As filed with the Securities and Exchange Commission on October 17, 1996
Registration No. ________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
PENEDERM INCORPORATED
(Exact name of registrant as specified in its charter)
California 77-0146116
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 Lakeside Drive, Foster City, California 94404
(Address of principal executive offices)
EQUITY INCENTIVE PLAN and
EMPLOYEE STOCK PURCHASE PLAN
(Full title of the plan)
Lloyd H. Malchow
Penederm Incorporated
320 Lakeside Drive
Foster City, California 94404
(Name and address of agent for service)
(415) 358-0100
(Telephone number, including area code, of agent for service)
Copy to: Richard Friedman
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, California 94301-1908
(415) 324-7000
CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed
Securities Amount to Maximum Maximum Amount
to be to be offering aggregate of
registered registered price per offering registration
share (1) price fee
- ---------- ---------- --------- --------- ------------
Common Stock
(no par value) 450,000 $ 8.00 $ 3,600,000 $ 1,090.91
(1) Estimated (solely for the purpose of calculating the registration
fee) on the basis of the last sale reported of the registrant's Common
Stock on the Nasdaq National Market on October 16, 1996 (as
reported in The Wall Street Journal on October 17, 1996).
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<PAGE>
EXPLANATORY NOTE
Penederm Incorporated, a California corporation (the "Registrant"),
previously filed (i) a Registration Statement on Form S-8 (No. 33-76100)
on March 4, 1994, covering, 1,018,714 shares issuable under Registrant's
Employee Stock Option Plan, as amended, Consultant Stock Option Plan, as
amended, Equity Incentive Plan ("Incentive Plan") and 1994 Nonemployee
Directors Stock Option Plan and (ii) a Registration Statement on Form S-
8 (No. 33-92884) on June 8, 1995, covering 50,000 shares issuable under
Registrant's Employee Stock Purchase Plan ("Purchase Plan"). This
Registration Statement on Form S-8 is filed pursuant to Rule 413 and the
general instruction to Form S-8 entitled "Registration of Additional
Securities" and is made for the purpose of registering an additional
450,000 shares of the same class of securities previously filed under
the above-referenced Registration Statements, which are issuable under
the Incentive Plan and the Purchase Plan.
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<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed or to be filed with the Commission by
the registrant are incorporated by reference in this registration
statement:
(a) The registrant's latest annual report (Form 10-K) filed
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or the latest prospectus filed
pursuant to Rule 424(b) under the Securities Act of 1933, as amended
(the "Securities Act"), that contains audited financial statements for
the registrant's latest fiscal year for which such statements have been
filed;
(b) All other reports filed by the registrant pursuant to
Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal
year covered by the annual report or prospectus referred to in (a)
above;
(c) The description of the Common Stock of the registrant
contained in the registration statement filed under the Exchange Act
registering such Common Stock under Section 12 of the Exchange Act.
All documents subsequently filed by the registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the
filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in
this registration statement and to be part thereof from the date of
filing of such documents.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Directors and Officers
Pursuant to Sections 204(a) and 317 of the California Corporations
Code, as amended, the registrant has included in its articles of
incorporation and by-laws provisions regarding the indemnification of
officers and directors of the registrant. Article Fourth of the
registrant's Restated Articles of Incorporation provides as follows:
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<PAGE>
"Fourth: The liability of the directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under
California law. This corporation is also authorized, to the fullest
extent permissible under California law, to indemnify its agents (as
defined in Section 317 of the California Corporations Code), whether by
by-law, agreement or otherwise, in excess of the indemnification
expressly permitted by Section 317 and to advance defense expenses to
its agents in connection with such matters as they are incurred. If,
after the effective date of this Article, California law is amended in a
manner which permits a corporation to limit the monetary or other
liability of its directors or to authorize indemnification of, or
advancement of such defense expenses to, its directors or other persons,
in any such case to a greater extent than is permitted on such effective
date, the references in this Article to `California law' shall to that
extent be deemed to refer to California law as so amended."
Section 29 of the registrant's By-Laws, as amended, provides as follows:
"29. Indemnification of Directors and Officers.
(a) Indemnification. To the fullest extent permissible under
California law, the corporation shall indemnify its directors and
officers against all expenses, judgments, fines, settlement and other
amounts actually and reasonably incurred by them in connection with any
proceeding, including an action by or in the right of the corporation,
by reason of the fact that such person is or was a director or officer
of the corporation, or is or was serving at the request of the
corporation as a director, officer, trustee, employee or agent of
another corporation, or of a partnership, joint venture, trust or other
enterprise (including service with respect to employee benefit plans).
To the fullest extent permissible under California law, expenses
incurred by a director or officer seeking indemnification under this By-
law in defending any proceeding shall be advanced by the corporation as
they are incurred upon receipt by the corporation of an undertaking by
or on behalf of the director or officer to repay such amount if it shall
ultimately be determined that the director or officer is not entitled to
be indemnified by the corporation for those expenses. If, after the
effective date of this By-law, California law is amended in a manner
which permits the corporation to authorize indemnification of or
advancement of expenses to its directors or officers, in any such case
to a greater extent than is permitted on such effective date, the
references in this By-law to `California law' shall to that extent be
deemed to refer to California law as so amended. The rights granted by
this By-law are contractual in nature and, as such, may not be altered
with respect to any present or former director or officer without the
written consent of that person.
(b) Procedure. Upon written request to the Board of Directors by a
person seeking indemnification under this By-law, the Board shall
promptly determine in accordance with Section 317(e) of the California
Corporations Code whether the applicable standard of conduct has been
met and, if so, the Board shall authorize indemnification. If the Board
cannot authorize indemnification because the number of directors who are
parties to the proceeding with respect to which indemnification is
sought prevents the formation of a quorum of directors who are not
parties to the proceeding, then, upon written request by the person
seeking indemnification, independent legal counsel (by means of a
written opinion obtained at the corporation's expense) or the
corporation's shareholders shall determine whether the applicable
standard of conduct has been met and, if so, shall authorize
indemnification.
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<PAGE>
(c) Definitions. The term `proceeding' means any threatened, pending
or completed action or proceeding, whether civil, criminal,
administrative or investigative. The term `expenses' includes, without
limitation, attorney's fees and any expenses of establishing a right to
indemnification."
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
5 Opinion of Heller Ehrman White & McAuliffe
23.1 Consent of Ernst & Young LLP
23.2 Consent of Coopers & Lybrand, L.L.P.
23.3 Consent of Heller Ehrman White & McAuliffe
(filed as part of Exhibit 5)
24 Power of Attorney (see pages 6 and 7)
99.1 Employee Stock Purchase Plan
99.2 Equity Incentive Plan
Item 9. Undertakings
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
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<PAGE>
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement;
provided, however, that paragraphs A(1)(i) and A(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
B. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each
filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item
6, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Foster City,
State of California, on this fourteenth day of October, 1996.
