STB BEAUTY, INC.
The purpose of this (the Plan) is to advance the interests of STB Beauty, Inc., aDelaware corporation (the Company), by enhancing the ability of the Company,and its subsidiaries to attract and retainable employees, consultants oradvisers; to reward such individuals for theircontributions; and to encourage such individuals to take into account thelong-term interests of the Company and its subsidiaries through interests inshares of the Companys common stock, $0.01 par value per share (the Stock).Any employee, consultant, or adviser selected to receive an Award (as definedbelow) under the Plan is referred to as a participant.
The Planis intended to accomplish these goals by enabling the Company to grant awards nthe forms of Options, Restricted Stock Awards, Unrestricted Stock, orcombinations thereof, all as more fully described below (Awards). Options granted pursuant to the Plan may be incentive stockoptions as defined in section 422 of the Internal Revenue Code of 1986 (as fromtime to time amended, the Code) (any Option that is intended so to qualify asan incentive stock option being referred to herein as an incentive option),or Options that are not incentive options, or both. Except as otherwiseexpressly provided with respect to an Option grant, no Option granted pursuantto the Plan shall be an incentive option.
The Planshall be administered by the Board of Directors (the Board) of the Company.The Board shall have discretionary authority, not inconsistent with the expressprovisions of the Plan, (a) to grant Awards to such eligible persons as the Board may select; (b) to determine the time ortimes when Awards shall be granted and the number of shares of Stock subject toeach Award; (c) to determine which Options are, and which Options are not,intended to be incentive options; (d) to determine the terms and conditions ofeach Award; (e) to prescribe the form or forms of any instruments evidencingAwards and any other instruments required under the Plan and to change suchforms from time to time; (f) to adopt, amend, and rescind rules and regulationsfor the administration of the Plan; and (g) to interpret the Plan and to decideany questions and settle all controversies and disputes that may arise inconnection with the Plan. Such determinations of the Board shall be conclusiveand shall bind all parties. Subject to Section 12, the Board shall also havethe authority, both generally and in particular instances, to waive complianceby a participant with any obligation to be performed by him or her under anAward, to waive any condition or provision of an Award, and to amend or cancelany Award (and if an Award is canceled, to grant a new Award on such terms asthe Board shall specify), except that the Board may not take any action withrespect to an outstanding Award that would adversely affect the rights of theparticipant under such Award without such participants consent. Nothing in thepreceding sentence shall be construed as limiting the power of the Board tomake adjustments required by Section 4(c) and Section 10.
TheBoard may, in its discretion, delegate some or all of its powers with respectto the Plan to a committee (the Committee), in which event all references (as appropriate) to the Board hereundershall 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 theCommittee shall constitute a quorum, and all determinations of the Committeeshall be made by a majority of its members. Any determination of the Committeeunder the Plan may be made without notice or meeting of the Committee by awriting signed by all of the Committee members. On and after registration ofthe Stock under the Securities Exchange Act of 1934 (the 1934 Act), the Boardshall delegate the power to select directors and officers to receive Awardsunder the Plan and the timing, pricing, and amount of such Awards to aCommittee, all members of which shall be non-employee directors within themeaning of Rule 16b-3 under the 1934 Act and outside directors within themeaning of section 162(m)(4)(c)(i) of the Code.
3. Effective Date and Term of Plan.
The Planshall become effective on the date on which it is approved by the shareholdersof 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 theshareholders.
NoAwards shall be granted under the Plan after the completion of ten years fromthe 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 providedin Section 4(c), the aggregate numberof shares of Stock that may be the subject of Awards granted under the Planshall be 7,709,812. If any Award granted under the Plan terminates withouthaving been exercised in full, is forfeited, or upon exercise is satisfiedother than by delivery of Stock, the number of shares of Stock as to which suchAward was not exercised shall be available for future grants.
