in the Offer Notice, payable in
respect of the Shares being purchased.

(b)           Compelled Sale.  If the Non-Requesting Party does not deliver
a First Offer to the Requesting Party pursuant to Section 2.4(a) above, the
Requesting Party may furnish a written notice (the “Compelled Sale Notice”) to
the Company and each of the other Stockholders notifying the Company of its
election to cause a Compelled Sale. 
Within 45 days of the receipt of the Compelled Sale Notice, the Company
shall have retained a nationally recognized investment bank reasonably
satisfactory to the Requesting Party. 
The Company shall take all actions necessary to consummate the Compelled
Sale as quickly as is reasonably practicable. 
The Company shall consult with the Requesting Party regularly until the
consummation of the Compelled Sale.  The
parties hereto agree that the Requesting Party shall have the right to cause the
Company to consummate the Compelled Sale within nine (9) months, in accordance
with the terms of this Section 2.4(b) and that all Stockholders will be
obligated to consummate, consent to and raise no objection to the Compelled
Sale and to take all other actions reasonably necessary or desirable to
consummate such Compelled Sale, provided  that, such obligations
shall not apply in the event that the Compelled Sale will result in a per share
price less than the Offer Price and a Compelled Sale shall result in each
holder of Shares receiving the same form and amount of consideration per Share.

(c)           Suspension of Rights.  To the extent that the Requesting Party does
not furnish a Compelled Sale Notice to the Company within 30 days of the Offer
Termination Date, the Requesting Party’s right to elect to cause the Company to
effect a Compelled Sale in accordance with the terms of the Offer Notice shall
terminate, and such Non-Requesting Party shall not have the right to deliver a
subsequent Offer Notice until the day after the first anniversary of the Offer
Termination Date.

2.5.          Corporate Governance.

(a)           Subject to Section 2.5(b) at each
annual meeting of the Stockholders and at each special meeting of the
Stockholders called for the purpose of electing directors of the Company, and
at any time at which Stockholders of the Company shall have the right

20

to, or shall, vote for
directors of the Company, then, and in each event, the Stockholders hereby
agree to attend each meeting in person or by proxy and hereby agree to vote all
Shares of the Company now owned or hereafter acquired by him, her or it
(whether at a meeting or by written consent in lieu thereof) (i) to fix the
number of members of the Board at up to seven (7), and (ii) to elect and
thereafter to continue in office as a director of the Company the following:
(a) two (2) directors nominated by the Berkshire Stockholders (who shall
initially be Brad Bloom and Ross Jones) (collectively the “Berkshire Representatives”);
(b) two (2) directors nominated by the JH Stockholders (who shall initially be
John Hansen and Peter Crowley) (collectively, the “JH Representatives”), (c) one (1) director who is nominated by
the Management Stockholders (who shall be Leslie Blodgett for as long as she
serves as the Chief Executive Officer of the Company) (the “Management
Representative”) and (d) two individuals nominated by the other five nominees
(the “Outside Representatives”) (one of whom shall initially be Lea Anne S.
Ottinger; the second of whom shall be nominated at a later date).  As to the directors elected to the Board
pursuant to this Section 2.5(a), the following provisions shall apply:  (i) no Berkshire Representative may be
removed without the consent of a majority in interest of the Berkshire
Stockholders and (ii) no JH Representative may be removed without the consent
of a majority in interest of the JH Stockholders.  Any vacancy on the Board shall be filled by
the designee of the Stockholders who would be entitled to designate such
director pursuant to this Section 2.5(a), and if there shall be no such
designation right, by a unanimous vote of the Berkshire Representatives, the
JH Representatives and the Management Representative.  Each Stockholder shall, upon receipt of
notice identifying such designee, take all action as may be necessary or
appropriate, including without limitation, the voting of all Shares owned by
such Stockholder, to elect the director so designated.  The Berkshire Stockholders shall have the
right to designate one of the directors (who may or may not be a Berkshire
Representative) to serve as the Chairman of the Board.  The initial Chairman shall be Ross Jones.

(b)           Board Alteration.

(i)           At any time after the occurrence of a
Trigger Event, the Berkshire Stockholders may require, (i) upon delivery of
written notice to the Outside Representatives, that the Outside Representatives
resign from the Board and (ii) upon written notice to the Stockholders, that
two additional directors nominated by the Berkshire Stockholders be appointed
to fill the vacancies caused by such resignations. Such additional Directors
shall be designated “Berkshire Representatives.”  Thereafter, notwithstanding anything to the
contrary in Section 2.5(a) above, the Board shall be composed of four (4)
Berkshire Representatives, two (2) JH Representatives and the Management
Representatives (who shall be Leslie Blodgett for as long as she serves as the
Chief Executive Officer of the Company).

(ii)          Each Stockholder agrees that such Stockholder
and its Permitted Transferees shall take all action as may be necessary or
appropriate, including without limitation, the voting of all shares owned by
them, to give effect to the provisions of this Section 2.5(b).

21

(c)           Subsidiaries; Committees.

(i)           The board of directors of each
Subsidiary of the Company shall be composed of (i) one Berkshire
Representative, one JH Representative and the Management Representative or (ii)
after the occurrence of a Trigger Event so that the representation thereon of
Berkshire Representatives, JH Representatives and Management Representatives
shall be in the same proportion, as nearly as may be, as the representation of
such directors on the Board.  The initial
Board of Directors of each Subsidiary shall be John Hansen, Ross Jones and
Leslie Blodgett.

(ii)          The board of directors of the audit
committee, the compensation committee and all other authorized committees of
the Board and of each Subsidiary’s board of directors shall be composed of (i)
one Berkshire Representative and one JH Representative and (if a committee of
the Company) one Outside Representative or (ii) after the occurrence of a
Trigger Event so that the representation thereon of Berkshire Representatives and
JH Representatives and (if a committee of the Company) Outside Representatives
shall be in the same proportion, as nearly as may be, as the representation of
such directors on the Board.

(d)           Required Governance Changes.  Notwithstanding anything to the contrary
contained herein, the Stockholders acknowledge that in anticipation of the
consummation of a Qualified Public Offering, the Company may be required to
make certain changes to its governance structure, which changes may be
inconsistent with the terms of this Section 2.5, including, but not limited to,
the limitation on the number of directors contained in Section 2.5(a) above and
the limitation on board and committee composition contained in Section 2.5(c),
and the Stockholders agree to take all actions reasonably necessary to permit
such required changes.

(e)           Observation Rights.  Each of (i) Fund I and its Affiliates that
hold Shares and (ii) York Street and its Affiliates that hold Shares will have
the right to appoint an observer to the Board, who shall be entitled to attend
(or at the option of such observer, monitor by telephone) all meetings of the
Board and each committee of the Board, but shall not be entitled to vote, and
who shall receive all reports, meeting materials, notices and other materials
as and when provided to the members of the Board.  In addition, the Berkshire Stockholders and
(if no Trigger Event shall have occurred) the JH Stockholders shall each be
permitted to appoint an additional observer to attend meetings of the
Board.  Notwithstanding anything to the
contrary, the rights granted to the observers (including the right to receive
all materials, notices, minutes, consents and forms of consents in lieu of
meetings) shall be temporarily suspended if and to the extent, in the reasonable
opinion of the Board, the observers’ attendance at any such meeting or portion
thereof (i) violates any law or Company policy regarding conflicts of interest
with interested members of the Board as applied generally to meetings of the
Board or (ii) otherwise could violate the fiduciary duties of the Board or
constitute a waiver of any attorney-client privilege that may exist in
connection with such meeting or any portion thereof, as advised by outside
counsel to the Company.  The Company
shall reimburse any

22

Stockholder for the
reasonable out-of-pocket expenses incurred by any observer appointed by such
Stockholder in connection with attendance at meetings of the Board.

(f)            Indemnification.  The Company will maintain indemnification for
officers and directors substantially similar to that which exists as of the
date hereof.

2.6.          Supermajority Provisions.

(a)           Without a prior Supermajority Vote
or, after the occurrence of a Trigger Event, without the consent of Berkshire
Stockholders, holding a majority of all Shares held by Berkshire Stockholders,
the Company shall not:

(i)           amend or repeal its charter or
by-laws;

(ii)          amend or modify this Agreement;

(iii)         increase the number of members of the
Board; or

(iv)         enter into, or materially modify, any
transaction or arrangement with any Affiliate of any JH Stockholder or any
Berkshire Stockholder.

(b)           After the occurrence of a Trigger
Event, without the consent of JH Stockholders holding a majority of all Shares
held by JH Stockholders, the Company will not:

(i)           Amend or modify its charter or
by-laws in a manner that has a disproportionate adverse effect on the JH
Stockholders relative to the rights, power and privileges of the Berkshire
Stockholders;

(ii)          Amend or modify the Stockholders
Agreement in a manner that has a disproportionate adverse effect on the rights
of the JH Stockholders thereunder; or

(iii)         Enter into, or materially modify, any
transaction or arrangement with any Berkshire Stockholder or any of its
Affiliates.

(c)           Any matter required to be submitted
to the Stockholders of the Company for approval, in addition to any
requirements contained in the charter or any statutory requirements, shall not
be effective (i) as long as no Trigger Event has occurred, without a
Supermajority Vote or (ii) after the occurrence of a Trigger Event, without the
approval of Berkshire Stockholders holding a majority of the Shares held by all
Berkshire Stockholders.

