Document:

SEPARATION AGREEMENT

 

	 	 	 	 	 

Exhibit 10.3

SEPARATION AGREEMENT

     THIS SEPARATION AGREEMENT (the “Agreement”) is entered into as of this
26th day of August, 2004 by and between Applica Incorporated, a Florida
corporation (the “Company”), and David M. Friedson (the “Executive”).

Recitals

     WHEREAS, the Executive has been employed by the Company pursuant to the
terms of an Executive Employment Agreement dated June 18, 1999 by and between
the Company and the Executive (the “Employment Agreement”); and

     WHEREAS, the Company and the Executive have mutually agreed that the
Employment Agreement, and the Executive’s employment with the Company and its
Affiliates (as defined below), shall terminate on August 26, 2004 (the
“Termination Date”); and

     WHEREAS, the Company and the Executive now wish to set forth in this
Agreement all of their respective rights and obligations resulting from such
termination of employment and the termination of the Employment Agreement.

     NOW, THEREFORE, in consideration of the mutual promises and covenants
between the parties, the sufficiency of which is hereby acknowledged, the
Company and Executive hereby agree to the following Terms and Conditions:

Terms and Conditions

     1. Recitals. All of the foregoing Recitals are true and correct
and are incorporated as part of these Terms and Conditions.

     2. Termination of Employment Agreement. The Company and the
Executive each acknowledge and agree that the Executive’s employment with the
Company and its Affiliates shall terminate as of the Termination Date, and that
the Employment Agreement shall terminate and be of no further force and effect
as of the Termination Date; provided, however, that the provisions of Section 6
of the Employment Agreement shall survive as restated and modified in Section 6
of this Agreement. For purposes of this Agreement, the term “Affiliate”
includes all of the Company’s direct and indirect subsidiaries and any other
entities that directly or indirectly, through one or more intermediaries,
control, are controlled by or are under common control with the Company.

     3. Severance Benefits. In consideration for the termination of the
Employment Agreement, the Company and the Executive agree that the Company
shall provide the Executive with the following benefits (the “Severance
Benefits”), in each case reduced by any applicable employment or withholding
taxes:

               (a) Accrued but Unpaid Base Salary. The Company shall pay to the
Executive his Annual Base Salary (as that term is defined in Section 4(a) of
the Employment Agreement) through the Termination Date, payable at such time
and in such manner as it would have been payable had the Executive’s employment
with the Company not terminated on the Termination Date.

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               (b) Additional Compensation. The Company shall make the following
payments of additional compensation to the Executive:

	 	 	 
	i.

	 	$500,000 payable within 15 days after the execution of this
Agreement;
	ii.

	 	$500,000 payable on December 15, 2004;
	iii.

	 	$3,000,000 payable on January 15, 2005;
	iv.

	 	$1,500,000 payable on June 15, 2005; and
	v.

	 	$1,000,000 payable on September 15, 2005.

               The Company may offset any amounts payable by the Company pursuant to
clause (iii) of this paragraph (b) against any amounts payable by the Executive
to the Company pursuant to Section 4(a) hereof, and may offset any amounts
payable pursuant to clause (iv) of this paragraph (b) against any amounts
payable by the Executive to the Company pursuant to Section 4(b) hereof.

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               (c) Continuation of Health Benefits and Executive Assistant

     i. The Executive shall be entitled to continued coverage for himself
and his family under the Company’s medical and dental insurance plan for
a period of 18 months immediately following the Termination Date, if and
to the extent that the Executive elects such continued coverage pursuant
to COBRA. The Company shall reimburse the Executive for his actual
premium expense with respect to maintaining the COBRA coverage during the
foregoing 18-month period; provided, however, if the Executive obtains
subsequent employment which includes medical and dental benefits, the
Company’s reimbursement obligations pursuant to this clause (i) of
paragraph (c) shall terminate.

     ii. The Executive shall continue to have use of an executive
assistant employed by the Company through December 31, 2004.

               (d) Stock Options. The stock options granted to the Executive by
the Company that are outstanding as of the Termination Date are listed on
Exhibit A attached hereto (the “Options”). All of such Options shall be
cancelled upon the execution of this Agreement; provided, however that the
Option granted on December 6, 2000 to acquire 500,000 shares of common stock at
an exercise price of $3.625 per share shall be and hereby is amended to provide
that such Option shall remain outstanding and exercisable on the same terms and
conditions set forth in the stock option plan pursuant to which the Option was
granted, until the Expiration Date for that Option reflected an Exhibit A,
notwithstanding the termination of the Executive’s employment with the Company.

               (e) Certain Violations. The Executive’s violation of any of the
provisions of Sections 6, 8, 9, 10 or 11 hereof shall, in addition to any other
remedy, result in a cessation of all Severance Benefits hereunder.

     4. Repayment of Loans.

               (a) On January 15, 2005, the Executive shall repay to the Company the full
principal amount, and all accrued but unpaid interest, payable under his
Promissory Note dated April 14, 1999, a copy of which is attached as Exhibit B
hereto; and

               (b) On June 15, 2005, the Executive shall repay to the Company the full
principal amount, and all accrued interest, payable under all other outstanding
loans with the Company.

     5. No Further Compensation. The Executive acknowledges and agrees
that other than (a) the Severance Benefits described in Section 3 above and (b)
the right to receive distributions under the Company’s 401(k) plan, no further
compensation or benefits or other monies are owed to the Executive by the
Company arising out of the Employment Agreement or otherwise on account of his
employment with, or service as a Director of, the Company and its Affiliates,
or termination of such employment or service with the Company and its
Affiliates.

     6. Restrictions.

               (a) Non-Competition. For the one year period that immediately
follows the Termination Date, the Executive shall not, directly or indirectly,
engage in or have any interest in any sole proprietorship, partnership,
corporation or business or any other person or entity (whether as an executive,
officer, director, partner, agent, security holder, creditor, consultant or
otherwise) that directly or indirectly (or through any affiliated entity)
engages in competition with the Company (for this purpose, any business that
engages in the manufacture or distribution of products similar to those
products manufactured or distributed by the Company on the Termination Date
shall be deemed to be in

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competition with the Company); provided that such provision shall not
apply to the Executive’s ownership of Common Stock of the Company or the
acquisition by the Executive, solely as an investment, of securities of any
issuer that is registered under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended, and that are listed or admitted for trading
on any United States national securities exchange or that are quoted on the
National Association of Securities Dealers Automated Quotations System, or any
similar system or automated dissemination of quotations of securities prices in
common use, so long as the Executive does not control, acquire a controlling
interest in or become a member of a group which exercises direct or indirect
control of, more than five percent of any class of capital stock of such
corporation.