(b) Shares to be Delivered. Shares delivered under the Planshall be authorized but unissued Stock, or if the Board so decides in its solediscretion, previously issued Stock acquired by the Company and held in itstreasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stocksplit or combination of shares, recapitalization, or other change in theCompanys capital stock, the number and kind of shares of Stock or securitiesof the Company subject to Awards then outstanding or subsequently granted underthe Plan, the exercise price of such Awards, the maximum number of shares orsecurities that may be delivered under the Plan, and other relevant provisionsshall be appropriately adjusted by the Board, whose determination shall bebinding on all persons.
TheBoard may also adjust the number of shares subject to outstanding Awards, theexercise price of outstanding Awards, and the terms of outstanding Awards, to take into considerationmaterial changes in accounting practices or principles, extraordinarydividends, consolidations or mergers (except those described in Section 10),acquisitions or dispositions of
[ILLEGIBLE] property, or any other event if it is determined bythe Board that such adjustment is appropriate to avoid distortion in theoperation of the Plan, provided, thatno such adjustment shall be made in the case of an incentive option, withoutthe consent of the participant, if it [ILLEGIBLE]constitute a modification, extension, orrenewal of the Section within the meaning of Section 424(h) of the Code.
5. Awards; Etc.
Persons eligible to receiveAwards under the Plan shall be those persons who, in the [ILLEGIBLE] of theBoard, are in a position to make a significantcontribution to the success of the Company and its subsidiaries. A subsidiaryfor purposes of the Plan shall be a corporation in which the Company owns,directly or indirectly, stock possessing 50% or more of the total combinedvoting power of all classes of stock.
Incentiveoptions shall be granted only to employees as defined in the provisions ofthe 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 optionto acquire Stock (an Option) shall be determined by the Board, but shallnot be less than 85% of the fair market value of the Stock at the time theOption is granted and, in the case of an incentive option shall not be lessthan 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; norshall the exercise price be less, in the case of an original issue ofauthorized stock, than par value. For this purpose, fair market value in thecase of incentive options shall have the same meaning as it [ILLEGIBLE]in the provisions of the Code and the regulations thereunder applicable toincentive options; [ILLEGIBLE] ten-percent shareholder shallmean any participant who at the time of grant owns directly, or by reason ofthe 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 allclasses of stock of the Company or of any of its parent or subsidiarycorporations.
(b) Durationof Options. Except as provided inclause 6(c) below, an Option shall be exercisable during such period or periodsas the Board may specify. In the case of an Option not immediatelyexercisable in full, the Board may at any time accelerate the time at which allor any part of the Option may be exercised. The latest date on which an Optionmay be exercised (the Expiration Date)shall be the date which is ten years (five years in the case of an incentive Optiongranted to anyone other than a ten percent shareholder as defined in(a) above) from the [ILLEGIBLE] the Optionwas granted or such earlier date as may be specified by the Board at the timethe Option is granted.
(c) Vesting.Except in the case of Options granted to officers, directors, managers or consultants of the Company, each Option shall vestand become exercisable at the rate of at least [ILLEGIBLE] per year overfive (5) years from the date the Option is granted, subject to continued employmentof the holder thereof.
(d) Exercise of Options.
(i) An Option shall become exercisableat such time or times and upon such conditionsas the Board shall specify. In the case of an Option not immediatelyexercisable in full, the Board may at any time accelerate the time at which allor any part of the Option may be exercised.
(ii) Anyexercise of an Option shall be in writing, signed by the proper person andfurnished to the Company, accompanied by (A) such documents as may be requiredby the Board and (B) payment in full as specifed below in Section 6(d) for thenumber of shares of Stock for which the Option is exercised.
(iii) If anOption 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 theparticipants will or the applicable laws of descent and distribution, theCompany shall be under no obligation to deliver Stock pursuant to such exerciseuntil the Company is satisfed as to the authority of the person or personsexercising the Option.