(d)           After (i) the occurrence of a Trigger
Event resulting from the death or disability of Hansen and (ii) the Berkshire
Stockholders’ exercise of their right to replace the Outside Representatives
pursuant to Section 2.5(b), the Company shall not, and shall not permit MD
Beauty to, terminate the employment of Leslie Blodgett as Chief

23

Executive Officer of MD
Beauty without the consent of at least one of the JH Representatives.

(e)           Without (i) a prior Supermajority
Vote or, after the occurrence of a Trigger Event, without the consent of
Berkshire Stockholders, holding a majority of all Shares held by Berkshire
Stockholders, and (ii) the approval of Mezzanine Stockholders holding a
majority of Shares held by Mezzanine Stockholders, the Company will not take
any action to change its corporate structure from a corporation or to otherwise
become a pass-through entity for tax purposes.

2.7.          Rights of Participation.

(a)           Rights of Participation.  The Company hereby grants to each Stockholder
so long as it shall own any Shares, the right to purchase up to a pro rata
portion of New Securities (as defined in paragraph (b) below) which the
Company, from time to time, proposes to sell or issue following the date
hereof.  A Stockholder’s pro rata
portion, for purposes of this Section 2.7, is the product of (i) a fraction,
the numerator of which is the number of outstanding Shares which such
Stockholder then owns and the denominator of which is the total number of
Shares then actually outstanding, multiplied by (ii) the number of New
Securities the Company proposes to sell or issue.

(b)           Definition of New Securities.  “New Securities” shall mean any Common Stock
or other equity securities of the Company whether now authorized or not, any
rights, options or warrants to purchase Common Stock or other equity securities
and any indebtedness or preferred stock of the Company which is convertible
into Common Stock or other equity securities (or which is convertible into a
security which is, in turn, convertible into Common Stock or other equity
securities); provided, that the term “New Securities” does not include (i)
indebtedness of the Company which is not by its terms convertible into Common
Stock; (ii) Common Stock issued as a stock dividend to all holders of Common
Stock pro rata or upon any subdivision or combination of shares of Common
Stock; (iii) any employee stock options approved by the Board of Directors of
the Company; (iv) Common Stock issued in exchange for the cancellation or
retirement of any debt securities of the Company or in connection with any
restructuring or other financial workout of the Company; (v) Common Stock or
warrants to purchase Common Stock issued to non-Affiliates of the Company as
part of a bona fide debt offering of units comprised of such Common Stock or
warrants, and a debt security of the Company; (vi) Common Stock issued in
connection with the acquisition of another corporation or other entity by the
Company by merger, purchase of substantially all assets or other
reorganization; (vii) the issuance of any Common Stock pursuant to the 2004
Equity Incentive Plan or upon the exercise or conversion any warrants or
preferred stock to purchase Common Stock, or Options or other securities issued
pursuant to the Incentive Plans; (viii) Common Stock issuable in a Public
Offering or (ix) securities sold to individual, non-institutional investors
(e.g. outside directors) or entities controlled by them in an amount not to
exceed $500,000 to any given person or entity.

(c)           Notice from the Company.  In the event the Company proposes to issue
New Securities, the Company shall give each Stockholder who has a right of
participation

24

under this Section 2.7
written notice of such proposal, describing the type of New Securities and the
price and the terms upon which the Company proposes to issue the same.  For a period of twenty (20) business days
following the delivery of such notice by the Company, the Company shall be
deemed to have irrevocably offered to sell to each Stockholder its pro rata
share of such New Securities for the price and upon the terms specified in the
notice.  Each Stockholder may exercise
its rights of participation hereunder by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased.  Each Stockholder shall also be entitled to
indicate a desire to purchase all or a portion of any New Securities remaining
after such pro rata allocation.  The
specific allocation of any such remaining New Securities shall be made in the
sole discretion of the Board; provided that the Board shall allocate the
maximum number of New Securities possible.

(d)           Sale by the Company.  In the event that the Stockholders who have a
right of participation under this Section 2.7 fail to commit to purchase all of
such New Securities within said twenty (20) business day period, the Company
shall have ninety (90) days thereafter to sell the New Securities with respect
to which the right of participation was not exercised, at a price and upon terms
no more favorable to the purchasers thereof than specified in the Company’s
notice given pursuant to Section 2.7(c). 
If the sale of such New Securities is not completed prior to the end of
such 90-day period, the Company must separately comply with this Section 2.7 to
effect such sale of New Securities.

(e)           Closing.  The closing for any such issuance shall take
place as proposed by the Company with respect to the New Securities to be
issued, at which closing the Company shall deliver certificates for the New
Securities in the respective names of the purchasing Stockholders against
receipt of payment therefor.

(f)            Exception.  Notwithstanding anything to
the contrary in this Section 2.7, JH MDB Investors, L.P. may delegate its pre-emptive rights
under this Section 2.7 with respect to any issuance of New Securities to any
Affiliate thereof, provided that after giving effect to the completion of the
offer and sale of such New Securities, no Trigger Event shall have occurred.

2.8.          Confidentiality; Non-Solicitation.

(a)           Confidentiality.  Each Stockholder will, and shall ensure that
its Affiliates shall, maintain the confidentiality of any confidential and
proprietary information of the Company (“Proprietary Information”) using the
same standard of care, but in no event less than reasonable care, as it applies
to its own confidential information, except for any Proprietary Information
which is publicly available or a matter of public knowledge generally. Nothing
herein shall prevent any Stockholder from using Proprietary Information to
enforce its rights under this Agreement or from disclosing a summary of
Proprietary Information to the partners of such Stockholder as to the
performance of the Company.  Nothing in
this Section 2.8(a) shall apply or be construed to apply to BNP Paribas’
Affiliate which is the Administrative Agent and a Lender under the Credit
Agreement, any other Lender under the Credit Agreement or any Lender under the

25

Subordinated Loan Purchase
Agreement or to modify such entity’s obligations, liabilities or lack thereof
in such capacity under the terms of the agreements governing the Credit
Agreement.

(b)           Non-Solicitation. For a period
of two years from and after the date any Stockholder and its Affiliates own
less than 5% of the equity of the Company, no Berkshire Stockholder or JH
Stockholder will, and will not permit its Affiliates to, directly or indirectly
(a) recruit, lure or entice away, or in any other manner persuade or attempt to
persuade, any person who is an employee of the Company or any of its
Subsidiaries to leave the employ of the Company or any Subsidiary, as the case
may be or (b) offer employment to, employ or engage as a consultant any
employee of the Company or any of its Subsidiaries.  If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 2.8(b) is
invalid or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability will have the power to reduce
the scope or duration of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or provision, and this
agreement will be enforceable as so modified after the expiration of the time
within which the judgment may be appealed.

2.9.          Financial and Business Information.  As long as (a) the JH Stockholders or the
Berkshire Stockholders, respectively, hold 17.5% of the fully diluted equity of
the Company and (b) each of (i) Fund I and Fund P, (ii) York Street, (iii) BNP
Paribas and (iv) CIT Lending Service Corporation, respectively, hold 62.5% of
the Shares purchased by them on June 10, 2004 (appropriately adjusted for
splits and similar events), such Stockholders shall be entitled to receive from
the Company (i) as soon as practicable following the end of each fiscal month
of the Company, unaudited monthly financial reports, (ii) as soon as
practicable following the end of each fiscal year of the Company, audited
annual financial reports, (iii) when and as approved to the Board of Directors,
budgets and business plans of the Company and (iv) as promptly as is reasonably
practicable, any other operating information reasonably requested by such
Stockholders.  Notwithstanding anything
to the contrary herein, each of the Mezzanine Stockholders and BNP Paribas
shall be entitled to receive unaudited quarterly financial statements and
audited annual financial reports for so long as such Stockholder holds any
Shares.

ARTICLE
III.

REGISTRATION RIGHTS

3.1.          General.  For
purposes of Article III: (a) the terms “register,” “registered” and “registration”
refer to a registration effected by preparing and filing a registration
statement in compliance with the 1933 Act and the declaration or ordering of
effectiveness of such registration statement; (b) the term “Holder” means any
Stockholder holding Registrable Securities; and (c) the shares of Common Stock
issuable upon the exercise of Rollover Options, vested Time Options and vested
and earned Performance Options shall be deemed to be outstanding and held by
the holders of such Rollover Options, vested Time Options and vested and earned
Performance Options.

26

3.2.          Demand Registration Initiated by the Berkshire
Stockholders.

(a)           Subject to paragraph (b) hereof, on
or after the date on which the Company has effected a Qualified Public
Offering, if the Company shall receive a written request (specifying that it is
being made pursuant to this Section 3.2) from Berkshire Stockholders holding an
aggregate of fifty percent (50%) or more of the interest of Registrable
Securities held by the Berkshire Stockholders that the Company file a
registration statement under the 1933 Act, or a similar document pursuant to
any other statute then in effect corresponding to the 1933 Act, covering the
registration of at least the lesser of (i) $20 million of Registrable
Securities (determined based on Fair Market Value of the Registrable Securities
at the time of the request) or (ii) one hundred percent (100%) of the
Registrable Securities then held by the Berkshire Stockholders, then the
Company shall promptly notify all other Holders of such request pursuant to
Section 3.4(b) and shall use its best efforts to cause all Registrable
Securities that the Holders have requested (within thirty (30) days of such
Company notice) be registered, to be registered under the 1933 Act.

