EXPLANATORY NOTE
Penederm Incorporated, a California corporation
("Penederm California"), previously filed (i) a Registration
Statement on Form S-8 (No. 33-76100) on March 4, 1994, covering
1,018,714 shares issuable under Penederm California'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, (ii) a Registration
Statement on Form S-8 (No. 33-92884) on June 8, 1995, covering
50,000 shares issuable under Penederm California's Employee Stock
Purchase Plan ("Purchase Plan") and (iii) a Registration
Statement on Form S-8 (No. 333-14317) on October 17, 1996
covering 400,000 additional shares issuable under Penederm
California's Incentive Plan and 50,000 additional shares issuable
under Penederm California's Purchase Plan. On August 1, 1997,
after Penederm California's reincorporation in Delaware, the new
corporation, Penederm Incorporated, a Delaware corporation
("Registrant"), filed Post-Effective Amendment No. 1 to the
Registration Statements on Form S-8 listed in the preceding
sentence, adopting those registration statements as its own
registration statements for all purposes of the Securities Act of
1933, as amended (the "Securities Act") and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). 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.
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) Penederm California's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, filed pursuant to
Section 13 of the Exchange Act;
(b) Penederm California's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, filed pursuant to Section
13 of the Exchange Act; and
(c) The description of the Registrant's Common Stock
contained in the Registration Statement on Form 8-A filed
pursuant to Section 12(g) of the Exchange Act and the
description of the Registrant's rights to purchase Common
Stock contained in the Registration Statement on Form 8-A
filed pursuant to Section 12(g) of the Exchange Act, each
as amended by the Registrant's report on Form 8-K filed on
August 1, 1997.
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 hereof 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 the Delaware General Corporation Law, the
registrant has included in its certificate of incorporation
provisions regarding the indemnification of officers and
directors of the registrant. Article TENTH of the Registrant's
Certificate of Incorporation provides as follows:
"TENTH.
A. RIGHT TO INDEMNIFICATION
Each person who was or is made a party or is
threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the corporation
or is or was serving at the request of the corporation as a
director or officer, employee or agent of another corporation, or
of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official
capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the corporation
to the fullest extent authorized or permitted by the Delaware
General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide
broader indemnification rights than that law permitted the
corporation to provide before the amendment) against all
expenses, liabilities and losses (including, without limitation,
attorneys' fees, judgments, fines, ERISA excise taxes and
penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection
therewith. Such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and
administrators. However, the corporation shall indemnify any
such person seeking indemnity in connection with an action, suit
or proceeding (or part thereof) initiated by that person only if
that action, suit or proceeding (or part thereof) was authorized
by the board of directors of the corporation. The rights set
forth in this Article TENTH shall be contract rights and shall
include the right to be paid expenses incurred in defending any
such proceeding in advance of its final disposition. However,
the payment of such expenses incurred by a director or officer of
the corporation in his or her capacity as a director or officer
(and not in any other capacity in which service was or is
rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in
advance of the final disposition of such proceeding shall be made
only upon delivery to the corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so
advanced if it should be determined ultimately that such director
or officer is not entitled to be so indemnified.
B. RIGHT OF CLAIMANT TO BRING SUIT
If a claim under Paragraph A of this Article
TENTH is not paid in full by the corporation within 90 days after
a written claim has been received by the corporation, the
claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim. If
successful in whole or in part, the claimant shall be entitled to
be paid the expense of prosecuting that claim. It shall be a
defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding
in advance of its final disposition where the required
undertaking, if any, has been tendered to this corporation) that
the claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law for the
corporation to indemnify the claimant for the amount claimed.
However, the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including
its board of directors, independent legal counsel or its
stockholders) to have made a determination before the
commencement of such action that indemnification of the claimant
is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the corporation
(including its board of directors, independent legal counsel or
its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard
of conduct.
C. NON-EXCLUSIVITY OF RIGHTS
The rights conferred on any person by Paragraphs
A and B of this Article TENTH shall not be exclusive of any other
rights which such person may have or hereafter may acquire under
any statute, provision of the Certificate of Incorporation,
by-law, agreement, vote of stockholders or of disinterested
directors, or otherwise.
D. EXPENSES AS A WITNESS
To the extent that any director, officer or
employee of the corporation is by reason of such position, or a
position with another entity at the request of the corporation, a
witness in any action, suit or proceeding, he or she shall be
indemnified against all costs and expenses actually and
reasonably incurred by him or her on his or her behalf in
connection therewith.
E. INDEMNITY AGREEMENTS
The corporation may enter into agreements with
any director, officer, employee or agent of the corporation or
any person who serves at the request of the corporation as a
director, officer, employee, or agent of another corporation or
other enterprise, providing for indemnification to the fullest
extent permissible under the Delaware General Corporation Law.
F. EFFECT OF REPEAL OR MODIFICATION
Any repeal or modification of this Article TENTH
shall not adversely affect any right of indemnification of a
director, officer or employee of the corporation existing at the
time of such repeal or modification with respect to any action or
omission occurring before the repeal or modification.
