Document:

Exhibit 10.5

 

THIS OPTION AND
THE SHARES RECEIVED UPON EXERCISE OF THIS OPTION SHALL BE SUBJECT TO THE
RIGHTS, RESTRICTIONS AND OBLIGATIONS APPLICABLE TO SUCH SECURITIES, ALL AS
PROVIDED IN THE STOCKHOLDERS AGREEMENT DATED AS OF JUNE 10, 2004 AMONG THE COMPANY
AND CERTAIN OTHER PARTIES THERETO, AS AMENDED AND IN EFFECT FROM TIME TO TIME
(THE “STOCKHOLDERS AGREEMENT”).

 

 

 

STB BEAUTY, INC.

2004 STOCK OPTION

 

PERFORMANCE
OPTION CERTIFICATE

 

This stock option
is granted by STB Beauty, Inc., a Delaware corporation (the “Company”), to ________
(the “Optionee”), pursuant to the Company’s 2004 Equity Incentive Plan (the “Plan”).  Definitions not otherwise set forth in the
text hereof are set forth in Section 3 hereof.  All capitalized terms not otherwise defined
herein (either in the text or Section 3 hereof) shall have the meaning
provided in the Plan.

 

1.             Grant of Option.

(a)           This
certificate evidences the grant by the Company on _________ to the Optionee of
an option to purchase, in whole or in part, on the terms provided herein and in
the Plan, a total of ________ shares (the “Shares”) of common stock of the
Company, $.01 par value per share (the “Common Stock”) at $________ per Share.

(b)           The
latest date on which this option may be exercised (the “Final Exercise Date”)
is the earliest of (i) the tenth anniversary of the date hereof or (ii) the
termination hereof in accordance with this certificate, the Stockholders
Agreement or the Plan.

(c)           The
option evidenced by this certificate is not intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue Code of 1986, as amended
(the “Code”).

2.             Vesting.  The option evidenced by this certificate
shall only be exercisable as to the total number of Shares which shall have
vested in accordance with this Section 2 (the “Vested Shares”), the date of
determination of such vesting being the earliest to occur of (i) a Sale
Transaction after which the Investor Stockholders hold less than one-half (1/2)
of the Investor Shares Purchased, (ii) at any time after an IPO, the Investor
Stockholders holding less than one half of the Investor Shares Purchased, or
(iii) the termination of the Optionee’s employment with the Company or any of
its subsidiaries (the earliest to occur being the “Determination Date”).

(a)           If
there shall not have been a Determination Date on or prior to December 31,
2009, then on December 31, 2009, the number of Vested Shares shall be the
Vested EBITDA Shares; provided, however,
that if after December 31, 2009 a Determination Date occurs and the number of
Vested Shares calculated in accordance with clauses (b), (c) or (d) below
yields a greater number of Vested Shares than the number of Shares which
otherwise had become Vested 

 

 

 

Shares
in accordance with this clause (a), then upon such Determination Date, an
additional number of Shares equal to the difference between (X) the number of
Shares that would have been Vested Shares pursuant to clause (b), (c) or (d)
below, as the case may be, and (Y) the number of Shares that had become Vested
Shares in accordance with this clause (a), shall become Vested Shares.

(b)           If
the Determination Date occurs as set forth in clause (i) above, the number of
Vested Shares shall be the product of the Retention Percentage multiplied by the greater of:

(I)            the
Vested EBITDA Shares, or

(II)           the
total number of Shares multiplied by
the MOI Percentage, where the MOI used to calculate the MOI Percentage is the
MOI realized on the portion of the Investor Equity Investment applicable to the
aggregate number of Investor Shares disposed of in all Common Sales (treating
the applicable Investor Shares sold on an average-cost basis), with the
Proceeds of such Common Sales for the purpose of determining the MOI being
equal to the cumulative, aggregate fair market value of consideration actually
received by the Investor Stockholders in all Common Sales (including in the
Sale Transaction triggering this calculation, after giving effect to any
dilution from the vesting of any Performance Options).

The Retention
Percentage shall not increase after the termination of the Optionee’s
employment with the Company or any of its subsidiaries.

 

(c)           If
the Determination Date occurs as set forth in clause (ii) above, the number of
Vested Shares shall be the product of the Retention Percentage multiplied by the greater of:

(I)            the
Vested EBITDA Shares; or

(II)           the
total number of Shares multiplied by
the MOI Percentage, where the MOI used to calculate the MOI Percentage is the
MOI on the Investor Equity Investment, with the Proceeds for the purpose of
determining the MOI being equal to the sum of (A) (x) the total number of
Investor Shares then held multiplied by
(y) the average closing bid price of the Common Stock as reported on the
national exchange or on the national market system on which the Common Stock is
listed or traded, for the thirty consecutive trading days immediately prior to
such Determination Date plus (B)
the aggregate fair market value of consideration actually received by the
Investor Stockholders in all previous Common Sales.

provided, however, that if on the Determination Date the Retention
Percentage is less than 100%, then on June 15 in each year subsequent to the
Determination Date up to and including the fifth anniversary of June 15, 2004,
a number of Shares equal to 20% of the greater of (I) or (II) of this clause
(c) shall become Vested Shares; and provided, further, if subsequent to the Determination Date, a Sale
Transaction is consummated, then upon the consummation of such Sale
Transaction, an additional number of Vested Shares equal to the difference
between (X) the number of Shares that would have been Vested Shares pursuant to
this clause (c) had the Sale Transaction occurred 

 

 

2

 

on the Determination Date and (Y) the number of Shares that had become
Vested Shares in accordance with this clause (c) prior to such Sale
Transaction, shall become Vested Shares. 
The Retention Percentage shall not increase after
the termination of the Optionee’s employment with the Company or any of its
subsidiaries.

 

(d)            If
the Determination Date occurs as set forth in clause (iii) above, the number of
Vested Shares shall be the product of the Retention Percentage multiplied by the total number of
Vested EBITDA Shares as of such Determination Date.

3.             Definitions.

As used herein,
the following terms shall have the meanings set forth below:

 

“Actual Cumulative
EBITDA” means the cumulative total of Adjusted EBITDA for each of the fiscal
quarters commencing on April 1, 2004 through the last day of the fiscal quarter
immediately preceding the fiscal quarter in which the Actual Cumulative EBITDA
is calculated; provided, however, that if the
Actual Cumulative EBITDA is calculated on the last day of a fiscal quarter, the
Actual Cumulative EBITDA shall also include the Adjusted EBITDA for that fiscal
quarter.  At no time shall Actual
Cumulative EBITDA include Adjusted EBITDA for partial fiscal quarters.

 

“Adjusted EBITDA”
means earnings before interest, taxes, depreciation and amortization of
financing costs and intangibles calculated in accordance with generally
accepted accounting principles applied consistently with prior periods as
reported in the Company’s financial statements for the fiscal quarter in
connection with which such term is used and includes an add back for management
fees paid to certain investors in the Company.

 

“Affiliate” means,
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).

 

“Berkshire
Stockholders” is defined in the Stockholders Agreement.

 

 “Common Sale” means one or more transactions
in which any of the Investor Stockholders, directly or indirectly, sells or
otherwise transfers for value, or causes to be sold or transferred for value,
the direct or indirect beneficial ownership of any or all of the Investor
Shares Purchased to any Person other than any Permitted Transferee (other than
a person acquiring under clause (vii) of the definition of such term in the
Stockholders Agreement) of an Investor Stockholder.

 

“Determination
Date” is defined in Section 2.

 

“EBITDA Percentage”
means:

 

 

3

 

(i)
                      If Actual Cumulative EBITDA is less than
the Minimum Threshold, then the EBITDA Percentage is 0%.

 

(ii)
                   If Actual Cumulative EBITDA is greater
than or equal to the Target Threshold, then the EBITDA Percentage is 100%.

 

(iii)                   If Actual Cumulative EBITDA is greater than or equal
to the Minimum Threshold but less than the Target Threshold, then the EBITDA
Percentage is (A) the difference between the Actual Cumulative EBITDA and the
Minimum Threshold divided by
(B) the difference between the Target Threshold and the Minimum Threshold.

 

“Group” means any
two or more Persons who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, act as a partnership,
limited partnership, syndicate or other group for the purpose of acquiring or
holding securities of the Company.

 

“Initial Public
Offering” or “IPO” means the first completion of a sale of Common Stock
pursuant to a registration statement which has become effective under the
Securities Act of 1933, as amended (excluding registration statements on Form
S-4, S-8 or similar limited purpose forms), in which the Common Stock shall be
listed and traded on a national exchange or on the NASDAQ National Market
System.

 

“Investor Equity
Investment” means, at the time of determination, the aggregate consideration
(whether cash or otherwise) paid by the Investor Stockholders to acquire the
Investor Shares Purchased from time to time, without giving effect to any
reduction resulting from any Common Sale or Sale Transaction.

 

“Investor Shares” means the shares of common stock,
par value $.01 per share, of the Company held by the Investor Stockholders or
any other securities or equity inter­ests into which such Investor Shares shall
be converted or exchanged pursuant to a merger, recapitalization or other
transaction.

 

“Investor Shares
Purchased” means, at the time of determination, the aggregate number of
Investor Shares acquired by the Investor Stockholders, without giving effect to
any reduction resulting from any Common Sale or Sale Transaction.

 

“Investor
Stockholders” means the Berkshire Stockholders and the JH Stockholders.

 

 “JH Stockholders” is defined in the
Stockholders Agreement.

 

“Minimum Threshold”
is defined on Schedule 1.

 

“MOI” means, with
respect to any portion of the Investor Shares, the ratio equal to the aggregate
Proceeds received by the Investor Stockholders with respect to such Investor
Shares divided by the portion of the
Investor Equity Investment attributable to such Investor Shares.

 

 

4

 

“MOI Percentage”
means:

 

(i)            If the MOI is less than 2.5, then
the MOI Percentage is 0%.

 

(ii)                                  If the MOI is greater than or equal to 5,
then the MOI Percentage is 100%.

 

(iii)                               If the MOI is greater than or equal to
2.5 and less than 5, then the MOI Percentage is (A) the difference between the
MOI and 2.5 divided by (B) 2.5.

 

“Permitted
Transferee” is defined in the Stockholders Agreement; provided,
that solely for the purposes of this Performance Option Certificate, Permitted
Transferee shall not include the Company.

 

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

 

“Proceeds” means
the sum of (i) actual proceeds received by the Investor Stockholders for
Investor Shares in all Common Sales and Sale Transactions, and (ii) any
dividends and other distributions received by the Investor Stockholders on
Investor Shares described in clause (i); provided, that
in no event shall “Proceeds” include the receipt by any of the Investor
Stockholders of (a) management fees or (b) closing fees, investment banking
fees or similar fees payable in connection with any transaction.  For purposes of this definition, all non-cash
proceeds received by the Investor Stockholders shall be valued at the fair
market value of such proceeds, as reasonably determined by the board of directors
of the Company (the “Board”).

 

“Retention
Percentage” means:

 

(i)                                     Before ________, 2006, 0%.

 

(ii)                                  On or after _________, 2006 and prior to _________,
2007, 20%.

 

(iii)                               On or after _________, 2007 and prior to _________,
2008, 40%.