               (b) Nondisclosure. The Executive shall not at any time divulge,
communicate, use to the detriment of the Company or for the benefit of any
other person or persons, or misuse in any way, any Confidential Information (as
hereinafter defined) pertaining to the business of the Company. Any
Confidential Information or data acquired by the Executive with respect to the
business of the Company (which shall include, but not be limited to,
information concerning the Company’s financial condition, prospects,
technology, products, customers, suppliers, sources of leads and methods of
doing business) shall be deemed a valuable, special and unique asset of the
Company that was received by the Executive in confidence and as a fiduciary,
and Executive shall remain a fiduciary to the Company with respect to all of
such information. For purposes of this Agreement, “Confidential Information”
means information disclosed to the Executive or known by the Executive as a
consequence of or through his employment by, or service as a Director of, the
Company (including information conceived, originated, discovered or developed
by the Executive) prior to or after the date hereof, and not generally known,
about the Company or its business. Notwithstanding the foregoing, nothing
herein shall be deemed to restrict the Executive from disclosing Confidential
Information to the extent required by law. If the Executive receives any
notice, including a subpoena, requiring such disclosure, he shall immediately
notify the Company so that the Company may have the opportunity to interpose an
objection. None of the foregoing obligations and restrictions apply to any
Confidential Information that the Executive demonstrates was or became
generally available to the public other than as a result of disclosure by the
Executive.

               (c) Non-solicitation of Executives and Clients. For the one year
period that immediately follows the Termination Date, the Executive shall not,
directly or indirectly, for himself or for any other person, firm, corporation,
partnership, association or other entity, (i) employ or attempt to employ or
enter into any contractual arrangement with any officer or former officer of
the Company, (ii) call on or solicit any of the actual or targeted prospective
customers, suppliers or clients of the Company on behalf of any person or
entity in connection with any business competitive with the business of the
Company, and/or (iii) make known the names and addresses of such customers,
suppliers or clients or any information relating in any manner to the Company’s
trade or business relationships with such customers, suppliers or clients.

               (d) Ownership of Developments. All copyrights, patents, trade
secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed
or created by Executive during the course of performing work for the Company or
its customers (collectively, the “Work Product”) shall belong exclusively to
the Company and shall, to the extent possible, be considered a work made by the
Executive for hire for the Company within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for the Company, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of the Company, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.

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               (e) Definition of Company. For purposes of this Section 6, the
term “Company” also shall include the Company’s Affiliates.

               (f) Acknowledgment by Executive. The Executive acknowledges and
confirms that (i) the restrictive covenants contained in this Section 6 are
reasonably necessary to protect the legitimate business interests of the
Company, and (b) the restrictions contained in this Section 6 (including
without limitation the length of the term of the provisions of this Section 6)
are not overbroad, overlong, or unfair and are not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges and confirms
that his full, uninhibited and faithful observance of each of the covenants
contained in this Section 6 will not cause him any undue hardship, financial or
otherwise, and that enforcement of each of the covenants contained herein will
not impair his ability to obtain employment commensurate with his abilities and
on terms fully acceptable to him or otherwise to obtain income required for the
comfortable support of him and his family and the satisfaction of the needs of
his creditors. The Executive acknowledges and confirms that his special
knowledge of the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge to the
benefit of a competitor or were to compete with the Company in violation of the
terms of this Section 6. The Executive further acknowledges that the
restrictions contained in this Section 6 are intended to be, and shall be, for
the benefit of and shall be enforceable by, the Company’s successors and
assigns.

               (g) Reformation by Court. In the event that a court of competent
jurisdiction shall determine that any provision of this Section 6 is invalid or
more restrictive than permitted under the governing law of such jurisdiction,
then only as to enforcement of this Section 6 within the jurisdiction of such
court, such provision shall be interpreted and enforced as if it provided for
the maximum restriction permitted under such governing law.

               (h) Extension of Time. If the Executive shall be in violation of
any provision of this Section 6, then each time limitation set forth in this
Section 6 shall be extended for a period of time equal to the period of time
during which such violation or violations occur. If the Company seeks
injunctive relief from such violation in any court, then the covenants set
forth in this Section 6 shall be extended for a period of time equal to the
pendency of such proceeding including all appeals by the Executive.

               (i) Injunctive Relief. The covenants of the Executive set forth in
this Section 6 are separate and independent covenants, for which valuable
consideration has been paid, the receipt, adequacy and sufficiency of which are
hereby acknowledged by the Executive, and which have been made by the Executive
to induce the Company to enter into this Agreement. Each of the aforesaid
covenants may be availed of, or relied upon, by the Company or any of its
Affiliates in a court of competent jurisdiction for the basis of injunctive
relief.

     7. Resignations. Upon execution of this Agreement, the Executive
hereby resigns all of his positions as an officer and member of the Board of
Directors of the Company and each of its Affiliates.

     8. Return of Books, Records and Equipment; Disclosure. The
Executive hereby acknowledges and agrees that all books, records and accounts
relating in any manner to the business of the Company and/or its Affiliates,
whether prepared by the Executive or otherwise coming into the Executive’s
possession, are the exclusive property of the Company and shall be returned to
the Company upon the Termination Date. The Executive represents and warrants
that he has advised the Chief Executive Officer or Chief Financial Officer of
the Company of all information, discussions, negotiations or business
arrangements relating to the Company and its Affiliates of which he has
knowledge or in which he has participated on behalf of the Company and its
Affiliates.

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     9. No Charges Filed. Executive represents and warrants that he has
not filed any claims or causes of action against the Company or any of its
Affiliates, including but not limited to any charges of discrimination against
the Company or its Affiliates, with any federal, state or local agency or
court.

     10. No Administrative Proceeding to be Filed. The Executive agrees
not to institute an administrative proceeding or lawsuit against the Company or
any of its Affiliates in violation of Section 13 below, and represents and
warrants that, to the best of his knowledge, no other person or entity has
initiated or is authorized to initiate such administrative proceedings or
lawsuit on his behalf. Furthermore, the Executive agrees not to encourage any
other person or suggest to any other person that he or she institute any legal
action or claim against the Company or any of its Affiliates or any past and
present shareholders, directors, officers, or agents.