PENEDERM INCORPORATED
By: -----\S\Lloyd H. Malchow------
Lloyd H. Malchow
Director, President and
Chief Executive Officer
POWER OF ATTORNEY TO SIGN AMENDMENTS
Each person whose signature appears below constitutes and
appoints Lloyd H. Malchow and Edgar A. Luce, and each of them, with full
power of substitution and full power to act without the other, such
person's true and lawful attorneys-in-fact and agents for such person in
such person's name, place and stead, in any and all capacities, to sign
any or all amendments (including post-effective amendments) to this
registration statement on Form S-8 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and
about the premises in order to effectuate the same as fully, to all
intents and purposes, as they or such person might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
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<PAGE>
Pursuant to the requirements of the Securities Act of 1933,
this registration statement on Form S-8 has been signed below by the
following persons in the capacities and on the dates indicated.
\S\Lloyd H. Malchow Director, President and Chief October 14, 1996
Lloyd H. Malchow Executive Officer (Principal
Executive Officer)
\S\Edgar A. Luce Vice President Finance and October 14, 1996
Edgar A. Luce Administration. Treasurer and
Secretary (Principal Financial
and Accounting Officer)
\S\Robert F. Allutt Director October 14, 1996
Robert F. Allnutt
\S\William I. Bergman Director October 14, 1996
William I. Bergman
\S\David E. Collins Director October 14, 1996
David E. Collins
\S\Mark J. Gabrielson Director October 14, 1996
Mark J. Gabrielson
\S\Terry L. Opdendyk Chairman of the Board October 14, 1996
Terry L. Opdendyk
\S\Harvey S. Sadow, Ph.D. Director October 14, 1996
Harvey S. Sadow, Ph.D.
\S\Gerald D. Weinstein, M.D. Director October 14, 1996
Gerald D. Weinstein, M.D.
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<PAGE>
Index to Exhibits
Exhibit No. Description of Exhibit
5 Opinion of Heller Ehrman White & McAuliffe
23.1 Consent of Ernst & Young LLP
23.2 Consent of Coopers & Lybrand, L.L.P.
23.3 Consent of Heller Ehrman White & McAuliffe
(See Exhibit 5)
24 Power of Attorney (See pages 6 and 7)
99.1 Employee Stock Purchase Plan
99.2 Equity Incentive Plan
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<PAGE>
October 14, 1996
13912-0008
Penederm Incorporated
320 Lakeside Drive
Foster, City, California 94404
Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to Penederm Incorporated, a California
corporation (the "Company"), in connection with the Registration
Statement on
Form S-8 (the "Registration Statement") which the Company proposes to
file
with the Securities and Exchange Commission on or about October 17, 1996
for
the purpose of registering under the Securities Act of 1933, as amended,
450,000 shares (the "Shares") of its no par value Common Stock to be
issued
under the Company's Employee Stock Purchase Plan and Equity Incentive
Plan
(collectively, the "Plans").
We have assumed the authenticity of all records, documents and
instruments submitted to us as originals, the genuineness of all
signatures,
the legal capacity of natural persons and the conformity to the
originals of
all records, documents and instruments submitted to us as copies. We
have
based our opinion upon our review of the following records, documents,
instruments and certificates and such additional certificates relating
to
factual matters as we have deemed necessary or appropriate for our
opinion:
(a) The Articles of Incorporation of the Company certified by
the
Secretary of State of the State of California as of October
11, 1996 and certified to us by an officer of the Company as
being complete and in full force and effect as of the date
of this opinion;
(b) The Bylaws of the Company certified to us by an officer
of the
Company as being complete and in full force and effect as of
the date of this opinion;
(c) A Certificate of the Chief Financial Officer of the
Company
(i) attaching records certified to us as constituting all
records of proceedings and actions of the Board of Directors
and shareholders of the Company relating to the Plans and
the Registration Statement, and (ii) certifying as to
certain factual matters;
(d) The Registration Statement;
(e) The Employee Stock Purchase Plan;
(f) The Equity Incentive Plan; and
(g) A letter of Chase Mellon Shareholder Services, the
Company's
transfer agent, dated October 10, 1996 as to certain factual
matters.
This opinion is limited to the laws of the State of California, and
we
disclaim any opinion as to the laws of any other jurisdiction. We
further
disclaim any opinion as to any statute, rule, regulation, ordinance,
order or
other promulgation of any regional or local governmental body or as to
any
related judicial or administrative opinion.
Based upon the foregoing and our examination of such questions of
law as
we have deemed necessary or appropriate for the purpose of this opinion,
it is
our opinion that when issued by the Company in accordance with the
Plans, the
Shares will be legally issued, fully paid and nonassessable, assuming
that (i)
the Registration Statement becomes and remains effective during the
period
when the Shares are offered and issued, (ii) each participant in each of
the
Plans pays to the Company the full consideration, if any, required to be
paid
under the Plans and (iii) all applicable securities laws are complied
with.
This opinion is rendered to you in connection with the Registration
Statement and is solely for your benefit. This opinion may not be
relied upon
by you for any other purpose, or relied upon by any other person, firm,
corporation or other entity without our prior written consent. We
disclaim
any obligation to advise you of any change of law that occurs, or any
facts of
which we become aware, after the date of this opinion.
We hereby consent to the filing of this opinion as an exhibit to
the
Registration Statement.
Very truly yours,
\S\ Heller Ehrman White & McAuliffe
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the Equity Incentive Plan and
Employee Stock Purchase Plan of Penederm Incorporated ("Penederm") of
our report dated January 26, 1996, with respect to the consolidated
financial statements incorporated by reference in its Annual Report
(Form 10-K) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
Ernst & Young LLP
Palo Alto, California
October 14, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement of Penederm Incorporated on Form S-8 of our report dated
January 20, 1995, except for note 13, for which the date is March 8,
1995, on our audits of the financial statements of Penederm Incorporated
as of December 31, 1994 and for each of the two years in the period
ended December 31, 1994 which report is included in the Registrant's
Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
San Jose, California
October 14, 1996
PENEDERM INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose
This Penederm Incorporated Employee Stock Purchase Plan (the
"Plan")
is designed to encourage and assist employees of Penederm Incorporated
(the
"Company") to acquire an equity interest in the Company through the
purchase
of shares of Company common stock (the "Common Stock").
2. Administration
The Plan shall be administered by the Board of Directors of the
Company (or by a committee of the Board that will satisfy Rule 16b-3 of
the
Securities and Exchange Commission ("Rule 16b-3") as in effect with
respect to
the Company from time to time, which in either case is referred to as
the
"Board") in accordance with Rule 16b-3. The Board may from time to time
select a committee or persons (the "Administrator"), to be responsible
for any
matters so long as such selection comports with the requirements of Rule
16b-
3. Subject to the express provisions of the Plan, to the overall
supervision
of the Board, and to the limitations of Section 423 of the Internal
Revenue
Code of 1986, as amended (the "Code"), the Administrator may administer
and
interpret the Plan in any manner it believes to be desirable, and any
such
interpretation shall be conclusive and binding on the Company and all
participants.
