SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
NEXMED, INC.
----------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
NEXMED, INC.
350 CORPORATE BOULEVARD
ROBBINSVILLE, NEW JERSEY 08691
-----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 2001
-----------
To Our Shareholders:
Notice is hereby given to all of the shareholders of NexMed, Inc. (the
"Company") that the Annual Meeting of Shareholders (the "Annual Meeting") of the
Company will be held in the conference room of the Company's facilities at 350
Corporate Boulevard, Robbinsville, New Jersey on Monday, May 7, 2001 at 10:00
a.m. for the following purposes:
(1) To elect two persons to the Board of Directors of the Company, each to
serve a three-year term, or until his successor is elected and
qualified.
(2) To consider and vote upon a proposal to approve and adopt an amendment
and restatement of the the Company's Stock Option and Long-Term
Incentive Compensation Plan.
(3) To consider and vote upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP, as the Company's independent accountants
for the ensuing year.
The enclosed Proxy Statement includes information relating to these
proposals. Additional purposes of the Annual Meeting or any adjournment or
postponement thereof are to consider and act upon such other business as may
properly come before this Annual Meeting or any adjournment or postponement
thereof.
All shareholders of record of the Company's common stock at the close of
business on March 16, 2001 are entitled to notice of and to vote at the Annual
Meeting or any adjournment or postponement thereof. At least a majority of the
outstanding shares of common stock of the Company present in person or by proxy
is required for a quorum.
By Order of the Board of Directors
/s/ Vivian H. Liu
-------------------------
Vivian H. Liu
Secretary
March 23, 2001
Robbinsville, New Jersey
THE BOARD OF DIRECTORS APPRECIATES AND ENCOURAGES YOUR PARTICIPATION IN THE
COMPANY'S ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. ACCORDINGLY, PLEASE SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD BY MAIL IN THE POSTAGE-PAID ENVELOPE
PROVIDED, OR VOTE THESE SHARES BY TELEPHONE AT (800) 240-6326 OR BY INTERNET AT
HTTP://WWW.EPROXY.COM/NEXM/. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE
ANY OF YOUR PROXIES, IF YOU WISH, AND VOTE IN PERSON. YOUR PROXIES ARE REVOCABLE
IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THIS PROXY STATEMENT.
MAILED TO SHAREHOLDERS
ON OR ABOUT MARCH 27, 2001
NEXMED, INC.
350 CORPORATE BOULEVARD
ROBBINSVILLE, NEW JERSEY 08691
-----------------------
PROXY STATEMENT
-----------------------
GENERAL INFORMATION
This Proxy Statement is furnished to shareholders of NexMed, Inc., a Nevada
corporation (the "Company"), in connection with the solicitation by the board of
directors (the "Board" or "Board of Directors") of the Company of proxies in the
accompanying form for use in voting at the Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held on Monday, May 7, 2001, at 10:00 a.m.,
local time, at the Company's headquarter facilities at 350 Corporate Boulevard,
Robbinsville, New Jersey, and any adjournment or postponement thereof.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised by delivering to the Company (to
the attention of Vivian H. Liu, the Company's Secretary) a written notice of
revocation or a properly executed proxy bearing a later date.
SOLICITATION AND VOTING PROCEDURES
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy materials for the Annual Meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's common stock, par value $.001 per share (the "Common Stock"). The
Company may use the services of Wells Fargo Shareowner Services in soliciting
proxies and, in such event, the Company expects to pay approximately $10,000,
plus out-of-pocket expenses, for such services. The Company may conduct further
solicitation personally, telephonically or by facsimile through its officers,
directors and regular employees, none of whom would receive additional
compensation for assisting with the solicitation.
The presence at the Annual Meeting of a majority of the outstanding shares
of Common Stock of the Company, represented either in person or by proxy, will
constitute a quorum for the transaction of business at the Annual Meeting. The
close of business on March 16, 2001 has been fixed as the record date (the
"Record Date") for determining the holders of shares of Common Stock (the
"Shareholders") entitled to notice of and to vote at the Annual Meeting. Each
share of Common Stock outstanding on the Record Date is entitled to one vote on
all matters. As of the Record Date, there were 25,202,654 shares of Common Stock
outstanding.