 

(iv)                              On or after _________, 2008 and prior to _________,
2009, 60%.

 

(v)                                 On or after _________, 2009 and prior to _________,
2010, 80%.

 

(vi)                              On or after _________, 2010, 100%.

 

(vii)                           Upon the consummation of a Sale Transaction, 100%.

 

“Sale Transaction”
shall mean (i) any transaction or series of related transactions in which any
Person who is not an Affiliate of the Company, or any two or more such Persons 

 

 

5

 

acting as a Group, and
all Affiliates of such Person or Persons, who prior to such time owned no
shares of the Company’s Common Stock or shares of the Company’s Common Stock
representing less than fifty percent (50%) of the voting power at elections for
the Board of Directors of the Company (the “Board”), shall (A) acquire, whether
by purchase, exchange, tender offer, merger, consolidation, recapitalization or
otherwise, or (B) otherwise be the owner of (as a result of a
redemption of shares of the Company’s Common Stock or otherwise), shares of the
Company’s Common Stock (or shares in a successor corporation by merger,
consolidation or otherwise) such that following such transaction or
transactions, such Person or Group and their respective Affiliates beneficially
own fifty percent (50%) or more of the voting power at elections for the board
of directors of the Company or any successor corporation, or (ii) the sale or
transfer of all or substantially all the Company’s or MD Beauty, Inc.’s assets
and following such sale or transfer, there is a liquidation of the
Company.  For purposes of this
definition, it is understood and agreed that as of the date hereof, the only
stockholders of the Company which constitute Affiliates of the Company are
Berkshire Fund VI Investment Corp., Berkshire Fund V, Limited Partnership,
Berkshire Fund VI, Limited Partnership, Berkshire Investors LLC, and JH MDB
Investors, L.P.

 

“Target Threshold”
is defined on Schedule 1.

 

“Vested EBITDA
Shares” means, on the date of calculation, the total number of Shares multiplied by  the EBITDA Percentage,
where the EBITDA Percentage is calculated using the Minimum Threshold, Target
Threshold and Actual Cumulative EBITDA values for the fiscal quarter
immediately preceding the date that the number of such Vested EBITDA Shares is
being determined; provided, however, that no
calculations shall take into account Adjusted EBITDA prior to April 1, 2004;
and provided, further, that if any
calculation of Vested EBITDA Shares is made on the last day of a fiscal
quarter, the Actual Cumulative EBITDA, the Minimum Threshold and the Target
Threshold shall all be calculated including Adjusted EBITDA for such fiscal
quarter rather than using the values of the preceding fiscal quarter.

 

“Vested Shares” is
defined in Section 2.

 

4.             Exercise of Option.

Each election to
exercise this option shall be in writing, signed by the Optionee or by his or
her executor or administrator or by the Person or Persons to whom this option
is transferred by will or the applicable laws of descent and distribution (the “Legal
Representative”), and received by the Company at its principal office,
accompanied by payment in full and by such additional documentation evidencing
the right to exercise (or, in the case of a Legal Representative, the authority
of such Legal Representative) as the Company may require.  The purchase price may be paid (i) in cash or
by personal check, bank check or money order payable to the order of the
Company, (ii) through the delivery of shares of Stock that have been
outstanding for at least six months and that have a fair market value on the
last business day preceding the date of exercise equal to the exercise price,
(iii) by delivery of an unconditional and irrevocable undertaking by a broker
to deliver to the Company promptly upon the sale of Shares to be issued
sufficient funds to pay the exercise price, or (iv) by any combination of the
permissible forms of payment.

 

 

6

 

5.             Stockholders Agreement; Termination of Employment.

The option evidenced by this certificate and any
Shares received upon the exercise of this option shall be subject to the Plan
and the Stockholders Agreement, and the issuance of this option certificate
shall be conditional upon the execution and delivery by the Optionee of a
joinder to the Stockholders Agreement. 
This option and the Shares received upon exercise of this option shall
be subject to the rights, restrictions and obligations applicable to options
and shares of Common Stock as provided from time to time in such Stockholders
Agreement, including without limitation, the obligations applicable to options
and shares of Common Stock under Section 2.2 thereof relating to the Company’s
right to call securities in the event of the termination of the Optionee’s
employment with the Company or any of its subsidiaries.  In addition to the provisions of the Plan and
the Stockholders Agreement, upon termination of the Optionee’s employment with
the Company or any of its subsidiaries for any reason, any portion of this
option that shall not have vested prior to or upon such termination shall
immediately terminate.

 

6.             Equitable
Adjustments.  In the event that on or
before the Final Exercise Date, the Company or any of its subsidiaries shall
make any acquisitions of any business (by merger, stock purchase, consolidation
or otherwise) or shall dispose of any significant assets of the business of the
Company or any of its subsidiaries, the Board, in its reasonable judgment and
after consultation with the senior management of the Company, may make any
equitable adjustments to the targets set forth on Schedule 1 hereof as may be
necessary to eliminate the effects of such events.

7.             Restrictions on Transfer.

(a)           In
addition to the provisions of Section 5 above, if at the time this option is
exercised the Company and a majority in interest of the Management Stockholders
(as defined in the Stockholders Agreement) are party to any other agreement restricting
the transfer of any outstanding shares of its Common Stock, this option may be
exercised only if the Shares so acquired are made subject to the transfer
restrictions set forth in that agreement (or if more than one such agreement is
then in effect, the agreement or agreements specified by the Board).

(b)           Certificates
evidencing any Shares purchased by an Optionee upon exercise of options granted
hereby may bear the following legends, in addition to any legends which may be
required by any agreement referred to in the immediately preceding paragraph:

“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 

 

 

7

 

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.

 

8.             Withholding.

No Shares will be
issued pursuant to the exercise of this option unless and until the Person
exercising this option shall have remitted to the Company an amount sufficient
to satisfy any federal, state or local withholding tax requirements, or shall
have made other arrangements satisfactory to the Company with respect to such
taxes.  The Optionee shall be responsible
for filing an election under Section 83(b) of the Internal Revenue Code of
1986, as amended, within 30 days of the exercise of the option to the extent
deemed necessary or desirable by the Optionee and the Optionee shall provide
the Company with a copy of any such election promptly thereafter.

 

9.             Nontransferability of Option.

This option is not
transferable by the Optionee other than by will or the applicable laws of
descent and distribution, and is exercisable during the Optionee’s lifetime
only by the Optionee.

 

10.           Effect on Employment.

Neither the grant
of this option, nor the issuance of Shares upon exercise of this option, shall
give the Optionee any right to be retained in the employ of the Company, affect
the right of the Company to discharge or discipline such Optionee at any time
or affect any right of such Optionee to terminate his or her employment at any
time.

 

11.           Provisions of the Plan.

This option is
subject in its entirety to the provisions of the Plan, a copy of which is
furnished to the Optionee with this option.

 

 

8

 

IN WITNESS
WHEREOF, the Company has caused this Performance Stock Option to be executed by
its duly authorized officer.

 

	
   

  	
  STB BEAUTY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

Dated:

 

 

9

 

SCHEDULE 1

Performance Option Certificate

Cumulative Adjusted EBITDA Calculation

($mm)

 

	
   

  	
   

  	
  Bank Case

  Projected EBITDA

  	
   

  	
  Minimum Cumulative

  EBITDA Threshold

  (“Minimum Threshold”)

  	
   

  	
  Management Case

  Projected EBITDA

  	
   

  	
  Target Cumulative

  EBITDA Threshold

  (“Target Threshold”)

  	
   

  
	
  Q2 ‘04

  	
   

  	
  $

  	
  7,739

  	
   

  	
  $

  	
  7,739

  	
   

  	
  $

  	
  9,925

  	
   

  	
  $

  	
  9,925

  	
   

  
	
  Q3 ‘04

  	
   

  	
  $

  	
  6,032

  	
   

  	
  $

  	
  13,771

  	
   

  	
  $

  	
  8,746

  	
   

  	
  $

  	
  18,671

  	
   

  
	
  Q4 ‘04

  	
   

  	
  $

  	
  9,474

  	
   

  	
  $

  	
  23,245

  	
   

  	
  $

  	
  12,556

  	
   

  	
  $

  	
  31,226

  	
   

  
	
  Q1 ‘05

  	
   

  	
  $

  	
  8,103

  	
   

  	
  $

  	
  31,348

  	
   

  	
  $

  	
  13,440

  	
   

  	
  $

  	
  44,666

  	
   

  
	
  Q2 ‘05

  	
   

  	
  $

  	
  9,230

  	
   

  	
  $

  	
  40,578

  	
   

  	
  $

  	
  14,544

  	
   

  	
  $

  	
  59,210

  	
   

  
	
  Q3 ‘05

  	
   

  	
  $

  	
  7,246

  	
   

  	
  $

  	
  47,824

  	
   

  	
  $

  	
  12,689

  	
   

  	
  $

  	
  71,899

  	
   

  
	
  Q4 ‘05

  	
   

  	
  $

  	
  10,909

  	
   

  	
  $

  	
  58,733

  	
   

  	
  $

  	
  16,645

  	
   

  	
  $

  	
  88,544

  	
   

  
	
  Q1 ‘06

  	
   

  	
  $

  	
  9,292

  	
   

  	
  $

  	
  68,025

  	
   

  	
  $

  	
  17,724

  	
   

  	
  $

  	
  106,268

  	
   

  
	
  Q2 ‘06

  	
   

  	
  $

  	
  10,483

  	
   

  	
  $

  	
  78,508

  	
   

  	
  $

  	
  19,017

  	
   

  	
  $

  	
  125,285

  	
   

  
	
  Q3 ‘06

  	
   

  	
  $

  	
  8,340

  	
   

  	
  $

  	
  86,848

  	
   

  	
  $

  	
  17,060

  	
   

  	
  $

  	
  142,345

  	
   

  
	
  Q4 ‘06

  	
   

  	
  $

  	
  12,482

  	
   

  	
  $

  	
  99,330

  	
   

  	
  $

  	
  21,703

  	
   

  	
  $

  	
  164,048

  	
   

  
	
  Q1 ‘07

  	
   

  	
  $

  	
  10,221

  	
   

  	
  $

  	
  109,551

  	
   

  	
  $

  	
  19,010

  	
   

  	
  $

  	
  183,058

  	
   

  
	
  Q2 ‘07

  	
   

  	
  $

  	
  11,531

  	
   

  	
  $

  	
  121,083

  	
   

  	
  $

  	
  21,447

  	
   

  	
  $

  	
  204,505

  	
   

  
	
  Q3 ‘07

  	
   

  	
  $

  	
  9,174

  	
   

  	
  $

  	
  130,257

  	
   

  	
  $

  	
  17,062

  	
   

  	
  $

  	
  221,567

  	
   

  
	
  Q4 ‘07

  	
   

  	
  $

  	
  13,730

  	
   

  	
  $

  	
  143,987

  	
   

  	
  $

  	
  25,536

  	
   

  	
  $

  	
  247,103

  	
   

  
	
  Q1 ‘08

  	
   

  	
  $

  	
  10,732

  	
   

  	
  $

  	
  154,719

  	
   

  	
  $

  	
  19,961

  	
   