3. Number of Shares
(a) The total number of shares of Common Stock reserved and
available for issuance pursuant to this Plan shall be 100,000. Such
shares
may consist, in whole or in part, of authorized and unissued shares or
treasury shares reacquired in private transactions or open market
purchases,
but all shares issued under this Plan shall be counted against the
100,000
share limitation.
(b) In the event of any reorganization, recapitalization,
stock
split, reverse stock split, stock dividend, combination of shares,
merger,
consolidation, offering of rights, or other similar change in the
capital
structure of the Company, the Board may make such adjustment, if any, as
it
deems appropriate in the number, kind, and purchase price of the shares
available for purchase under the Plan and in the maximum number of
shares
subject to any option under the Plan.
4. Eligibility Requirements
(a) Each employee of the Company, except those described in
the
next paragraph, shall become eligible to participate in the Plan in
accordance
with Section 5 on the first Enrollment Date on or following commencement
of
his or her employment by the Company or following such period of
employment as
is designated by the Board from time to time. Participation in the Plan
is
entirely voluntary.
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<PAGE>
(b) The following employees are not eligible to participate
in
the Plan:
(I) employees who would, immediately upon
enrollment in
the Plan, own directly or indirectly (including options or rights to
acquire
stock possessing) five percent or more of the total combined voting
power or
value of all classes of stock of the Company or any subsidiary of the
Company;
and
(ii) employees who are customarily employed by the
Company less than 20 hours per week or less than five months in any
calendar
year.
(c) "Employee" shall mean any individual who is an employee
of
the Company or a Participating Subsidiary within the meaning of Section
3401(c) of the Code and the Treasury Regulations thereunder.
"Subsidiary"
shall mean any corporation described in Section 424(e) or (f) of the
Code.
"Participating Subsidiary" shall mean a subsidiary which has been
designated
by the Administrator as covered by the Plan.
5. Enrollment
Any eligible employee may enroll or re-enroll in the Plan each
year
as of the first trading day of (i) July 1995, (ii) the sixth month
following
such month, and (iii) each yearly anniversary of such months (e.g. any
January
and July), or such other days as may be established by the Board from
time to
time (the "Enrollment Dates"). In order to enroll, an eligible employee
must
complete, sign, and submit to the Company an enrollment form. Any
enrollment
form received by the Company by the 15th day of the month preceding an
Enrollment Date (or by the Enrollment Date in the case of employees
hired
after such 15th day), or such other date established by the
Administrator from
time to time, will be effective on that Enrollment Date. For purposes
of the
Plan, a "trading day" is any day on which regular trading occurs on any
established stock exchange or market system on which the Common Stock is
traded.
6. Grant of Option on Enrollment
(a) Enrollment or re-enrollment by a participant in the
Plan on
an Enrollment Date will constitute the grant by the Company to the
participant
of an option to purchase shares of Common Stock from the Company under
the
Plan. Any participant whose option expires and who has not withdrawn
from the
Plan will automatically be re-enrolled in the Plan and granted a new
option on
the Enrollment Date immediately following the date on which the option
expires.
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<PAGE>
(b) Except as provided in Section 9, each option granted
under
the Plan shall have the following terms:
(i) each option granted under the Plan will have
a term
of not more than 24 months or such shorter option period as may be
established
by the Board from time to time; notwithstanding the foregoing, however,
whether or not all shares have been purchased thereunder, the option
will
expire on the earlier to occur of (A) the completion of the purchase of
shares
on the last Purchase Date occurring within 24 months after the
Enrollment Date
for such option, or such shorter option period as may be established by
the
Board before an Enrollment Date for all options to be granted on such
date or
(B) the date on which the employee's participation in the Plan
terminates for
any reason;
(ii) payment for shares purchased under the option
will
be made only through payroll withholding in accordance with Section 7;
(iii) purchase of shares upon exercise of the
option will
be effected only on the Purchase Dates established in accordance with
Section
8;
(iv) the price per share under the option will be
determined as provided in Section 8;
(v) the number of shares available for purchase
under
an option will, unless otherwise established by the Board before an
Enrollment
Date for all options to be granted on such date, be determined by
dividing
$25,000 by the fair market value of a share of Common Stock on the
Enrollment
Date and by multiplying the result by the number of calendar years
included in
whole or in part in the period from grant to expiration of the option;
(vi) the option (taken together with all other
options
then outstanding under this and all other similar stock purchase plans
of the
Company and any subsidiary of the Company, collectively "Options") will
in no
event give the participant the right to purchase shares at a rate per
calendar
year which accrues in excess of $25,000 of fair market value of such
shares,
determined at the applicable Enrollment Date; and
(vii) the option will in all respects be subject to
the
terms and conditions of the Plan, as interpreted by the Administrator
from
time to time.
7. Payroll and Tax Withholding; Use by Company
(a) Each participant shall elect to have amounts withheld
from
his or her compensation paid by the Company during the option period, at
a
rate equal to any whole percentage up to a maximum percentage as the
Board may
establish from time to time before an Enrollment Date. Compensation
includes
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<PAGE>
regular salary payments, commissions, overtime pay and any other
compensation
as may be determined from time to time by the Board of Directors, but
excludes
all other payments including, without limitation, long-term disability
or
workers compensation payments, car allowances, employee referral
bonuses,
relocation payments, expense reimbursements (including but not limited
to
travel, entertainment, and moving expenses), salary gross-up payments,
and
non-cash recognition awards. The participant shall designate a rate of
withholding in his or her enrollment form and may elect to increase or
decrease the rate of contribution effective as of any Enrollment Date,
by
delivery to the Company, not later than 15 days before such Enrollment
Date,
of a written notice indicating the revised withholding rate.
(b) Payroll withholdings shall be credited to an account
maintained for purposes of the Plan on behalf of each participant, as
soon as
administratively feasible after the withholding occurs. The Company
shall be
entitled to use the withholdings for any corporate purpose, shall have
no
obligation to pay interest on withholdings to any participant, and shall
not
be obligated to segregate withholdings.
(c) Upon disposition of shares acquired by exercise of an
option,
the participant shall pay, or make provision adequate to the Company for
payment of, all federal, state, and other tax (and similar) withholdings
that
the Company determines, in its discretion, are required due to the
disposition, including any such withholding that the Company determines
in its
discretion is necessary to allow the Company to claim tax deductions or
other
benefits in connection with the disposition. A participant shall make
such
similar provisions for payment that the Company determines, in its
discretion,
are required due to the exercise of an option, including such provisions
as
are necessary to allow the Company to claim tax deductions or other
benefits
in connection with the exercise of the option.
