Document:

Exhibit
10.22

 

MANAGEMENT
SERVICES AGREEMENT

 

                THIS
MANAGEMENT SERVICES AGREEMENT is made as of the 18 day of December, 2002 by and
between OMP, INC., a Delaware corporation (the “Company”) and STONINGTON
PARTNERS, Inc., a Delaware Corporation limited partnership (“Stonington”).

 

RECITALS

 

                The
Company desires to obtain the benefits of the knowledge, experience and
expertise of Stonington’s executive and managerial personnel by retaining
Stonington to provide management consulting and business advisory services from
time to time with respect to the conduct of the Company’s business and affairs.

 

                Stonington
desires to provide such services to the Company which its affiliate, Stonington
Capital Appreciation 1994 fund, L.P. (the “1994 Fund”) has made and investment
in, on the terms and conditions set forth herein.

 

                The
parties believe it is in their best interest to make provision for certain
aspects of their relationship during and after the period in which Stonington
offers services to the Company.

 

                NOW,
THEREFORE, in consideration of the mutual promises and agreements contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

AGREEMENT

 

                1.  Definitions.  The following terms used in this Agreement
shall have the following meanings:

 

                (a)  “Affiliate” means, in reference to the
Company, a Person that directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Company.

 

                (b)  “Board of Directors” means the Board of
Directors of the Company.

 

                (c)  “Change of Control” means (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company
stock would be converted to cash, securities, or other property, other than a
merger of the Company in which shareholders immediately prior to the merger
have the same proportionate ownership of stock of the surviving corporation
immediately after the merger; (ii) any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company; or (iii) any plan of
liquidation or dissolution of the Company.

 

                (d)  “Confidential Information” means all
information disclosed by the Company to Stonington in connection with or for
the provision of management consulting or

 

 

 

 

business advisory services by Stonington. In
particular, Confidential Information shall be deemed to include any trade
secret or other confidential information, know-how or data of any nature
concerning the development, use, formulation or manufacture of the Company’s
products or prospective products, and any process, technique, formula, recipe,
chemical composition, algorithm, computer program (source and object codes),
design, drawing or test data therefor. Confidential Information shall further
include any information relating to any marketing, servicing, financing or
personnel matter relating to the Company or any third party, or their
respective present or future products, sales, suppliers, clients, employees,
investors, or businesses, whether in oral, written, graphic or electronic form.
Confidential Information shall not be deemed to include information which
Stonington can demonstrate by competent proof is: (i) now, or hereafter
becomes, through no act or failure to act on the part of Stonington, publicly
known or available; (ii) known by Stonington at the time of receiving such
information as evidenced by it written records; (iii) hereafter furnished to
Stonington by a third party, as a matter of right and without restriction on
disclosure; (iv) the subject of a written permission to disclose provided by
the Company; or (v) required to be disclosed by law, provided that the Company
is given prior written notice of any such proposed disclosure.

 

                (e)  “Person” shall mean any individual,
partnership, joint venture, limited liability company, corporation,
unincorporated organization or association, trust or other entity.

 

                2.  Consulting and Advisory Services.  Stonington shall furnish management
consultant, financial and business advisory services concerning such matters
related to the business of the Company as may from time-to-time be requested by
the Company, which may include, without limitation:

 

                (a)  advise and consult with the Board of
Directors, the Company’s officers and other executive personnel regarding
business developments, expansion and growth potentials, industry trends,
marketing strategy and opportunities for the Company generally;

 

                (b)  review offers to acquire the Company or
substantially all of its assets and consult with the Board of Directors
regarding such potential acquisitions;

 

 

                (c)  advise and consult with the Company’s
officers and other executive personnel regarding the Company’s entry into other
lines of business and the marketing of the Company’s products in other
geographic regions;

 

                (d)  make recommendations to the Company’s
officers and other executive personnel regarding product development and
research strategies;

 

                (e)  advise and consult with the Board of
Directors regarding the Company’s working capital needs and maintenance of
reserves;

 

                (f)  advise and consult with the Board of Directors
regarding the borrowing of funds by the Company and available equity and debt
financing structures;

 

                (g)  make recommendations to the Company’s
officers and other executive personnel with respect to the Company’s engagement
of consultants and other professionals and review proposals related to such
engagements;

 

 

2

 

 

                (h)  advise and consult with the Company’s
officers and other executive personnel with respect to the Company’s dealings
with suppliers, distributors and vendors; and

 

                (i)  review overall Company operations and make
recommendations to the Company’s officers and other executive personnel on
reducing operating expenses, improving efficiency and increasing Company
profitability.

 

                3.  Commitment of Time and Personnel.  Stonington shall devote such time and
personnel, on a non-exclusive basis, to the affairs of the Company as is
reasonably necessary for Stonington to perform its services hereunder.
Stonington may represent, perform services for, and be retained by such
additional Persons as Stonington, in it sole discretion, deems advisable and
the Company specifically acknowledges that Stonington provides similar services
to other portfolio companies of Stonington Partners, Ltd.