     11. Non-Disparagement. The Executive agrees not to make any
disparaging or negative comment to any other person or entity regarding (a) the
Company or any of its Affiliates, (b) any of the owners, directors, officers,
shareholders, members, employees, attorneys or agents of the Company or any of
its Affiliates, (c) the working conditions at the Company or any of its
Affiliates, or (d) the circumstances surrounding the Executive’s separation
from the Company or any of its Affiliates. The Company agrees not to make any
disparaging or negative comment to any other person or entity regarding any
aspect of the Executive’s employment with or separation from the Company and
its Affiliates.

     12. Duty of Cooperation. The parties hereto agree to cooperate
with each other and each other’s attorneys in connection with any threatened or
pending litigation against the Company or any of its Affiliates, or against the
Executive. The Executive agrees to make himself available upon reasonable
notice to prepare for and appear at deposition or at trial in connection with
any such matters, and the Company agrees to make the appropriate persons
available upon reasonable notice to prepare for and appear at deposition or at
trial in connection with any such matters. Furthermore, the parties hereto
agree to cooperate fully in effecting an orderly transition with regard to the
termination of the Executive’s employment and the transition of his duties to
other employees of the Company and its Affiliates. The foregoing obligations
shall be without cost to the party to whom cooperation is provided.

     13. Mutual General Releases.

               (a) Release by Executive. The Executive, his personal
representatives, heirs and assigns, first party, hereby releases, discharges
and covenants not to sue the Company, its past and present shareholders,
directors, officers, employees, partners and agents, subsidiary and affiliated
entities and successors and assigns, second party, from and for any and all
claims, demands, damages, lawsuits, obligations, promises, administrative
actions, charges and causes of action, both known or unknown, in law or in
equity, of any kind whatsoever, which first party ever had, now has, or may
have against second party, for, upon or by reason of any matter, cause or thing
whatsoever, up to and including the date of this Agreement, including but
not limited to any and all claims and causes of action arising out of or in
connection with Executive’s employment with Company, any and all claims and
causes of action under Title VII of the Civil Rights Act of 1964, as amended,
the Age Discrimination in Employment Act of 1967, as amended, the Retirement
Income Security Act (“ERISA”) and any other federal, state or local
anti-discrimination law, statute or ordinance, and any lawsuit founded in tort,
contract (oral, written or implied) or any other common law or equitable basis
of action, but excluding any obligations of the Company under this
Agreement.

               (b) Release by Company. The Company, its subsidiary and affiliated
entities, and successors and assigns, first party, hereby releases, discharges,
and covenants not to sue the Executive, his personal representatives, heirs and
assigns, second party, from and for any and all claims, demands, damages,
lawsuits, obligations, promises, administrative actions, charges or causes of
action, both known

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or unknown, in law or in equity, of any kind whatsoever, which first party
ever had, now has, or may have against second party, for, upon or by reason of
any matter, cause or thing whatsoever, up to and including the date of this
Agreement, including any lawsuit founded in tort, contract (oral, written or
implied) or any other common law on equitable basis of action, but
excluding any obligations of the Executive under this Agreement.

     14. Attorneys’ Fees. In the event that a legal action is brought
to enforce the terms of this Agreement, the prevailing party shall be entitled
to recover its costs of court, including all attorneys fees at all trial and
appellate levels.

     15. Severability. If any provision of this Agreement is
invalidated by a court of competent jurisdiction, then all of the remaining
provisions of this Agreement shall remain in full force and effect, provided
that both parties may still effectively realize the substantial benefit of the
promises and considerations conferred hereby.

     16. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the matters set forth
herein and supersedes in its entirety any and all agreements or communications,
whether written or oral, previously made in connection with the matter herein.
Any agreement to amend or modify the terms and conditions of this Agreement
must be in writing and executed by the parties hereto.

     17. Construction. The parties acknowledge that each party has
reviewed and revised this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement.

     18. Governing Law; Venue; Waiver of Jury Trial. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida without regard to principles of conflicts of law. The exclusive venue
for any action to enforce any provision of this Agreement shall be the state or
federal courts located in Miami-Dade County, Florida. THE COMPANY AND THE
EXECUTIVE EACH HEREBY KNOWINGLY WAIVE THEIR RIGHTS TO REQUEST A TRIAL BY JURY
IN ANY LITIGATION IN ANY COURT OF LAW, TRIBUNAL OR LEGAL PROCEEDING INVOLVING
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT.

     19. Notices. All notices required or permitted to be given
hereunder shall be in writing and shall be personally delivered by courier,
sent by registered or certified mail, return receipt requested or sent by
confirmed facsimile transmission addressed as set forth herein. Notices
personally delivered, sent by facsimile or sent by overnight courier shall be
deemed given on the date of delivery and notices mailed in accordance with the
foregoing shall be deemed given upon the earlier of receipt by the addressee,
as evidenced by the return receipt thereof, or three (3) days after deposit in
the U.S. mail. Notice shall be sent (i) if to the Company, addressed to: 3633
Flamingo Road, Miramar, Florida 33027, Attention: General Counsel, and (ii)
if to the Executive, to his address as reflected on the payroll records of the
Company, or to such other address designated by the party by written notice in
accordance with this provision.

     20. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.

     21. Non-Admission of Liability. Neither this Agreement nor
anything contained herein shall constitute or is to be construed as an
admission by the Company or its Affiliates or the Executive as evidence of any
liability, wrongdoing, or unlawful conduct.

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     22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument and agreement. Facsimile
signatures are acceptable as originals.

     23. Sufficient Time to Review. The Executive acknowledges and
agrees that he has had sufficient time to review this Agreement and consult
with anyone he chooses regarding this Agreement, that he has a right to consult
with legal counsel regarding this Agreement and has been represented by counsel
in connection with this Agreement, and that he has received all information he
requires from the Company in order to make a knowing and voluntary release and
waiver of all claims against the Company.

     24. Right of Rescission. The Executive acknowledges and agrees
that he has been given at least twenty-one (21) days to review this Agreement,
and that he has (7) seven days from the date of the execution of this Agreement
by all parties hereto within which to rescind this Agreement by providing
notice in writing to the Company. The Executive further acknowledges that by
this Agreement he is receiving consideration in addition to that to which he is
already entitled. The Executive further acknowledges that this Agreement and
the release contained herein satisfy all of the requirements for an effective
release by the Executive of all age discrimination claims under ADEA.

     25. Joint Press Release. The parties hereto agree that, upon the
execution of this Agreement, the Company shall issue the press release attached
hereto as Exhibit C.