(e) Payment for and Delivery of Stock. Stockpurchased upon exercise of an Option under the Plan shall be paid for asfollows: (i) in cash, check acceptable to the Company (determined in accordancewith such guidelines as the Board may prescribe), or money order payable to theorder of the Company, or (ii) if so permitted by the Board (which, in the caseof an incentive option, shall specify such method of payment at the time ofgrant), (A) through the delivery of shares of Stock (which, in the case ofStock acquired from the Company, shall have been held for at least six monthsunless the Board specifes a shorter period) having a fair market value on thelast business day preceding the date of exercise equal to the purchase price,(B) by delivery of an unconditional and irrevocable undertaking by a broker todeliver 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. Subjectto the terms and provisions of the Plan, the Boardmay grant shares of Stock in such amounts and upon such terms and conditions asthe Board shall determine in accordance with this Section 7 (Restricted Stock).
(b) RestrictedStock Agreement. The Board mayrequire, as a condition to an Award, that a recipient of a Restricted StockAward enter into a Restricted Stock Award Agreement, setting forth the termsand conditions of the Award. In lieu of a Restricted Stock Award Agreement, theBoard may provide the terms and conditions of an Award in a notice to theParticipant of the Award, on the Stock certifcate representing the RestrictedStock, in the resolution approving the Award, or in such other manner as itdeems appropriate.
(c) Transferability and Other Restrictions. Except asotherwise provided in this Section 7, the shares of Restricted Stock grantedherein may not be sold, transferred, pledged, assigned, or otherwise alienatedor hypothecated until the end of the applicable period or periods establishedby the Board and the satisfaction of any other conditions or restrictionsestablished by the Committee (such period during which a share of RestrictedStock is subject to such restrictions and conditions is referred to as the RestrictedPeriod). Except as the Board may
otherwisedetermine under Section 9, if a Participant suffers a Termination of Service(as defned at Section 9) for any reason during the Restricted Period, theCompany may purchase the shares of Restricted Stock subject to suchrestrictions and conditions for the amount of cash paid by the Participant forsuch shares; provided, that if no cash waspaid by the Participant any such shares of Restricted Stock that wouldotherwise be subject to repurchase by the Company in accordance with theforegoing shall be automatically forfeited to the Company.
During the Restricted Period with respect to any shares ofRestricted Stock, the Company shall have the right to retain in the Companyspossession the certifcate or certifcates representing such shares.
(d) Removal of Restrictions. Except as otherwiseprovided in this Section 7, a share of Restricted Stock covered by a RestrictedStock grant shall become freely transferable by the Participant upon completionof the Restricted Period, including the passage of any applicable period oftime and satisfaction of any conditions to vesting; provided that except in thecase of Restricted Stock Awarded to offcers, directors, managers or consultantsof the Company, the right to repurchase at the original purchase price shalllapse 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 ofShares of Restricted Stock or an Option exercisable for Shares of RestrictedStock). The Board, in its sole discretion, shall have the right at any timeimmediately to waive all or any part of the restrictions and conditions withregard to all or any part of the shares held by any Participant.
(e) Voting Rights, Dividends and Other Distributions. Duringthe Restricted Period, Participants holding shares of Restricted Stock grantedhereunder may exercise full voting rights and shall receive all regular cashdividends paid with respect to such shares. Except as the Board shall otherwisedetermine, any other cash dividends and other distributions paid toParticipants with respect to shares of Restricted Stock including any dividendsand distributions paid in shares shall be subject to the same restrictions andconditions as the shares of Restricted Stock with respect to which they werepaid.
(f) Other Awards Settled with Restricted Stock. TheBoard may, at the time any Award is granted, provide that any or all the Stockdelivered pursuant to the Award will be Restricted Stock.
(g) Notice of Section 83(b) Election. Any Participantmaking an election under Section 83(b) of the Code with respect to RestrictedStock must provide a copy thereof to the Company within 10 days of fling suchelection with the Internal Revenue Service.