 

                4.  Fees and Payments.  As compensation in full for all services
rendered by Stonington during the term of this Agreement, the Company shall pay
Stonington an annual management consultant and business advisory fee equal to
1.5% of invested capital, as contributed into OMP by the 1994 Fund and its
affiliates, which shall be paid upon mutually agreeable terms. Payments shall
be made within 10 business days following the end of each calendar quarter. If
this Agreement is terminated pursuant to Section 5 hereof prior to the end of a
calendar year, the Company shall be obligated to pay only for the days that
have elapsed during such calendar year through and including the date of
termination at the daily pro rated amount. As additional consideration for
Stonington’s willingness to enter into this Agreement and as compensation in
full for such services rendered during calendar year 2002, the Company shall
pay Stonington one full year’s fee, payable within 30 days of execution of this
Agreement.

 

                5.  Term. 
The initial term of this Agreement shall commence on January 1, 2003 and
end on December 31, 2003, and shall automatically renew on an annual basis,
unless sooner terminated by either party at any time upon thirty (30) days
written notice; provided, however, that the Company shall not terminate this
Agreement prior to June 30, 2003 (or provide written notice of such termination
prior to May 31, 2003). Notwithstanding the foregoing, his Agreement shall
automatically terminate upon completion of the first underwritten public offering
of the Company’s common stock pursuant to an effective registration statement
under the Securities Act of 1933, as amended, or upon a Change of Control.
Termination of this Agreement shall not relieve Stonington of the obligations
imposed by Section 8 of this Agreement with respect to Confidential Information
disclosed prior to the effective date of such termination and the provisions of
Section 8 shall survive termination of this Agreement without time limitation.

 

                6.  Expenses.  Stonington shall pay all personnel and
operating expenses required to perform the management consulting and business
advisory services it has agreed to provide the Company under this Agreement.
The Company agrees to reimburse Stonington from time to time, upon written
request, for all reasonable and properly documented expenses incurred by
Stonington in connection with the performance of its services hereunder (i.e.,
airfare, reasonable accommodations, document procurement and delivery expenses,
and other general or administrative expenses reasonably utilized to perform
services under this Agreement and related matters, including reasonable fees
and expenses of attorneys engaged by Stonington in the

 

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conduct of a legal review of finance
transactions and contract for the Company). Such expenses are to be paid on a
current basis within thirty (30) days of receipt of a statement therefore. The
Company shall be obligated to pay any and all expenses related to the operation
of its business, including, but not limited to, legal, accounting and other
professional fees.

 

                7.  Independent Contractor Status.

 

                (a)  Each party shall retain full control,
authority and discretion at all times, with regard to the hiring, firing and
working conditions of the parties’ respective employees or other personnel,
subject only to the provisions of this Agreement.

 

                (b)  Each party shall remain solely responsible
and liable for compliance with all local, state and federal laws and
regulations, and any contractual obligations related to the employment of such
parties’ respective employees or other personnel.

 

                (c)  Each party shall remain solely responsible
and liable for the payment of all wages, fringe benefits, payroll related taxes
and premiums, and expense reimbursement related to the employment of such
parties, respective employees or other personnel.

 

                (d)  The parties hereto acknowledge that their
relationship shall be that of an independent contractor rather than that of
employee, agent, partnership, or a joint venture. As an independent contractor,
Stonington shall have no authority, express or implied, to commit or obligate
the Company in any manner whatsoever, except as specifically authorized from
time to time in writing by an authorized representative of the Company, which
authorization may be general or specific.

 

                8.  Confidential Information. Stonington
agrees that:

 

                (a)  all Confidential Information shall remain the
property of the Company and shall be returned to the Company promptly upon its
request together with all copies thereof;

 

                (b)  Stonington shall protect the Confidential
Information received with at least the same degree of care used to protect its
own proprietary information from unauthorized use or disclosure and shall not
use it for any purpose other than as specified above;

 

                (c)  Stonington shall not disclose the
Confidential Information to any third party without the express written consent
of the Company;

 

                (d)  Confidential Information supplied shall not
be reproduced in any form except as required to accomplish the intent of this
Agreement;

 

                (e)  Stonington shall advise its employees or
agents who might have access to such Confidential Information of the
confidential nature thereof and shall obtain from each of such employees and
agents an agreement to abide by the terms of this Agreement;

 

                (f)  nothing contained herein shall constitute any
form of warranty with regard to the Confidential Information, nor be construed
as granting to either party any license or right under any patent, copyright,
trade secret, or any other rights in the Confidential Information; and

 

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                (g)  nothing contained herein shall be construed
as committing either party to enter into any further agreements with the other
party.