     26. Headings. The headings are for the convenience of the parties,
and are not to be construed as terms or conditions of this Agreement.

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

	 	 	 	 	 
	 	COMPANY:

Applica Incorporated, a Florida

corporation

 	 
	 	By:  	/s/ Harry D. Schulman
 	 
	 	 	Name:  	Harry D. Schulman 	 
	 	 	Title:  	President and Chief
Executive Officer 	 
	 

	 	 	 	 	 
	 	EXECUTIVE:

 	 
	 	/s/ David M. Friedson
 	 
	 	David M. Friedson 	 
	 	 	 

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Exhibit A

Outstanding Options

of August 26, 2004

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Grant	 	Expiration	 	 	 	 	 	Grant	 	Options	 	Options
	Date
	 	Date
	 	Plan ID
	 	Type
	 	Price
	 	Outstanding

	01/19/1996
	 	 	8/26/2004	 	 	NQNP	 	Non-Qualified	 	$	7.2500	 	 	 	81,540	 
	06/02/1997
	 	 	8/26/2004	 	 	 	1988DSOP	 	 	Non-Qualified	 	$	14.8750	 	 	 	1,500	 
	06/01/1998
	 	 	8/26/2004	 	 	 	1996SOP	 	 	Non-Qualified	 	$	31.6875	 	 	 	1,500	 
	06/01/1999
	 	 	8/26/2004	 	 	 	1998SOP	 	 	Non-Qualified	 	$	12.8125	 	 	 	1,500	 
	06/01/2000
	 	 	8/26/2004	 	 	 	2000SOP	 	 	Non-Qualified	 	$	14.7500	 	 	 	1,500	 
	12/06/2000
	 	 	12/06/2005	 	 	 	2000SOP	 	 	Non-Qualified	 	$	3.6250	 	 	 	500,000	 

A-1

 

Exhibit B

Copy of Promissory Note

Secured Promissory Note

			
	$1,496,250
	 	April 14, 1999

New York, New York

     FOR VALUE RECEIVED, David M. Friedson (the “Borrower”), does hereby
promise to pay to Windmere-Durable Holdings, Inc., a Florida corporation (the
“Company”), or order, the principal sum of One Million, Four Hundred and
Ninety-Six Thousand, Two Hundred and Fifty Dollars ($1,496,250) (the “Principal
Balance”), together with interest on the Principal Balance from and after the
date hereof until paid at an annual rate prior to maturity or default equal to
LIBOR plus 2.75% per annum, to be adjusted in accordance with the comparable
change in the borrowing rate on the Company’s revolving credit loan with
NationsBank, National Association (the “Rate”), with the Rate in effect on the
first day of a month being applicable to the entire month. All sums payable
hereunder shall be payable at the offices of the Company, 5980 Miami Lakes
Drive, Miami Lakes, Florida 33014, or at such other place or places as the
holder hereof may from time to time otherwise direct in writing, in such coin
and currency as shall be at the time of payment legal tender for the payment of
public and private debts in the United States of America.

     The entire Principal Balance of this Note, plus all accrued interest shall
be payable on April 14, 2002 (the “Payment Date”). Interest on this Note shall
be computed on basis of the actual number of days elapsed over a 365-day year.
Any payment of principal or interest under this Note which is not made within
15 days of the Payment Date shall bear interest from the due date at the Rate
plus two percent (2%).

     This Note and the indebtedness evidenced hereby may be prepaid, in whole
or in part, without notice, penalty or premium at any time and from time to
time. Any prepayment shall first be applied to unpaid interest and the
remainder, if any, to the unpaid Principal Balance.

     The Company shall have the right to declare the amount of the total unpaid
Principal Balance, together with all accrued and unpaid interest thereon,
immediately due and payable upon the adjudication of the Borrower as bankrupt,
or upon the taking of any voluntary action by the Borrower or 90 days following
the taking of any involuntary action against the Borrower seeking an
adjudication of the Borrower as bankrupt, or seeking relief by or against the
Borrower under any provision of the Bankruptcy Code, which, in the case of an
involuntary action, is not dismissed within such time. Any payment of
principal or interest under this Note which is not made within 30 days of its
due date shall bear interest from the due date at the highest rate of interest
permitted under Florida law.

     The Borrower agrees to pay all costs, fees and expenses incurred by a
holder hereof, including attorneys’ fees (including those for appellate
proceedings) incurred in connection with the collection or attempted collection
or enforcement hereof, whether or not legal proceedings may have been
instituted. The Borrower shall pay all Florida or applicable state documentary
stamp taxes, if any, due in connection with the execution and delivery of this
Note.

     In the event that the Borrower makes any payment of interest, fees or
other charges, however denominated, pursuant to this Note, which payment causes
the interest paid to the Company to exceed the maximum rate of interest
permitted under Florida law, any excess over such maximum shall be applied in
reduction of the Principal Balance owed to the Company as of the date of such
payment, or if such excess exceeds the amount of the Principal Balance owed to
the Company as of the date of such payment, the difference shall be paid by the
Company to the Borrower.

     THE BORROWER HEREBY AND THE COMPANY BY ACCEPTANCE OF THIS NOTE, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREOF, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE COMPANY MAKING THE LOAN EVIDENCED BY THIS NOTE.

B-1

 

     This Note cannot be changed or modified other than pursuant to a written
instrument signed by the parties hereto. This Note cannot be assigned by the
Borrower, in whole or in part, unless the Company shall consent in writing
prior to such assignment. The Company may assign this Note to any direct or
indirect subsidiary or affiliate of the Company.

     All past due and delinquent sums hereunder, both principal and interest,
shall bear interest at the rate determined above until such sums have been
paid.

     The Borrower hereby waives demand, presentment for payment, protest,
notice of protest, filing of suit and diligence in collecting this Note, and
consents that the time of all payments or any part thereof may be extended,
rearranged, renewed or postponed by the Company. The Borrower shall pay all
amounts owing under this Note without set-off, counterclaim, deduction or
withholding for any reason whatsoever.

     Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex or
similar communications equipment) against receipt to the party to whom it is to
be given, (i) if to the Company, at its address at 5980 Miami Lakes Drive,
Miami Lakes, Florida 33014, Attention: President, (ii) if to the Borrower, to
300 Central Park West, Apt. 21D, New York, New York 10024, or (iii) in either
case, to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section. Any notice or other
communication given hereunder shall be deemed given and received, if given by
hand, when a writing containing such notice is received by the entity or person
to whom addressed or, if given by mail, five business days after a certified or
registered letter containing such notice, with postage prepaid, is deposited in
the United States mail, except for a notice changing a party’s address which
shall be deemed given at the time of receipt thereof. Any notice given by
other means permitted by this paragraph shall be deemed given at the time of
receipt thereof.