8. Purchase of Shares
(a) On the last trading day of each month immediately
preceding a
month containing an Enrollment Date, or on such other days as may be
established by the Board from time to time, prior to an Enrollment Date
for
all options to be granted on an Enrollment Date (each a "Purchase
Date"), the
Company shall apply the funds then credited to each participant's
payroll
withholdings account to the purchase of whole shares of Common Stock.
The
cost to the participant for the shares purchased under any option shall
be not
less than 85 percent of the lower of:
(i) the fair market value of the Common Stock on
the
Enrollment Date for such option; or
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<PAGE>
(ii) the fair market value of the Common Stock on
that
Purchase Date.
The "fair market value" of the Common Stock on a date shall be the
closing
price of the Common Stock on such date on any established stock exchange
or
market system if the Common Stock is traded on such an exchange or
market
system (and the largest such exchange or market system if the Common
Stock is
traded on more than one), if the Common Stock is not so traded then the
mean
between the bid and asked prices for Common Stock on such date as quoted
on
Nasdaq National Market or reported in The Wall Street Journal or similar
publication if such prices are so quoted or reported, or the fair market
value
on such date as determined by the Administrator if shares of Common
Stock are
not so traded, quoted, or reported.
(b) Any funds in an amount less than the cost of one share
of
Common Stock left in a participant's payroll withholdings account on a
Purchase Date shall be carried forward in such account for application
on the
next Purchase Date, and any additional amount shall be distributed to
the
participant.
(c) If at any Purchase Date, the shares available under the
Plan
are less than the number all participants would otherwise be entitled to
purchase on such date, purchases shall be reduced proportionately to
eliminate
the deficit. Any funds that cannot be applied to the purchase of shares
due
to such a reduction shall be refunded to participants as soon as
administratively feasible.
9. Withdrawal from the Plan
A participant may withdraw from the Plan in full (but not in
part) at
any time, effective after written notice thereof is received by the
Company.
All funds credited to a participant's payroll withholdings account shall
be
distributed to him or her without interest within 60 days after notice
of
withdrawal is received by the Company. Any eligible employee who has
withdrawn from the Plan may enroll in the Plan again on any subsequent
Enrollment Date in accordance with the provisions of Section 5.
10. Termination of Employment
Participation in the Plan terminates immediately when a
participant
ceases to be employed by the Company for any reason whatsoever
(including
death or disability) or otherwise becomes ineligible to participate in
the
Plan. As soon as administratively feasible after termination, the
Company
shall pay to the participant or his or her beneficiary or legal
representative, all amounts credited to the participant's payroll
withholdings
account; provided, however, that if a participant ceases to be employed
by the
Company because of the commencement of employment with a Subsidiary of
the
- - 5 -
<PAGE>
Company that is not a Participating Subsidiary, funds then credited to
such
participant's payroll withholdings account shall be applied to the
purchase of
whole shares of Common Stock at the next Purchase Date, and any funds
remaining after such purchase shall be paid to the participant.
11. Designation of Beneficiary
(a) Each participant may designate one or more beneficiaries
in the
event of death and may, in his or her sole discretion, change such
designation
at any time. Any such designation shall be effective upon receipt in
written
form by the Company and shall control over any disposition by will or
otherwise.
(b) As soon as administratively feasible after the death of a
participant, amounts credited to his or her account shall be paid in
cash to
the designated beneficiaries or, in the absence of a designation, to the
executor, administrator, or other legal representative of the
participant's
estate. Such payment shall relieve the Company of further liability
with
respect to the Plan on account of the deceased participant. If more
than one
beneficiary is designated, each beneficiary shall receive an equal
portion of
the account unless the participant has given express contrary written
instructions.
12. Assignment
(a) The rights of a participant under the Plan shall not be
assignable by such participant, by operation of law or otherwise. No
participant may create a lien on any funds, securities, rights, or other
property held by the Company for the account of the participant under
the
Plan, except to the extent that there has been a designation of
beneficiaries
in accordance with the Plan, and except to the extent permitted by the
laws of
descent and distribution if beneficiaries have not been designated.
(b) A participant's right to purchase shares under the Plan
shall be
exercisable only during the participant's lifetime and only by him or
her,
except that a participant may direct the Company in the enrollment form
to
issue share certificates to the participant and his or her spouse in
community
property, to the participant jointly with one or more other persons with
right
of survivorship, or to certain forms of trusts approved by the
Administrator.
- - 6 -
<PAGE>
13. Administrative Assistance
If the Administrator in its discretion so elects, it may retain
a
brokerage firm, bank, or other financial institution to assist in the
purchase
of shares, delivery of reports, or other administrative aspects of the
Plan.
If the Administrator so elects, each participant shall be deemed upon
enrollment in the Plan to have authorized the establishment of an
account on
his or her behalf at such institution. Shares purchased by a
participant
under the Plan shall be held in the account in the name in which the
share
certificate would otherwise be issued pursuant to Section 12(b).
14. Costs
All costs and expenses incurred in administering the Plan shall
be
paid by the Company, except that any stamp duties or transfer taxes
applicable
to participation in the Plan may be charged to the account of such
participant
by the Company. Any brokerage fees for the purchase of shares by a
participant shall be paid by the Company, but brokerage fees for the
resale of
shares by a participant shall be borne by the participant.
15. Equal Rights and Privileges
All eligible employees shall have equal rights and privileges
with
respect to the Plan so that the Plan qualifies as an "employee stock
purchase
plan" within the meaning of Section 423 of the Code and the related
Treasury
Regulations. Any provision of the Plan which is inconsistent with
Section 423
of the Code shall without further act or amendment by the Company or the
Board
be reformed to comply with the requirements of Section 423. This
Section 16
shall take precedence over all other provisions of the Plan.
16. Applicable Law
The Plan shall be governed by the substantive laws (excluding
the
conflict of laws rules) of the State of California.
17. Modification and Termination
(a) The Board may amend, alter, or terminate the Plan at any
time,
including amendments to outstanding options. No amendment shall be
effective
unless within 12 months after it is adopted by the Board, it is approved
by
the holders of a majority of the votes cast at a duly held stockholders'
meeting at which a quorum of the voting power of the Company is
represented in
person or by proxy, if such amendment would:
(i) increase the number of shares reserved for
purchase
under the Plan; or
- - 7 -
<PAGE>
(ii) require stockholder approval in order to
comply
with SEC Rule 16b-3.
(b) In the event the Plan is terminated, the Board may
elect to
terminate all outstanding options either immediately or upon completion
of the
purchase of shares on the next Purchase Date, or may elect to permit
options
to expire in accordance with their terms (and participation to continue
through such expiration dates). If the options are terminated prior to
expiration, all funds contributed to the Plan that have not been used to
purchase shares shall be returned to the participants as soon as
administratively feasible.
(c) In the event of the sale of all or substantially all of
the assets of the Company or the Company, or the merger of the Company
or the Company with or into another corporation, or the dissolution or
liquidation of the Company, a Purchase Date shall occur on the trading
day immediately preceding the date of such event, unless otherwise
provided by the Board in its sole discretion, including provision for
the assumption or substitution of each option under the Plan by the
successor or surviving corporation, or a parent or subsidiary thereof.