Subject to the terms and provisions of the Plan, the Boardmay grant or sell shares of fully vested and unrestricted Stock in such amountsand for such consideration, if any, as the Committee shall determine (UnrestrictedStock); provided, that the aggregate number ofshares of Unrestricted Stock that may be granted or sold for a purchase pricethat is less than their fair market value, unless granted in lieu of cashcompensation equal to such fair market value, shall not exceed 770,981 shares.
9. Termination of Employment.
In the case of any Award, the Board may, through agreementwith the participant (including without limitation, any Stockholders Agreementof the Company to which the participant is a party), resolution, or otherwise,provide for post-termination exercise provisions different from those expresslyset forth in this Section 9, including without limitation the vestingimmediately prior to termination of all or any portion of an Award nototherwise vested prior to termination, and, in the case of an Option, termsallowing a later exercise by a former employee, consultant or advisor (or, inthe case of a former employee, consultant or advisor who is deceased, theperson or persons to whom the Award is transferred by will or the laws ofdescent and distribution) as to all or any portion of the Award not exercisableimmediately prior to termination of employment or other service, but in no casemay an Award be exercised after the Expiration Date. If the Board does nototherwise provide for such provisions and if a participants employment orother service relationship with the Company and its subsidiaries terminatesprior to the Expiration Date (including by reason of death) the following shallapply:
(i) Options that are not vestedimmediately prior to the termination shall automaticallyterminate upon termination. To the extent vested immediately prior totermination of employment or other service, the Option shall continue to bevested and shall be exercisable thereafer during the period prior to theExpiration Date and (i) in the case of time-vested Options, within 90 daysfollowing such termination and (ii) in the case of performance Options, withinthe later of (x) 30 days following the date value is determined as specified bythe Board in the Option certifcate evidencing the grant of such Options and (y)30 days following such termination; provided, however,that if the participants employment or other service is terminated for causeas defned in (ii) below, all unvested or unexercised Awards shall terminateimmediately; and provided further that if termination is caused by death ordisability, the Option shall continue to be vested and shall be exercisable upto six (6) months from the date of termination.. Except as otherwise providedin an Award, afer completion of such exercise period, such Awards shallterminate to the extent not previously exercised, expired, or terminated.
(ii) For purposes of the foregoing, termination for cause shallmean that the Board of Directors of the Company has determined, in itsreasonable judgment, that any one or more of the following has occurred:
a) the participantshall have been convicted of, or shall have pleaded guilty or nolo contendere to, a felony;
b) the participantshall have breached any non-competition agreement between the participant andthe Company or its affliates; or
c) the participantshall have openly disregarded his or her responsibilities to the Company and/orits affiliates and shall have refused to devote substantial time and energy tothe business and affairs of the Company
and/orits affiliates (other than due to disability or temporary disability which, inthe reasonable judgment of the Board of Directors, causes the participant to beincapable of devoting such time and energy) within 30 days after writtennotification by the Board of Directors that, in their good faith judgment, theparticipant has consistently failed to do so;
providedthat, with respect to anyparticipant who is employed by the Company or one of its subsidiaries pursuantto an effective written employment agreement in which there is a definition of cause, the definition of cause as set forth in suchemployment agreement shall be deemed to be the definition of causesolely for such participant and only for so long as such employment agreementremains effective.
No Option shall be exercised or surrendered in exchangefor a cash payment after the Expiration Date.