     The obligations of the Borrower under this Note are secured by the grant
by the Borrower to the Company of a security interest in and to certain shares
of Common Stock of the Company owned by the Borrower pursuant to the terms and
subject to the conditions of a Pledge and Security Agreement of even date
herewith.

     This Note shall be governed by and construed in accordance with the laws
of the State of Florida without regard to any conflict of law rule or principle
that would give effect to the laws of another jurisdiction.

     IN WITNESS WHEREOF, the Borrower has caused this Note to be executed as of
the date first above written.

Attest:

	 	 	 
	/s/ Harry D. Schulman

	 	/s/ David M. Friedson
	
 

	 	
 
	

	 	David M. Friedson

B-2

 

Exhibit C

Press Release

[Applica logo]

FOR IMMEDIATE RELEASE

	 	 	 	 	 
	 

	 	Contact:
	 	Investor Relations Department

(305) 362-2611

investor.relations@applicamail.com

Applica Incorporated Announces Resignation of

David M. Friedson as Chairman of the Board and Director

     Miami Lakes, Florida (August 27, 2004) — Applica Incorporated (NYSE: APN)
today announced that David M. Friedson has resigned his positions as Chairman
of the Board and Director of the company for personal reasons effective
immediately. Harry D. Schulman will become interim Chairman of the Board while
retaining his current title of President and Chief Executive Officer of the
Company. The vacated board seat will remain empty at this time.

     Mr. Schulman commented “On behalf of the Board of Directors and the
employees of Applica, we would like to express our appreciation to David
Friedson for his efforts on behalf of the company over the past 28 years. We
wish David the best of luck in his future endeavors and thank him for his
significant contributions.”

     Applica Incorporated and its subsidiaries are marketers and distributors
of a broad range of branded and private-label small electric consumer goods.
Applica markets and distributes kitchen products, home products, pest control
products, pet care products and personal care products. Applica markets
products under licensed brand names, such as Black & Decker®, its own brand
names, such as Windmere®, LitterMaid® and Applica®, and other private-label
brand names. Applica’s customers include mass merchandisers, specialty
retailers and appliance distributors primarily in North America, Latin America
and the Caribbean. The Company operates manufacturing facilities in Mexico.
Additional information regarding the Company is available at
www.applicainc.com.

C-1<PAGE>
                                                  Exhibit 4.3

              ORIGINAL BEVERAGE CORPORATION 2001 STOCK OPTION PLAN

1. Purpose, Restrictions on Amount Available Under the Plan. The Original
Beverage Corporation 2001 Stock Option Plan (the "Plan") is intended to
encourage stock ownership by employees, consultants and directors of Original
Beverage Corporation (the "Corporation"), and any divisions and Subsidiary
Corporations (as hereinafter defined), so that they may acquire or increase
their proprietary interest in the Corporation, and to encourage such employees,
directors, and consultants to remain in their employ of or associated with the
Corporation and to put forth maximum efforts for the success of the Corporation
and its business. It is further intended that options granted by the Committee
pursuant to Section 6 of this Plan shall constitute "incentive stock options"
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code (as hereinafter defined), and the regulations issued thereunder,
and options granted by the Committee pursuant to Section 7 of this Plan shall
constitute "non-qualified stock options" ("Non-qualified Stock Options").

2. Definitions. As used in this Plan, the following words and phrases shall have
the meanings indicated.

(a) "Disability" shall mean an Optionee's inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or that has lasted or can be
expected to last for a continuous period of not less than 12 months.

(b) "Employer Corporation" is the entity which employs the person granted
options under this Plan.

(c) "Fair Market Value" per share as of a particular date shall mean the last
sale price of the Corporation's Common Stock as reported in a national
securities exchange or the NASDAQ National Market System or, if last sale
reporting quotation is not available for the Corporation's Common Stock, the
average if the bid and asked prices of the Corporation's Common Stock as
reported by NASDAQ or on the OTC Bulletin Board, or if none, National Quotation
Bureau Inc.'s "Pink Sheets" or, if such quotations are unavailable, the value
determined by the Committee (as hereinafter defined) in accordance with its
discretion in making a bona fide, good faith determination of fair market value.
The Board of Directors may reject the determination of Fair Market Value made by
the Committee, and shall thereupon determine the applicable Fair Market Value.
Fair Market Value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse.

(d) "Internal Revenue Code" shall mean the United States Internal Revenue Code
of 1986, as amended from time to time (codified at Title 26 of the United States
Code), and any successor legislation.

<PAGE>

(e) "Options" shall mean Incentive Stock Options and/or Non-qualified Stock
Options granted pursuant to this Plan.

(f) "Parent Corporation" shall mean any corporation (other than the Employer
Corporation) in an unbroken chain of corporations ending with the Employer
Corporation if, at the time of granting an Option, each of the corporations
other than the Employer Corporations own stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

(g) "Subsidiary Corporation" shall mean any corporation (other than the Employer
Corporation) in an unbroken chain beginning with the Employer Corporation if, at
the time of granting an Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

3. Administration.

(a) The Plan shall be administered by the Compensation Committee (the
"Committee"), consisting of not less than two members of the Board of Directors
of the Corporation (the "Board"), or alternatively, in the absence of a
designated and qualified committee, the entire Board shall serve as the
Committee.

(b) The Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan and
to exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan,
including (without limitation): the authority to grant Options; to determine
which Options shall constitute Incentive Stock Options and which Options shall
constitute Non-qualified Stock Options; to determine the purchase price of the
shares of Common Stock covered by each Option (the "Option Price") to determine
the persons to whom, and the time or times at which, Options shall be granted,
to determine the number of shares to be covered by each Option; to determine
Fair Market Value per share; to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the Option Agreements (which need not be identical) entered into
in connection with Options granted under the Plan, and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee or
any person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan.

(c) The Board shall fill all vacancies, however caused, in the Committee. The
Board may from time to time appoint additional members to the Committee, and may
at any time remove one or more Committee members and substitute others. One
member of the Committee shall be selected by the Board as chairman. The
Committee shall hold its meetings at such times and places as it shall deem
advisable. All determinations

<PAGE>

of the Committee shall be made by not less than a majority of its members either
present in person or participating by conference telephone at a meeting or by
written consent. The Committee may appoint a secretary and make such rules and
regulations for the conduct of its business as it shall deem advisable, and
shall keep minutes of its meetings. The secretary need not be a member of the
Committee or a member of the Board.