G. SEPARABILITY
Each and every paragraph, sentence, term and
provision of this Article TENTH is separate and distinct. If any
paragraph, sentence, term or provision is held to be invalid or
unenforceable for any reason, such invalidity or unenforceability
shall not affect the validity or enforceability of any other such
paragraph, sentence, term or provision. To the extent required
in order to make any such paragraph, sentence, term or provision
of this Article TENTH valid or enforceable, the corporation
shall, and the indemnitee or potential indemnitee may, request a
court of competent jurisdiction to modify the paragraph,
sentence, term or provision in order to preserve its validity and
provide the broadest possible indemnification permitted by
applicable law.
H. INSURANCE
The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the corporation or another corporation, partnership,
joint venture, trust or other enterprise against any expense,
liability or loss of the type referred to in this Article TENTH,
whether or not the corporation would have the power to indemnify
such person against such expense, liability or loss under
applicable law."
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 8 and 9)
99.1 Equity Incentive Plan
99.2 Employee Stock Purchase 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;
(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.
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 1st day of
August, 1997.
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 Michael A. Bates, 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.
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 August 1, 1997
______________________________ and Chief Executive
Lloyd H. Malchow Officer (Principal
Executive Officer)
/s/ Robert F. Allnutt Director August 1, 1997
______________________________
Robert F. Allnutt
/s/ William I. Bergman Director August 1, 1997
______________________________
William I. Bergman
/s/ David E. Collins Director August 1, 1997
______________________________
David E. Collins
/s/ Mark J. Gabrielson Director August 1, 1997
______________________________
Mark J. Gabrielson
/s/ Harvey S. Sadow, Ph.D. Director August 1, 1997
______________________________
Harvey S. Sadow, Ph.D.
/s/ Gerald D. Weinstein, M.D. Director August 1, 1997
______________________________
Gerald D. Weinstein, M.D.
Index to Exhibits
Sequentially
Numbered
Exhibit No. Description of Exhibit Page
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 8 and 9)
99.1 Equity Incentive Plan
99.2 Employee Stock Purchase Plan
Penederm Incorporated
August 1, 1997
EXHIBIT 5
August 1, 1997
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
Delaware 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 August 1, 1997 for the purpose of
registering under the Securities Act of 1933, as amended, an
additional 450,000 shares of its Common Stock, par value $.01
(the "Shares"), 400,000 of which are issuable under the Company's
Equity Incentive Plan (the "Incentive Plan"), and 50,000 of which
are issuable under the Company's Employee Stock Purchase Plan
(the "Purchase Plan").
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.
In rendering our opinion, we have examined the following
records, documents and instruments:
(a) The Certificate of Incorporation of the Company, certified
by the Delaware Secretary of State as of July 30, 1997,
and certified to us by an officer of the Company as being
complete and in full force 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 an officer of the Company (i) attaching
records certified to us as constituting all records of
proceedings and actions of the Board of Directors, including
any committee thereof, and stockholders of the Company
relating to the Shares, and the Registration Statement, and
(ii) certifying as to certain factual matters;
(d) The Registration Statement;
(e) The Incentive Plan and the Purchase Plan (together, the
"Plans"); and
(f) A letter from ChaseMellon Shareholder Services, the
Company's transfer agent, dated July 30, 1997, as to the
number of shares of the Company's Common Stock that were
outstanding on July 30, 1997.
This opinion is limited to the federal law of the United
States of America and the General Corporation Law of the State of
Delaware, and we disclaim any opinion as to the laws of any other
jurisdiction. We further disclaim any opinion as to any other
statute, rule, regulation, ordinance, order or other promulgation
of any other jurisdiction or 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, and assuming that (i) the
Registration Statement becomes and remains effective during the
period when the Shares are offered and issued, (ii) the full
consideration stated in the Plans is paid for each Share and that
such consideration in respect of each Share includes payment of
cash or other lawful consideration at least equal to the par
value thereof, (iii) appropriate certificates evidencing the
Shares are executed and delivered by the Company, and (iv) all
applicable securities laws are complied with, it is our opinion
that when issued and sold by the Company, after payment therefore
in the manner provided in the Plans and the Registration
Statement, the Shares will be legally issued, fully paid and
nonassessable.
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 for any purpose, 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 may 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
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the Equity Incentive Plan and
the Employee Stock Purchase Plan of Penederm Incorporated of our
report dated January 27, 1997 (except for the second paragraph of
Note 12 as to which the date is March 12), with respect to the
consolidated financial statements included in its Annual Report
(Form 10-K) for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Palo Alto, California
July 31, 1997
Exhibit 23.2
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, on our audit of the statement of operations,
shareholders' equity and cash flows of Penederm Incorporated for the
year ended December 31, 1994, which report is included in the
Registrant's 1996 Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
San Jose, California
July 30, 1997
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.
(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.
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.
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 1,712,500 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 1,712,500 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:
(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.
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 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.
(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 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 (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 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.
(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.
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 150,000. 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 150,000 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.
(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.
(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 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
(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 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.
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
(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.