  	
  $

  	
  267,064

  	
   

  
	
  Q2 ‘08

  	
   

  	
  $

  	
  12,108

  	
   

  	
  $

  	
  166,827

  	
   

  	
  $

  	
  22,519

  	
   

  	
  $

  	
  289,582

  	
   

  
	
  Q3 ‘08

  	
   

  	
  $

  	
  9,633

  	
   

  	
  $

  	
  176,460

  	
   

  	
  $

  	
  17,915

  	
   

  	
  $

  	
  307,498

  	
   

  
	
  Q4 ‘08

  	
   

  	
  $

  	
  14,417

  	
   

  	
  $

  	
  190,877

  	
   

  	
  $

  	
  26,813

  	
   

  	
  $

  	
  334,311

  	
   

  
	
  Q1 ‘09

  	
   

  	
  $

  	
  11,269

  	
   

  	
  $

  	
  202,146

  	
   

  	
  $

  	
  20,958

  	
   

  	
  $

  	
  355,269

  	
   

  
	
  Q2 ‘09

  	
   

  	
  $

  	
  12,713

  	
   

  	
  $

  	
  214,859

  	
   

  	
  $

  	
  23,645

  	
   

  	
  $

  	
  378,914

  	
   

  
	
  Q3 ‘09

  	
   

  	
  $

  	
  10,114

  	
   

  	
  $

  	
  224,973

  	
   

  	
  $

  	
  18,811

  	
   

  	
  $

  	
  397,725

  	
   

  
	
  Q4 ‘09

  	
   

  	
  $

  	
  15,138

  	
   

  	
  $

  	
  240,111

  	
   

  	
  $

  	
  28,154

  	
   

  	
  $

  	
  425,879

  	
   

  

 

 

10STB Beauty, Inc. 

“DEFERRED COMPENSATION PLAN”

 

THIS
PLAN is adopted as of the 1st day of July 2005, by STB Beauty, Inc., a
Delaware Corporation (the “Plan Sponsor”), as follows:

RECITALS

WHEREAS, the Plan
Sponsor wishes to establish the STB Beauty, Inc. “Deferred Compensation Plan”
(the “Plan”) to provide additional retirement benefits and income tax deferral
opportunities for a select group of management and highly compensated employees
of the Plan Sponsor and certain of its affiliates.  As a result, this Plan is intended to be a “top
hat plan,” exempt from certain requirements of ERISA, pursuant to Sections
201(2), 301(a)93) and 401(a)(1) of ERISA; and

WHEREAS, the Plan
Sponsor intends that the Plan shall at all times be administered and
interpreted in such a manner as to constitute an unfunded nonqualified deferred
compensation plan for tax purposes and for purposes of Title I of ERISA.  This Plan is not intended to qualify for
favorable tax treatment pursuant to SEction 401(a) of the Code or any successor
section or statute.  This Plan is
intended to comply with the requirements of Section 409A(a)(2), (3) and (4) of
the Code;

NOW,
THEREFORE, the Plan Sponsor hereby adopts the following STB
Beauty, Inc. “Deferred Compensation Plan.”

ARTICLE ONE

DEFINITIONS

                DEFINITION OF
TERMS.  Certain words
and phrases are defined when first used in later Articles of this Plan.  Whenever any words are used
herein in the masculine, they shall be construed as though they were in the
feminine in all cases where they would so apply; and whenever any words are
used herein in the singular or in the plural, they shall be construed as though
they were used in the plural or the singular, as the case may be, in all cases
where they would so apply.  In addition, the following words and phrases when used herein,
unless the context clearly requires otherwise, shall have the following
respective meanings:

1.1.                                              Account
Balance.  With respect to a
Participant, a credit on the records of the Employer equal to the sum of (i)
the Participant’s Deferral Account balance, and (ii) the Corporate
Contributions Account balance.  The Account
Balance, and each other specified account balance, shall be a bookkeeping entry
only and shall be utilized solely as a device for the measurement and
determination of the amounts to be paid to a Participant, or his or her
designated Beneficiary, pursuant to this Plan.

1.2.                                              Accounts.  With
respect to a Participant, as the context indicates, any or all of his or her
Deferral Account and Corporate Contribution Account.

 

 

1.3.                                              Affiliate.  Any corporation, partnership, joint venture,
association, or similar organization or entity, which is a member of a
controlled group of companies which includes, or which is under common control
with, the Plan Sponsor under Section 414 of the Code.

1.4.                                              Annual
Corporate Contribution Amount.  For any one
Plan Year, the amount determined in accordance with Section 3.4(b).

1.5.                                              Base
Salary.  The annual cash
compensation (excluding bonuses, commissions, overtime, incentive payments,
non-monetary awards, directors fees and other fees, stock options and grants
and any other form of equity-based compenstion, and car allowances) paid to a
Participant for services rendered during the Calendar Year, before reduction
for compensation deferred pursuant to all qualified, non-qualified and Code Section
125 plans of any Employer.

1.6.                                            Beneficiary.  The
Beneficiary designated by a Participant under Article 7, or, if the Participant
has not designated a Beneficiary under Article 7, the person or persons
entitled to receive distributions of benefits under Article 5.

1.7.                                            Beneficiary
Designation Form.  The form established from time to time
by the Plan Administrator that a Participant completes, signs and returns to
the Plan Administrator to designate one or more Beneficiaries.

1.8.                                            Board.  The
Board of Directors of the Plan Sponsor.

1.9.                                            Bonus.  Any
cash compensation, in addition to Base Salary, paid in respect of a Plan Year
to a Participant as an Employee, as a bonus paid in the discretion of the
Employer.

1.10.                                      Calendar
Year.  January 1 to
December 31.

1.11.                                      Cause.  For purposes of this Plan, “Cause” shall mean any of the
following acts or circumstances: 
(i) willful destruction by the Participant of property of the Plan
Sponsor or an Affiliate having a material value to the Plan Sponsor or such
Affiliate; (ii) fraud, embezzlement, theft, or comparable dishonest
activity committed by the Participant (excluding acts involving a de minimis dollar value and not related to the Plan Sponsor
or an Affiliate); (iii) the Participant’s conviction of or entering a plea
of guilty or nolo contendere to any crime
constituting a felony or any misdemeanor involving fraud, dishonesty or moral
turpitude (excluding acts involving a de minimis dollar
value and not related to the Plan Sponsor or an Affiliate); (iv) the
Participant’s breach, neglect, refusal, or failure to materially discharge the
Participant’s duties (other than due to physical or mental illness)
commensurate with the Participant’s title and function or the Participant’s
failure to comply with the lawful directions of the Board or the Chief
Executive Officer of the Plan Sponsor, or of the Board of Directors or the
Chief Executive Officer of the Affiliate that employs the Participant, in any
such case that is not cured within fifteen (15) days after the Participant has
received written notice thereof from such Board of Directors or Chief Executive
Officer; (v) any willful misconduct by the Participant which may cause
substantial economic or reputational injury to the Plan Sponsor or an Affiliate,
including, but not limited to, sexual harassment, or (vi) a willful and
knowing material misrepresentation to the Board or the Chief 

 

 

                                                Executive Officer of the Plan Sponsor or to the Board of Directors or the
Chief Executive Officer of the Affiliate that employs the Participant.

1.12.                                      Change
in Control shall mean the occurrence of
any of the following:

(a)                Any “Person” or
“Group,” as such terms are defined in Section 13(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations
promulgated thereunder, excluding any Excluded Stockholder, who is or becomes
the “Beneficial Owner” (within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Plan Sponsor, or of
any entity resulting from a merger or consolidation involving the Plan Sponsor,
representing more than fifty percent (50%) of the combined voting power of the
then outstanding securities of the Plan Sponsor or such entity.

(b)               The individuals
who, as of the Effective Date, are members of the Board (the “Existing
Directors”), cease, for any reason, to constitute more than fifty percent (50%)
of the number of authorized directors of the Plan Sponsor as determined in the
manner prescribed in the Plan Sponsor’s Certificate of Incorporation and
Bylaws; provided, however, that if the election, or nomination for election, by
the Plan Sponsor’s stockholders of any new director was approved by a vote of
at least fifty percent (50%) of the Existing Directors, such new director shall
be considered an Existing Director; provided further, however, that no
individual shall be considered an Existing Director if such individual
initially assumed office as a result of either an actual or threatened “Election
Contest” (as described in Rule 14a-11 promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies by or on behalf of anyone
other than the Board (a “Proxy Contest”), including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest.

(c)                The
consummation of (x) a merger, consolidation or reorganization to which the Plan
Sponsor is a party, whether or not the Plan Sponsor is the Person surviving or
resulting therefrom, or (y) a sale, assignment, lease, conveyance or other
disposition of all or substantially all of the assets of the Plan Sponsor, in
one transaction or a series of related transactions, to any Person other than
the Plan Sponsor, where any such transaction or series of related transactions
as is referred to in clause (x) or clause (y) above in this subparagraph (c)
(singly or collectively, a “Transaction”) does not otherwise result in a “Change
in Control” pursuant to subparagraph (a) of this definition of “Change in
Control”; provided, however, that no such Transaction shall constitute a “Change
in Control” under this subparagraph (c) if the Persons who were the
stockholders of the Plan Sponsor immediately before the consummation of such
Transaction are the Beneficial Owners, immediately following the consummation
of such Transaction, of fifty percent (50%) or more of the combined voting
power of the then outstanding voting securities of the Person surviving or
resulting from any merger, consolidation or reorganization referred to in
clause (x) above in this subparagraph (c) or the Person to whom the assets of
the Plan Sponsor are sold, assigned, leased, conveyed or disposed of in any
transaction or series of related transactions referred in clause (y) above in
this subparagraph (c), in substantially the same proportions in which such stockholders
held voting stock in the Plan Sponsor immediately before such Transaction.

 

1.13.                        Code.  The Internal Revenue Code of 1986, as amended from time to
time.  Reference to a section of
the Code shall include that section and any comparable section or sections of
any future legislation that amends, supplements or supersedes such section.

1.14.                        Compensation.  The Base Salary and Bonus paid to a Participant
for the relevant period.

1.15.                        Corporate
Contribution.  Any contribution made and credited to
Corporate Contribution Accounts by the Plan Sponsor in accordance with Section
3.4(b).

1.16.                        Corporate
Contribution Account.  The sum
of (i) all of a Participant’s Annual Corporate Contribution Amounts,
plus (ii) the hypothetical deemed investment earnings and losses credited or
charged in accordance with all the applicable provisions of this Plan that
relate to the Participant’s Corporate Contribution Account, less (iii) all
distributions made to the Participant or his or her Beneficiary pursuant to
this Plan that relate to the Participant’s Corporate Contribution Account.  A Participant’s Corporate Contribution
Account shall be divided into subaccounts as determined by the Plan
Administrator to properly account for distribution elections attributable to a
Participant’s Annual Corporate Contribution Amounts, and the deemed investment
earnings and losses attributable thereto.