(d) No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Option granted
hereunder.

4. Eligibility.

(a) Subject to certain limitations hereinafter set forth, Options may be granted
to employees of (including officers), and consultants to and directors of
(whether or not they are employees), the Corporation or its present or future
divisions and Subsidiary Corporations, provided such persons meet minimum
requirements, if any, as may be established by the Committee, in its discretion.
In determining the persons to whom Options shall be granted and the number of
shares to be covered by each Option, the Committee shall take into account the
duties of the respective persons, their present and potential contributions to
the success of the Corporation and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan. A person
to whom an Option has been granted hereunder is sometimes referred to herein as
an "Optionee."

(b) An Optionee shall be eligible to receive more than one grant of an Option
during the term of the Plan, but only on the terms and subject to the
restrictions as hereinafter set forth.

5. Stock.

(a) The stock subject to the Options hereunder shall be shares of the
Corporation's common stock, no par value per share ("Common Stock"). Such shares
may, in whole or in part, be authorized but unissued shares or shares that shall
have been or that may be reacquired by the Corporation. The aggregate number of
shares of Common Stock as to which Options may be granted from time to time
under the Plan shall not exceed 500,000. The limitations established by the
preceding sentences shall be subject to adjustment as provided in Section 8(i)
hereof.

(b) In the event that any outstanding Option under the Plan for any reason
expires or is terminated without having been exercised in full, the shares of
Common Stock allocable to the unexercised portion of such Option (unless the
Plan shall have been terminated) shall become available for subsequent grants of
Options under the Plan.

<PAGE>

6. Incentive Stock Options

(a) Options granted pursuant to this Section 6 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms and
conditions, in addition to the general terms and conditions specified in Section
8 hereof. Consultants and directors who are not employees of the Corporation
shall not be entitled to receive Incentive Stock Options.

(b) The aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of the shares of Common Stock, with respect to which
Incentive Stock Options granted under this and any other plan of the Corporation
or any Parent Corporation or Subsidiary Corporation are exercisable for the
first time by an Optionee during any calendar year, may not exceed the amount
set forth in Section 422 (d) of the Internal Revenue Code.

(c) Incentive Stock Options granted under this Plan are intended to satisfy all
requirements for incentive stock options under the Internal Revenue Code and the
Treasury Regulations thereunder and, notwithstanding any other provision of this
Plan. The Plan and all Incentive Stock Options granted under it shall be so
construed, and all contrary provisions shall be so limited in scope and effect
and, to the extent they cannot be so limited, they shall be void.

7. Non-qualified Stock Options. Options granted pursuant to this Section 7 are
intended to constitute Non-qualified Stock Options and shall be subject only to
the general terms and conditions specified in Section 8 hereof.

8. Terms and Conditions at Options. Each Option granted pursuant to the Plan
shall be evidenced by a written option agreement between the Corporation and the
Optionee, which agreement shall comply with and be subject to the following
terms and conditions.

(a) Number of Shares. Each Option Agreement shall state the number of shares of
Common Stock to which the Option relates.

(b) Type of Option. Each Option Agreement shall specifically identify the
portion, if any, of the Option which constitutes an Incentive Stock Option and
the portion, if any, which constitutes a Non-qualified Stock Option.

(c) Option Price.

(i) Each Option Agreement shall state the Option Price, which (except as
otherwise set forth in paragraphs 8 (c) (ii) hereof) shall not be less than 100%
of the Fair Market Value per share on the date of grant of the Option.

(ii) Any Incentive Stock Option granted under the Plan to a person owning more
than ten percent of the total combined voting power of the Common Stock shall be
at a price of not less than 110% of the Fair Market Value per share on the date
of grant of the Option.

(iii) The Option Price shall be subject to adjustment as provided in Section
8(i) hereof.

<PAGE>

(iv) The date on which the Committee adopts a resolution expressly granting an
Option shall be considered the day on which such Option is granted.

(d) Term of Options. Options shall be exercisable over the exercise period as
and at the times the Committee, in its sole discretion, may determine, as
reflected in the Option Agreement, provided, however:

(i) The exercise period shall not exceed ten years from the date of grant of the
Option.

(ii) Incentive Stock Options granted to a person owning more than ten percent of
the total combined voting power of the Common Stock of the Corporation shall be
for no more than five years.

(iii) An Option granted under the Plan to an Optionee may, at the election of
the Committee, include a provision conditioning or accelerating the receipt of
benefits upon the occurrence of specified events, such as a change in control of
the Corporation or a dissolution, liquidation, sale of substantially all of the
property and assets of the Corporation, or other event.

(iv) The exercise period shall be subject to earlier termination as provided in
Sections 8(f) and 8(g) hereof, and furthermore shall be terminated upon
surrender of the option by the holder thereof if such surrender has been
authorized in advance by the Committee.

(e) Method of Exercise and Medium and Time of Payment

(i) An Option may be exercised as to any, or all, full shares of Common Stock as
to which the Option is exercisable, provided, however, that an Option may not be
exercised at any one time as to fewer than 100 shares (or such number of shares
as to which the Option is then exercisable if such number of shares is less than
100).

(ii) Each exercise of an Option granted hereunder, whether in whole or in part,
shall be by written notice to the Secretary of the Corporation designating the
number of shares as to which the Option is exercised, and shall be accompanied
by payment in full of the Option Price for the number of shares so designated,
together with any written statements or investment letter required by or
advisable under any applicable security laws.

(iii) The Option Price shall be paid in cash.

(f) Termination. Except as provided in this Section 8(f) and in Section 8 (g)
hereof, an Option may not be exercised unless the Optionee is then an employee
or director of or consultant to the Corporation or a division or Subsidiary
Corporation thereof (or a corporation or a Parent or Subsidiary Corporation of
such corporation issuing or assuming the option in a transaction to which
Section 424(a) of the Internal

<PAGE>

Revenue Code applies), and unless the Optionee has remained continuously as an
employee or director of or consultant to the Corporation since the date of grant
of the Option.

(i) If the Optionee ceases to be an employee or director of or consultant to the
Corporation (other than by reason of death, Disability or retirement), all
Options of such Optionee that are exercisable at the time of such cessation may,
unless earlier terminated in accordance with their terms, be exercised at any
time within three months after such cessation; provided, however, that if the
employment or consulting relationship of an Optionee shall terminate, or if a
director shall be removed, for cause, all Options theretofore granted to such
Optionee shall, to the extent not theretofore exercised, terminate immediately
upon such termination or removal.