(b) Restricted Stock. RestrictedStock held by the Participant must be transferred to the Company (and, in theevent 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 asotherwise provided at the time of grant, in the event of a consolidation ormerger of the Company in which the Company is not the surviving corporation orwhich results in the acquisition of substantially all the Companys outstandingvoting stock by a single person or entity or by a group of persons and/orentities acting in concert, or in the event of the sale or transfer of allor substantially all the Companys assets (a Covered Transaction), thefollowing rules shall apply:
(i) Subject toparagraph (ii) below, all outstanding Awards requiring exercise will cease to be exercisable (after any payment orother consideration deemed equitable by the Board for the termination of anyvested portion of any Award is made), and all other Awards to the extent notfully vested (including Awards subject to conditions not yet satisfied ordetermined) will be forfeited, as of the effective time of the CoveredTransaction, provided that the Board may in its sole discretion on or prior tothe effective date of the Covered Transaction, (1) make any outstanding Optionsexercisable in part or in full, (2) remove any performance or other conditionsor restrictions on any Awards, and/or (3) in the event of a Covered Transactionunder the terms of which holders of the Stock of the Company will receive uponconsummation thereof a payment (whether cash, non-cash or a combination of theforegoing) for each such share surrendered in the Covered Transaction, make orprovide for a payment (whether cash, non-cash or a combination of theforegoing) to the participant equal to the difference between (A) the fairmarket value of the Stock times the number of shares of Stock subject tooutstanding Awards (to the extent then exercisable at prices not in excess ofthe fair market value) and (B) the aggregate exercise price of all suchoutstanding Awards in exchange for the termination of such Award by action ofthe Board which may be reflected in a resolution or in an Option certificate orsimilar instrument or agreement; or
(ii) With respect to anoutstanding Award held by a participant who, following the Covered Transaction, will be employed by or otherwise providingservices to an entity which is a surviving or acquiring entity in the coveredtransaction or an affiliate of such an entity, the Board may at or prior to theeffective time of the Covered Transaction, in its sole discretion and in lieuof the action described in paragraph (i) above, arrange to have such survivingor acquiring entity or affiliate assume any Award held by such participantoutstanding hereunder or grant a replacement Award which, in the judgment ofthe Board, is substantially equivalent to any Award being replaced.
The Board may grant Awards under the Plan in substitutionfor Awards held by directors, employees, consultants or advisers of anothercorporation who concurrently become directors, employees, consultants oradvisers of the Company or a subsidiary of the Company as the result of amerger or consolidation of that corporation with the Company or a subsidiary ofthe Company, or as the result of the acquisition by the Company or a subsidiaryof the Company of property or stock of that corporation. The Company may directthat substitute Awards be granted on such terms and conditions as the Boardconsiders appropriate in the circumstances.
11. General Provisions.
(a) Documentation of Awards. Awardswill be evidenced by such written instruments,if any, as may be prescribed by the Board from time to time. Such instrumentsmay be in the form of agreements to be executed by both the participant and theCompany, or certificates, letters or similar instruments, which need not beexecuted by the participant but acceptance of which will evidence agreement tothe terms thereof.
(b) Rights as a Stockholder, Dividend Equivalents. Exceptas specifically provided by the Plan, the receipt of an Award will not give aparticipant rights as a stockholder; the participant will obtain such rights,subject to any limitations imposed by the Plan or the instrument evidencing theAward, only upon the issuance of Stock. However, the Board may, on suchconditions as it deems appropriate, provide that a Participant will receive a benefitin lieu of cash dividends that would have been outstanding. Without limitation,the Board may provide for payment to the Participant of amounts representingsuch dividends, either currently or in the future, or for the investment ofsuch amounts on behalf of the participant.
(c) Delivery of Stock. A participantshall not have the rights of a shareholder with regard to Awards under the Planexcept as to Stock actually received by him or her under the Plan.
The Company shall not be obligated to deliver any sharesof Stock (i) until, in the opinion of the Companys counsel, all applicablefederal and state laws and regulations have been complied with, (ii) if theoutstanding Stock is at the time listed on any stock exchange, until the sharesto be delivered have been listed or authorized to be listed on such exchangeupon official notice of issuance, and (iii) until all other legal matters inconnection with the issuance and delivery of such shares have been approved bythe Companys counsel. Without limiting the generality of the foregoing, if thesale of Stock has not been registered under the Securities Act of 1933, asamended, the Company may require, as a condition to exercise of the Award, suchrepresentations or agreements as counsel for the Company may considerappropriate to avoid
violationof such Act and may require that the certificates evidencing such Stock bear anappropriate legend restricting transfer.