Shareholder votes will be tabulated by the persons appointed by the Board
of Directors to act as inspectors of election for the Annual Meeting. Shares
represented by a properly executed and delivered proxy will be voted at the
Annual Meeting and, when instructions have been given by the Shareholder, will
be voted in accordance with those instructions. If no instructions are given,
the shares will be voted FOR the election of the nominees for directors named
below and FOR Proposal Nos. 2 and 3.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Articles of Incorporation divide the
Company's Board of Directors into three classes, the term of office for each
class arranged so that the term of office of one class expires at each
successive Annual Meeting of Shareholders. The Board of Directors presently
consists of five members as follows: Class I directors, Robert W. Gracy, Ph.D
and Yu-Chung Wei, whose terms expire in 2001 and if Gracy is re-elected at the
Annual Meeting, in 2004; Class II director, Gilbert S. Banker, Ph.D., whose term
expires in 2003; and Class III directors, Y. Joseph Mo, Ph.D. and James L.
Yeager, Ph.D., whose terms expire in 2002.
At the Annual Meeting, the Shareholders will elect two directors to serve
as Class I directors. Each of the directors who is elected at the Annual Meeting
will serve until the Annual Meeting of Shareholders to be held in 2004 and until
such director's successor is elected or appointed and qualifies or until such
director's earlier resignation or removal. It is intended that, unless
authorization to do so is withheld, the proxies will be voted "FOR" the election
of each of the director nominees named below. The Board of Directors believes
that nominees Robert W. Gracy, Ph.D and Stephen M. Sammut will stand for
election and will, if elected, serve as Class I directors. However, with respect
to each nominee, in the event such nominee is unable or unwilling to serve as a
Class I director at the time of the Annual Meeting, the proxies may be voted for
any substitute nominee designated by the present Board of Directors or the proxy
holders to fill such vacancy or the Board of Directors may be reduced to no less
than three members in accordance with the Amended and Restated Articles of
Incorporation of the Company.
NOMINEES FOR DIRECTOR
The following information was furnished to the Company by the nominees.
Robert W. Gracy, Ph.D., nominee for Class I director, is and has been a
director of the Company since January 1997 and a member of the Executive
Compensation Committee and the Audit Committee of the Board of Directors since
February 2000. Dr. Gracy is and has been Associate Vice President for Research
and Biotechnology at the University of North Texas Health Science Center in Fort
Worth, Texas since 1993. Dr. Gracy is recipient of Research Career Development
and MERIT Awards from the National Institutes of Health and research awards from
the American Chemical Society and the American Osteopathic Medical Association.
Dr. Gracy has published approximately 200 research papers and book chapters,
holds patents in biotechnology and lectures internationally on aging and
age-related medical problems. He serves as a consultant or as a director on the
board of directors of several pharmaceutical, healthcare, and biotechnology
organizations. Dr. Gracy received his Ph.D. in Biochemistry from the University
of California, Riverside in 1968 and was a Daymon Runyon Cancer Fellow at Albert
Einstein College of Medicine and an Alexander von Humboldt Fellow at the
University of Wurzburg in Germany. Dr. Gracy is also a member of the Company's
Scientific Advisory Committee.
Stephen M. Sammut, a nominee for a Class I director, is Chairman & CEO of
Buttonwood Ventures, a merchant bank and private equity advisory firm and holds
appointments as a Lecturer at the Wharton School, the Law School and the School
of Engineering and Applied Science of the University of Pennsylvania. From
1993-1999, Mr. Sammut was the Managing Director of Access Management Services,
Inc., a seed stage venture firm focusing on the formation and funding of life
science firms built around university technologies. From 1986-1993, Mr. Sammut
served in various executive positions with Teleflex Incorporated, a NYSE-listed
international engineering/manufacturing company, and S.R. One, Limited, a
venture capital fund of SmithKline Beckman Corporation. Mr. Sammut serves on the
board of directors and advisory boards of several development-stage
biotechnology companies. Mr. Sammut holds an A.B. and M.A. from Villanova
University and an MBA from the University of Pennsylvania. Mr. Sammut is 49
years old and currently serves as a consultant to the Company in licensing and
partnering negotiations.
REQUIRED VOTE AND RECOMMENDATION OF BOARD OF DIRECTORS
Under Nevada law shares as to which there is an abstention or broker
non-vote shall be deemed to be present at the meeting for purposes of
determining a quorum. However, because under Nevada law the nominees
2
for the election of directors must be elected by a plurality of the votes cast
at the election, abstentions and broker non-votes will have no effect on the
outcome of this vote.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES NAMED
ABOVE.
DIRECTORS
Set forth below is certain information as of the Record Date regarding the
directors of the Company.