(ii) Nothing in the Plan or in any Option granted pursuant hereto shall confer
upon an individual any right to continue in the employ of the Corporation or any
of its divisions or Subsidiary Corporations or interfere in any way with the
right of the Corporation or its shareholders or any such division or Subsidiary
Corporations to terminate such employment or other relationship between the
individual and the Corporation or any of its divisions and subsidiary
corporations.

(g) Death, Disability or Retirement of Optionee. If an Optionee shall die while
a director of, or employed by, or a consultant to, the Corporation or a
Subsidiary Corporation, or within three months after the termination or removal
of such Optionee's employment or directorship or consulting relationship, other
than termination or removal for cause, or if the Optionee's employment or
directorship or consulting relationship, shall terminate by reason of Disability
or retirement, all Options theretofore granted to such Optionee (whether or not
otherwise exercisable) may, unless earlier terminated in accordance with their
terms, be exercised by the Optionee or by Optionee's estate or by a person who
acquired the right to exercise such Option by bequest or inheritance or
otherwise by reason of the death or Disability of the Optionee, at any time
within one year after the date of death, Disability or retirement of the
Optionee.

(h) Nontransferability.

(i) Options granted under the Plan shall not be transferable other than by will
or by the laws of descent, and Options may be exercised, during the lifetime of
the Optionee, only by the Optionee and thereafter only by his legal
representative.

(ii) Any attempted sale, pledge, assignment, hypothecation or other transfer of
an Option contrary to the provisions hereof and, the levy of any execution,
attachment or similar process upon an Option shall be null and void and without
force or effect and shall result in automatic termination of the Option.

(iii) (A) As a condition to the transfer of any shares of Common Stock issued
upon exercise of an Option granted under this Plan, the Corporation may require
an opinion of counsel, satisfactory to the Corporation, to the effect that such
transfer will not be in

<PAGE>

violation of the Securities Act of 1933 or any other applicable securities laws
or that such transfer has been registered under federal and all applicable state
securities laws; (B) Further, the Corporation shall be authorized to refrain
from delivering or transferring shares of Common Stock issued under this Plan
until the Board of Directors determines that such delivery or transfer will not
violate applicable securities laws and the Optionee has tendered to the
Corporation any federal, state or local tax owed by the Optionee as a result of
exercising the Option, or disposing of any Common Stock, when the Corporation
has a legal liability to satisfy such tax; (C) The Corporation shall not be
liable for damages due to delay in the delivery or issuance of any stock
certificate for any reason whatsoever, including, but not limited to, a delay
caused by listing requirements of any securities exchange or any registration
requirements under the Securities Act of 1933, the Securities Exchange Act of
1934, or under any other state or federal law, rule or regulation; (D) The
Corporation is under no obligation to take any action or incur any expense in
order to register or qualify the delivery or transfer of shares of Common Stock
under applicable securities laws or to perfect any exemption from such
registration or qualification; and (E) Furthermore, the Corporation will have no
liability to any Optionee for refusing to deliver or transfer shares of Common
Stock if such refusal is based upon the foregoing provisions of this Paragraph.

(i) Effect of Certain Changes

(i) If there is any change in the number of shares of Common Stock through the
declaration of stock dividends, or through recapitalization resulting in stock
splits, or combinations or exchanges of such shares, the number of shares of
Common Stock available for Options, the number of such shares covered by
outstanding Options, and the price per share of such Options, shall be
proportionately adjusted by the Committee to reflect any increase or decrease in
the number of issued shares of Common Stock; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated.

(ii) In the event of a proposed dissolution or liquidation of the Corporation,
in the event of any corporate separation or division, including, but not limited
to, split-up, split-off or spin-off, or in the event of a merger or
consolidation of the Corporation with another corporation, the Committee may
(but is not obligated to) provide that the holder of each Option then
exercisable shall have the right to exercise such Option (at its then Option
Price) solely for the kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such dissolution,
liquidation, corporate separation or division, or merger or consolidation by a
holder of the number of shares of Common Stock for which such Option might have
been exercised immediately prior to such dissolution, liquidation, corporate
separation or division or merger or consolidation; or the Committee may provide
in the alternative, that each Option granted under the Plan shall terminate as
of a date to be fixed by the Committee, provided, however, that not less than 30
days' written notice of the date so fixed shall be given to each Optionee, who
shall have the right, during the period of 30 days preceding such termination,
to exercise the Options as to all or any part of the shares of Common Stock
covered thereby. In such

<PAGE>

case the Committee may (but is not obligated to) provide that Options not
otherwise exercisable may be exercised in such circumstances.

(iii) Paragraph (ii) of this Section 8(i) shall not apply to a merger or
consolidation in which the Corporation is the surviving corporation and shares
of Common Stock are not converted into or exchanged for stock, securities of any
other corporation, cash or any other thing of value. Notwithstanding the
preceding sentence, in case of any consolidation or merger of another
corporation into the Corporation in which the Corporation is the surviving
corporation and in which there is a reclassification or change (including a
change to the right to receive cash or other property) of the shares of Common
Stock (other than a change in par value, to no par value, or as a result of a
subdivision or combination, but including any change in such shares into two or
more classes or series of shares), the Committee may provide the holder of each
Option then exercisable shall have the right to exercise such Option solely for
the kind and amount of shares of stock and other securities (including those of
any new direct or indirect parent of the Corporation), property, cash or any
combination thereof receivable upon such reclassification, change, consolidation
or merger by the holder of the number of shares of Common Stock for which such
Option might have been exercised.

(iv) In the event of a change in the Common Stock of the Corporation as
presently constituted, which is limited to a change of all its authorized shares
with par value into the same number of shares with a different par value or
without par value, the shares resulting from any such change shall be deemed to
be the Common Stock within the meaning of the Plan.

(v) To the extent that the foregoing adjustments relate to stock or securities
of the Corporation, such adjustments shall be made to the Committee, whose
determination in that respect shall be final, binding and conclusive, provided
that each Incentive Stock Option granted pursuant to this Plan shall not be
adjusted in a manner that causes such option to fail to continue to qualify as
an Incentive Stock Option within the meaning of Section 422 of the Internal
Revenue Code.

(vi) The Committee may, in its sole discretion, grant an Optionee market and/or
issuance price anti-dilution protection.