1.17.                        Deferral
Account. The sum of (i) all of a
Participant’s Participant Annual Deferral Amounts, plus (ii) the
hypothetical deemed investment earnings and losses credited or charged in
accordance with all the applicable provisions of this Plan that relate to the
Participant’s Deferral Account, less (iii) all distributions made to the
Participant or his or her Beneficiary pursuant to this Plan that relate to his
or her Deferral Account.  A Participant’s
Deferral Account shall be divided into subaccounts as determined by the Plan
Administrator to properly account for distribution elections attributable to a
Participant Annual Deferral Amount, and the deemed investment earnings and
losses attributable thereto.

1.18.                        Disability.  A
Participant shall be considered disabled if the Participant: (i) is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, or (ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than 3 months under an accident
and health plan, if any, covering employees of the Participant’s employer.

1.19.                        Disability
Date.  shall mean the date on which the Plan
Administrator confirms that the Participant has a qualifying Disability and is
eligible to receive payment hereunder.

1.20.                        Effective
Date.  July 1, 2005.

 

 

1.21.                        Election
Form.  The form
established from time to time by the Plan Administrator that a Participant
completes, signs and returns to the Plan Administrator.

1.22.                        Eligible Employee.  Any employee of the Plan Sponsor or an Affiliate who is
selected to participate herein in accordance with the provisions of Section 2.1
hereof, and one of a select group of management or highly compensated
employees, as defined by ERISA.

1.23.                        Employer(s).  Any
of the Plan Sponsor’s subsidiaries or affiliates (now in existence or hereafter
formed or acquired) that have been selected by the Board to participate in the
Plan and have adopted the Plan as a sponsor.

1.24.                        ERISA.  The Employee Retirement Income Security Act of 1974, as
amended from time to time.  Reference
to a section of ERISA shall include that section and any comparable section or
sections of any future legislation that amends, supplements or supersedes such
section.

1.25.                        Good
Reason.  means the
occurrence, on or after the occurrence of a Change in Control, or any of the
following:

(a)
             The Plan
Sponsor or any of its Affiliates materially reduces the Participant’s Base
Salary.

(b)
            The Plan
Sponsor discontinues its bonus plan in which the Participant participates as in
effect immediately before the Change in Control without immediately replacing
such bonus plan with a plan that is the substantial economic equivalent of such
bonus plan, or a successor to the Plan Sponsor fails or refuses to assume the
obligations of the Plan Sponsor under such bonus plan as in effect immediately
before the Change in Control or under a plan that is the substantial economic
equivalent of such bonus plan.

(c)
       Without the Participant’s
express written consent, the Plan Sponsor or any of its Affiliates requires the
Participant to change the location of the Participant’s job or office, so that
the Participant will be based at a location more than 100 miles from the former
location of the Participant’s job or office.

(d)         Without the Participant’s
express written consent, the Plan Sponsor or any of its Affiliates reduces the
Participant’s responsibilities or directs the Participant to report to a person
of lower rank or responsibilities than the person to whom the Participant
reported before the Change in Control.

1.26.                        Measurement Fund.  The investment fund or funds
selected by the Plan Administrator from time to time.

1.27.                        Participant.  Any
Employee (i) who is selected to participate in the Plan, (ii) who elects to
participate in the Plan, (iii) who signs an Election Form, (iv) whose signed
Election Form is accepted by the Administrator, and (v) who commences
participation in the Plan.  A spouse or
former spouse of a Participant shall not be treated as a Participant in the
Plan or have an account balance under the Plan, even if he or she has an
interest in the Participant’s benefits under the Plan as a result of applicable
law or property settlements resulting from legal separation or divorce.

 

 

1.28           Participant.  An Eligible Employee designated as a participant by the Plan
Administrator.

1.29           Participant Annual
Deferral Amount.  The portion
of a Participant’s Compensation, which he or she elects to defer, and is
deferred, for the Plan Year in question. In the event of a Participant’s
termination from participation in the Plan prior to the end of a Plan Year,
such year’s Participant Annual Deferral Amount shall be the actual amount
withheld prior to such event.

1.30           Plan.  This Plan, together with any and all amendments or supplements
thereto.

1.31           Plan Administrator.  The Board or its designee. A Participant in
the Plan should not serve as a singular Plan Administrator. If a Participant is
part of a group or committee designated as Plan Administrator, then the
Participant may not participate in any activity or decision relating solely to
his or her individual benefits under the Plan; matters solely affecting the
applicable Participant will be resolved by the remaining committee members or
by the Board.

1.32           Plan Retirement Date.  The date the Participant attains 65 years of age.

1.33           Plan Year.  The Calendar Year.

1.34                           Quarterly
Installment Method.  A quarterly installment payment
over two, five or ten years selected by the Participant in accordance with this
Plan, calculated as follows:  The Account
Balance of the Participant determined immediately prior to the date the
distribution is to be made under Section 5.1 shall be multiplied by a fraction,
the numerator of which is one, and the denominator of which is the remaining
number of quarterly payments due the Participant.  By way of example, if the Participant elects
a two year Quarterly Installment Method, the first payment shall be 1/8 of the
Account Balance, calculated as described in this definition.  The following quarter, the payment shall be
1/7 of the Account Balance, calculated as described in this definition.  Each quarterly installment shall be paid
within 60 days following each anniversary of the day the distributions are
scheduled to commence.

1.35         Retirement.  A
Participant’s Separation from Service after the Participant has reached his
Plan Retirement Date.

1.36         Separation from Service.  With
respect to a Participant, his or her “separation from service,” with respect to
the Employers, within the meaning of Section 409A(a)(2)(A)(i) of the Code, as
determined by the Secretary of the Treasury. 
The Plan Administrator shall have full and final authority, which shall
be exercised in its discretion, to determine conclusively whether a Participant
has had a “Separation from Service,” and the date of such “Separation from
Service.”

1.37                           Specified
Employee shall mean a key employee
(as defined by Section 416(i) of the Code without regard to paragraph (5)
thereof) of a corporation the stock of which is publicly traded on an
established securities market or otherwise. 
Notwithstanding other provisions of this Plan to the contrary,
distributions by the Plan Sponsor to Specified Employees (if any) may not be
made before the date which is 6 months after the date of separation from
service (or, if earlier, the date of death of the employee).

 

 

1. 38                        Year of Plan Participation.  Each twelve
(12) month period during which the Participant is employed on a full-time basis
by an Employer, with a minimum of 1,000 hours of service, inclusive of any
approved leaves of absence, beginning on the Participant’s date of entry into
this Plan.

 

 

ARTICLE TWO

ELIGIBILITY AND PARTICIPATION

 

2.1           Selection.  Participation
in the Plan shall be limited to each Employee of the Employers who for any Plan
Year is expected to be a “highly compensated employee” as defined in Section
414(q) of the Code and a member of a “select group of management and highly
compensated employees” within the meaning of Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA, as determined by the Plan Administrator in its sole
discretion.

2.2           Enrollment Requirements.  As
a condition to participation, each selected Employee shall complete, execute
and return to the Plan Administrator an Election Form.  In addition, the Plan Administrator shall
establish from time to time such other enrollment requirements as it determines
in its sole discretion are necessary.

2.3           Eligibility; Commencement
of Participation.  Provided an
Employee selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the Plan Administrator,
including returning all required documents to the Plan Administrator within the
specified time period, that Employee shall commence participation in the Plan
on the day on which his or her Election Form first becomes effective.

2.4           Termination of
Participation and/or Deferrals.  Once an
Employee is designated as a Participant, he or she shall continue as such for
all future Plan Years unless and until: 
(a) the Participant terminates from employment with the Employer and
receives a full distribution of his Accounts, (b) is no longer categorized as
an individual entitled to participate in the Plan pursuant to Section 2.1
above, or (c) the Plan Administrator specifically acts to discontinue the
Participant’s participation.  If a
Participant’s participation is discontinued, to the extent permissible under
Code Section 409A, the Plan Administrator shall (i) terminate any deferral
election the Participant has made for the remainder of the Plan Year in which
the Participant’s membership status changes, (ii) prevent the Participant from
making future deferral elections and/or (iii) immediately distribute the
balance of the Participant’s Accounts and terminate the Participant’s
participation in the Plan.  If
distribution of the balance of the Participant’s Accounts is not permissible
under Code Section 409A, then such Accounts shall be held until distributable
under the terms of Article 5 as originally elected by the Participant.

2.5           Reemployment.  If
a former Employee is rehired by an Employer and is again selected as eligible
to participate in the Plan, he or she shall reenter the Plan on the first day
of any Plan Year commencing after the date he or she is selected in accordance
with the provisions of Section 2.1.  Such
Employee’s reentry into the Plan shall have no impact on any distributions that
have been made or are being made in accordance with Article 5.  Any amounts previously forfeited from the
Participant’s Accounts pursuant to this Plan

 

 

shall
not be restored or reinstated upon the Participant’s subsequent reentry into
the Plan.

 

ARTICLE THREE

CONTRIBUTIONS AND CREDITS

3.1           Election to Defer.  In
connection with a Participant’s commencement of participation in the Plan, the
Participant shall make a deferral election by delivering to the Plan
Administrator a completed and signed Election Form, which must be accepted by
the Plan Administrator for a valid election to exist.  For each succeeding Plan Year, a new Election
Form must be delivered to the Plan Administrator, in accordance with its rule
and procedures, before the end of the Plan Year preceding the Plan Year for
which the election is made.  After a Plan
Year commences, such deferral election shall be irrevocable and shall continue
for the entire Plan Year and subsequent Plan Years, except that it shall
terminate upon the execution and timely submission of a newly completed
Election Form or Separation from Service or Death.  If no Election Form is timely delivered for a
Plan Year, no Participant Annual Deferral Amount shall be withheld for that
Plan Year. Notwithstanding anything to the contrary in this Section 3.1, and
subject to any terms and conditions imposed by the Plan Administrator, in the
case of any Bonus that constitutes performance-based compensation (within the
meaning of Section 409A(a)(4)(b)(iii) of the Code) deferrable under this Plan,
which Bonus is based on services performed over a period of at least 12 months,
an election to defer such Bonus compensation may be made by timely completing
and submitting to the Plan Administrator an Election Form no later than six (6)
months before the end of the service period during such period as may be
established by the Plan Administrator in its discretion for such
elections.  Notwithstanding anything to
the contrary in this Section 3.1, in the case of the first Plan Year in which a
Participant becomes eligible to participate in this Plan, elections may be made
within 30 days after the date the Participant becomes eligible to participate
in this Plan; provided, however, that such election shall only be effective
with respect to Base Salary and Bonus earned for services to be performed
subsequent to such election.

 

3.2           Minimum Participant Annual
Deferral Amount.  For each Plan Year, the aggregate
minimum Participant Annual Deferral Amount for each Participant is $2,500.  If an election is made for less than such
minimum amount, or if no election is made, the amount deferred shall be zero.

 

3.3           Maximum Deferral.  For each Plan Year, a Participant may
elect to defer, as his or her Participant Annual Deferral Amount, up to 50% of
his or her Base Salary and up to 100% of his or her Bonus, subject to the
limitations set forth in this Section 3.1. 
Notwithstanding the foregoing, a Participant Annual Deferral Amount shall
be limited in any Calendar Year, if necessary, to satisfy the Participant’s
income and employment tax withholding obligations (including Social Security,
unemployment and Medicare), and the Participant’s employee benefit plan
contribution requirements, determined on the first day of the election period
for such Plan Year, as determined by the Plan Administrator.