 

                9.  Limited Liability.  With regard to the management consulting and
business advisory services to be performed by Stonington pursuant to this
Agreement, Stonington shall not be liable to the Company, or to anyone who may claim
any right due to its relationship with the Company, for any acts or omissions
in the performance of services on the part of Stonington or on the part of the
officers, employees or agents of Stonington, unless the acts or omissions of
Stonington or its officers, employees or agents have been determined to have
been due to their willful misconduct or gross negligence, The Company shall
defend, indemnify and hold Stonington, its officers, employees and agents free
and harmless from any obligations, costs, claims, judgments, attorneys’ fees,
attachments and all other liabilities whatsoever arising from, growing out of
or incurred in connection with the services rendered to the Company pursuant to
the terms of this Agreement, unless the same shall have been determined to have
arisen due to the willful misconduct or gross negligence of Stonington or its
officers, employees or agents.

 

                10.  Remedies.  If any action at law or equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys’ fees, costs, and necessary disbursements
in addition to any other relief to which that party may be entitled.

 

                11.  Notices.  Any and all notices, consents, documents or
communications provided for in this Agreement shall be given in writing and
shall be personally delivered, mailed by registered or certified mail (return
receipt requested) or sent by courier, confirmed by receipt, and addressed as
follows (or to such other address as the addressed party may have substituted
by notice pursuant to this Section 11):

 

 

 

                  

 

	
  (a)

  	
   

  	
  If
  to the Company:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OMP,
  Inc.

  
	
   

  	
   

  	
  310
  Golden Shore

  
	
   

  	
   

  	
  Long
  Beach, California 90802

  
	
   

  	
   

  	
  Attn:Curtis
  A. Cluff

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
   If to Stonington:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Stonington
  Partners, Inc.

  
	
   

  	
   

  	
  767
  5th Avenue, 48th Floor

  
	
   

  	
   

  	
  New
  York, NY 10153

  
	
   

  	
   

  	
  Attn:
  Frank Bartoletti

  

 

Such notice, consent, document or
communication shall be deemed given upon personal delivery or receipt at the
address of the party stated above or at any other address specified by such party
to the other party in writing, except that if delivery is refused or cannot be
made for any reason, then such notice shall be deemed given on the third day
after it is sent.

 

                12.  Governing Law.  This Agreement shall be construed under and
in accordance with the laws of the State of Delaware.

 

5

 

                13.  Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Neither this Agreement nor any right, remedy, obligation or liability
arising hereunder or by reason hereof shall be assignable (including by
operation of law) by Stonington without the prior written consent of the
Company.

 

                14.  Severability; Legal Construction.  In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if the invalid, illegal, or unenforceable
provisions had never been contained herein. This Agreement shall be construed
without regard to the party or parties deemed responsible for the drafting hereof.

 

                15.  Entire Agreement.  This Agreement contains the entire
understanding and the full and complete agreement of the parties and replaces
any prior understandings and agreements among the parties, with respect to the
subject matter hereof.

 

                16.  Amendment.  This Agreement may be altered, amended or
modified only in a writing signed by both of the parties hereto.

 

                17.  Counterparts.  This Agreement may be executed in one or more
counterparts and each so executed shall constitute one agreement, binding on
all of the parties hereto, notwithstanding that all of the parties may not be
signatories to the same counterpart, provided that each party is a signatory to
at least one counterpart.

 

                18.  Facsimile Signature.  Any signature page to this Agreement transmitted
by facsimile machine shall be treated in all manner and respects as an original
agreement and the signature of any party to this Agreement transmitted by
facsimile machine shall for all purposes be considered an original signature.

 

[signatures
on next page]

 

6

 

                IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.

 

	
  OMP, INC.

  	
   

  	
  STONINGTON PARTNERS, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Curtis A. Cluff

  	
   

  	
  By:

  	
  /s/ Robert F. End

  	
   

  
	
  Name:

  	
  Curtis A. Cluff

  	
   

  	
  Name:

  	
  Robert F. End

  	
   

  
	
  Title:

  	
  CFO

  	
   

  	
  Title:

  	
   Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

7Exhibit
10.1

 

STB BEAUTY, INC.

 

2004 EQUITY INCENTIVE PLAN

 

 

1.             Purpose.

 

The purpose of this Equity
Incentive Plan (the “Plan”) is to advance the interests of STB Beauty, Inc., a
Delaware corporation (the “Company”), by enhancing the ability of the Company
and its subsidiaries to attract and retain able employees, consultants or
advisers; to reward such individuals for their
contributions; and to encourage such individuals to take into account the
long-term interests of the Company and its subsidiaries through interests in
shares of the Company’s common stock, $0.01 par value per share (the “Stock”).
Any employee, consultant, or adviser selected to receive an Award (as defined
below) under the Plan is referred to as a “participant.”