(vii) Except as hereinbefore expressly provided in this Section 8(i), this
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger, or consolidation or spin-off of assets
or stock of another corporation, and any issue by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number of price of shares of Common Stock subject to the Option. The
grant of an Option pursuant to the Plan shall not affect in any way the right or
power of the Corporation to make adjustments, reclassifications, reorganizations
or

<PAGE>

changes of its capital or business structures or to merge or to consolidate or
to dissolve, liquidate or sell, or transfer all or part of its business or
assets.

(j) Rights as Shareholder - Non-Distributive Intent

(i) Neither a person to whom an Option is granted, nor such person's legal
representative, heir, legatee or distribute, shall be deemed to be the holder
of, or to have any rights of a holder with respect to, any shares subject to
such Option, until after the Option is exercised and the shares are issued to
the person exercising such Options.

(ii) Upon exercise of an Option at a time when there is no registration
statement in effect under the Securities Act of 1933 relating to the shares
issuable upon exercise and available for delivery of a prospectus meeting the
requirements of Section 10(a)(3) of said Act, shares may be issued to the
Optionee only if the Optionee represents and warrants in writing to the
Corporation that the shares purchased are being acquired for investment and not
with a view to the distribution thereof.

(iii) No shares shall be issued upon the exercise of an Option unless and until
there shall have been compliance with any then applicable requirements of the
Securities and Exchange Commission, or any other regulatory agencies having
jurisdiction over the Corporation.

(iv) No adjustment shall be made for dividends (ordinary or extraordinary),
whether in cash, securities or other property) or distribution or other rights
for which the record date is prior to the date such stock certificate is issued,
except as provided in Section 8(i) hereof.

(k) Other Provisions. The Option Agreements authorized under the Plan shall
contain such other provisions, including, without limitation, (i) the imposition
of restrictions upon the exercise of an Option, and (ii) in the case of an
Incentive Stock Option, the inclusion of any condition not inconsistent with
such Option qualifying as an Incentive Stock Option, as the Committee shall deem
advisable.

(l) Leave of Absence The Committee shall be entitled to make such rules,
regulations, and determinations as it deems appropriate under the Plan in
respect of any leave of absence taken by the recipient of any Option awarded
hereunder. Without limiting the generality of the foregoing, the Committee shall
be entitled to determine: (i) whether or not any such leave of absence shall
constitute a termination of employment within the meaning of the Plan; and (ii)
the impact, if any, of any such leave of absence on awards under the Plan
theretofore made to any recipient who takes such leave of absence.

9. Agreement by Optionee Regarding Withholding Taxes. If the Committee shall so
require, as a condition of exercise, each Optionee shall agree that:

(a) No later than the date of exercise of any Option granted hereunder, the
Optionee will pay to the Corporation or make arrangements satisfactory to the
Committee regarding

<PAGE>

payment of any federal, state or local taxes of any kind required by law to be
withheld upon the exercise of such Option, and

(b) The Corporation shall, to the extent permitted or required by law, have the
right to deduct federal, state and local taxes of any kind required by law to be
withheld upon the exercise of such Option from any payment of any kind otherwise
due to the Optionee. For withholding tax purposes, the shares of Common Stock
shall be valued on the date the withholding obligations is incurred.

(c) The Corporation shall not be obligated to advisee any Optionee of the
existence of any such tax or the amount which the Corporation will be so
required to withhold.

10. Agreement by Optionee With Respect to Section 16. If the Optionee is subject
to the reporting requirements of Section 16(a) of the Securities Exchange Act of
1934, as amended, the grant of this option shall not be effective until such
person complies with the reporting requirements of Section 16(a).

11. Term of Plan. Options may be granted pursuant to the Plan from time to time
within a period of ten years from the date the Plan is adopted by the Board, or
the date the Plan is approved by the shareholders of the Corporation, whichever
is earlier.

12. Amendment and Termination of the Plan.

(a) The Board at any time and from time to time may suspend, terminate, modify
or amend the Plan; provided, however, that:

(i) Any amendment that would: (A) materially increase the benefits accruing to
participants under the Plan, or (B) increase the number of shares of Common
Stock as to which Options may be granted under the Plan or materially modify the
requirements as to eligibility for participation in the Plan, shall be subject
to the approval of the holders of a majority of the shares of Common Stock of
the Corporation presented or represented and entitled to vote at a duly
constituted and held meeting of shareholders,

(ii) Any such increase or modification that may result from adjustments
authorized by Section 8(i) hereof shall not require such approval.

(b) Except as provided in Section 8 hereof, no suspension, termination,
modification or amendment of the Plan may adversely affect any Option previously
granted, unless the written consent of the Optionee is obtained.

13. Approval of Shareholders. The Plan shall take effect upon its adoption by
the Board but shall be subject to the approval of the holders of the shares of
Common Stock of the Corporation present or represented and entitled to vote at a
duly constituted and held meeting of shareholders, which approval must occur
within 12 months after the date the Plan is adopted by the Board.

<PAGE>

14. Assumption. The terms and conditions of any outstanding Options granted
pursuant to this Plan shall be assumed by, be binding upon and inure to the
benefit of any successor corporation to the Corporation and shall continue to be
governed by, to the extent applicable, the terms and conditions of this Plan.
Such successor corporation shall not be otherwise obligated to assume this Plan.

15. Termination of Right of Action. Every right of action arising out of or in
connection with the Plan by or on behalf of the Corporation or of any
Subsidiary, or by any shareholder of the Corporation or of any Subsidiary
Corporation against any past, present or future member of the Board, or against
any employer, or by an employee (past, present or future) against the
Corporation or any Subsidiary Corporation will, irrespective of the place where
an action may be brought and irrespective of the place of residence of any such
shareholder, director or employee, cease and be barred as of the expiration of
three years from the date of the act or omission in respect of which such right
of action is alleged to have risen.

16. Tax Litigation. The Corporation shall have the right, but not the
obligation, to contest, at its expense, any tax ruling or decision,
administrative or judicial, on any issue which is related to the Plan and which
the Board believes to be important to holders of Options issued under the Plan
and to conduct any such contest or any litigation arising therefrom to a final
decision.

17. Adoption.

(a) This Plan was approved by the Board of Directors of the Corporation at a
meeting on August 10, 2001.

(b) This Plan was approved by the shareholders of the Corporation at a meeting
on August 29, 2001.

ORIGINAL BEVERAGE CORPORATION

By /s/ Christopher Reed
Christopher Reed, President

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