 

3.4           Accounts; Crediting of
Deferrals.  Solely for record keeping purposes, the Plan
Administrator shall establish a Deferral Account and a Corporate Contributions Account
for each Participant.  A Participant’s
Accounts shall be credited with the deferrals made by him or her or on his or
her behalf by his or her Employer under this Article 3 and shall 

 

 

be
credited (or charged, as the case may be) with the hypothetical or deemed
investment earnings and losses determined pursuant to Article 4, and charged
with distributions made to or with respect to him or her.

 

(a)           Participant Annual
Deferral Amounts.  For each Plan
Year, the Base Salary portion of the Participant Annual Deferral Amount shall
be withheld from each payroll period in equal amounts from the Participant’s
Base Salary.  The Bonus portion of the
Participant Annual Deferral Amount shall be withheld at the time the Bonus is
or would otherwise be paid to the Participant. 
The Participant Annual Deferral Amount shall be credited to the
Participant’s Deferral Account.

(b)           Corporate Contributions.  Each
Plan Year, The Plan Sponsor may make contributions (either discretionary,
matching or both) to the Plan as it may determine from time to time and may
direct that such contributions be allocated among the Corporate Contribution
Accounts of those Participants that it may select.  The amount so credited to a Participant may
be smaller or larger than the amount credited to any other Participant, and the
amount credited to any Participant for a Plan Year may be zero.  The Corporate Contribution, if any, shall be
credited as of the last day of a Plan Year. 
If a Participant is not employed by an Employer as of the last day of a
Plan Year other than by reason of his or her Retirement, Disability or death
while employed, the Discretionary Company Contribution for such Participant for
that Plan Year shall be zero.  In the
event of Retirement, Disability or death, a Participant shall be credited with
the Corporate Contribution(s) (if any) for the Plan Year in which he or she
Retires, becomes Disabled or dies.  A
Corporate Contribution, if any, shall be credited to Participants’ Corporate
Contribution Accounts on the date declared by the Plan Sponsor.  No Participant shall have a right to compel
the Plan Sponsor to make a contribution under this Section 3.4(b) and no
Participant shall have the right to share in the allocation of any such
contribution for any Plan Year unless selected by the Plan Sponsor, in its sole
discretion.

3.5           Vesting.

(a)           Deferral Account.  A
Participant shall at all times be 100% vested in his or her Deferral Account.

(b)           Corporate Contribution
Account.  Plan Sponsor contributions credited to
a Participant’s Corporate Contribution Account under Section 3.4(b)
of the Plan and any hypothetical or deemed investment earnings and losses
attributable to these contributions shall become vested or nonforfeitable based
on the Participant’s Years of Plan Participation according to the following
schedule: 

	
  Years of Plan Participation

  	
   

  	
  Percentage Vested

  	
   

  
	
  Less than 2

  	
   

  	
  0

  	
  %

  
	
  2 but less than 3

  	
   

  	
  25

  	
  %

  
	
  3 but less than 4

  	
   

  	
  50

  	
  %

  
	
  4 but less than 5

  	
   

  	
  75

  	
  %

  
	
  5 or more

  	
   

  	
  100

  	
  %

  

 

Notwithstanding
the foregoing, a Participant’s Corporate Contribution Account shall be fully
vested and nonforefeitable upon (i) the Participant’s attainment of the Plan
Retirement Age, (ii) the Participant’s death, (iii) the Participant’s
Disability, or (iv) termination of the Plan.

 

 

(c)           Forfeiture.  A
Participant shall forfeit any unvested portion of his or her Corporate
Contribution Account determined as of the most recent determination date
preceding his or her termination of employment with the Employers.  Any portion of a Participant’s Corporate
Contribution Account which is not vested shall be forfeited and shall cease to
be liabilities of the Employer or the Plan. 
All forfeited amounts shall be immediately deducted from the Participant’s
Corporate Contribution Accounts and credited to such Employer. 

ARTICLE FOUR

ACCOUNTS AND ALLOCATION OF FUNDS

4.1           Earnings Credits or Losses.  In
accordance with, and subject to, the rules and procedures that are established
from time to time by the Plan Administrator, in its sole discretion, amounts
shall be credited or debited to a Participant’s Account Balance in accordance
with the following rules:

(a)           Measurement Funds.  The Plan Administrator shall from time to time select
one or more types of Measurement Funds and one or more specific Measurement
Funds for deemed investment designation by Participants for the purpose of
crediting or charging hypothetical or deemed investment earnings and losses to
his or her Account Balance.  As
necessary, the Plan Administrator may, in its sole discretion, discontinue,
substitute or add a Measurement Fund. 
The Plan Administrator shall notify the Participants of the types of
Measurement Funds and the specific Measurement Funds selected from time to
time.

(b)           Election of
Measurement Funds.  A Participant may elect one or
more Measurement Fund(s) (as described in Section 4.1(c) below) to be used to
determine the additional amounts to be credited (or charged, as the case may
be) to his or her Account Balance, in accordance with such rules as the Plan
Administrator may provide.

(c)           Crediting or Debiting Method.  The
performance of each elected Measurement Fund (either positive or negative) will
be determined by the Plan Administrator, in its sole discretion, based on the
performance of the Measurement Funds themselves.  A Participant’s Account Balance shall be
credited or debited as frequently as is administratively feasible, but no less
often than monthly, based on the performance of each Measurement Fund selected
by the Participant, as determined by the Plan Administrator in its sole
discretion.

(d)           No Actual Investment.  Notwithstanding
any other provision of this Plan that may be interpreted to the contrary, the
Measurement Funds are to be used for measurement purposes only, and a
Participant’s election of any such Measurement Fund, the allocation to his or
her Account Balance thereto, the calculation of additional amounts and the
crediting or debiting of such amounts to a Participant’s Account Balance shall
not be considered or construed in any manner as an actual investment of
his or her Account Balance in any such Measurement Fund.  In the event that the Company, in its own
discretion, decides to invest funds in any or all of the Measurement Funds, no
Participant shall have any rights in or to such investments themselves.  Without limiting the foregoing, a Participant’s
Account Balance shall at all times be a bookkeeping entry only and shall not
represent any investment made on his or her behalf by any Employer or 

 

 

the Trust; the Participant
shall at all times remain an unsecured creditor of the Employers.  Any liability of an Employer to any
Participant, former Participant, or Beneficiary with respect to a right to
payment shall be based solely upon contractual obligations created by the
Plan.  The Plan Sponsor, the Board, the
Plan Administrator, any Employer and any individual or entity shall not be
deemed to be a trustee of any amounts to be paid under the Plan.  Nothing contained in the Plan, and no action
taken pursuant to its provisions, shall create or be construed to create a
trust of any kind, or a fiduciary relationship, between the Plan Sponsor and an
Employer and a Participant, former Participant, Beneficiary or any other
individual or entity.  Neither the Plan Sponsor
nor any Employer in any way guarantees any Participant’s Account Balance
against loss or depreciation, whether caused by poor investment performance,
insolvency of a deemed investment or by any other event or occurrence.  In no event shall any Employee, officer,
director or stockholder of the Plan Sponsor or any Employer be liable to any
individual or entity on account of any claim arising by reason of the Plan
provisions or any instrument or instruments implementing its provisions, or for
the failure of any Participant, Beneficiary or other individual or entity to be
entitled to any particular tax consequences with respect to the Plan or any
credit or payment hereunder.

4.2           Distributions.  Any
distribution with respect to a Participant’s Account Balance shall be charged
to the appropriate account as of the date such payment is made by the Employer
or the trustee of any Trust which may be established for the Plan.

 

ARTICLE FIVE

ENTITLEMENT TO BENEFITS

5.1           Retirement
Benefit:

(a)          In the event of a Participant’s Retirement, the Plan
Administrator shall thereafter cause to be paid to the Participant his or her
Accrued Benefit, valued as of the date of such Retirement.  Such benefits shall be payable in the manner
and frequency previously elected by the Participant on his or her Election
Form(s).  A Participant may select
distribution of his or her Retirement benefit in the form of a lump sum
payment, or a two, five or ten year Quarterly Installment Method.  If such Participant fails to select a form of
distribution for purposes of distributions from such Participant’s Accounts for
a Plan Year, such distributions shall be made in a lump sum payment. Unless
otherwise provided for under Section 1.37, the first payment shall be due on or
about the first day of the first month following the Participant’s Plan
Retirement Date.

(b)         Notwithstanding the foregoing, a Participant’s Retirement
benefit may be distributed in one lump sum rather than in installments if the
Participant’s Account Balance as of the date of his or her Retirement is less
than $10,000.00.

(c)          A Participant may not change his or her election
with respect to the form of distribution of his or her Account Balance pursuant
to this Section 5.1 for a Plan Year.

5.2           Disability
Retirement Benefit.  The Participant
shall be entitled to receive payments hereunder prior to his or her Separation
from Service if he or she is Disabled. If 

 

 

a Participant has a qualifying Disability the
benefit payable hereunder shall be equal to the Participant’s Accrued Benefit,
valued as of his or her Disability Date. 
Such benefit shall be payable in in a lump sum within
45 days following the Participant’s Disability Date.

5.3           Death
Benefits:

(a)          Death
Benefit Prior to Commencement of Benefits.  If the
Participant dies while in the employment of the Plan Sponsor or an Affiliate
prior to the commencement of benefit payments, the Plan Administrator shall
cause a survivor benefit to be paid in an amount based on the Participant’s
Accrued Benefit at the date of death. The death benefit payable under this Section
5.3 shall be distributed to the Participant’s Beneficiary pursuant to the
payment method previously elected by the Participant for payment of his or her
Separation from Service Benefit. Payment(s) shall commence on or about the
first day of the third month following the Participant’s date of death and
based on the last Beneficiary designation received by the Plan Sponsor from the
Participant prior to his or her death.  If no such designation has been received by
the Plan Sponsor, such payment shall be made to the Participant’s
surviving legal spouse.  If the
Participant is not survived by a legal spouse, the said payment(s) shall be
made to the then living children of the Participant, if any, in equal shares.  If there are no surviving children, the
balance of the Accrued Benefit shall be paid to the estate of the Participant. If the total amount of benefits payable at the time of the
Participant’s death is less than $10,000.00, the Plan Administrator may elect
to pay the benefit in a lump sum rather than in installments.

(b)         Death
Benefit After Commencement of Benefits.  In the event of
the Participant’s death after the commencement of benefit payments, but prior
to the completion of such payments due to and owing hereunder, the Plan Administrator
shall cause such payments to continue , in installments over the remainder of
the period and in the same amounts as that benefit would have been paid to the
Participant had he or she survived.  Such
continuing payments shall be made to the Participant’s designated Beneficiary
in accordance with the last such designation received by the Plan Sponsor from
the Participant prior to his death.  If
no such designation has been received by the Plan Sponsor, such payments shall
be made to the Participant’s surviving legal spouse.  If such spouse dies before receiving all
payments to which he or she is entitled hereunder, then the balance of the
Accrued Benefit shall be paid to the spouse’s estate.  If the Participant is not survived by a legal
spouse, then the said payments shall be made to the then living children of the
Participant, if any, in equal shares.  If
there are no surviving children, the balance of the Accrued Benefit shall be
paid to the estate of the Participant.  If the total amount of benefits payable at the time of the
Participant’s death is less than $10,000.00, the Plan Administrator may elect
to pay the benefit in a lump sum rather than in installments.