NAME AGE TITLE
- ---- --- -----
Y. Joseph Mo, Ph.D. 53 Chairman of the Board of Directors,
President and Chief Executive Officer
James L. Yeager, Ph.D. 54 Director, Vice President, R&D and
Business Development
Gilbert S. Banker, Ph.D. 69 Director
Robert W. Gracy, Ph.D. 59 Director
Yu-Chung Wei 38 Director
Biographical information concerning each of the director nominees is set
forth above under the caption "Proposal No. 1 Election of Directors."
Biographical information concerning the remaining directors of the Company is
set forth below.
Y. Joseph Mo, Ph.D., is, and has been since 1995, the Chief Executive
Officer and President of the Company and Chairman and member of the Board of
Directors. His current term as member of the Board of Directors expires in 2002.
Prior to joining the Company in 1995, Dr. Mo was President of a privately-held
investment consulting company. From 1991 to 1994, he was President of the
Chemical Division, and from 1988 to 1994, the Vice President of Manufacturing
and Medicinal Chemistry, of Greenwich Pharmaceuticals, Inc. Prior to that, he
served in various executive positions with several major pharmaceutical
companies, including Johnson & Johnson, Rorer Pharmaceuticals, and predecessors
of SmithKline Beecham. Dr. Mo received his Ph.D. in Industrial and Physical
Pharmacy from Purdue University in 1977.
James L. Yeager, Ph.D., is, and has been since December 1998, a member of
the Board of Directors and, since June 1996, Vice President of Research and
Development and Business Development. His current term as member of the Board of
Directors expires in 2002. Before joining the Company, Dr. Yeager was Vice
President of Research and Development of Pharmedic Company. During that time he
specialized in building and managing new product development programs. From 1989
to 1992, Dr. Yeager held international managerial positions with Abbott
Laboratories. Dr. Yeager received his Ph.D. in Industrial and Physical Pharmacy
from Purdue University in 1978.
Gilbert S. Banker, Ph.D., is and has been a director of the Company since
September 1995, and a member of the Executive Compensation Committee and the
Audit Committee of the Board of Directors since February 2000. His current term
as a member of the Board of Directors expires in 2003. Since 1992 Dr. Banker is
Dean Emeritus and John Lach Distinguished Professor of Drug Delivery of the
College of Pharmacy at the University of Iowa. Dr. Banker is also President &
CEO of Biocontrol Inc., a research firm based in Iowa City. From 1985 to 1992,
he was Dean and Professor of the College of Pharmacy at the University of
Minnesota. Prior to that time, he was the Department Head of Industrial and
Physical Pharmacy at Purdue University for 18 years. Dr. Banker has authored
numerous publications, lectures internationally and consults to several major
pharmaceutical companies. Dr.
3
Banker received his Ph.D. in Industrial Pharmacy from Purdue University in 1957.
Dr. Banker is also a member of the Company's Scientific Advisory Committee.
Yu-Chung Wei, is and has been a director of the Company since March 1997,
and a member of the Executive Compensation Committee and the Audit Committee of
the Board of Directors since February 2000. Since 1995, Mr. Wei has been
President of Dacom Capital Ltd., an investment firm focusing on the formation
and funding of wire and and wireless technology firms. From 1992 to 1994, Mr.
Wei was the Special Assistant to the Chairman of Suzuki Motorcycle Corporation
in Taiwan. From 1989 to 1992, Mr. Wei held various managerial positions at
Kidder, Peabody Incorporated and Merrill Lynch & Co., in New York City. Mr. Wei
received his MBA in Finance and Management Information Systems from Pace
University in 1990.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of Common Stock by (a) each person known by the Company to be the
beneficial owner of more than 5% of the Company's outstanding voting securities,
(b) the directors and executive officers of the Company, individually, and (c)
directors and executive officers of the Company as a group. Unless otherwise
noted herein, the information set forth below is as of the Record Date.