 

The Plan
is intended to accomplish these goals by enabling the Company to grant awards n
the forms of Options, Restricted Stock Awards, Unrestricted Stock, or
combinations thereof, all as more fully described below (“Awards”). Options granted pursuant to the Plan may be incentive stock
options as defined in section 422 of the Internal Revenue Code of 1986 (as from
time to time amended, the “Code”) (any Option that is intended so to qualify as
an incentive stock option being referred to herein as an “incentive option”),
or Options that are not incentive options, or both. Except as otherwise
expressly provided with respect to an Option grant, no Option granted pursuant
to the Plan shall be an incentive option.

 

2.             Administration.

 

The Plan
shall be administered by the Board of Directors (the “Board”) of the Company.
The Board shall have discretionary authority, not inconsistent with the express
provisions of the Plan, (a) to grant Awards to such eligible persons as the Board may select; (b) to determine the time or
times when Awards shall be granted and the number of shares of Stock subject to
each Award; (c) to determine which Options are, and which Options are not,
intended to be incentive options; (d) to determine the terms and conditions of
each Award; (e) to prescribe the form or forms of any instruments evidencing
Awards and any other instruments required under the Plan and to change such
forms from time to time; (f) to adopt, amend, and rescind rules and regulations
for the administration of the Plan; and (g) to interpret the Plan and to decide
any questions and settle all controversies and disputes that may arise in
connection with the Plan. Such determinations of the Board shall be conclusive
and shall bind all parties. Subject to Section 12, the Board shall also have
the authority, both generally and in particular instances, to waive compliance
by a participant with any obligation to be performed by him or her under an
Award, to waive any condition or provision of an Award, and to amend or cancel
any Award (and if an Award is canceled, to grant a new Award on such terms as
the Board shall specify), except that the Board may not take any action with
respect to an outstanding Award that would adversely affect the rights of the
participant under such Award without such participant’s consent. Nothing in the
preceding sentence shall be construed as limiting the power of the Board to
make adjustments required by Section 4(c) and Section 10.

 

 

The
Board may, in its discretion, delegate some or all of its powers with respect
to the Plan to a committee (the “Committee”), in which event all references (as appropriate) to the Board hereunder
shall be deemed to refer to the Committee. The Committee, if one is appointed,
shall consist of at least two directors. A majority of the members of the
Committee shall constitute a quorum, and all determinations of the Committee
shall be made by a majority of its members. Any determination of the Committee
under the Plan may be made without notice or meeting of the Committee by a
writing signed by all of the Committee members. On and after registration of
the Stock under the Securities Exchange Act of 1934 (the “1934 Act”), the Board
shall delegate the power to select directors and officers to receive Awards
under the Plan and the timing, pricing, and amount of such Awards to a
Committee, all members of which shall be “non-employee directors” within the
meaning of Rule 16b-3 under the 1934 Act and “outside directors” within the
meaning of section 162(m)(4)(c)(i) of the Code.

 

3.             Effective Date and Term of Plan.

 

The Plan
shall become effective on the date on which it is approved by the shareholders
of the Company. Grants of Awards under the Plan may be made prior to that date
(but after Board adoption of the Plan), subject to approval of the Plan by the
shareholders.

 

No
Awards shall be granted under the Plan after the completion of ten years from
the date on which the Plan was adopted by the Board, but Awards previously granted may extend beyond that date.

 

4.             Shares Subject to the Plan.

 

(a)           Number of Shares. Subject to adjustment as provided
in Section 4(c), the aggregate number
of shares of Stock that may be the subject of Awards granted under the Plan
shall be 7,709,812. If any Award granted under the Plan terminates without
having been exercised in full, is forfeited, or upon exercise is satisfied
other than by delivery of Stock, the number of shares of Stock as to which such
Award was not exercised shall be available for future grants.

 

(b)           Shares to be Delivered. Shares delivered under the Plan
shall be authorized but unissued Stock, or if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in its
treasury. No fractional shares of Stock shall be delivered under the Plan.

 

(c)           Changes in Stock. In the event of a stock dividend, stock
split or combination of shares, recapitalization, or other change in the
Company’s capital stock, the number and kind of shares of Stock or securities
of the Company subject to Awards then outstanding or subsequently granted under
the Plan, the exercise price of such Awards, the maximum number of shares or
securities that may be delivered under the Plan, and other relevant provisions
shall be appropriately adjusted by the Board, whose determination shall be
binding on all persons.

 

The
Board may also adjust the number of shares subject to outstanding Awards, the
exercise price of outstanding Awards, and the terms of outstanding Awards, to take into consideration
material changes in accounting practices or principles, extraordinary
dividends, consolidations or mergers (except those described in Section 10),
acquisitions or dispositions of 

 

2

 

stock or property,
or any other event if it is determined by the Board that such adjustment is appropriate
to avoid distortion in the operation of the Plan, provided,
that no such adjustment shall be made in the case of an incentive option,
without the consent of the participant, if it would constitute a modification, extension, or renewal of the Section within
the meaning of Section 424(h) of the Code.