5.4           Separation
from Service Benefits:

(a)          In the event of the Participant’s Separation from
Service for any reason other than for Cause, Disability, Retirement or Death,
the Plan Administrator shall cause to be paid to the Participant a Separation
from Service Benefit based on 

 

 

                        the Participant’s
vested Account Balance.  Such benefit
shall be payable in a lump sum. Unless otherwise provided for under Section 1.37,
the first payment shall be due on or about the first day of the third month
following the Participant’s date of termination.

(b)         In the event the Participant’s Separation from
Service is as a result of the termination of his or employment by an Employer
for Cause, no benefits of any kind will be due or payable under the terms of
this Plan from amounts credited to the Participant’s Corporate Contribution Account
, and all rights of the Participant, his or her designated Beneficiary,
executors, or administrators, or any other person, to receive payments thereof
shall be forfeited.

5.5           Distribution
Upon Unforeseeable Emergency:

(a)          Unforeseeable Emergency.  In
the event that the Plan Administrator, following a written request by a
Participant, determines, in its sole discretion, that the Participant has
suffered an Unforeseeable Emergency, the Plan Administrator shall cause to be
paid to the Participant, within 30 days following such determination, an amount
necessary to meet the Unforeseeable Emergency, but not exceeding the vested
balance of such Participant’s Accounts as of the date of such payment.  For purposes of this Section 5.5(a), an “Unforeseeable
Emergency” shall mean a severe financial hardship to the Participant resulting
from a sudden and unexpected illness or accident of the Participant, the
Participant’s spouse, or the Participant dependent (as defined in Section
152(a) of the Code), loss of the Participant’s property due to casualty, or
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. 
The amounts distributed with respect to an Unforeseeable Emergency may
not exceed the amounts necessary to satisfy such Unforeseeable Emergency plus
amounts necessary to pay taxes reasonably anticipated as a result of the
distribution, after taking into account the extent to which such Unforeseeable
Emergency  is or may be relieved through
reimbursement or compensation by insurance or otherwise or by liquidation of
the Participant’s assets (to the extent liquidation of such assets would not
itself cause severe financial hardship), as determined by the Plan
Administrator in accordance with Section 409A(2)(B)(ii)(II) of the Code.

 

(b)         Rules
Adopted by Plan Administrator.  The Plan
Administrator shall have the authority to adopt additional rules relating to
hardship distributions.  In administering
these rules, the Plan Administrator shall act in accordance with the principle
that the primary purpose of this Plan is to provide additional retirement
income, not additional funds for current consumption.

(c)          Limit
on Number of Distributions.  No Participant
may receive more than one distribution on account of an Unforeseeable Emergency
in any Calendar Year.

(d) Prohibition of Further Deferrals.  A Participant who receives a
distribution on account of an Unforeseeable Emergency, and who is still
employed by an Employer, shall be prohibited from making deferrals under
Article 3.1 for the remainder of the Plan Year in which the distribution
is made, to the extent required under Section 409A(a)(2)(B)(ii) of the Code.

 

 

(e)           Account Adjustments .  A Participant’s withdrawal upon the
occurrence of Unforeseeable Emergency shall be charged on a pro rata basis to
the Participant’s vested interests in such Participant’s Accounts.

5.6           Effect of Change in Control.  A Participant shall become fully vested in
his or her Corporate Contribution Account if, within one year after the
occurrence of a Change in Control, his employment is involuntarily terminated
by all Employers for any reason other than Cause or his death or Disability, or
he voluntarily terminates his employment with all Employers for Good
Reason.  From and after the occurrence of
a Change in Control, the Plan Administrator shall consist of a committee of the
individuals who were members of the Board 90 days before the occurrence of the
Change in Control, with any vacancy in such the Plan Administrator occurring
thereafter being filed with a person or persons selected by the other members
of the Plan Administrator.

5.7           Excise
Tax Limitation:  Notwithstanding anything contained
in this Plan to the contrary, in the event that any payment or benefit (within
the meaning of Section  280G(b)(2) of the Code) to the Participant or for
the Participant’s benefit paid or payable or distributed or distributable
(including, but not limited to, the acceleration of the time for the vesting or
payment of such benefit or payment) pursuant to the terms of this Plan or
otherwise in connection with, or arising out of, the Participant’s employment
with the Plan Sponsor or any of its Affiliates or a change of control within
the meaning of Section 280G of the Code (a “Payment” or “Payments”), would
be subject to the excise tax imposed by Section  4999 of the Code (the “Excise
Tax”), then the Payments shall be reduced (but not below zero) but only to the
extent necessary that no portion thereof shall be subject to the excise tax
imposed by Section  4999 of the Code (the “ Section  4999 Limit”).  Unless the Participant shall have given prior
written notice specifying a different order to the Plan Sponsor to effectuate
the limitations described in the preceding sentence, the Plan Sponsor shall
reduce or eliminate the Payments by first reducing or eliminating those
Payments or benefits which are not payable in cash and then by reducing or
eliminating cash Payments, in each case in reverse order beginning with
payments or benefits which are to be paid the farthest in time.  Any notice given by the Participant pursuant
to the preceding sentence shall take precedence over the provisions of any
other plan, arrangement or agreement governing the Participant’s rights and
entitlements to any benefits or compensation. 
[MD Beauty to confirm this provision is intended to be included]

5.8           Benefits
Not Transferable.  No Participant or Beneficiary under this Plan
shall have any power or right to transfer, assign, anticipate, hypothecate or
otherwise encumber any part of all the amounts payable hereunder.  No part of the amounts payable shall, prior
to actual payment, be subject to seizure or sequestration for the payment of
any debts, judgments, alimony or separate maintenance owed by a Participant or
any other person, nor be transferable by operation of law in the event of a
Participant’s or any other person’s bankruptcy or insolvency, or dissolution of
marriage. Any such attempted assignment shall be void.  The benefits
which a Participant may accrue under this Plan are not subject to the terms of
any Qualified Domestic Relations Order (as that term is defined in Section
414(p) of the Code) with respect to any Participant, and the Plan
Administrator, the Board, the Plan Sponsor and any Employer shall not be
required to comply with the terms of such order in connection with this
Plan.  Notwithstanding the foregoing, the
withholding of taxes from Plan payments, the recovery of Plan overpayments of
benefits made to a Participant or Beneficiary, the transfer of Plan benefit
rights from the Plan to another plan, or the direct deposit of Plan payments to
an account 

 

in
a financial institution (if not actually a part of an arrangement constituting
an assignment or alienation) shal not be construed as an assignment or
alienation under this Section 5.8 and shall be permitted under the Plan.

5.9           No
Trust Created.  Nothing contained in this Plan, and no action
taken pursuant to its provisions by any person shall create, or be construed to
create, a trust of any kind, or a fiduciary relationship between the Plan
Sponsor or any Employer and any other person.

ARTICLE SIX

DISTRIBUTION OF BENEFITS

6.1                                 Benefits
Payable Only From General Corporate Assets: Unsecured General Creditor Status
of Participant:

(a)                                  Payment to the Participant
or any Beneficiary hereunder shall be made from assets which shall continue,
for all purposes, to be part of the general, unrestricted assets of the Employers;
no person shall have any interest in any such asset by virtue of any provision
of this Plan.  An Employer’s obligation
hereunder shall be an unfunded and unsecured promise to pay money in the
future.  To the extent that any person
acquires a right to receive payments from an Employer under the provisions
hereof, such right shall be no greater than the right of any unsecured general
creditor of the Employer; no such person shall have or acquire any legal or
equitable right, interest or claim in or to any property or assets of the
Employer.

(b)                                 In the event that, in its
discretion, an Employer purchases an insurance policy or policies insuring the
life of a Participant or Employee, to allow the Employer to recover or meet the
cost of providing benefits in whole or in part, hereunder, no Participant or
Beneficiary shall have any rights whatsoever therein or in said policy or the
proceeds therefrom.  The Employer shall
be the sole owner and beneficiary of any such insurance policy or property and
shall possess and may exercise all incidents of ownership therein.

(c)                                  In the event that an Employer purchases an insurance policy
or policies on the life of a Participant or an 
Employee as provided for above,
then all of such policies shall be subject to the claims of the creditors of
the Employer.

(d)                                 If an Employer
chooses to obtain insurance on the life of a Participant in connection with its
obligations under this Plan, the Participant hereby agrees to take such
physical examinations and to truthfully and completely supply such information
as may be required by the Employer or the insurance company(ies) designated by
the Employer. If a Participant submits information to any such insurance
company(ies) and if the Participant makes a material misrepresentation in an
application for any insurance that may be used to insure any of the Employer’s
obligations under this Plan, and if as a result of that material
misrepresentation an insurance company is not required to pay all or any part
of the benefit provided under that insurance, the Participant’s right to a
benefit under this Plan will be reduced by the amount of the benefit that is
not paid by the insurance company because of such material misrepresentation if
applicable.

 

6.2           Facility
of Payment.  If a distribution is to be made to a minor,
or to a person who is otherwise incompetent, then the Plan Administrator may,
in its discretion, make such distribution (i) to the legal guardian, or if
none, to a parent of a minor payee with whom the payee maintains his or her
residence, or (ii) to the conservator or committee or, if none, to the
person having custody of an incompetent payee. Any such distribution shall
fully discharge the Employer, the Plan Sponsor and Plan from further liability
on account thereof.

ARTICLE SEVEN

BENEFICIARIES

7.1           Beneficiary
Designation.  The Participant shall have the right, at any
time, to submit a Beneficiary Designation Form designating of primary and
secondary Beneficiaries to whom payment under this Plan shall be made in the
event of his or her death prior to complete distribution of the benefits
payable.  Each Beneficiary Designation
Form shall become effective only when receipt thereof is acknowledged in
writing by the Plan Administrator. The Plan Administrator shall have the right,
in its sole discretion, to reject any Beneficiary Designation Form.  Any attempt to designate a Beneficiary,
otherwise than as provided in this Article shall be ineffective.

7.2           Spouse’s
Interest. A Participant’s
Beneficiary designation shall be deemed automatically revoked if the
Participant names a spouse as Beneficiary and the marriage is later dissolved
or the spouse dies. Without limiting the generality of the foregoing, the
interest in the benefits hereunder of a spouse of a Participant who has predeceased
the Participant or whose marriage with the Participant has been dissolved shall
automatically pass to the Participant and shall not be transferable by such
spouse in any manner, including but not limited to such spouse’s will, nor
shall such interest pass under the laws of intestate succession.

7.3           Doubt as to Beneficiary.  If the Plan Administrator has any doubt
as to the proper Beneficiary to receive payments pursuant to this Plan, the
Plan Administrator shall have the right, exercisable in its discretion, to
cause the Participant’s Employer to withhold such payments until this matter is
resolved to the Plan Administrator’s satisfaction.

