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.