 

5.             Awards; Etc.

 

Persons eligible to receive
Awards under the Plan shall be those persons who, in the opinion of the Board,
are in a position to make a significant
contribution to the success of the Company and its subsidiaries. A subsidiary
for purposes of the Plan shall be a corporation in which the Company owns,
directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock.

 

Incentive
options shall be granted only to “employees” as defined in the provisions of
the Code or regulations thereunder applicable to incentive stock options.

 

6.             Terms and Conditions of Options.

 

(a)           Exercise Price of Options. The exercise price of each option
to acquire Stock (an “Option”) shall be determined by the Board, but shall
not be less than 85% of the fair market value of the Stock at the time the
Option is granted and, in the case of an incentive option shall not be less
than 100% (110%, in the case of an incentive option granted to a ten-percent shareholder)
of the fair market value of the Stock at the time the Option is granted; nor
shall the exercise price be less, in the case of an original issue of
authorized stock, than par value. For this purpose, “fair market value” in the
case of incentive options shall have the same meaning as it does in the
provisions of the Code and the regulations thereunder applicable to incentive
options;  and “ten-percent shareholder”
shall mean any participant who at the time of grant owns directly, or by reason
of the attribution rules set forth in section 424(d) of the Code is deemed to
own, stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any of its parent or subsidiary
corporations.

 

(b)           Duration
of Options. Except as provided in
clause 6(c) below, an Option shall be exercisable during such period or periods
as the Board may specify. In the case of an Option not immediately
exercisable in full, the Board may at any time accelerate the time at which all
or any part of the Option may be exercised. The latest date on which an Option
may be exercised (the “Expiration Date”)
shall be the date which is ten years (five years in the case of an incentive Option
granted to anyone other than a “ten percent shareholder” as defined in
(a) above) from the date the Option was granted or such earlier date as may be specified
by the Board at the time the Option is granted.

 

(c)           Vesting.
Except in the case of Options granted to officers, directors, managers or consultants of the Company, each Option shall vest
and become exercisable at the rate of at least 20% per year over five
(5) years from the date the Option is granted, subject to continued employment
of the holder thereof.

 

 

3

 

(d)           Exercise of Options.

(i)            An Option shall become exercisable
at such time or times and upon such conditions
as the Board shall specify. In the case of an Option not immediately
exercisable in full, the Board may at any time accelerate the time at which all
or any part of the Option may be exercised.

(ii)           Any
exercise of an Option shall be in writing, signed by the proper person and
furnished to the Company, accompanied by (A) such documents as may be required
by the Board and (B) payment in full as specified below in Section 6(d) for the
number of shares of Stock for which the Option is exercised.

(iii)          If an
Option is exercised by the executor or administrator of a deceased participant,
or by the person or persons to whom the Option has been transferred by the
participant’s will or the applicable laws of descent and distribution, the
Company shall be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of the person or persons
exercising the Option.

(e)           Payment for and Delivery of Stock.  Stock
purchased upon exercise of an Option under the Plan shall be paid for as
follows: (i) in cash, check acceptable to the Company (determined in accordance
with such guidelines as the Board may prescribe), or money order payable to the
order of the Company, or (ii) if so permitted by the Board (which, in the case
of an incentive option, shall specify such method of payment at the time of
grant), (A) through the delivery of shares of Stock (which, in the case of
Stock acquired from the Company, shall have been held for at least six months
unless the Board specifies a shorter period) having a fair market value on the
last business day preceding the date of exercise equal to the purchase price,
(B) by delivery of an unconditional and irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
(C) by any combination of the permissible forms of payment.

 

7.             Restricted Stock.

 

(a)           Grant of Restricted Stock.  Subject
to the terms and provisions of the Plan, the Board
may grant shares of Stock in such amounts and upon such terms and conditions as
the Board shall determine in accordance with this Section 7 (“Restricted Stock”).

(b)           Restricted
Stock Agreement.  The Board may
require, as a condition to an Award, that a recipient of a Restricted Stock
Award enter into a Restricted Stock Award Agreement, setting forth the terms
and conditions of the Award. In lieu of a Restricted Stock Award Agreement, the
Board may provide the terms and conditions of an Award in a notice to the
Participant of the Award, on the Stock certificate representing the Restricted
Stock, in the resolution approving the Award, or in such other manner as it
deems appropriate.