7.4           Discharge of Obligations.  The payment of benefits under this Plan to a
Beneficiary shall fully and completely discharge all Employers and the Plan
Administrator from all further obligations under this Plan with respect to the
Participant, and that Participant’s Election of Deferral shall terminate upon
such full payment of benefits.

ARTICLE EIGHT

PLAN ADMINISTRATION

8.1           Responsibility
of Administration of the Plan:

(a)                                  The Plan Administrator shall
be responsible for the management, operation and administration of the
Plan.  The Plan Administrator may employ
others to render advice with regard to its responsibilities under this
Plan.  It may also delegate all or a
portion of its responsibilities as Plan Administrator to others and may
exercise any other powers necessary for the discharge of its duties.  

 

The Plan Administrator shall be entitled to rely
conclusively upon all tables, valuations, certifications, opinions and reports
furnished by any actuary, accountant, controller, counsel or other person
employed or engaged by the Plan Administrator with respect to the Plan.

(b)                                 The primary responsibility
of the Plan Administrator is to administer the Plan for the benefit of the
Participants and their Beneficiaries, subject to the specific terms of the
Plan.  The Plan Administrator shall
administer the Plan in accordance with its terms and shall have the power to
determine all questions arising in connection with the administration,
interpretation, and application of the Plan. 
Any such determination shall be conclusive and binding upon all persons
and their heirs, executors, beneficiaries, successors and assigns.  The Plan Administrator shall have all powers
necessary or appropriate to accomplish its duties under the Plan.  The Plan Administrator shall also have the
discretion and authority to make, amend, interpret, and enforce all appropriate
rules and regulations for the administration of this Plan and decide or resolve
any and all questions, including but not limited to, interpretations of this
Plan and entitlement to or amount of benefits under this Plan, as may arise in
connection with the Plan.

8.2           Claims
Procedure:

(a)                                  Claim.  A person who believes that he or she is being
denied a benefit to which he or she is entitled under the Plan (hereinafter
referred to as a “Claimant”) may file a written request for such benefit with
the Plan Administrator, setting forth his or her claim.  The request must be addressed to the Plan
Administrator at the Plan Sponsor’s then principal place of business.The claims
procedure of this Section 8.2 shall be applied in accordance with Section 503
of ERISA and Department of Labor Regulation Section 2560.503-1.

(b)                                 Claim
Decision. Upon receipt of a claim, the Plan Administrator
shall advise the Claimant that a reply will be forthcoming within 90 days after
the receipt of the benefits claim by the Plan Administrator and that the Plan
Administrator shall, in fact, deliver such reply within such period.  The Plan Administrator may, however, extend
the reply period for an additional 90 days, unless the Plan Administrator
determines that special circumstances require an extension of time for making a
determination with respect to the benefits claim.  If the Plan Administrator determines that an
extension of time for making a determination with respect to the benefits claim
is required, the Plan Administrator shall provide the Claimant with written
notice of such extension prior to the end of the initial 90 day period.  The extension notice shall indicate the
special circumstances requiring the extension of time and the date by which the
Plan Administrator expects to render the benefit determination..  If the claim is denied in whole or in part,
the Plan Administrator shall adopt a written opinion, using language calculated
to be understood by the Claimant, setting forth:

(i)                                     The specific reasons for
such denial;

(ii)                                  Specific reference to
pertinent provisions of this Plan on which such denial is based;

 

(iii)                               A description of any
additional material or information necessary for the Claimant to perfect his or
her claim and an explanation why such material or such information is
necessary; and

(iv)                              A description of the Plan’s
appeal procedures and the time limits applicable to such procedures, including
a statement of the Claimant’s right to bring a civil action under Section
502(a) of ERISA following a denial of the appeal of the denial of the benefits
claim.

(c)                                  Request
for Review.  Within 60
days after receipt by the Claimant of the written opinion described above, the
Claimant may request in writing that the Review Committee (as defined
below)review the Plan Administrator’s determination.  Such request must be addressed to the Plan
Administrator at the Plan Sponsor’s then principal place of business.  The Claimant shall be afforded the
opportunity to submit written comments, documents, records, and other
information relating to the benefits claim, and the Claimant shall be provided,
upon request and free of charge, reasonable access to all documents, records
and other information relevant to the Claimant’s benefits claim.  A document, record or other information shall
be considered “relevant” to the benefits claim as provided in Department of
Labor Regulation Section 2560-503-1(m)(8). 
The review on appeal by the Board of Directors of the Plan Sponsor shall
take into account all comments, documents, records and other information
submitted by the Claimant, without regard to whether such information was
submitted or considered in the Plan Administrator’s initial determination with
respect to the benefits claim.  If the
Claimant does not request a review of the determination within such 60-day
period, he or she shall be barred and estopped from challenging the
determination.

(d)                                 Review
of Decision.  The Review
Committee shall advise the Claimant in writing of the Review Committee’s
determination of the appear within 60 days of the Review Committee’s receipt of
Claimant’s written request for review, unless special circumstances (such as a
hearing) would make the rendering of a determination within the 60 day period
infeasible, but in no event shall the Review Committee render a determination
regarding the denial of a claim for benefits later than 120 days after its
receipt of a request for review.  If an
extension of time for review is required because of special circumsntaces,
written notice of the extension shall be furnished to the Claimant prior to the
date the extension period commences.  If
the Claimant’s appeal of the denial of the Claimant’s benefits claim is denied
in whole or in part, the Review Committee shall adopt a written opinion, using
language calculated to be understood by the Claimant, setting forth:

(i)                                     The specific reasons for
such denial of the appeal;

(ii)                                  Specific reference to
pertinent provisions of this Plan on which such denial of the appeal is based;

(iii)                               A statement that the
Claimant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records and other information relevant
to the Claimant’s benefits claim 

 

(and a document, record or other information shall
be considered “relevant” to the benefits claims as provided in Department of
Labor Regulation Section 2560.503-1(m)(8); and

(iv)                              A statement describing the
Claimant’s right to bring an action under ERISA Section 502(a).

(e)                                  Review
Committee.  The Plan Administrator may from time to time
appoint a review panel that may consist of two or more individuals who may, but
need not, be employees of the Plan Sponsor (the “Review Committee”).  If no such Review Committee is named, the
Board of Directors of the Plan Sponsor shall be deemed the Review Committee for
purposes of this Section 8.2.  The Review
Committee shall be the named fiduciary that has the authority to act with
respect to any appeal from a denial of benefits or a determination of benefit
rights.

8.3           Arbitration.  Any claim or controversy
between the parties which the parties are unable to resolve themselves, and
which is not resolved through the claims procedure set forth in
Section 8.2, including any claim arising out of a Participant’s employment
or the termination of that employment, and including any claim arising out of,
connected with, or related to the formation, interpretation, performance or
breach of any provision of this Plan, and any claim or dispute as to whether a
claim is subject to arbitration, shall be submitted to and resolved exclusively
by expedited arbitration by a single arbitrator in accordance with the
following procedures:

(a)                                  In the event of a claim or
controversy subject to this arbitration provision, the complaining party shall
promptly send written notice to the other party identifying the matter in
dispute and the proposed remedy. 
Following the giving of such notice, the parties shall meet and attempt
in good faith to resolve the matter. In the event the parties are unable to
resolve the matter within 21 days, the parties shall meet and attempt in good
faith to select a single arbitrator acceptable to both parties.  If a single arbitrator is not selected by
mutual consent within 10 business days following the giving of the written
notice of dispute, an arbitrator shall be selected from a list of nine persons
each of whom shall be an attorney who is either engaged in the active practice
of law or a recognized arbitrator and who, in either event, is experienced in
serving as an arbitrator in disputes between employers and employees, which list
shall be provided by the office of the American Arbitration Association (“AAA”)
or of the Federal Mediation and Conciliation Service. If, within three business
days of the parties’ receipt of such list, the parties are unable to agree upon
an arbitrator from the list, then the parties shall each strike names
alternatively from the list, with the first to strike being determined by the
flip of a coin.  After each party has had
four strikes, the remaining name on the list shall be the arbitrator.  If such person is unable to serve for any
reason, the parties shall repeat this process until an arbitrator is selected.

(b)                                 Unless the parties agree
otherwise, within 60 days of the selection of the arbitrator, a hearing shall
be conducted before such arbitrator at a time and a place agreed upon by the
parties.  In the event the parties are
unable to agree upon the time or place of the arbitration, the time and place
shall be designated by the arbitrator after consultation with the parties.  Within 30 days of the conclusion of the
arbitration hearing, the arbitrator shall issue an 

 

award, accompanied by a written decision explaining
the basis for the arbitrator’s award.

(c)                                  In any arbitration
hereunder, the Plan Sponsor shall pay all administrative fees of the arbitration
and all fees of the arbitrator, except that the Participant or Beneficiary may,
if he wishes, pay up to one-half of those amounts.  Each party shall pay its own attorneys’ fees,
costs, and expenses, unless the arbitrator orders otherwise.  The prevailing party in such arbitration, as
determined by the arbitrator, and in any enforcement or other court
proceedings, shall be entitled, to the extent permitted by law, to
reimbursement from the other party for all of the prevailing party’s costs
(including but not limited to the arbitrator’s compensation), expenses, and
attorneys’ fees.  The arbitrator shall
have no authority to add to or to modify this Plan, shall apply all applicable
law, and shall have no lesser and no greater remedial authority than would a
court of law resolving the same claim or controversy. The arbitrator shall,
upon an appropriate motion, dismiss any claim without an evidentiary hearing if
the party bringing the motion establishes that it would be entitled to summary
judgment if the matter had been pursued in court litigation.  The parties shall be entitled to reasonable
discovery subject to the discretion of the arbitrator.

(d)                                 The decision of the
arbitrator shall be final, binding, and non-appealable, and may be enforced as
a final judgment in any court of competent jurisdiction.

(e)                                  This arbitration provision
of the Plan shall extend to claims against any parent, subsidiary, or affiliate
of each party, and, when acting within such capacity, any officer, director,
shareholder, Participant, Beneficiary, or agent of each party, or of any of the
above, and shall apply as well to claims arising out of state and federal
statutes and local ordinances as well as to claims arising under the common law
or under this Plan.

Notwithstanding
the foregoing, and unless otherwise agreed between the parties, either party
may, in an appropriate manner, apply to a court for provisional relief,
including a temporary restraining order or preliminary injunction, on the
ground that the arbitration award to which the applicant may be entitled may be
rendered ineffectual without provisional relief.

Any
arbitration hereunder shall be conducted in accordance with the employee
benefit plan claims rules and procedures of the AAA then in effect; provided,
however, that, (i) all evidence presented to the arbitrator shall be in
strict conformity with the legal rules of evidence, and (ii) in the event
of any inconsistency between the employee benefit plan claims rules and
procedures of the AAA and the terms of this Plan, the terms of this Plan shall
prevail.

If
any of the provisions of this Section 8.3 are determined to be unlawful or
otherwise unenforceable, in whole or in part, such determination shall not
affect the validity of the remainder of this Section  8.3, and this
Section  8.3 shall be reformed to the extent necessary to carry out its
provisions to the greatest extent possible and to insure that the resolution of
all conflicts between the parties, including those arising out of statutory
claims, shall be resolved by neutral, binding arbitration.  If a court should find that the provisions of
this Section  8.3 are not absolutely binding, then the parties intend any
arbitration decision and award to be fully admissible in evidence in any 

 

subsequent
action, given great weight by any finder of fact, and treated as determinative
to the maximum extent permitted by law.