(b)           If the total amount of Registrable
Securities that the Holders request to be included in such offering exceeds the
amount of securities that the underwriters reasonably believe compatible with
the success of the offering, then the Company will include in such registration
only the number of securities which, in the opinion of such underwriters, can
be sold, in accordance with the procedures set forth in Section 3.4(b);

(c)           The Company shall be obligated to effect
for the Berkshire Stockholders three (3) registrations of Registrable
Securities pursuant to this Section 3.2; provided, that in the event that, at
the request of the underwriters, the amount of Registrable Securities that the
Berkshire Stockholders requested to be included in any offering is reduced by
more than thirty percent (30%), such offering shall be deemed not to be a
registration demanded by the Berkshire Stockholders for purposes of this
Section 3.2(c).

3.3.          Demand Registration Initiated by the JH Stockholders.

(a)           Subject to paragraph (b) hereof, on
or after the date on which the Company has effected a Qualified Public
Offering, if the Company shall receive a written request (specifying that it is
being made pursuant to this Section 3.3) from JH Stockholders holding an
aggregate of fifty percent (50%) or more of the interest of Registrable
Securities held by the JH Stockholders that the Company file a registration
statement under the 1933 Act, or a similar document pursuant to any other statute
then in effect corresponding to the 1933 Act, covering the registration of at
least the lesser of (i) $20 million of Registrable Securities (determined based
on Fair Market Value of the Registrable Securities at the time of the request),
or (ii) one hundred percent (100%) of the Registrable Securities, then held by
the JH Stockholders, then the Company shall promptly notify all other Holders
of such request pursuant to Section 3.4(b) and shall use its best efforts to
cause all Registrable Securities that the Holders have requested (within thirty
(30) days of such Company notice) be registered, to be registered under the
1933 Act.

27

(b)           If the total amount of Registrable
Securities that all Holders request to be included in such offering exceeds the
amount of securities that the underwriters reasonably believe compatible with
the success of the offering, then the Company will include in such registration
only the number of securities which, in the opinion of such underwriters, can
be sold, in accordance with the procedures set forth in Section 3.4(b).

(c)           The Company shall be obligated to
effect for the JH Stockholders three (3) registrations of Registrable
Securities pursuant to this Section 3.3; provided, that in the event that, at
the request of the underwriters, the amount of Registrable Securities that the
JH Stockholders requested to be included in any offering is reduced by more than
thirty percent (30%), such offering shall be deemed not to be a registration
demanded by the JH Stockholders for purposes of this Section 3.3(c).

3.4.          Piggyback Registration.

(a)           If, at any time, the Company
determines to register any of its equity securities for its own account under
the 1933 Act in connection with the public offering of such securities solely
for cash on a form that would also permit the registration of any of the
Registrable Securities, the Company shall, at each such time, promptly give
each Holder written notice of such determination.  Upon the written request of any Holder
received by the Company within thirty (30) days after the giving of any such
notice by the Company, the Company shall use its best efforts to cause to be
registered under the 1933 Act all of the Registrable Securities of such Holder
that each Holder has requested be registered. 
If the total amount of Registrable Securities that are to be included by
the Company for its own account and at the request of Holders thereof exceeds
the amount of securities that the underwriters reasonably believe compatible
with the success of the offering, then the Company will include in such
registration only the number of securities which in the opinion of such
underwriters can be sold, in the following order:

(i)           first, the equity securities to be
registered on behalf of the Company; and

(ii)          then the Registrable Securities
requested to be included by the Holders pro rata based on the number of
Registrable Securities owned by each of them which each of them request be
included in such registration; provided, however, that if an underwriter who is
not an Affiliate or Associate of any Holder, in good faith requires, in
connection with such underwritten offering, that the number of Registrable
Securities to be sold by any Holder be apportioned or excluded, such number of
Registrable Securities of such Holder shall be reduced or not included to the
extent so requested by said underwriter;

(b)           If the Company at any time proposes
to register any of its equity securities for the account of any Holder pursuant
to Section 3.2, Section 3.3 or Section 3.10 of this Agreement, under the 1933
Act in connection with the public offering of such securities solely for cash
on a form that would also permit the registration of any of the Registrable
Securities, the Company shall, at each such time, promptly give each Holder
written

28

notice of such
determination.  Upon the written request
of any Holder received by the Company within thirty (30) days after the giving
of any such notice by the Company, the Company shall use its best efforts to
cause to be registered under the 1933 Act all of the Registrable Securities of
such Holder that each Holder has requested be registered.  If the total amount of Registrable Securities
that are to be included by the requesting Holder under Section 3.2., Section
3.3 or Section 3.10, by the Company for its own account and at the request of
all other Holders thereof exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of the offering,
then the Company will include in such registration only the number of
securities which in the opinion of such underwriters can be sold, in the
following order:

(i)           first, the equity securities to be
registered on behalf of the Holders pro rata based
on the number of Registrable Securities owned by each of them which each of
them request be included in such registration; and

(ii)          second, the equity securities to be
registered on behalf of the Company;

provided, however, that
if an underwriter who is not an Affiliate or Associate of any Holder or the
Company, in good faith, requires in connection with such underwritten offering
that the number of Registrable Securities to be sold by any Holder or the
Company be apportioned or excluded, such number of Registrable Securities of
such Holder or the Company shall be reduced or not included to the extent so
requested by said underwriter.

3.5.          Obligations of the Company.  Whenever required under Sections 3.2, 3.3,
3.4 or 3.10 hereof to use its best efforts to effect the registration of any
Registrable Securities, the Company shall:

(a)           prepare and file with the SEC a
registration statement with respect to such Registrable Securities, and use its
best efforts to cause such registration statement to become and remain
effective until the completion of the proposed offering;

(b)           as expeditiously as reasonably
possible, prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such registration
statement;

(c)           as expeditiously as reasonably
possible furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with requirements of the 1933
Act, and such other documents they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them;

(d)           as expeditiously as reasonably
possible use its best efforts to register and qualify the securities covered by
such registration statement under such securities or Blue Sky laws of such
jurisdictions as shall be reasonably appropriate for the distribution of the
securities covered by the registration statement, provided that the Company
shall not be required in connection therewith or as a condition thereto to qualify
to do business or

29

to file a general consent to
service of process in any such jurisdiction, and further provided that
(anything in this Agreement to the contrary notwithstanding with respect to the
bearing of expenses) if any jurisdiction in which the securities shall be
qualified shall require that expenses incurred in connection with the
qualification of the securities in that jurisdiction be borne by selling
stockholders, then such expenses shall be payable by selling stockholders pro
rata, to the extent required by such jurisdiction;

(e)           use its best efforts to cause all
Registrable Securities covered by such registration statement to be registered
with, or approved by, such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities;

(f)            notify each seller of Registrable
Securities covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, upon discovery
that, or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made, and at the request
of any such seller or Holder, promptly prepare and furnish to such seller or
Holder a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made; provided, that, each
Holder agrees that it shall not sell any Registrable Securities covered by such
a registration statement upon notice from the Company until receipt of notice
that such statement or omission has been corrected;

(g)           otherwise use its best efforts to
comply with all applicable rules and regulations of the Securities and Exchange
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve (12)
months, but not more than eighteen (18) months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the 1933
Act, and will furnish to each such seller at least two (2) business days prior
to the filing thereof a copy of any amendment or supplement to such
registration statement or prospectus and shall not file any amendment or
supplement thereof to which any such seller shall have reasonably objected,
except to the extent required by law, on the grounds that such amendment or
supplement does not comply in all material respects with the requirements of
the 1933 Act or of the rules or regulations thereunder;

(h)           provide and cause to be maintained a
transfer agent and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the effective date
of such registration statement; and

30

(i)            use its best efforts to list all
Registrable Securities covered by such registration statement on a securities
exchange on which any of class of Registrable Securities is then listed.

3.6.          Furnish Information. 
It shall be a condition precedent to the obligations of the Company to
take any act pursuant to Article III that the Holders shall furnish to the
Company such information regarding them, the Registrable Securities held by
them, and the intended method of disposition of such securities as the Company
shall reasonably request and as shall be required in connection with the action
to be taken by the Company.

3.7.          Expenses of Registration.  All expenses incurred in connection with a
registration pursuant to Sections 3.2, 3.3, 3.4 or 3.10 hereof (excluding
underwriters, discounts and commissions, which shall be borne by the sellers),
including without limitation all registration and qualification fees, printers’
and accounting fees, fees and disbursements of counsel for the Company (which
counsel shall be reasonably satisfactory to the holders of a majority of the
Registrable Securities then being registered), and the reasonable fees and
disbursements of one counsel for the selling Holders and their Permitted
Transferees (which counsel shall be selected by the Holders which together with
their Permitted Transferees own a majority of the Registrable Securities being
sold under the applicable registration) shall be borne by the Company;
provided, however, that all such expenses in connection with any amendment or
supplement to a registration statement or prospectus filed more than nine (9)
months after the effective date of such registration statement because any
Holder of Registrable Securities has not effected the disposition of the
securities requested to be registered shall be paid by such Holder; provided,
further, however, that the Holders, which together with their Permitted
Transferees, own a majority of the Registrable Securities being sold under the
registration may withdraw any request made pursuant to Section 3.2 or Section
3.3 hereof, in which event such first withdrawn request shall be deemed for all
purposes herein not to have been made.