18. Rights as an Employee
Nothing in the Plan shall be construed to give any person the
right
to remain in the employ of the Company or to affect the Company's right
to
terminate the employment of any person at any time with or without
cause.
19. Rights as a Stockholder; Delivery of Certificates
Unless otherwise determined by the Board, certificates
evidencing
shares purchased on any Purchase Date shall be delivered to participants
as
soon as administratively feasible. Participants shall be treated as the
owners of their shares effective as of the Purchase Date.
- - 8 -
<PAGE>
PENEDERM INCORPORATED
EQUITY INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
(a) Purpose. The purpose of the Plan is to provide selected
eligible
employees and directors of, and consultants to, Penederm Incorporated, a
California corporation, its subsidiaries and affiliates an opportunity
to
participate in the Company's future by offering them an opportunity to
acquire
stock in the Company so as to retain, attract and motivate them.
(b) Definitions. For purposes of the Plan, the following terms
have
the following meanings:
(i) "Award" means any award under the Plan, including any
Option, Restricted Stock, Stock Purchase Right or Performance Share
Award.
(ii) "Award Agreement" means, with respect to each Award,
the
signed written agreement between the Company and the Plan participant
setting
forth the terms and conditions of the Award.
(iii) "Board" means the Board of Directors of the Company.
(iv) "Change in Control" has the meaning set forth in
Section
9(a).
(v) "Change in Control Price" has the meaning set forth in
Section 9(c).
(vi) "Code" means the Internal Revenue Code of 1986, as
amended
from time to time, and any successor statute.
(vii) "Commission" means the Securities and Exchange
Commission
and any successor agency.
(viii) "Committee" means the Committee referred to in Section
2, or
the Board in its capacity as administrator of the Plan in accordance
with
Section 2.
(ix) "Company" means Penederm Incorporated, a California
corporation.
(x) "Disability" means permanent and total disability as
determined by the Committee for purposes of the Plan.
(xi) "Exchange Act" means the Securities Exchange Act of
1934, as
amended from time to time, and any successor statute.
(xii) "Fair Market Value" means as of any given date (a) if
the
Stock is listed on any established stock exchange or a national market
system,
the closing sales price for the Stock or the closing bid if no sales
were
reported, as quoted on such system or exchange, as reported in the Wall
Street
Journal; or (b) in the absence of an established market for the Stock,
the
fair market value of the Stock as determined by the Committee in good
faith.
- - 1 -
<PAGE>
(xiii) "Incentive Stock Option" means any Option intended to
be and
designated as an "incentive stock option" within the meaning of Section
422 of
the Code.
(xiv) "Nonqualified Stock Option" means any Option that is
not an
Incentive Stock Option.
(xv) "Option" means an option granted under Section 5.
(xvi) "Performance Period" means the period determined by
the
Committee under Section 8(a).
(xvii) "Performance Share" means the equivalent, as of any
time
such assessment is made, of the Fair Market Value of one share of Stock.
(xviii) "Performance Share Award" means an Award under Section
8.
(xix) "Plan" means this Penederm Incorporated Equity
Incentive
Plan, as amended from time to time.
(xx) "Restricted Stock" means an Award of Stock subject to
restrictions, as more fully described in Section 6.
(xxi) "Restriction Period" means the period determined by
the
Committee under Section 6(b).
(xxii) "Rule 16b-3" means Rule 16b-3 under Section 16(b) of
the
Exchange Act, as amended from time to time, and any successor rule.
(xxiii) "Stock" means the no par value Common Stock of the
Company,
and any successor security.
(xxiv) "Stock Purchase Right" means an Award granted under
Section
7.
(xxv) "Subsidiary" has the meaning set forth in Section 424
of the
Code.
(xxvi) "Tax Date" means the date defined in Section 10(f).
(xxvii) "Termination" means, for purposes of the Plan, with
respect
to a participant, that the participant has ceased to be, for any reason,
employed by, consulting to, or a director of, the Company, a subsidiary
or an
affiliate; provided, that for purposes of this definition, if so
determined by
the President of the Company, in his sole discretion, Termination shall
not
include a change in status from an employee of, to a consultant to or
director
of, the Company or any subsidiary or affiliate, or vice versa.
- - 2 -
<PAGE>
SECTION 2. ADMINISTRATION.
(a) Committee. The Plan shall be administered by the Board or,
upon
delegation by the Board, by a committee of the Board appointed by the
Board
that will satisfy Rule 16b-3 and Section 162(m) of the Code, as in
effect with
respect to the Company from time to time. In connection with the
administration of the Plan, the Committee shall have the powers
possessed by
the Board. The Committee may act only by a majority of its members,
except
that the Committee may from time to time select another committee or one
or
more other persons to be responsible for any matters so long as such
selection
comports with the requirements of Section 162(m) of the Code and Rule
16b-3.
The Board at any time may abolish the Committee and revest in the Board
the
administration of the Plan.
(b) Authority. The Committee shall grant Awards to eligible
employees and consultants. In particular and without limitation, the
Committee, subject to the terms of the Plan, shall:
(I) select the directors, officers, other key employees
and
consultants to whom Awards may be granted;
(ii) determine whether and to what extent Awards are to be
granted under the Plan;
(iii) determine the number of shares to be covered by each
Award
granted under the Plan;
(iv) determine the terms and conditions of any Award
granted
under the Plan and any related loans to be made by the Company, based
upon
factors determined by the Committee; and
(v) determine to what extent and under what circumstances
any
Award payments may be deferred by a participant.
(c) Committee Determinations Binding. The Committee may adopt,
alter
and repeal administrative rules, guidelines and practices governing the
Plan
as it from time to time shall deem advisable, may interpret the terms
and
provisions of the Plan, any Award and any Award Agreement and may
otherwise
supervise the administration of the Plan. Any determination made by the
Committee pursuant to the provisions of the Plan with respect to any
Award
shall be made in its sole discretion at the time of the grant of the
Award or,
unless in contravention of any express term of the Plan or Award, at any
later
time. All decisions made by the Committee under the Plan shall be
binding on
all persons, including the Company and Plan participants.
- - 3 -
<PAGE>
SECTION 3. STOCK SUBJECT TO PLAN.
(a) Number of Shares. The total number of shares of Stock
reserved
and available for issuance pursuant to Awards under this Plan and
pursuant to
options under each of this Company's Employee Stock Option Plan and
Consultant
Stock Option Plan shall be 1,312,500 shares. Such shares may consist,
in
whole or in part, of authorized and unissued shares or treasury shares
or
shares reacquired in private transactions or open market purchases, but
all
shares issued under the Plan, the Employee Stock Option Plan and the
Consultant Stock Option Plan, regardless of source shall be counted
against
the 1,312,500 share limitation. If any Option terminates or expires
without
being exercised in full or if any shares of Stock subject to an Award
are
forfeited, or if an Award otherwise terminates without a payment being
made to
the participant in the form of Stock, the shares issuable under such
Option or
Award shall again be available for issuance in connection with Awards.