(c)           Transferability and Other Restrictions.  Except as
otherwise provided in this Section 7, the shares of Restricted Stock granted
herein may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated until the end of the applicable period or periods established
by the Board and the satisfaction of any other conditions or restrictions
established by the Committee (such period during which a share of Restricted
Stock is subject to such restrictions and conditions is referred to as the “Restricted
Period”). Except as the Board may

 

 

4

otherwise
determine under Section 9, if a Participant suffers a Termination of Service
(as defined at Section 9) for any reason during the Restricted Period, the
Company may purchase the shares of Restricted Stock subject to such
restrictions and conditions for the amount of cash paid by the Participant for
such shares; provided, that if no cash was
paid by the Participant any such shares of Restricted Stock that would
otherwise be subject to repurchase by the Company in accordance with the
foregoing shall be automatically forfeited to the Company.

During the Restricted Period with respect to any shares of
Restricted Stock, the Company shall have the right to retain in the Company’s
possession the certificate or certificates representing such shares.

(d)           Removal of Restrictions.  Except as otherwise
provided in this Section 7, a share of Restricted Stock covered by a Restricted
Stock grant shall become freely transferable by the Participant upon completion
of the Restricted Period, including the passage of any applicable period of
time and satisfaction of any conditions to vesting; provided that except in the
case of Restricted Stock Awarded to officers, directors, managers or
consultants of the Company, the right to repurchase at the original purchase
price shall lapse at a rate of at least 20% of the shares of Restricted Stock
over five (5) years from the date the Award was made (whether such Award was an
Award of Shares of Restricted Stock or an Option exercisable for Shares of
Restricted Stock). The Board, in its sole discretion, shall have the right at
any time immediately to waive all or any part of the restrictions and
conditions with regard to all or any part of the shares held by any
Participant.

(e)           Voting Rights, Dividends and Other Distributions.  During
the Restricted Period, Participants holding shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such shares. Except as the Board shall otherwise
determine, any other cash dividends and other distributions paid to
Participants with respect to shares of Restricted Stock including any dividends
and distributions paid in shares shall be subject to the same restrictions and
conditions as the shares of Restricted Stock with respect to which they were
paid.

(f)            Other Awards Settled with Restricted Stock.  The
Board may, at the time any Award is granted, provide that any or all the Stock
delivered pursuant to the Award will be Restricted Stock.

(g)           Notice of Section 83(b) Election.  Any Participant
making an election under Section 83(b) of the Code with respect to Restricted
Stock must provide a copy thereof to the Company within 10 days of filing such
election with the Internal Revenue Service.

 

8.             Unrestricted
Stock.

Subject to the terms and provisions of the Plan, the Board
may grant or sell shares of fully vested and unrestricted Stock in such amounts
and for such consideration, if any, as the Committee shall determine (“Unrestricted
Stock”); provided, that the aggregate number of
shares of Unrestricted Stock that may be granted or sold for a purchase price
that is less than their fair market value, unless granted in lieu of cash
compensation equal to such fair market value, shall not exceed 770,981 shares.

 

 

5

9.             Termination of Employment.

In the case of any Award, the Board may, through agreement
with the participant (including without limitation, any Stockholders Agreement
of the Company to which the participant is a party), resolution, or otherwise,
provide for post-termination exercise provisions different from those expressly
set forth in this Section 9, including without limitation the vesting
immediately prior to termination of all or any portion of an Award not
otherwise vested prior to termination, and, in the case of an Option, terms
allowing a later exercise by a former employee, consultant or advisor (or, in
the case of a former employee, consultant or advisor who is deceased, the
person or persons to whom the Award is transferred by will or the laws of
descent and distribution) as to all or any portion of the Award not exercisable
immediately prior to termination of employment or other service, but in no case
may an Award be exercised after the Expiration Date. If the Board does not
otherwise provide for such provisions and if a participant’s employment or
other service relationship with the Company and its subsidiaries terminates
prior to the Expiration Date (including by reason of death) the following shall
apply:

 

(a)           Options.

(i)            Options that are not vested
immediately prior to the termination shall automatically
terminate upon termination. To the extent vested immediately prior to
termination of employment or other service, the Option shall continue to be
vested and shall be exercisable thereafter during the period prior to the
Expiration Date and (i) in the case of time-vested Options, within 90 days
following such termination and (ii) in the case of performance Options, within
the later of (x) 30 days following the date value is determined as specified by
the Board in the Option certificate evidencing the grant of such Options and
(y) 30 days following such termination; provided, however,
that if the participant’s employment or other service is terminated “for cause”
as defined in (ii) below, all unvested or unexercised Awards shall terminate
immediately; and provided further that if termination is caused by death or
disability, the Option shall continue to be vested and shall be exercisable up
to six (6) months from the date of termination. Except as otherwise provided in
an Award, after completion of such exercise period, such Awards shall terminate
to the extent not previously exercised, expired, or terminated.