3.8.          Underwriting Requirements.  Each Holder (together with its Permitted
Transferees) selling Registrable Securities in any registration pursuant to Sections
3.2, 3.3 or 3.4 shall, as a condition for inclusion of such Registrable
Securities in such registration execute and deliver an underwriting agreement
acceptable to the Company and consented to by the Berkshire Stockholders and,
to the extent no Trigger Event has occurred, the JH Stockholders, in the case
of a registration pursuant to Section 3.4, acceptable to the Berkshire
Stockholders, in the case of a registration pursuant to Section 3.2 or
acceptable to the JH Stockholders, in the case of a registration pursuant to
Section 3.3, and in each case the underwriters with respect to such
registration.  Such underwriters shall be
(i) selected by the Company and consented to by the Berkshire Stockholders and,
to the extent no Trigger Event has occurred,  the JH Stockholders, in the case of a
registration pursuant to Section 3.4(a), (ii) selected by the Berkshire
Stockholders and reasonably consented to by the Company, in the case of a
registration pursuant to Section 3.4(b) initiated by the Berkshire Stockholders,
or (iii) selected by the JH Stockholders and reasonably consented to by the
Company, in the case of a registration pursuant to Section 3.4(b) initiated by
the JH Stockholders.

Notwithstanding the foregoing, in any registration
pursuant to Sections 3.2 or 3.3, each Holder shall take all action with respect
to executing such underwriting agreement, including being liable in respect of
(i) any representations and warranties being made by each selling

31

Holder, and (ii) any indemnification agreements and “lock-up”
agreements made by each selling Holder for the benefit of the underwriters in
such underwriting agreement; provided, however, that except with respect to individual
representations and warranties regarding such matters as legal capacity or due
organization of such participating Holder, authority to participate in the
Public Offering, compliance by such Holder with laws and agreements applicable
to it, ownership (free and clear of liens, charges, encumbrances and adverse
claims) of Registrable Securities to be sold by such Holder and accuracy of
information with respect to such Holder furnished for inclusion in any
disclosure document relating to each Public Offering, the aggregate amount of
the liabilities of such participating Holder pursuant to such underwriting
agreement shall not exceed the lesser of (a) such participating Holder’s pro
rata portion of any such liability, in accordance with such participating
Holder’s portion of the total number of Registrable Securities included in the
public offering, or (b) the net proceeds received by such participating Holder
from the public offering.

Notwithstanding
the foregoing, in any registration pursuant to Sections 3.4, each Holder shall
take all action with respect to executing such underwriting agreement,
including being liable in respect of (i) any representations and warranties
being made by each selling Holder, and (ii) any indemnification agreements and “lock-up”
agreements made by each selling Holder for the benefit of the underwriters in
such underwriting agreement; provided, however, that (a) with
respect to individual representations and warranties regarding such matters as
legal capacity or due organization of such participating Holder, authority to
participate in the Public Offering, compliance by such Holder with laws and
agreements applicable to it, ownership (free and clear of liens, charges,
encumbrances and adverse claims) of Registrable Securities to be sold by such
Holder and accuracy of information with respect to such Holder furnished for
inclusion in any disclosure document relating to each Public Offering, the
aggregate amount of such liability shall not exceed the net proceeds received
by such participating Holder from the public offering and (b) to the extent
selling stockholders give further representations, warranties and indemnities,
then with respect to all other representations, warranties and indemnities of
sellers of shares in such Public Offering, the aggregate amount of such
liability shall not exceed the lesser of (i) such participating Holder’s
pro rata portion of any such liability, in accordance with such participating
Holder’s portion of the total number of Registrable Securities included in the
public offering or (ii) the net proceeds received by such participating Holder
from the public offering.

3.9.          Indemnification. 
In the event any Registrable Securities are included in a registration
statement under Article III:

(a)           To the fullest extent permitted by
law, the Company will indemnify and hold harmless each Holder (which term, for
purposes of this Section 3.9, shall include each Stockholder, including the JH
Stockholders, the Berkshire Stockholders, the Management Stockholders and the
Other Stockholders holding Registrable Securities and shall also include the
directors, officers and employees of such Stockholders and their Affiliates)
requesting or joining in a registration, any underwriter (as defined in the
1933 Act) for it, and each person, if any, who controls such Holder or such
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which they may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based on any untrue or

32

alleged untrue statement of
any material fact contained in such registration statement including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or arise out of any
violation by the Company of any rule or regulation promulgated under the 1933
Act applicable to the Company and relating to action or inaction required of
the Company in connection with any such registration, and will reimburse each
such Holder, underwriter or control person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 3.9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable to anyone for
any such loss claim, damage, liability or action to the extent that it arises
out of or is based upon an untrue statement or omission made in connection with
such registration statement, preliminary prospectus, final prospectus or
amendments or supplements thereto in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, underwriter or control person.  Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Holder,
underwriter or control person and shall survive the transfer of such securities
by such Holder.

(b)           To the fullest extent permitted by
law, each Holder requesting or joining in a registration will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, and each agent and any underwriter
for the Company and any person who controls any such agent or underwriter and
each other Holder and any person who controls such Holder (within the meaning
of the 1933 Act) against any losses, claims, damages or liabilities to which
the Company or any such director, officer, control person, agent, underwriter,
or other Holder may become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon an untrue statement of any material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
or arise out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or omission was made in such registration statement,
preliminary or final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and such Holder
will reimburse any legal or other expenses reasonably incurred by the Company
or any such director, officer, control person, agent, underwriter, or other
Holder in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, the indemnity obligation of
each such Holder hereunder shall be limited to and shall not exceed the
proceeds actually received by such Holder upon a sale of Registrable Securities
pursuant to a registration statement

33

hereunder; and provided,
further that the indemnity agreement contained in this Section 3.9(b) shall not
apply to amounts paid in settlements effected without the consent of such
Holder (which consent shall not be unreasonably withheld); and provided,
further, that no Holder shall be required to indemnify any Person against any
liability arising from any untrue or misleading statement or omission contained
in any preliminary prospectus if such deficiency is corrected in the final
prospectus or for any liability which arises out of the failure of any Person
to deliver a prospectus as required by the 1933 Act.  Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company or
any such director, officer, Holder, underwriter or control person and shall
survive the transfer of such securities by such Holder.

(c)           Any person seeking indemnification
under this Section 3.9 will (i) give prompt notice to the indemnifying party of
any claim with respect to which it seeks indemnification (but the failure to
give such notice will not affect the right to indemnification hereunder, unless
the indemnifying party is materially prejudiced by such failure) and (ii)
unless in such indemnified party’s reasonable judgment a conflict of interest
may exist between such indemnified and indemnifying parties with respect to
such claim, permit such indemnifying party, and other indemnifying parties
similarly situated, jointly to assume the defense of such claim with counsel
reasonably satisfactory to the parties. 
In the event that the indemnifying parties cannot mutually agree as to
the selection of counsel, each indemnifying party may retain separate counsel
to act on its behalf and at its expense. 
The indemnified party shall in all events be entitled to participate in
such defense at its expense through its own counsel.  If such defense is not assumed by the
indemnifying party, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent will not be
unreasonably withheld).  No indemnifying
party will consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation.  An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the reasonable fees and expenses
of such additional counsel.

(d)           If for any reason the foregoing
indemnification is unavailable to any party or insufficient to hold it harmless
as and to the extent contemplated by the preceding paragraphs of this Section
3.9, then each indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative benefits
received by the Company, on the one hand, and the applicable indemnified party,
as the case may be, on the other hand, and also the relative fault of the
Company and any applicable indemnified party, as the case may be, as well as
any other relevant equitable considerations.

34

3.10.        Registration on Form S-3.  After the date on which the Company has
effected a Qualified Public Offering, if (i) one or more Berkshire Stockholders
or JH Stockholders request in writing (specifying that such request is being
made pursuant to this Section 3.10) that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3 regardless of its
designation) for a public offering of securities having an aggregate value of
not less than $5,000,000 and (ii) the Company is entitled to use such form to
register such securities, then the Company shall file a Form S-3 with respect
to such securities within ninety (90) days from the date of such request, and
shall use its best efforts to cause such registration statement to become
effective; provided, that the Company shall not be required to effect such
registration more frequently than once every six (6) months.

3.11.        Reports Under Securities Exchange Act of 1934.  With a view to making available to the
Holders and their Permitted Transferees the benefits of Rule 144 promulgated
under the 1933 Act and any other rule or regulation of the Securities and
Exchange Commission that may at any time permit a Holder to sell securities of
the Company to the public without registration, the Company agrees to use its
best efforts to:

(a)           make and keep public information
available, as those terms are understood and defined in Rule 144, at all times
subsequent to ninety (90) days after the effective date of the first
registration statement covering a Public Offering filed by the Company;

(b)           file with the Securities and Exchange
Commission in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act; and

(c)           furnish to any Holder forthwith upon
request a written statement by the Company that it has complied with the
reporting requirements of Rule 144 (at any time after ninety (90) days after
the effective date of said first registration statement filed by the Company),
and of the 1933 Act and the 1934 Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by the
Company as may be reasonably requested in availing any Holder of any rule or
regulation of the Securities and Exchange Commission permitting the selling of
any such securities without registration.