To the
extent an Award is paid in cash, the number of shares of Stock
representing,
at Fair Market Value on the date of the payment, the value of the cash
payment
shall not be available for later grant under the Plan, the Employee
Stock
Option Plan or the Consultant Stock Option Plan. Any Award under this
Plan
shall be governed by the terms of the Plan and any applicable Award
Agreement.
(b) Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split or other
change
in corporate structure affecting the Stock, such substitution or
adjustments
shall be made in the aggregate number of shares of Stock reserved for
issuance
under the Plan, in the number and exercise price of shares subject to
outstanding Options, and in the number of shares subject to other
outstanding
Awards, as may be determined to be appropriate by the Committee, in its
sole
discretion; provided, however, that the number of shares subject to any
Award
shall always be a whole number.
SECTION 4. ELIGIBILITY.
Awards may be granted to directors, officers and other key
employees of,
and consultants to, the Company, its subsidiaries and affiliates.
SECTION 5. STOCK OPTIONS.
(a) Types. Any Option granted under the Plan shall be in such
form
as the Committee may from time to time approve. The Committee shall
have the
authority to grant to any participant Incentive Stock Options,
Nonqualified
Stock Options or both types of Options. Incentive Stock Options may be
granted only to employees of the Company, its parent (within the meaning
of
Section 424(e) of the Code) or Subsidiaries. Any portion of an Option
that is
not designated as, or does not qualify as, an Incentive Stock Option
shall
constitute a Nonqualified Stock Option.
(b) Terms and Conditions. Options granted under the Plan shall
be
subject to the following terms and conditions:
- - 4 -
<PAGE>
(i) Option Term. The term of each Option shall be fixed
by the
Committee, but no Incentive Stock Option shall be exercisable more than
ten
(10) years after the date the Option is granted, and no Nonqualified
Stock
Option shall be exercisable more than fifteen (15) years after the date
the
Option is granted. If, at the time the Company grants an Incentive
Stock
Option, the optionee owns directly or by attribution stock possessing
more
than 10% of the total combined voting power of all classes of stock of
the
Company, or any parent or Subsidiary of the Company, the Incentive Stock
Option shall not be exercisable more than five (5) years after the date
of
grant.
(ii) Grant Date. The Company may grant Options under the
Plan at
any time and from time to time before the Plan terminates. The
Committee
shall specify the date of grant or, if it fails to, the date of grant
shall be
the date of action taken by the Committee to grant the Option. However,
if an
Option is approved in anticipation of employment, the date of grant
shall be
the date the intended optionee is first treated as an employee for
payroll
purposes.
(iii) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be equal to at least 85% of the Fair
Market
Value on the date of grant, and in the case of Incentive Stock Options
shall
be equal to at least the Fair Market Value on the date of grant;
provided,
however, that if, at the time the Company grants an Incentive Stock
Option,
the optionee owns directly or by attribution stock possessing more than
10% of
the total combined voting power of all classes of stock of the Company,
or any
parent or Subsidiary of the Company, then the exercise price shall be
not less
than 110% of the Fair Market Value on the date the Incentive Stock
Option is
granted.
(iv) Exercisability. Subject to the other provisions of
the
Plan, an Option shall be exercisable in its entirety at grant or at such
times
and in such amounts as are specified in the Award Agreement evidencing
the
Option. The Committee, in its absolute discretion, at any time may
waive any
limitations respecting the time at which an Option first becomes
exercisable
in whole or in part.
(v) Method of Exercise; Payment. To the extent the right
to
purchase shares has accrued, Options may be exercised, in whole or in
part,
from time to time, by written notice from the optionee to the Company
stating
the number of shares being purchased, accompanied by payment of the
exercise
price for the shares.
(vi) No Disqualification. Notwithstanding any other
provision in
the Plan, no term of the Plan relating to Incentive Stock Options shall
be
interpreted, amended or altered nor shall any discretion or authority
granted
under the Plan be exercised so as to disqualify the Plan under Section
422 of
the Code or, without the consent of the optionee affected, to disqualify
any
Incentive Stock Option under such Section 422.
- - 5 -
<PAGE>
SECTION 6. RESTRICTED STOCK.
(a) Price. The Committee may grant to a participant Restricted
Stock. The grantee shall pay no consideration therefor.
(b) Restrictions. Subject to the provisions of the Plan and
the
Award Agreement, during the Restriction Period set by the Committee,
commencing with, and not exceeding ten (10) years from, the date of such
Award, the participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber shares of Restricted Stock. Within these
limits,
the Committee may provide for the lapse of such restrictions in
installments
and may accelerate or waive such restrictions, in whole or in part,
based on
service, performance or such other factors or criteria as the Committee
may
determine.
(c) Dividends. Unless otherwise determined by the Committee,
with
respect to dividends on shares of Restricted Stock, dividends payable in
cash
shall be automatically reinvested in additional Restricted Stock, and
dividends payable in Stock shall be paid in the form of Restricted
Stock.
(d) Termination. Except to the extent otherwise provided in
the
Award Agreement and pursuant to Section 6(b), in the event of a
Termination
during the Restriction Period, all shares still subject to restriction
shall
be forfeited by the participant.
SECTION 7. STOCK PURCHASE RIGHTS.
(a) Price. The Committee may grant Stock Purchase Rights which
shall
enable the recipients to purchase Stock at a price equal to not less
than 85%
of its Fair Market Value on the date of grant.
(b) Exercisability. Stock Purchase Rights shall be exercisable
for a
period determined by the Committee not exceeding 30 days from the date
of the
grant.
SECTION 8. PERFORMANCE SHARES.
(a) Awards. The Committee shall determine the nature, length
and
starting date of the Performance Period for each Performance Share
Award,
which period shall be at least one (1) year (subject to Section 9) and
not
more than six (6) years. The consideration payable by a participant
with
respect to a Performance Share Award shall be an amount determined by
the
Committee in the exercise of the Committee's discretion at the time of
the
Award; provided, that the amount of consideration may be zero and may in
no
event exceed 50% of the Fair Market Value at the time of grant. The
Committee
shall determine the performance objectives to be used in awarding
Performance
Shares and the extent to which such Performance Shares have been earned.
Performance Periods may overlap and participants may participate
simultaneously with respect to Performance Share Awards that are subject
to
different Performance Periods and different performance factors and
criteria.
At the beginning of each Performance Period, the Committee shall
determine
- - 6 -
<PAGE>
for each Performance Share Award subject to such Performance Period the
number
of shares of Stock (which may consist of Restricted Stock) to be awarded
to
the participant at the end of the Performance Period if and to the
extent that
the relevant measures of performance for such Performance Share Award
are met.