(ii)           For purposes of the foregoing, termination for “cause” shall
mean that the Board of Directors of the Company has determined, in its
reasonable judgment, that any one or more of the following has occurred:

a)  the participant
shall have been convicted of, or shall have pleaded guilty or nolo contendere to, a felony;

b)  the participant
shall have breached any non-competition agreement between the participant and
the Company or its affiliates; or

c)  the participant
shall have openly disregarded his or her responsibilities to the Company and/or
its affiliates and shall have refused to devote substantial time and energy to
the business and affairs of the Company

6

 

and/or
its affiliates (other than due to disability or temporary disability which, in
the reasonable judgment of the Board of Directors, causes the participant to be
incapable of devoting such time and energy) within 30 days after written
notification by the Board of Directors that, in their good faith judgment, the
participant has consistently failed to do so;

provided
that, with respect to any
participant who is employed by the Company or one of its subsidiaries pursuant
to an effective written employment agreement in which there is a definition of “cause,” the definition of “cause” as set forth in such
employment agreement shall be deemed to be the definition of “cause”
solely for such participant and only for so long as such employment agreement
remains effective.

No Option shall be exercised or surrendered in exchange
for a cash payment after the Expiration Date.

(b)      Restricted Stock.  Restricted
Stock held by the Participant must be transferred to the Company (and, in the
event the certificates representing such Restricted Stock are held by the Company,
such Restricted Stock will be so transferred without any further action by the Participant)
pursuant to the terms of Section 7(c).

10.           Mergers, etc.  Except as
otherwise provided at the time of grant, in the event of a consolidation or
merger of the Company in which the Company is not the surviving corporation or
which results in the acquisition of substantially all the Company’s outstanding
voting stock by a single person or entity or by a group of persons and/or
entities acting in concert, or in the event of the sale or transfer of all
or substantially all the Company’s assets (a “Covered Transaction”), the
following rules shall apply:

(i)            Subject to
paragraph (ii) below, all outstanding Awards requiring exercise will cease to be exercisable (after any payment or
other consideration deemed equitable by the Board for the termination of any
vested portion of any Award is made), and all other Awards to the extent not
fully vested (including Awards subject to conditions not yet satisfied or
determined) will be forfeited, as of the effective time of the Covered
Transaction, provided that the Board may in its sole discretion on or prior to
the effective date of the Covered Transaction, (1) make any outstanding Options
exercisable in part or in full, (2) remove any performance or other conditions
or restrictions on any Awards, and/or (3) in the event of a Covered Transaction
under the terms of which holders of the Stock of the Company will receive upon
consummation thereof a payment (whether cash, non-cash or a combination of the
foregoing) for each such share surrendered in the Covered Transaction, make or
provide for a payment (whether cash, non-cash or a combination of the
foregoing) to the participant equal to the difference between (A) the fair
market value of the Stock times the number of shares of Stock subject to
outstanding Awards (to the extent then exercisable at prices not in excess of
the fair market value) and (B) the aggregate exercise price of all such
outstanding Awards in exchange for the termination of such Award by action of
the Board which may be reflected in a resolution or in an Option certificate or
similar instrument or agreement; or

 

 

7

 

(ii)           With respect to an
outstanding Award held by a participant who, following the Covered Transaction, will be employed by or otherwise providing
services to an entity which is a surviving or acquiring entity in the covered
transaction or an affiliate of such an entity, the Board may at or prior to the
effective time of the Covered Transaction, in its sole discretion and in lieu
of the action described in paragraph (i) above, arrange to have such surviving
or acquiring entity or affiliate assume any Award held by such participant
outstanding hereunder or grant a replacement Award which, in the judgment of
the Board, is substantially equivalent to any Award being replaced.

The Board may grant Awards under the Plan in substitution
for Awards held by directors, employees, consultants or advisers of another
corporation who concurrently become directors, employees, consultants or
advisers of the Company or a subsidiary of the Company as the result of a
merger or consolidation of that corporation with the Company or a subsidiary of
the Company, or as the result of the acquisition by the Company or a subsidiary
of the Company of property or stock of that corporation. The Company may direct
that substitute Awards be granted on such terms and conditions as the Board
considers appropriate in the circumstances.

 

11.           General Provisions.

 

(a)           Documentation of Awards.  Awards
will be evidenced by such written instruments,
if any, as may be prescribed by the Board from time to time. Such instruments
may be in the form of agreements to be executed by both the participant and the
Company, or certificates, letters or similar instruments, which need not be
executed by the participant but acceptance of which will evidence agreement to
the terms thereof.

(b)           Rights as a Stockholder, Dividend Equivalents.  Except
as specifically provided by the Plan, the receipt of an Award will not give a
participant rights as a stockholder; the participant will obtain such rights,
subject to any limitations imposed by the Plan or the instrument evidencing the
Award, only upon the issuance of Stock. However, the Board may, on such
conditions as it deems appropriate, provide that a Participant will receive a benefit
in lieu of cash dividends that would have been outstanding. Without limitation,
the Board may provide for payment to the Participant of amounts representing
such dividends, either currently or in the future, or for the investment of
such amounts on behalf of the participant.