3.12.        No Inconsistent Agreements.  The Company represents and warrants that it
has not entered into, and covenants that it will not hereafter enter into, any
agreement with respect to the registration of its securities that is
inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement without the prior written consent of (i) a majority in
interest of the Holders, (ii) the holders of more than 50% of the Registrable
Securities held by the Berkshire Stockholders, (iii) to the extent no
Trigger Event has occurred, the holders of more than 50% of the Registrable
Securities held by the JH Stockholders and (iv) to the extent such agreement
would have a disproportionately adverse effect on any Stockholder (distinct
from the effect on the Stockholders in general), such affected Stockholder.

3.13.        Stock Split. 
If, on or after the receipt by the Company of a request for registration
of a public offering pursuant to Section 3.2 or Section 3.3 hereof, the
proposed managing

35

underwriter or underwriters of such offering
reasonably believes that that a forward or reverse stock split would increase
the likelihood of success of such offering, the Company will promptly prepare
and submit to the Board, use best efforts to cause to be adopted by the Board
and Stockholders, and, if so adopted, file and cause to become effective, an
appropriate amendment to its charter. 
Each Stockholder, together with his or its Permitted Transferees, hereby
agrees to vote the Shares held by him or it in favor of adopting such
amendment.

3.14.        Timing and Other Limitations.

(a)           No request shall be made with respect
to any registration pursuant to Section 3.2 or Section 3.3 hereof within one
hundred and twenty (120) days immediately following the effective date of any
registration statement filed pursuant to this Article III.

(b)           If the Company shall furnish to the
Holders of Registrable Securities requesting a registration pursuant to Section
3.2 or Section 3.3 hereof a certificate signed by a majority of the Board of
Directors of the Company stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
or its stockholders for such registration statement to be filed on or before
the date filing would be required and it is therefore advisable to defer the
filing of such registration statement, then the Company shall have the right to
defer the filing of the registration statement for a period of not more than
120 days and the request pursuant to Section 3.2 or Section 3.3 then made shall
not be counted for purposes of determining the number of registrations pursuant
to Section 3.2 or Section 3.3 hereof; provided, however, that the Company may
not utilize such right more than once in any twelve-month period.

3.15.        Lock-up.  In
connection with any Public Offering of Shares, no holder of Shares shall
Transfer any Shares for a period beginning seven days immediately preceding the
date upon which the Company in good faith believes that the relevant
registration statement shall become effective, and ending on the 90th day (or
in the case of the Initial Public Offering, 180th day) (or, at the
discretion of the underwriter, such lesser period) following the effectiveness
of such registration statement with respect to such Public Offering without the
prior written consent of the underwriters managing the offering; provided,
however, that the provisions of this Section 3.15 shall not prohibit any
Permitted Transfers, provided that the Permitted Transferee agrees to be bound
by the terms of this Agreement, including this Section 3.15.

ARTICLE
IV.

MISCELLANEOUS

4.1.          Appointment of Proxies.

(a)           Each of the Management Stockholders
hereby appoints Leslie Blodgett (the “Management Proxy”) as the agent, proxy,
and attorney-in-fact for the Management Stockholders (including, without
limitation, full power and authority to act on the Management Stockholders’
behalf) to take any action, should the Management Proxy elect to do so in his
or her sole discretion: (i) to vote on all matters to be voted on under this
Agreement, (ii) to receive all notices on behalf of each Management
Stockholder, (iii) to execute and deliver on behalf of the Management
Stockholders any amendment to

36

this Agreement so long as
such amendments shall apply to all Management Stockholders and (vii) to take
all other actions to be taken by or on behalf of the Management Stockholders as
a group and exercise any and all rights which the Management Stockholders are
permitted or required to do or exercise under this Agreement other than
exercise any rights with respect to investment decisions.  Each of the Management Stockholders hereby
agrees not to assert any claim against, and agrees to indemnify and hold
harmless, the Management Proxy from and against any and all losses incurred by
the Management Proxy or any of his Affiliates, partners, employees, agents,
investment bankers or representatives, or any Affiliate of any of the
foregoing, relating to the Management Proxy’s capacity as the Management Proxy
other than such claims or losses resulting from the Management Proxy’s gross
negligence or willful misconduct.  By
execution hereof, Leslie Blodgett hereby agrees to act as Management Proxy
until such time as a new Management Proxy is elected by the majority in
interest of the Management Stockholders.

(b)           Each of the Stockholders and the
Company hereby appoints Berkshire Partners, LLC (“Berkshire Partners”) as the
agent, proxy, and attorney-in-fact for the Stockholders and the Company
(including, without limitation, full power and authority to act on the
Stockholders’ and the Company’s behalf) to take any action, should Berkshire
Partners elect to do so in its sole discretion in connection with the
negotiation of any conflict or dispute arising with the Selling Securityholders
under the Merger Agreement.

4.2.          Regulatory Cooperation.  If any Stockholder reasonably determines
that, by reason of any existing or future federal or state rule, regulation,
guideline, order, request or directive (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) (
collectively, a “Regulatory Requirement”), it is effectively restricted or
prohibited from holding any Shares (including any shares or other securities
distributable in any merger, reorganization, readjustment or other
reclassification of such shares), the Company and the other Stockholders shall
take such action as may be reasonably necessary to permit such Stockholder to
comply with such Regulatory Requirement; provided, that no such action pursuant
to this Section 4.2 shall adversely affect the Company, the rights of the other
Stockholders hereunder or the rights, preferences, qualifications and
limitations of any shares of the Company held by the other Stockholders.  Such reasonable action to be taken may
include the Company’s authorization of one or more new classes of non-voting
common stock that is otherwise substantially identical to the Shares then owned
by such Stockholder and the amendment of the Company’s certificate of
incorporation or any other documents or instruments executed in connection with
the Shares held by such Stockholder. 
Such Stockholder shall give written notice to the Company and the other
Stockholders of any such determination and the actions necessary to comply with
such Regulatory Requirement, and the Company and such other Stockholders shall take
all reasonably necessary steps to comply with such determination as
expeditiously as possible, provided that any expenses incurred by the Company
in complying with such Regulatory Requirement shall be paid by the requesting
Stockholder.

4.3.          Remedies.  The
parties to this Agreement acknowledge and agree that the covenants of the
Company and the Stockholders set forth in this Agreement may be enforced in
equity by a decree requiring specific performance.  In the event of a breach of any material
provision of this Agreement, the aggrieved party will be entitled to institute
and prosecute a 

37

proceeding to enforce specific performance of such
provision, as well as to obtain damages for breach of this Agreement.  Without limiting the foregoing, if any
dispute arises concerning the sale or other disposition of any of the Shares
subject to this Agreement or concerning any other provisions hereof or the
obligations of the parties hereunder, the parties to this Agreement agree that
an injunction may be issued in connection therewith (including, without
limitation, restraining the sale or other disposition of such Shares or
rescinding any such sale or other disposition). 
Such remedies shall be cumulative and non-exclusive and shall be in
addition to any other rights and remedies the parties may have under this Agreement
or otherwise.

4.4.          Entire Agreement; Amendment; Waiver.  This Agreement, together with the Schedule
hereto, sets forth the entire understanding of the parties, and as of the
closing contemplated by the Merger Agreement supersedes all prior agreements
and all other arrangements and communications, whether oral or written, with
respect to the subject matter hereof. 
The Schedule may be amended to reflect changes in the composition of the
Stockholders and changes in stock ownership that may occur from time to time as
a result of Permitted Transfers or Transfers permitted under Article II
hereof.  Amendments to the Schedule
reflecting Permitted Transfers or Transfers permitted under Article II hereof
shall become effective when a copy of the Agreement as executed by any new
transferee is filed with the Company, except as otherwise provided in Section
4.13 hereof.  Any other amendments to, or
the termination of, this Agreement shall require the prior written consent of
the Company and a majority in interest of each of the Berkshire Stockholders
and, provided that no Trigger Event has occurred, the JH Stockholders; provided
that (a) any such amendment adversely affecting the Management Stockholders in
a manner distinct from the effect of such amendment on the Berkshire
Stockholders and the JH Stockholders shall require the written consent of
Management Stockholders holding a majority of the Shares held by the Management
Stockholders, (b) any such amendment adversely affecting the Other Stockholders
in a manner distinct from the effect of such amendment on the Berkshire
Stockholders and the JH Stockholders shall require the written consent of Other
Stockholders holding a majority of the Shares held by the Other Stockholders
(c) any such amendment adversely affecting the Mezzanine Stockholders in a manner
distinct from the effect of such amendment on the Berkshire Stockholders and
the JH Stockholders shall require the written consent of Mezzanine Stockholders
holding a majority of the Shares held by the Mezzanine Stockholders; (d) after
the occurrence of a Trigger Event, any such amendment adversely affecting the
JH Stockholders in a manner distinct from the Berkshire Stockholders shall
require the written consent of JH Stockholders holding a majority of the Shares
held by all JH Stockholders and (e) any such amendment adversely affecting any
single Stockholder in a manner distinct from the effect of such amendment on
the other Stockholders shall require the written consent of such affected
Stockholder.  Notwithstanding any
provisions to the contrary contained herein, any party may waive any rights
with respect to which such party is entitled to the benefits under this
Agreement.  No waiver of or consent to
any departure from any provision of this Agreement shall be effective unless
signed in writing by the party entitled to the benefit thereof.