NUMBER OF SHARES
NAME, POSITION AND ADDRESS(1) BENEFICIALLY OWNED(2) PERCENT OF CLASS(%)
- ----------------------------- --------------------- -------------------
Y. Joseph Mo, Ph.D. 2,731,333 (3) 10.85
Chairman of the Board of Directors, President
and Chief Executive Officer
Kenneth Anderson 22,500 (4) 0.05
Vice-President-Commercial Development
Vivian H. Liu 430,000 (5) 1.71
Vice President-Corporate Affairs and Secretary
James L. Yeager, Ph.D. 405,000 (6) 1.61
Director and Vice President-
Research and Development and Business
Development
Gilbert S. Banker, Ph.D. 160,000 (7) 0.63
Director
Robert W. Gracy, Ph.D., 120,000 (8) 0.47
Director
Yu-Chung Wei 90,000 (9) 0.36
Director
All Executive Officers and Directors as a Group 3,951,333 (10) 15.70
(seven persons)
Vergemont International Limited 2,000,000 (11) 7.94
Suite 2401-2408, 24F CITIC Tower, One Tim
Mei Avenue, Central, Hong Kong
4
1) The address for the executive officers and directors of the Company is 350
Corporate Boulevard, Robbinsville, New Jersey, 08691.
2) Except as otherwise noted below, all shares are solely and directly owned,
with sole voting and dispositive power.
3) Includes 1,231,333 shares issuable upon exercise of immediately exercisable
stock options.
4) Represents 22,500 shares issuable upon exercise of immediately exercisable
stock options.
5) Includes 225,000 shares issuable upon exercise of immediately exercisable
stock options.
6) Includes 250,000 shares issuable upon exercise of immediately exercisable
stock options.
7) Includes 35,000 shares issuable upon exercise of immediately exercisable
stock options.
8) Includes 90,000 shares issuable upon exercise of immediately exercisable
stock options.
9) Represents 90,000 shares issuable upon exercise of immediately exercisable
stock options.
10) Includes 1,966,333 shares issuable upon exercise of immediately exercisable
stock options.
11) Represents shares issued upon the exercise of 2,000,000 warrants in June
2000. The warrants were issued in May 1999, in connection with Vergemont
International Limited's acquisition of the Company's Asian operations.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's executive officers, directors and persons
who beneficially own greater than 10% of a registered class of the Company's
equity securities to file certain reports ("Section 16 Reports") with the
Securities and Exchange Commission with respect to ownership and changes in
ownership of the Common Stock and other equity securities of the Company. Based
solely on the Company's review of the Section 16 Reports furnished to the
Company, all Section 16(a) requirements applicable to its officers, directors
and greater than 10% beneficial owners were complied with.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company during
the fiscal years ended December 31, 2000, 1999 and 1998 to the Chief Executive
Officer and its three other most highly compensated persons who were serving as
executive officers of the Company at the end of 2000:
LONG-TERM
COMPENSATION
AWARDS/SECURITIES ALL OTHER
FISCAL ANNUAL ANNUAL UNDERLYING OPTIONS COMPENSATION
NAME AND POSITION YEAR SALARY ($) BONUS ($) (#) ($)(2)
- ----------------- ------ ---------- --------- ------------------ ------------
Y. Joseph Mo 2000 180,000 72,000 1,114,000 64,535
President & Chief 1999 120,000 100,000 -- --
Executive Officer 1998 120,000 -- 100,000 --
- -----------------------------------------------------------------------------------------------------------
Kenneth Anderson 2000 26,333 3,000 67,500 --
Vice-President, 1999 -- -- -- --
Commercial 1998 -- -- -- --
Development (1)
- -----------------------------------------------------------------------------------------------------------
Vivian H. Liu 2000 132,000 40,000 90,000 18,587
Vice-President, 1999 98,000 60,000 -- --
Corporate Affairs 1998 88,000 -- 15,000 --
- -----------------------------------------------------------------------------------------------------------
James L. Yeager 2000 156,000 60,000 120,000 39,180
Vice-President 1999 112,000 80,000 -- --
R&D and Business 1998 100,000 -- 30,000 --
Development
- -----------------------------------------------------------------------------------------------------------
5
(1) Kenneth Anderson started with the Company in November 2000.
(2) Includes insurance premiums paid on behalf of the executive officer and
Company matching contributions to the Salomon Smith Barney 401(K) plan.
EMPLOYMENT AGREEMENTS
There are currently no employment agreements between the Company and any of
its named executive officers.