Such number of shares of Stock may be fixed or may vary in accordance
with
such performance or other criteria as may be determined by the
Committee. The
Committee may provide that (i) amounts equivalent to interest at such
rates as
the Committee may determine, or (ii) amounts equivalent to dividends
paid by
the Company upon outstanding Stock shall be payable with respect to
Performance Share Awards.
(b) Termination. Except as otherwise provided in the Award
Agreement
or determined by the Committee, in the event of a Termination during a
Performance Period, the participant shall not be entitled to any payment
with
respect to the Performance Shares subject to the Performance Period.
(c) Form of Payment. Payment shall be made in the form of cash
or
whole shares of Stock, as the Committee, in its discretion, shall
determine.
SECTION 9. CHANGE IN CONTROL.
(a) Definition of "Change in Control". For purposes of Section
9(b),
a "Change in Control" means the occurrence of any one of the following:
(i) Any "person", as such term is used in Sections 13(d)
and
14(d) of the Exchange Act (other than the Company, a subsidiary, an
affiliate,
or a Company employee benefit plan, including any trustee of such plan
acting
as trustee) is or becomes the "beneficial owner" (as defined in Rule
13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company
representing 20% or more of the combined voting power of the Company's
then
outstanding securities;
(ii) the solicitation of proxies (within the meaning of
Rule 14a-1(k) under the Exchange Act and any successor rule) with
respect to
the election of any director of the Company where such solicitation is
for
any candidate who is not a candidate proposed by a majority of the Board
in
office prior to the time of such election; or
(iii) the dissolution or liquidation (partial or total) of
the
Company or a sale of assets involving 30% or more of the assets of the
Company, any merger or reorganization of the Company whether or not
another
entity is the survivor, a transaction pursuant to which the holders, as
a
group, of all of the shares of the Company outstanding prior to the
transaction hold, as a group, less than 70% of the shares of the Company
outstanding after the transaction, or any other event which the Board
determines, in its discretion, would materially alter the structure of
the
Company or its ownership.
- - 7 -
<PAGE>
(b) Impact of Event. In the event of a "Change in Control" as
defined in Section 9(a), but only if and to the extent so specifically
determined by the Board in its discretion, which determination may be
amended
or reversed only by the affirmative vote of a majority of the persons
who were
directors at the time such determination was made, acceleration and
valuation
provisions no more favorable to participants than the following may
apply:
(I) Subject to Section 5(b)(vi), any Options outstanding
as of
the date such Change in Control is determined to have occurred and not
then
exercisable and vested shall become fully exercisable and vested.
(ii) The restrictions and limitations applicable to any
Restricted Stock and Stock Purchase Rights shall lapse, and such
Restricted
Stock shall become fully vested.
(iii) The value (net of any exercise price) of all
outstanding
Options, Restricted Stock and Stock Purchase Rights, unless otherwise
determined by the Committee at or after grant and subject to Rule 16b-3,
shall
be cashed out on the basis of the "Change in Control Price", as defined
in
Section 9(c), as of the date such Change in Control is determined to
have
occurred or such other date as the Board may determine prior to the
Change in
Control.
(iv) Any outstanding Performance Share Awards shall be
vested and
paid in full as if all performance criteria had been met.
(c) Change in Control Price. For purposes of this Section 9,
"Change
in Control Price" means the highest price per share paid in any
transaction
reported on the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System or paid or offered
in any
bona fide transaction related to a potential or actual Change in Control
of
the Company at any time during the preceding 60-day period as determined
by
the Board, except that, in the case of Incentive Stock Options, such
price
shall be based only on transactions reported for the date on which the
Board
decides to cash out such Options.
SECTION 10. GENERAL PROVISIONS.
(a) Award Grants. Any Award may be granted either alone or in
addition to other Awards granted under the Plan. Subject to the terms
and
restrictions set forth elsewhere in the Plan, the Committee shall
determine
the consideration, if any, payable by the participant for any Award and,
in
addition to those set forth in the Plan, any other terms and conditions
of the
Awards. The Committee may condition the grant or payment of any Award
upon
the attainment of specified performance goals or such other factors or
criteria, including vesting based on continued employment or consulting,
as
the Committee shall determine. Performance objectives may vary from
participant to participant and among groups of participants and shall be
based
upon such Company, subsidiary, group or division factors or criteria as
the
Committee may deem appropriate, including, but not limited to, earnings
per
share or return on equity. The other provisions of Awards also need not
be
- - 8 -
<PAGE>
the same with respect to each recipient. Unless specified otherwise in
the
Plan or by the Committee, the date of grant of an Award shall be the
date of
action by the Committee to grant the Award. The Committee may also
substitute
new Options for previously granted Options, including previously granted
Options having higher exercise prices.
(b) Award Agreement. As soon as practicable after the date of
an
Award grant, the Company and the participant shall enter into a written
Award
Agreement identifying the date of grant, and specifying the terms and
conditions of the Award. Options are not exercisable until after
execution of
the Award agreement by the Company and the Plan participant, but a delay
in
execution of the agreement shall not affect the validity of the Option
grant.
(c) Certificates. All certificates for shares of Stock or
other
securities delivered under the Plan shall be subject to such stock
transfer
orders, legends and other restrictions as the Committee may deem
advisable
under the rules, regulations and other requirements of the Commission,
any
market in which the Stock is then traded and any applicable federal,
state or
foreign securities law.
(d) Termination. Unless otherwise provided in the applicable
Award
Agreement or by the Committee, in the event of Termination for any
reason
other than death, retirement or Disability, Awards held at the date of
Termination (and only to the extent then exercisable or payable, as the
case
may be) may be exercised in whole or in part at any time within three
(3)
months after the date of Termination, or such lesser period specified in
the
Award Agreement (but in no event after the expiration date of the
Award), but
not thereafter. If Termination is due to retirement or to death or
Disability, Awards held at the date of Termination (and only to the
extent
then exercisable or payable, as the case may be) may be exercised in
whole or
in part by the participant in the case of retirement or Disability, by
the
participant's guardian or legal representative or by the person to whom
the
Award is transferred by will or the laws of descent and distribution, at
any
time within two (2) years from the date of Termination or any lesser
period
specified in the Award Agreement (but in no event after the expiration
of the
Award).
(e) Delivery of Purchase Price. If and only to the extent
authorized
by the Committee, participants may make all or any portion of any
payment due
to the Company
(i) with respect to the consideration payable for an
Award,
(ii) upon exercise of an Award, or
(iii) with respect to federal, state, local or foreign tax
payable
in connection with an Award, by delivery of (x) cash, (y) check, or (z)
any
property other than cash (including a promissory note of the participant
or
shares of Stock or securities) so long as, if applicable, such property
constitutes valid consideration for the Stock under, and otherwise
complies
with, applicable law. No promissory note under the Plan shall have a
term
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<PAGE>
(including extensions) of more than five years or shall be of a
principal
amount exceeding 90% of the purchase price paid by the borrower.