4.5.          Severability. 
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is
sought.  Accordingly, the invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if the invalid or

38

unenforceable provision were omitted.  Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid or unenforceable
in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn,
without invalidating the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.

4.6.          Notices.  All
notices or other communications required or permitted to be given hereunder
shall be in writing and shall be delivered in the manner specified herein or,
in the absence of such specification, shall be deemed to have been duly given
seven (7) days after mailing by certified mail, when delivered by hand, upon
confirmation of receipt by telecopy, or one (1) business day after sending by
overnight delivery service, to the respective addresses of the parties set
forth below:

(a)           For notices and communications to the Company to:

                                                STB Beauty, Inc.

                                                425 Bush Street

                                                San
Francisco, CA  94108

                                                Attention:  Chief Financial Officer

                                                Facsimile: (415)
288-3501

 

                                with
a copy to:

 

                                                Ropes
& Gray LLP

                                                One
International Place

                                                Boston,
Massachusetts 02110

                                                Attention:
David Chapin, Esq.

                                                Facsimile:
(617) 951-7050

 

(b)           For notices and communications to the
JH Stockholders, to their respective addresses set forth in the Schedule, in
either case, with a copy to:

                                                Latham
& Watkins LLP

                                                12636
High Bluff Drive, Suite 300

                                                San
Diego, CA  92130

                                                Attention:  Robert Burwell, Esq.

                                                Facsimile:  (858)
523-5450

 

(c)           For notices and communications to the
Berkshire Stockholders, to their respective addresses set forth in the
Schedule, with a copy to:

                                                Ropes
& Gray LLP

                                                One
International Place

                                                Boston,
Massachusetts 02110

                                                Attention:
David Chapin, Esq.

                                                Facsimile:
(617) 951-7050

 

 

39

(d)           For notices and communications to any
Management Stockholders or Other Stockholders, to their respective addresses
set forth in the Schedule.

By notice complying with the foregoing provisions of
this Section 4.5, each party shall have the right to change the mailing address
for future notices and communications to such party.

4.7.          Binding Effects Assignment.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective transferees,
successors and assigns; provided, however, that the rights under this Agreement
may not be assigned except as expressly provided herein, it being understood
that the Company’s rights hereunder may be assigned by the Company to any
corporation which is the surviving entity in a merger, consolidation or like
event involving the Company.  No such
assignment shall relieve an assignor of its obligations hereunder.

4.8.          Governing Law. 
This Agreement shall be governed by the law of the State of Delaware
(regardless of the laws that might otherwise govern under applicable Delaware
principles of conflicts of law) as to all matters, including but not limited to
matters of validity, construction, effect, performance and remedies.

4.9.          Termination. 
Without affecting any other provision of this Agreement requiring
termination of any rights in favor of any Stockholder or any transferee of
Shares, the provisions of Article II of this Agreement shall terminate as to
such Stockholder or transferee, when, pursuant to and in accordance with this
Agreement, such Stockholder or transferee, as the case may be, no longer owns
any Shares or Options; provided, that termination pursuant to this Section 4.8
shall only occur in respect of a Stockholder after all Permitted Transferees in
respect thereof also no longer own any Shares. 
Notwithstanding the foregoing, Article II of this Agreement shall terminate
upon the consummation of a Qualified Public Offering.

4.10.        Recapitalizations, Exchanges, Etc.  The provisions of this Agreement shall apply,
to the full extent set forth herein with respect to Shares, to any and all
shares of capital stock of the Company or any successor or assign of the Company
(whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for, or in substitution of the Shares, by
reason of a stock dividend, stock split, stock issuance, reverse stock split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise.

4.11.        Action Necessary to Effectuate the Agreement.  The parties hereto agree to take or cause to
be taken all such corporate and other action as may be necessary to effect the
intent and purposes of this Agreement.

4.12.        Purchase for Investment; Legend on Certificate.  Each of the parties acknowledges that all of
the Shares held by such party are being (or have been) acquired for investment
and not with a view to the distribution thereof and that no transfer,
hypothecation or assignment of Shares may be made except in compliance with
applicable federal and state securities laws. 
All the certificates of Shares of the Company which are now or hereafter
owned by the Stockholders and which are subject to the terms of this Agreement
shall have endorsed in writing, stamped or printed, thereon the following
legend:

40

“The
securities represented by this Certificate have not been registered under the
Securities Act of 1933, as amended, and may not be sold, offered for sale,
pledged or hypothecated in the absence of an effective registration statement
as to the securities under said Act or an opinion of counsel satisfactory to
the Company and its counsel that such registration is not required.”

“The
securities represented by this Certificate are subject to the terms and
conditions, including certain restrictions on transfer, of a Stockholders
Agreement dated as of June 10, 2004, as amended from time to time, and none of
such securities, or any interest therein, shall be transferred, pledged,
encumbered or otherwise disposed of except as provided in that Agreement.  A copy of the Stockholders Agreement is on
file with the Secretary of the Company and will be mailed to any properly
interested person without charge within five (5) business days after receipt of
a written request.”

All shares shall also bear all legends required by
federal and state securities laws.

4.13.        Effectiveness of Transfers.  All Shares transferred by a Stockholder
(other than pursuant to an effective registration statement under the
Securities Act or pursuant to a Rule 144 transaction) shall, except as
otherwise expressly stated herein, be held by the Transferee thereof pursuant
to this Agreement.  Such Transferee
shall, except as otherwise expressly stated herein, have all the rights and be
subject to all of the obligations of a Stockholder under this Agreement (as
though such party had so agreed pursuant to Section 4.14 hereof) automatically
and without requiring any further act by such transferee or by any parties to
this Agreement.  Without affecting the
preceding sentence, if such transferee is not a Stockholder on the date of such
transfer, then such transferee, as a condition to such transfer, shall confirm
such transferee’s obligations hereunder in accordance with Section 4.14
hereof.  No Shares shall be transferred
on the Company’s books and records, and no transfer of Shares shall be otherwise
effective, unless any such transfer is made in accordance with the terms and
conditions of this Agreement, and the Company is hereby authorized by all of
the Stockholders to enter appropriate stop transfer notations on its transfer
records to give effect to this Agreement.

4.14.        Other Stockholders. 
Subject to the restrictions on transfers of Shares contained herein, any
person or entity who is not already a Stockholder acquiring Shares, shall, on
or before the transfer or issuance to it of Shares, sign a counterpart or
joinder to this Agreement in form reasonably satisfactory to the Company and
shall thereby become a party to this Agreement to be bound hereunder as (i) a
JH Stockholder if a Permitted Transferee (other than the Company) of a JH
Stockholder, (ii) a Berkshire Stockholder if a Permitted Transferee (other than
the Company) of a Berkshire Stockholder, (iii) a Management Stockholder if a
Permitted Transferee (other than the Company) of a Management Stockholder, (iv)
a Mezzanine Stockholder if a Permitted Transferee (other than the Company) of a
Mezzanine Stockholder or (v) an Other Stockholder if such transferee (other
than the Company) is a Permitted Transferee acquiring under clause (vii) of the
definition of Permitted Transferee or does not fall within clause (i), (ii),
(iii) or (iv) above.  Each such
additional Stockholder shall be listed on the Schedule, as amended from time to
time.

41

4.15.        No Waiver.  No
course of dealing and no delay on the part of any party hereto in exercising any
right, power or remedy conferred by this Agreement shall operate as waiver
thereof or otherwise prejudice such party’s rights, powers and remedies.  No single or partial exercise of any rights,
powers or remedies conferred by this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.

4.16.        Counterparts. 
This Agreement may be executed in two or more counterparts each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument, and all signatures need not appear on any one counterpart.

4.17.        Headings.  All
headings and captions in this Agreement are for purposes of reference only and
shall not be construed to limit or affect the substance of this Agreement.

4.18.        Third Party Beneficiaries.  Nothing in this Agreement is intended or
shall be construed to entitle any Person other than the Company and the
Stockholders to any claim, cause of action, right or remedy of any kind.

4.19.        Consent to Jurisdiction.  The Company and each of the Stockholders, by
its, his or her execution hereof, (i) hereby irrevocably submit to the
exclusive jurisdiction of the state courts of the State of Delaware for the purposes of any claim or action
arising out of or based upon this Agreement or relating to the subject matter
hereof, (ii) hereby waive, to the extent not prohibited by applicable law, and
agree not to assert by way of motion, as a defense or otherwise, in any such
claim or action, any claim that it or he is not subject personally to the
jurisdiction of the above-named courts, that its or his property is exempt or
immune from attachment or execution, that any such proceeding brought in the
above-named court is improper, or that this Agreement or the subject matter
hereof may not be enforced in or by such court, and (iii) hereby agree not to
commence any claim or action arising out of or based upon this Agreement or
relating to the subject matter hereof other than before the above named courts
nor to make any motion or take any other action seeking or intending to cause
the transfer or removal of any such claim or action to any court other than the
above-named courts whether on the grounds of inconvenient forum or
otherwise.  The Company and each of the
Stockholders hereby consent to service of process in any such proceeding, and
agree that service of process by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 4.5 hereof is
reasonably calculated to give actual notice.