STOCK OPTION INFORMATION
The following table sets forth the stock options granted to the named
executive officers in fiscal year 2000, pursuant to the NexMed, Inc. Stock
Option and Long-Term Incentive Compensation Plan (the "Stock Plan"):
PERCENTAGE OF TOTAL GRANT DATE
NUMBER OF SHARES OPTIONS GRANTED TO EXERCISE PRICE PRESENT VALUE
NAME UNDERLYING OPTIONS EMPLOYEES IN 2000 (%) PER SHARE ($)(1) ($)(5)
- ---- ------------------ --------------------- ---------------- -------------
Y. Joseph Mo 1,114,000 (2) 56.8 4.00 2,974,380
- ------------------------- ---------------------- --------------------------- -------------------- --------------------
Kenneth Anderson 60,000 (3) 3.1 16.25 652,200
7,500 (4) 0.4 5.00 24,675
- ------------------------- ---------------------- --------------------------- -------------------- --------------------
Vivian H. Liu 90,000 (2) 4.6 4.00 240,300
- ------------------------- ---------------------- --------------------------- -------------------- --------------------
James L. Yeager 120,000 (2) 6.1 4.00 320,400
- ------------------------- ---------------------- --------------------------- -------------------- --------------------
(1) The exercise price (the price that the officer must pay to purchase each
share of stock that is subject to an option) is equal to the fair market
value of the stock on the date of grant of the option.
(2) The options expire on January 19, 2010 and vest in three installments on
December 31, 2001 and 2002.
(3) The options expire on November 16, 2010 and vest in four equal annual
installments commencing on his date of hire.
(4) The options expire on December 27, 2010 and vest on December 31, 2001.
(5) The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model. For options with ten year terms,
the assumptions are 80%, 6.2% and 0% for the volatility, risk free yield
and dividend yield, respectively.
The following table sets forth information concerning the value of
unexercised options as of December 31, 2000 held by the executives named in the
Summary Compensation Table above. On January 11, 2000, Dr. Mo exercised 400,000
stock options at $0.25 per share and on April 14, 2000, Ms. Liu exercised 60,000
stock options at $0.25 per share.
6
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 2000
AND FISCAL YEAR 2000-END OPTION VALUES
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT FISCAL MONEY OPTIONS AT
YEAR END (#) FISCAL YEAR END ($)
EXERCISABLE EXERCISABLE
SHARES ACQUIRED ON VALUE REALIZED (E)/UNEXERCISABLE (E)/UNEXERCISABLE
NAME EXERCISE (#) ($)(1) (U)(2) (U)(2)
- ------------------------- -------------------- -------------- ------------------ -----------------
Y. Joseph Mo, Ph.D. 400,000 1,375,000 1,231,333 (E) 6,595,332 (E)
742,667 (U) 2,970,668 (U)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Kenneth Anderson -- -- 15,000 (E) 0 (E)
52,500 (U) 22,500 (U)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Vivian H. Liu 60,000 461,250 225,000 (E) 1,370,000 (E)
60,000 (U) 240,000 (U)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
James L. Yeager, Ph.D. -- -- 250,000 (E) 1,405,000 (E)
80,000 (U) 320,000 (U)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
(1) Based on the closing price on the date of exercise.
(2) Based on a closing sale price of the Company's Common Stock on the NASDAQ
Stock Market of $8.00 on December 29, 2000.
DIRECTOR COMPENSATION
There is no arrangement for the cash compensation of directors. Pursuant to
the NexMed, Inc. Recognition and Retention Stock Incentive Plan, (the
"Recognition Plan") each non-employee director has been granted stock options,
which generally vest over a period of several years from the date of grant based
on continuous and uninterrupted service to the Company. This approach is
designed to align the interests of the directors with those of the Shareholders
over the long-term since the full benefits of the stock option compensation
package cannot be realized unless the stock price appreciation occurs over a
number of years.
THE BOARD AND ITS COMMITTEES
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 2000, four meetings of the Board
of Directors were held. All directors attended at least 75% of the combined
number of meetings of the Board and the Committees on which they served in
during the fiscal year ended December 31, 2000.
COMMITTEES
The Board of Directors presently has two committees, the Executive
Compensation Committee and the Audit Committee. The Board of Directors does not
have a nominating committee or a committee performing the functions of a
nominating committee.
The Executive Compensation Committee establishes remuneration levels for
executive officers of the Company and implements incentive program, for
officers, directors and consultants, including the Stock Plan and the
Recognition Plan. The Executive Compensation Committee was formed on February 7,
2000, and it met two times in 2000. The Executive Compensation Committee
consists of Gilbert S. Banker, Robert W. Gracy and Yu-Chung Wei.