(f) Tax Withholding. Any shares or other securities so
withheld or
tendered will be valued by the Committee as of the date they are
withheld or
tendered; provided, however, that Stock shall be valued at Fair Market
Value
on such date. The value of the shares withheld or tendered may not
exceed the
required federal, state, local and foreign withholding tax obligations
as
computed by the Company. Unless the Committee permits otherwise, the
participant shall pay to the Company in cash, promptly when the amount
of such
obligations becomes determinable (the "Tax Date"), all applicable
federal,
state, local and foreign withholding taxes that the Committee in its
discretion determines to result, (i) from the lapse of restrictions
imposed
upon an Award, (ii) upon exercise of an Award, or (iii) from a transfer
or
other disposition of shares acquired upon exercise or payment of an
Award, or
otherwise related to the Award or the shares acquired in connection with
an
Award.
A participant who has received an Award or payment under an
Award
may, to the extent, if any, authorized by the Committee in its
discretion,
make an election to (x) deliver to the Company a promissory note of the
participant on the terms set forth in Section 10(e), or (y) tender any
such
securities to the Company to pay the amount of tax that the Committee in
its
discretion determines to be required to be withheld by the Company;
provided,
however, that such election shall be subject to the disapproval of the
Committee.
(g) No Transferability. No Award shall be assignable or
otherwise
transferable by the participant other than by will or by the laws of
descent
and distribution. During the life of a participant, an Award shall be
exercisable, and any elections with respect to an Award may be made,
only by
the participant or participant's guardian or legal representative.
(h) Adjustment of Awards; Waivers. Subject to Section
5(b)(vi), the
Committee may adjust the performance goals and measurements applicable
to
Awards (i) to take into account changes in law and accounting and tax
rules,
(ii) to make such adjustments as the Committee deems necessary or
appropriate
to reflect the inclusion or exclusion of the impact of extraordinary or
unusual items, events or circumstances in order to avoid windfalls or
hardships, and (iii) to make such adjustments as the Committee deems
necessary
or appropriate to reflect any material changes in business conditions.
In the
event of hardship or other special circumstances of a participant and
otherwise in its discretion, the Committee may waive in whole or in part
any
or all restrictions, conditions, vesting, or forfeiture with respect to
any
Award granted to such participant.
(i) Non-Competition. The Committee may condition its
discretionary
waiver of a forfeiture, the acceleration of vesting at the time of
Termination
of a participant holding any unexercised or unearned Award, the waiver
of
restrictions on any Award, or the extension of the expiration period to
a
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<PAGE>
period not longer than that provided by the Plan upon such participant's
agreement (and compliance with such agreement) to (i) not engage in any
business or activity competitive with any business or activity conducted
by
the Company and (ii) be available for consultations at the request of
the
Company's management, all on such terms and conditions (including
conditions
in addition to (i) and (ii)) as the Committee may determine.
(j) Dividends. The reinvestment of dividends in additional
Stock or
Restricted Stock at the time of any dividend payment pursuant to Section
6(c)
shall only be permissible if sufficient shares of Stock are available
under
Section 3 for such reinvestment (taking into account then outstanding
Awards).
(k) Regulatory Compliance. Each Award under the Plan shall be
subject to the condition that, if at any time the Committee shall
determine
that (i) the listing, registration or qualification of the shares of
Stock
upon any securities exchange or for trading in any securities market or
under
any state or federal law, (ii) the consent or approval of any government
or
regulatory body or (iii) an agreement by the participant with respect
thereto,
is necessary or desirable, then such Award shall not be consummated in
whole
or in part unless such listing, registration, qualification, consent,
approval
or agreement shall have been effected or obtained free of any conditions
not
acceptable to the Committee.
(l) Rights as Shareholder. Unless the Plan or the Committee
expressly specifies otherwise, an optionee shall have no rights as a
shareholder with respect to any shares covered by an Award until the
stock
certificates representing the shares are actually delivered to the
optionee.
Subject to Sections 3(b) and 6(c), no adjustment shall be made for
dividends
or other rights for which the record date is prior to the date the
certificates are delivered.
(m) Beneficiary Designation. The Committee, in its discretion,
may
establish procedures for a participant to designate a beneficiary to
whom any
amounts payable in the event of the participant's death are to be paid.
(n) Additional Plans. Nothing contained in the Plan shall
prevent
the Company, a subsidiary or an affiliate from adopting other or
additional
compensation arrangements for its employees and consultants.
(o) No Employment Rights. The adoption of the Plan shall not
confer
upon any employee any right to continued employment nor shall it
interfere in
any way with the right of the Company, a subsidiary or an affiliate to
terminate the employment of any employee at any time.
(p) Rule 16b-3. Notwithstanding any provision of the Plan, the
Plan
shall always be administered, and Awards shall always be granted and
exercised, in such a manner as to conform to the provisions of Rule 16b-
3.
(q) Governing Law. The Plan and all Awards shall be governed
by and
construed in accordance with the laws of the State of California.
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<PAGE>
(r) Use of Proceeds. All cash proceeds to the Company under
the Plan
shall constitute general funds of the Company.
(s) Unfunded Status of Plan. The Plan shall constitute an
"unfunded"
plan for incentive and deferred compensation. The Committee may
authorize the
creation of trusts or arrangements to meet the obligations created under
the
Plan to deliver Stock or make payments; provided, however, that unless
the
Committee otherwise determines, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan.
(t) Assumption by Successor. The obligations of the Company
under
the Plan and under any outstanding Award may be assumed by any successor
corporation, which for purposes of the Plan shall be included within the
meaning of "Company".
(u) Limitation on Award Grants to Certain Executive Officers.
The
Company may not grant Awards under the Plan for more than 500,000 shares
to
any executive officer whose compensation is required to be disclosed
under
Item 402 of Regulation S-K.
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may amend, alter or discontinue the Plan or any Award,
but no
amendment, alteration or discontinuance shall be made which would impair
the
rights of a participant under an outstanding Award without the
participant's
consent. No amendment, alteration or discontinuance shall require
shareholder
approval except (a) an increase in the total number of shares reserved
for
issuance pursuant to Awards under the Plan, (b) with respect to
provisions
solely as they relate to Incentive Stock Options, to the extent required
for
the Plan to comply with Section 422 of the Code, (c) to the extent
required by
other applicable laws, rules or regulations or (d) to the extent that
the
Board otherwise concludes that shareholder approval is advisable.
SECTION 12. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is adopted by the Board
but
all Awards shall be conditioned upon approval of the Plan (a) at a duly
held
shareholders' meeting by the affirmative vote of the holders of a
majority of
the voting power of the shares of the Company entitled to vote and
represented
in person or by proxy at the meeting, or (b) by an action by written
consent
of the holders of a majority of the voting power of the shares of the
Company
entitled to vote.
SECTION 13. TERM OF PLAN.
No Award shall be granted on or after September 30, 2003, but
Awards
granted prior to September 30, 2003 may extend beyond that date.
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