(d) Nontransferabilityof Awards. No Award may be transferred other than by will or bythe laws of descent and distribution, and during a participants lifetime anAward may be exercised only by him or her; provided, however,that the foregoing provisions shall not prohibit any pledge of an Award to theCompany.
(e) Employment Rights. Neither the adoption of thePlan nor the grant of Awards shall confer upon any participant any right tocontinue as an employee of, or consultant or adviser to, the Company or anysubsidiary or affect in any way the right of the Company or a subsidiary toterminate the participants relationship at any time. Except as specificallyprovided by the Board in any particular case, the loss of existing or potentialprofit in Awards granted under this Plan shall not constitute an element ofdamages in the event of termination of the relationship of a participant evenif the termination is in violation of an obligation of the Company to theparticipant by contract or otherwise.
(f) Deferral of Payments. The Board may agree at anytime, upon request of the participant, to defer the date on which any paymentunder an Award will be made.
(g) Past Services as Consideration. Where aparticipant purchases Stock under an Award (other than an Option), the Boardmay accept in satisfaction of the purchase price such lawful consideration,including past services, as it determines appropriate.
(h) Tax Withholding. The Company will withhold fromany cash payment made pursuant to an Award an amount sufficient to satisfy allfederal, state and local withholding tax requirements (the withholdingrequirements).
In the case of an Award pursuant to which Stock may bedelivered, the Board will have the right to require that the Participant orother appropriate person remit to the Company an amount sufficient to satisfythe withholding requirements, or make other arrangements satisfactory to theBoard with regard to such requirements, prior to the delivery of any Stock orremoval of restrictions thereon. If and to the extent that such withholding isrequired, the Board may permit the participant or such other person to elect atsuch time and in such manner as the Board provides to have the Company holdback from the shares to be delivered, or to deliver to the Company, Stockhaving a value calculated to satisfy the withholding requirement. The Board maymake such share withholding mandatory with respect to any Award at the timesuch Award is made to a participant.
If at the time an incentive option is exercised the Boarddetermines that the Company could be liable for withholding requirements withrespect to the exercise or with respect to a disposition of the Stock receivedupon exercise, the Board may require as a condition of exercise that the personexercising the incentive option agree (i) to provide for withholding under thepreceding paragraph of this Section 11(h), if the Board determines that awithholding responsibility may arise in connection with tax exercise, (ii) toinform the Company promptly of any disposition (within the meaning of Section424(c) of the Code) of Stock received upon exercise, and (iii) to give suchsecurity as the Board deems adequate to meet the potential
liabilityof the Company for the withholding requirements and to augment such securityfrom time to time in any amount reasonably deemed necessary by the Board topreserve the adequacy of such security.
12. Effect, Discontinuance,Cancellation, Amendment, and Termination.
Neither adoption of the Plan nor the grant of Awards to aparticipant shall affect the Companys right to make Awards to such participantthat are not subject to the Plan, to issue to such participant Stock as a bonusor otherwise, or to adopt other plans or arrangements under which Stock may beissued.
The Board may at any time discontinue granting Awardsunder the Plan. With the consent of the participant, the Board may at any timecancel an existing Award in whole or in part and grant another Award for suchnumber of shares as the Board specifies. The Board may at any time or timesamend the Plan or any outstanding Award for the purpose of satisfying therequirements of section 422 of the Code or of any changes in applicable laws orregulations 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 bythe Plan, no such amendment shall adversely affect the rights of anyparticipant (without his or her consent) under any Award previously granted,nor shall such amendment, without the approval of the stockholders of theCompany, effectuate a change for which stockholder approval is required inorder for the Plan to continue to qualify for the Award of incentive stockoptions under Section 422 of the Code and to continue to qualify under Rule16b-3 promulgated under Section 16 of the 1934 Act.