 

(c)           Delivery of Stock.  A participant
shall not have the rights of a shareholder with regard to Awards under the Plan
except as to Stock actually received by him or her under the Plan.

The Company shall not be obligated to deliver any shares
of Stock (i) until, in the opinion of the Company’s counsel, all applicable
federal and state laws and regulations have been complied with, (ii) if the
outstanding Stock is at the time listed on any stock exchange, until the shares
to be delivered have been listed or authorized to be listed on such exchange
upon official notice of issuance, and (iii) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company’s counsel. Without limiting the generality of the foregoing, if the
sale of Stock has not been registered under the Securities Act of 1933, as
amended, the Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid

 

8

 

violation
of such Act and may require that the certificates evidencing such Stock bear an
appropriate legend restricting transfer.

(d)           Nontransferability
of Awards.  No Award may be transferred other than by will or by
the laws of descent and distribution, and during a participant’s lifetime an
Award may be exercised only by him or her; provided, however,
that the foregoing provisions shall not prohibit any pledge of an Award to the
Company.

(e)           Employment Rights.  Neither the adoption of the
Plan nor the grant of Awards shall confer upon any participant any right to
continue as an employee of, or consultant or adviser to, the Company or any
subsidiary or affect in any way the right of the Company or a subsidiary to
terminate the participant’s relationship at any time. Except as specifically
provided by the Board in any particular case, the loss of existing or potential
profit in Awards granted under this Plan shall not constitute an element of
damages in the event of termination of the relationship of a participant even
if the termination is in violation of an obligation of the Company to the
participant by contract or otherwise.

(f)            Deferral of Payments.  The Board may agree at any
time, upon request of the participant, to defer the date on which any payment
under an Award will be made.

(g)           Past Services as Consideration.  Where a
participant purchases Stock under an Award (other than an Option), the Board
may accept in satisfaction of the purchase price such lawful consideration,
including past services, as it determines appropriate.

(h)           Tax Withholding.  The Company will withhold from
any cash payment made pursuant to an Award an amount sufficient to satisfy all
federal, state and local withholding tax requirements (the “withholding
requirements”).

In the case of an Award pursuant to which Stock may be
delivered, the Board will have the right to require that the Participant or
other appropriate person remit to the Company an amount sufficient to satisfy
the withholding requirements, or make other arrangements satisfactory to the
Board with regard to such requirements, prior to the delivery of any Stock or
removal of restrictions thereon. If and to the extent that such withholding is
required, the Board may permit the participant or such other person to elect at
such time and in such manner as the Board provides to have the Company hold
back from the shares to be delivered, or to deliver to the Company, Stock
having a value calculated to satisfy the withholding requirement. The Board may
make such share withholding mandatory with respect to any Award at the time
such Award is made to a participant.

If at the time an incentive option is exercised the Board
determines that the Company could be liable for withholding requirements with
respect to the exercise or with respect to a disposition of the Stock received
upon exercise, the Board may require as a condition of exercise that the person
exercising the incentive option agree (i) to provide for withholding under the
preceding paragraph of this Section 11(h), if the Board determines that a
withholding responsibility may arise in connection with tax exercise, (ii) to
inform the Company promptly of any disposition (within the meaning of Section
424(c) of the Code) of Stock received upon exercise, and (iii) to give such
security as the Board deems adequate to meet the potential

 

 

9

 

liability
of the Company for the withholding requirements and to augment such security
from time to time in any amount reasonably deemed necessary by the Board to
preserve the adequacy of such security.

12.
          Effect, Discontinuance,
Cancellation, Amendment, and Termination.

Neither adoption of the Plan nor the grant of Awards to a
participant shall affect the Company’s right to make Awards to such participant
that are not subject to the Plan, to issue to such participant Stock as a bonus
or otherwise, or to adopt other plans or arrangements under which Stock may be
issued.

The Board may at any time discontinue granting Awards
under the Plan. With the consent of the participant, the Board may at any time
cancel an existing Award in whole or in part and grant another Award for such
number of shares as the Board specifies. The Board may at any time or times
amend the Plan or any outstanding Award for the purpose of satisfying the
requirements of section 422 of the Code or of any changes in applicable laws or
regulations or for any other purpose that may at the time be permitted by law,
or may at any time terminate the Plan as to any further grants of Awards; provided, that except to the extent expressly required by
the Plan, no such amendment shall adversely affect the rights of any
participant (without his or her consent) under any Award previously granted,
nor shall such amendment, without the approval of the stockholders of the
Company, effectuate a change for which stockholder approval is required in
order for the Plan to continue to qualify for the Award of incentive stock
options under Section 422 of the Code and to continue to qualify under Rule
16b-3 promulgated under Section 16 of the 1934 Act.

 

10

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