4.20.        WAIVER OF JURY TRIAL. 
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED,
EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER
AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM
IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT,
TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR
BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. 
EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER
PARTIES HERETO THAT THIS SECTION 4.19 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH
THEY ARE

42

RELYING AND WILL RELY IN ENTERING INTO THIS
AGREEMENT.   ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.19 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL
BY JURY.

[Remainder of Page
Intentionally Left Blank]

43

IN WITNESS WHEREOF, each of the undersigned has duly
executed this Agreement (or caused this Agreement to be executed on its behalf
by its officer or representative thereunto duly authorized) under seal as of
the date first above written.

 

	
  THE COMPANY:

  	
  STB BEAUTY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ross M. Jones

  
	
   

  	
   

  	
  Name: Ross M. Jones

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE JH STOCKHOLDERS:

  	
  JH MDB INVESTORS, L.P.

  
	
   

  	
  By:

  	
  JHMD Beauty GP, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Hansen

  
	
   

  	
   

  	
  Name: John Hansen

  
	
   

  	
   

  	
  Title: Manager

  

 

[Signature
Page to Stockholders Agreement]

 

 

	
  THE BERKSHIRE

  STOCKHOLDERS:

  	
  BERKSHIRE
  FUND VI

  INVESTMENT CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ross M. Jones

  
	
   

  	
   

  	
  Name: Ross M. Jones

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BERKSHIRE FUND V,

  LIMITED PARTNERSHIP

  
	
   

  	
  By:

  	
  Fifth Berkshire Associates
  LLC,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ross M. Jones

  
	
   

  	
   

  	
  Name: Ross M. Jones

  
	
   

  	
   

  	
  Title: Manager Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BERKSHIRE FUND VI,

  LIMITED PARTNERSHIP

  
	
   

  	
  By:

  	
  Sixth Berkshire Associates
  LLC,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ross M. Jones

  
	
   

  	
   

  	
  Name: Ross M. Jones

  
	
   

  	
   

  	
  Title: Manager Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BERKSHIRE INVESTORS LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ross M. Jones

  
	
   

  	
   

  	
  Name: Ross M. Jones

  
	
   

  	
   

  	
  Title: Manager Director

  

 

[Signature
Page to Stockholders Agreement]

 

 

	
  THE MANAGEMENT

  	
   

  	
   

  
	
  STOCKHOLDERS:

  	
   

  	
  /s/ Leslie A. Blodgett

  
	
   

  	
   

  	
  Leslie A. Blodgett

  
	
   

  	
   

  	
   

  
	
  /s/ Mary Ann Dunn

  	
   

  	
  /s/ Phyllis Halili

  
	
  Mary Ann Dunn

  	
   

  	
  Phyllis Halili

  
	
   

  	
   

  	
   

  
	
  /s/ Joshua A. Harrell

  	
   

  	
  /s/ Jaime Hutter

  
	
  Joshua A. Harrell

  	
   

  	
  Jaime Hutter

  
	
   

  	
   

  	
   

  
	
  /s/ Ibtisam Mogannam

  	
   

  	
  /s/ Vicki Parotino

  
	
  Ibtisam Mogannam

  	
   

  	
  Vicki Parotino

  
	
   

  	
   

  	
   

  
	
  /s/ Kristen
  Kendrick-Bigley

  	
   

  	
  /s/ Sharon Zuckerman

  
	
  Kristen Kendrick-Bigley

  	
   

  	
  Sharon Zuckerman

  
	
   

  	
   

  	
   

  
	
  /s/ Ron Pulga

  	
   

  	
  /s/ Meri Feldman

  
	
  Ron Pulga

  	
   

  	
  Meri Feldman

  
	
   

  	
   

  	
   

  
	
  /s/Andrew Molloy

  	
   

  	
  /s/ Gigi Desin-Phillips

  
	
  Andrew Molloy

  	
   

  	
  Gigi Desin-Phillips

  
	
   

  	
   

  	
   

  
	
  /s/ Deirdre Burke

  	
   

  	
  /s/ Erika Nagel

  
	
  Deirdre Burke

  	
   

  	
  Erika Nagel

  
	
   

  	
   

  	
   

  
	
  /s/ Sharon Lee

  	
   

  	
  /s/ Staci Wilson

  
	
  Sharon Lee

  	
   

  	
  Staci Wilson

  
	
   

  	
   

  	
   

  
	
  /s/ Julia Keroke

  	
   

  	
  /s/ Sarina Godin

  
	
  Julia Keroke

  	
   

  	
  Sarina Godin

  

 

[Signature
Page to Stockholders Agreement]

 

 

	
  THE OTHER

  	
   

  	
   

  
	
  STOCKHOLDERS:

  	
  PARIBAS NORTH AMERICA, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Everett Schenk

  
	
   

  	
   

  	
  Name: Everett Schenk

  
	
   

  	
   

  	
  Title: President &
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Lea Anne Ottinger

  
	
   

  	
  Lea Anne Ottinger

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RGIP, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alfred O. Rose

  
	
   

  	
   

  	
  Name: Alfred O. Rose

  
	
   

  	
   

  	
  Title: Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SQUAM LAKE INVESTORS VI, L.P.

  
	
   

  	
  By:

  	
  BGPI, Inc.,

  
	
   

  	
   

  	
  its Managing General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bill Doherty

  
	
   

  	
   

  	
  Name: Bill Doherty

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SUNAPEE SECURITIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary Welch

  
	
   

  	
   

  	
  Name: Mary Welch

  
	
   

  	
   

  	
  Title: Assistant Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WABAN INVESTORS II, L.P.

  
	
   

  	
  By:

  	
  BG Investments, Inc.,

  
	
   

  	
   

  	
  its
  Managing General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Graham Luce

  
	
   

  	
   

  	
  Name: Graham Luce

  
	
   

  	
   

  	
  Title: Director

  

 

[Signature
Page to Stockholders Agreement]

 

 

	
  THE OTHER

  	
   

  	
   

  
	
  STOCKHOLDERS:

  	
  /s/ Stephen R. Karp

  
	
   

  	
  Stephen R. Karp

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  STEPHEN R. KARP 1999 TRUST VI

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven R. Karp

  
	
   

  	
   

  	
  Stephen R. Karp

  
	
   

  	
   

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Steven S. Fischman

  
	
   

  	
  Steven S. Fischman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Steven S. Fischman

  
	
   

  	
  Gregory W. Sullivan with
  Power of Attorney dated 6/02/04

  

 

[Signature
Page to Stockholders Agreement]

 

	
  THE OTHER

  	
   

  	
   

  
	
  STOCKHOLDERS:

  	
  CIT GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John P. Sirico, II

  
	
   

  	
   

  	
  Name: John P. Sirico, II

  
	
   

  	
   

  	
  Title: Vice President and
  Assistant Chief Counsel

  

 

[Signature
Page to Stockholders Agreement]

 

 

	
  THE MEZZANINE

  	
   

  	
   

  
	
  STOCKHOLDERS:

  	
  GLEACHER MEZZANINE FUND I, L.P.

  
	
   

  	
  By:

  	
  Gleacher Mezzanine LLC,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary Gay

  
	
   

  	
   

  	
  Name: Mary Gay

  
	
   

  	
   

  	
  Title: Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GLEACHER MEZZANINE FUND P, L.P.

  
	
   

  	
  By:

  	
  Gleacher Mezzanine LLC,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary Gay

  
	
   

  	
   

  	
  Name: Mary Gay

  
	
   

  	
   

  	
  Title: Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  YORK
  STREET MEZZANINE

  
	
   

  	
  PARTNERS,
  L.P.

  
	
   

  	
  By:

  	
  York Street Capital
  Partners, L.L.C.,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher A. Layden

  
	
   

  	
   

  	
  Name: Christopher A.
  Layden

  
	
   

  	
   

  	
  Title: Managing Director

  

 

[Signature
Page to Stockholders Agreement]

 

 

Exhibit
A

 

	
  Stockholder

  	
   

  	
  Type of
  Stockholder

  	
   

  	
  Common
  Stock

  	
   

  	
  Rollover
  Options

  	
   

  	
  Performance

  Options

  	
   

  	
  Time
  Options

  	
   

  
	
  Berkshire Fund VI

  Investment Corp.

  c/o Berkshire Partners LLC

  One Boston Place

  Boston, MA 02108-4401

  Attn: Ross Jones

  	
   

  	
  Berkshire

  	
   

  	
  864,528

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Berkshire Fund V, Limited

  Partnership

  c/o Berkshire Partners LLC

  One Boston Place

  Boston, MA 02108-4401

  Attn: Ross Jones

  	
   

  	
  Berkshire

  	
   

  	
  10,016,567

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Berkshire Fund VI Limited

  Partnership

  c/o Berkshire Partners LLC

  One Boston Place

  Boston, MA 02108-4401

  Attn: Ross Jones

  	
   

  	
  Berkshire

  	
   

  	
  10,036,429

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Berkshire Investors LLC

  c/o Berkshire Partners LLC

  One Boston Place

  Boston, MA 02108-4401

  Attn: Ross Jones

  	
   

  	
  Berkshire

  	
   

  	
  1,118,946

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JH MDB Investors, L.P.