8.4           Notice. Any notice, consent or demand required or permitted to be given under
the provisions of this Plan shall be in writing and shall be signed by the
party giving or making the same.  If such
notice, consent or demand is mailed, it shall be sent by United States
certified mail, postage prepaid, addressed to the addressee’s last known
address as shown on the records of the Plan Sponsor.  The date of such mailing shall be deemed the
date of notice consent or demand.  Any
person may change the address to which notice is to be sent by giving notice of
the change of address in the manner aforesaid.

ARTICLE NINE

AMENDMENT OR TERMINATION

9.1           Termination.  Although each Employer anticipates that it
will continue the Plan for an indefinite period of time, there is no guarantee
that any Employer will continue the Plan or will not terminate the Plan at any
time in the future.  Accordingly, each
Employer reserves the right to discontinue its sponsorship of the Plan and/or
to terminate the Plan at any time with respect to any or all of its
participating Employees, by action of its board of directors or other similar
governing body.  Upon the termination of
the Plan with respect to any Employer, the participation of the affected
Participants who are employed by that Employer shall terminate.  Each Employer reserves the right at any time
to terminate this Plan or to reduce, temporarily suspend or discontinue contributions
hereunder.  If this Plan is terminated,
all Plan benefits shall be distributed in accordance with Article 5 and the
elections of the Participants, following the termination of the Plan.

 

9.2           Amendment.

(a)           An Employer may, at any time, amend
or modify the Plan in whole or in part with respect to that Employer by the
action of its board of directors or similar governing body; provided, however, that no amendment or modification shall
be effective to decrease or restrict the value of a Participant’s Account
Balance in existence at the time the amendment or modification is made or to
cause the Plan to fail to meet the requirements of Code Section 409A with
respect to any Participant without such Participant’s consent.  The amendment or modification of the Plan
shall not affect any Participant or Beneficiary who has become entitled to the
payment of benefits under the Plan as of the date of the amendment or
modification.  Notwithstanding any
provisions of this Section 9.2 to the contrary, the Board may amend the Plan at
any time, in any manner, if the Board determines any such amendment is required
to ensure that the Plan is characterized as providing deferred compensation for
a select group of management or highly compensated employees and as described
in ERISA Sections 201(2), 301(a)(3) and 401(a)(1) or to otherwise conform the
Plan to the provisions of any applicable law, including ERISA and the Code.

(b)           Notwithstanding anything to the
contrary in the Plan, if and to the extent the Plan Administrator shall
determine that the terms of the Plan may result in the failure of the Plan, or
amounts deferred by or for any Participant under the Plan, to comply with the
requirements of Section 409A of the Code, or any applicable regulations or
guidance promulgated by the Secretary of the Treasury in connection therewith,
the Plan 

 

Administrator
shall have authority to take such action to amend, modify, cancel or terminate
the Plan (effective with respect to all Employers) or distribute any or all of
the amounts deferred by or for a Participant, as it deems necessary or
advisable, including without limitation:

(i)            Any amendment or modification of the
Plan to conform the Plan to the requirements of Section 409A of the Code or any
regulations or other guidance thereunder (including, without limitation, any
amendment or modification of the terms of any applicable to any Participant’s
Accounts regarding the timing or form of payment).

(ii)           Any cancellation or termination of
any unvested interest in a Participant’s Accounts without any payment to the
Participant.

(iii)          Any cancellation or termination of any
vested interest in any Participant’s Accounts, with immediate payment to the Participant of the amount
otherwise payable to such Participant.

(iv)          Any such amendment, modification,
cancellation, or termination of the Plan may adversely affect the rights of a Participant without the Participant’s
consent.

9.3           Effect of Payment.  The full payment of the applicable benefit
under Article 5 of the Plan shall completely discharge all obligations to
a Participant and his or her designated Beneficiaries under this Plan.

ARTICLE  TEN

THE TRUST

10.1         Establishment
of Trust.  The Plan Sponsor may establish a grantor
trust, of which the Plan Sponsor is the grantor, within the meaning of subpart
E, part I, subchapter J, subtitle A of the Code, to pay benefits under this
Plan (the “Trust”).  If the Plan
Sponsor establishes a Trust, all benefits payable under this Plan to a
Participant shall be paid directly by the Employer(s) from the Trust.  To the extent such benefits are not paid from
the Trust, the benefits shall be paid from the general assets of the
Employer(s).  The Trust, if any, shall be
an irrevocable grantor trust which conforms to the terms of the model trust as
described in IRS Revenue Procedure 92-64, I.R.B. 1992-33.  If the Plan Sponsor establishes a Trust, the
assets of the Trust will be subject to the claims of each Employer’s creditors
in the event of its insolvency.  Except
as may otherwise be provided under the Trust, neither the Plan Sponsor nor any
Employer shall be obligated to set aside, earmark or escrow any funds or other
assets to satisfy its obligations under this Plan, and the Participant and/or
his or her designated Beneficiaries shall not have any property interest in any
specific assets of the Plan Sponsor or an Employer other than the unsecured
right to receive payments from the Employer, as provided in this Plan.

10.2         Interrelationship
of the Plan and the Trust.  The provisions of the Plan shall govern the
rights of a Participant to receive distributions pursuant to the Plan.  The provisions of the Trust (if established)
shall govern the rights of the Participant and the creditors of the Employers
to the assets transferred to the Trust. Each Employer shall at all times remain
liable to carry out its obligations under the Plan.  Each Employer’s 

 

obligations under the Plan may be satisfied
with Trust assets distributed pursuant to the terms of the Trust.

10.3         Contribution
to the Trust.  Amounts may be contributed by an Employer to
the Trust in the sole discretion of the Employer.

ARTICLE ELEVEN

MISCELLANEOUS

11.1         Entire Agreement.  The Plan and each executed
Election Form, Beneficiary Designation Form, and other administrative forms
shall constitute the total agreement between the Employers and the Participant.
No oral statement regarding the Plan may be relied upon by the Participant. In
the event that there is a discrepancy between the Plan and the administrative
forms, summary descriptions, the Plan will control.

 

11.2         Invalidity
of Provisions.  If any
provision of this Plan shall be for any reason invalid or unenforceable, the
remaining provisions shall nevertheless be carried into effect.

 

11.3         Unclaimed
Benefits.  In the case of
a benefit payable on behalf of such Participant, if the Plan Administrator is
unable to locate the Participant or beneficiary to whom such benefit is
payable, such Plan benefit may be forfeited to the Plan Sponsor upon the Plan
Administrator’s determination. 
Notwithstanding the foregoing, if, subsequent to any such forfeiture,
the Participant or beneficiary to whom such Plan benefit is payable makes a
valid claim for such Plan benefit, such forfeited Plan benefit shall be paid by
the Plan Administrator to the Participant or beneficiary, without interest from
the date it would have otherwise been paid.

 

11.4         Offset
For Obligations To Plan Sponsor.  If, at such time as the Plan Participant
becomes entitled to benefit payments hereunder, the Plan Participant has any
debt, obligation or other liability representing an amount owing to the Plan
Sponsor or an Affiliate of Plan Sponsor, and if such debt, obligation, or other
liability is due and owing at the time benefit payments are payable hereunder,
the Plan Sponsor may offset the amount owing it or an Affiliate against the
amount of benefits otherwise distributable hereunder.

 

11.5         Governing
Law. 
The Plan and the rights and
obligations of all persons hereunder shall be governed by and construed in
accordance with the laws of the State of California, other than its laws
regarding choice of law, to the extent that such state law is not preempted by
federal law.

11.6         Status of Plan.  The Plan is intended to be a plan that (i) is
not qualified within the meaning of Code Section 401(a), (ii) “is unfunded and
is maintained by an employer primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees”
within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1), and (iii)
is intended to comply with the requirements of Section 409A of the Code.  The Plan shall be administered and
interpreted to the extent possible in a manner consistent with that intent.

11.7         Tax Withholding.

 

                (a)           Annual Deferral Amounts.  For each Plan Year in which a Participant
Annual Deferral Amount is being withheld from a Participant, the Participant’s
Employer(s) shall be entitled to require payment by the Participant of any sums
required by federal, state or local tax law to be withheld with respect to the
deferral, in amounts and in a manner to be determined in the sole discretion of
the Employer(s).

                (b)           Corporate Contributions.  When a Participant becomes vested in a
portion of his or her Corporate Contribution Account, the Participant’s
Employer(s) shall be entitled to require payment by the Participant of any sums
required by federal, state or local tax law to be withheld with respect to the
deferral, in amounts and in a manner to be determined in the sole discretion of
the Employer(s).

                (c)           Distributions.  The Participant’s Employer(s), or the trustee
of the Trust, shall withhold from any payments made to a Participant under this
Plan all federal, state and local income, employment and other taxes required
to be withheld by the Employer(s), or the trustee of the Trust, in connection
with such payments, in amounts and in a manner to be determined in the sole
discretion of the Employer(s) and the trustee of the Trust.

                (d)           Satisfaction of Tax Obligations.  There shall be deducted from each payment made
under the Plan or any other compensation payable to the Participant (or
Beneficiary) all taxes which are required to be withheld by the Employer(s) in
respect to such payment or this Plan. 
The Company shall have the right to reduce any payment (or compensation)
by the amount of such of cash sufficient to provide the amount of said taxes.

11.8         Coordination with Other Benefits.  The benefits provided for a Participant and
Participant’s Beneficiary under the Plan are in addition to any other benefits
available to such Participant under any other plan or program for Employees of the Participant’s
Employer(s).  The Plan shall supplement
and shall not supersede, modify or amend any other such plan or program except
as may otherwise be expressly provided.

11.9         Compliance.  A Participant shall have no right to receive
payment with respect to the Participant’s Account Balance until all legal and
contractual obligations of the Employer(s) relating to establishment of the
Plan and the making of such payments shall have been complied with in full.

11.10       Successors.  The provisions of this Plan shall bind and
inure to the benefit of the Participant’s Employer and its successors and
assigns and the Participant and the Participant’s designated Beneficiaries.

11.11       Court Order.  The Plan Administrator is authorized to make
any payments directed by court order in any action in which the Plan or the
Plan Administrator has been named as a party. 
In addition, if a court determines that a spouse or former spouse of a
Participant has an interest in the Participant’s benefits under the Plan in
connection with a property settlement or otherwise, the Plan Administrator, in
its sole discretion, shall have the right, notwithstanding any election made by
a Participant, to immediately distribute the spouse’s or former spouse’s
interest in the Participant’s benefits under the Plan to that spouse or former
spouse.

11.12       Savings Clause.  In the event any provision of this Plan, or
the application thereof, is or becomes inconsistent with Code Section 409A and
any regulations promulgated 

 

thereunder,
such provision shall be void or unenforceable. 
The other provisions of this Plan shall remain in full force and effect.

IN
WITNESS WHEREOF, the Plan Sponsor has executed this Plan as of the
day and year first written above.

	
   

  	
   

  	
  For:

  	
  STB Beauty, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Myles McCormick

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  CFO

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