  451 Jackson Street

  San Francisco, CA 94111-1615

  	
   

  	
  JH

  	
   

  	
  14,868,783

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Paribas North America, Inc. 787 Seventh Avenue

  32nd Floor

  New York, NY 10019

  	
   

  	
  Other

  	
   

  	
  1,115,159

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Steven R. Karp

  c/o New England

  Development

  One Wells Ave

  Newton, MA 02459

  	
   

  	
  Other

  	
   

  	
  92,930

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Steven R. Karp 1999 Trust VI

  c/o New England

  Development

  One Wells Ave

  Newton, MA 02459

  	
   

  	
  Other

  	
   

  	
  37,172

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Steven S. Fischman

  c/o New England

  Development

  One Wells Ave

  Newton, MA 02459

  	
   

  	
  Other

  	
   

  	
  37,172

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gregory W. Sullivan

  c/o New England

  Development

  One Wells Ave

  Newton, MA 02459

  	
   

  	
  Other

  	
   

  	
  18,586

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Lea Anne S. Ottinger

  18 Brook Bay 

  	
   

  	
  Other

  	
   

  	
  111,516

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
  Mercer Island, WA 98040

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RGIP, LLC

  c/o Ropes & Gray LLP

  One International Place

  Boston, MA 02110

  Attn: R. Bradford Malt

  	
   

  	
  Other

  	
   

  	
  92,930

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Squam Lake Investors VI, L.P.

  c/o Bain & Company, Inc.

  131 Dartmouth Street

  Boston, MA 02116

  Attn: Bill Doherty

  	
   

  	
  Other

  	
   

  	
  86,983

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sunapee Securities, Inc.

  c/o Bain & Company, Inc.

  131 Dartmouth Street

  Boston, MA 02116

  Attn: Mary Welch

  	
   

  	
  Other

  	
   

  	
  3,215

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Waban Investors II, L.P.

  c/o The Bridgespan Group, Inc.

  535 Boylston Street, 10thFloor

  Boston, MA 02116

  Attn: Alan W. Tuck

  	
   

  	
  Other

  	
   

  	
  2,732

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CIT Lending Services

  Corporation

  1 CIT Drive

  Livingston, NJ 07039

  	
   

  	
  Other

  	
   

  	
  185,860

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gleacher Mezzanine Fund I, L.P.

  c/o Gleacher Mezzanine LLC

  660 Madison Avenue, 17th Floor

  New York, NY 10021

  	
   

  	
  Mezzanine

  	
   

  	
  821,696

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gleacher Mezzanine Fund P, L.P.

  c/o Gleacher Mezzanine LLC

  660 Madison Avenue, 17th Floor

  New York, NY 10021

  	
   

  	
  Mezzanine

  	
   

  	
  293,463

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  York Street Mezzanine Partners, L.P.

  One Pluckemin Way

  Bedminster, NJ 07921

  	
   

  	
  Mezzanine

  	
   

  	
  1,115,159Exhibit
4.3

 

FIRST AMENDMENT TO STOCKHOLDERS
AGREEMENT

 

This First Amendment to Stockholders Agreement (the “Amendment”)
is effective as of December 21, 2004.

 

WHEREAS, STB Beauty, Inc., a Delaware corporation (the
“Company”), and the undersigned stockholders of the Company are parties to a
Stockholders Agreement dated as of June 10, 2004 (the “Agreement”) between the
Company and the stockholders party thereto (the “Stockholders”);

 

WHEREAS, the parties hereto wish to amend the
provisions of the Agreement regarding the size and composition of the Board of
Directors of the Company; and

 

WHEREAS, Section 4.4 of the Agreement provides that,
except in specified situations, it may be amended by written consent of the
Company and by a majority in interest of each of the Berkshire Stockholders (as
defined) and the JH Stockholders (as defined).

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.             Section
2.5(a) of the Agreement shall be amended and restated as follows:

 

“(a)         Subject to Section 2.5(b), at each annual
meeting of the Stockholders and at each special meeting of the Stockholders
called for the purpose of electing directors of the Company, and at any time at
which Stockholders of the Company shall have the right to, or shall, vote for
directors of the Company, then, and in each event, the Stockholders hereby
agree to attend each meeting in person or by proxy and hereby agree to vote all
Shares of the Company now owned or hereafter acquired by him, her or it
(whether at a meeting or by written consent in lieu thereof) (i) to fix the
number of members of the Board at up to nine (9), and (ii) to elect and
thereafter to continue in office as a director of the Company the following:
(a) two (2) directors nominated by the Berkshire Stockholders (who shall initially
be Brad Bloom and Ross Jones) (collectively the “Berkshire Representatives”);
(b) two (2) directors nominated by the JH Stockholders (who shall initially be
John Hansen and Peter Crowley) (collectively, the “JH Representatives”),
(c) one (1) director who is nominated by the Management Stockholders (who shall
be Leslie Blodgett for as long as she serves as the Chief Executive Officer of
the Company) (the “Management Representative”) and (d) four individuals
nominated by the other five nominees (the “Outside Representatives”) (the first
of whom shall initially be Lea Anne S. Ottinger; the second of whom shall be initially
by Glen Senk; the third of whom shall initially be Thomas E. Whiddon; and the
fourth of whom shall be nominated at a later date).  As to the directors elected to the Board
pursuant to this Section 2.5(a), the following provisions shall apply:  (i) no Berkshire Representative may be
removed without the consent of a majority in interest of the Berkshire 

 

 

 

Stockholders and (ii) no JH Representative may be
removed without the consent of a majority in interest of the JH
Stockholders.  Any vacancy on the Board
shall be filled by the designee of the Stockholders who would be entitled to
designate such director pursuant to this Section 2.5(a), and if there shall be
no such designation right, by a unanimous vote of the Berkshire Representatives, the JH
Representatives and the Management Representative.  Each Stockholder shall, upon receipt of
notice identifying such designee, take all action as may be necessary or
appropriate, including without limitation, the voting of all Shares owned by
such Stockholder, to elect the director so designated.  The Berkshire Stockholders shall have the
right to designate one of the directors (who may or may not be a Berkshire
Representative) to serve as the Chairman of the Board.  The initial Chairman shall be Ross Jones.”

 

2.             This
Amendment may be executed in one or more counterparts, and by different parties
hereto in separate counterparts, each of which when executed shall be deemed to
be an original, including counterparts transmitted by facsimile, but all of
which taken together shall constitute one and the same agreement.

 

3.             On
and after the date hereof, each reference in the Agreement to the “Agreement”
shall mean the Agreement as amended hereby. 
Except as specifically amended above, the Agreement shall remain in full
force and effect and is hereby ratified and confirmed.  The execution, delivery and effectiveness of
this Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of any party hereto, nor constitute a
waiver of any provision of the Agreement.

 

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

 

2

 

                IN
WITNESS HEREOF, the parties hereto hereby acknowledge and consent to the
Amendment as of the date first written above.

 

 

	
  THE COMPANY:

  	
  STB BEAUTY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Leslie A. Blodgett

  
	
   

  	
   

  	
  Name: Leslie A. Blodgett

  
	
   

  	
   

  	
  Title: CEO

  
	
   

  	
   

  	
   

  
	
  THE JH STOCKHOLDERS:

  	
  JH MDB INVESTORS, L.P.

  
	
   

  	
  By: JHMD Beauty GP, LLC

  
	
   

  	
  Its: General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Hansen

  
	
   

  	
   

  	
  Name: John Hansen

  
	
   

  	
   

  	
  Title: Manager

  
	
   

  	
   

  	
   

  
	
  THE BERKSHIRE

  	
   

  	
   

  
	
  STOCKHOLDERS:

  	
  BERKSHIRE FUND VI

  
	
   

  	
  INVESTMENT CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ross M. Jones

  
	
   

  	
   

  	
  Name: Ross M. Jones

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  BERKSHIRE
  FUND V,

  
	
   

  	
  LIMITED
  PARTNERSHIP

  
	
   

  	
  By: Fifth
  Berkshire Associates LLC,

  
	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ross M.
  Jones

  
	
   

  	
   

  	
  Name: Ross M.
  Jones

  
	
   

  	
   

  	
  Title: Managing
  Director

  

 

 

3

 

	
   

  	
  BERKSHIRE FUND VI,

  
	
   

  	
  LIMITED PARTNERSHIP

  
	
   

  	
  By: Sixth Berkshire Associates LLC,

  
	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ross M. Jones

  
	
   

  	
   

  	
  Name: Ross M. Jones

  
	
   

  	
   

  	
  Title: Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
  BERKSHIRE INVESTORS LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ross M. Jones

  
	
   

  	
   

  	
  Name: Ross M. Jones

  
	
   

  	
   

  	
  Title: Managing Director

  

 

 

4

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