7
The Audit Committee periodically meets with the Company's financial and
accounting management and independent auditors and accountants to make
recommendations concerning the engagement of independent accountants, reviews
with the independent accountants the scope and results of the audit engagement,
approves professional services provided by the independent accountants, reviews
the independence of the independent accountants and reviews the adequacy of the
internal accounting controls. The members of the Committee meet the independence
and experience requirements of the NASDAQ Stock Market listing requirements. The
Audit Committee was formed on February 7, 2000 and acts under a written charter
first adopted and approved by the Board on the same date. A copy of the written
charter is attached to this Proxy Statement as Exhibit A. The current members of
the Committee are Gilbert S. Banker, Robert W. Gracy and Yu-Chung Wei. The
Committee met two times in 2000.
PERFORMANCE COMPARISON
The following table shows a comparison of total stockholder return for
holders of the company's Common Stock from June 30, 1997* through December 31,
2000 compared with the Nasdaq Stock Market (U.S.) and Nasdaq Pharmaceutical
Stocks. The Company believes that while total stockholder return is an important
indicator of corporate performance, the stock prices of drug delivery technology
stocks like NexMed are subject to a number of market-related factors other than
company performance, such as the current market conditions, the general state of
the economy and the performance of other drug delivery technology stocks.
*The Company has been a reporting company under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), since the effectiveness on May 13, 1997
of the registration statement on Form 10-SB, which the Company filed voluntarily
in March 1997 pursuant to Section 12(g) of the Exchange Act.
COMPARISON OF TOTAL RETURNS OF NEXMED, INC., THE NASDAQ STOCK MARKET
(U.S.) AND NASDAQ PHARMACEUTICALS STOCKS
NASDAQ STOCK NASDAQ
MARKET US GROWTH PHARMACEUTICAL NEXMED
DATE OF $100 GROWTH OF $100 GROWTH OF $100
- --------------------------------------------------------------------------------
12/29/00 177.328 298.973 387.800
- --------------------------------------------------------------------------------
09/29/00 264.852 360.190 951.454
- --------------------------------------------------------------------------------
06/30/00 287.840 327.469 460.607
- --------------------------------------------------------------------------------
03/31/00 331.382 295.138 769.696
- --------------------------------------------------------------------------------
12/31/99 295.374 240.449 190.918
- --------------------------------------------------------------------------------
09/30/99 199.800 164.561 145.470
- --------------------------------------------------------------------------------
06/30/99 195.061 143.026 48.490
- --------------------------------------------------------------------------------
03/31/99 178.401 140.441 96.980
- --------------------------------------------------------------------------------
12/31/98 159.125 128.097 103.036
- --------------------------------------------------------------------------------
09/30/98 122.399 96.498 72.731
- --------------------------------------------------------------------------------
06/30/98 135.619 102.122 190.906
- --------------------------------------------------------------------------------
03/31/98 132.022 110.416 72.726
- --------------------------------------------------------------------------------
12/31/97 112.764 100.623 72.726
- --------------------------------------------------------------------------------
09/30/97 120.527 111.995 121.205
- --------------------------------------------------------------------------------
06/30/97 103.100 99.700 103.030
- --------------------------------------------------------------------------------
8
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 2000, the Company repaid $33,092 in principal and interest to
Dr. Joseph Mo, an officer and director of the Company, representing cash
advances previously made to the Company by Dr. Mo under an informal agreement.
The advances to the Company were made in installments in 1998 and 1999 and bore
interest at a rate 12% per annum.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Gilbert S. Banker, Robert W. Gracy and Yu-Chung Wei (Chairman) served on
the Executive Compensation Committee in 2000. None of these three individuals
has ever been an employee of the Company or its subsidiaries. No executive
officer of the Company has ever served as a member of the board of directors or
the compensation committee of any company whose executive officers include a
member of the Board of Directors or the Executive Compensation Committee.
AUDIT COMMITTEE REPORT
We have reviewed and discussed with management the Company's audited
consolidated financial statements for the fiscal year ended December 31, 2000.
We have discussed with PricewaterhouseCoopers LLP
("PricewaterhouseCoopers"), the independent auditor for the Company, the matters
required to be discussed by Statements on Auditing Standards No. 61,
Communications with Audit Committees, as amended.
We have also received the written disclosures and the letter from
PricewaterhouseCoopers required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as amended, and have discussed
with PricewaterhouseCoopers its independence.
Based on the reviews and discussions referred to above, we recommended to
the Board of Directors that the audited financial statements referred to above
be included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000, to be filed with the Securities and Exchange Commission.
The Audit Committee of the Board of Directors
Gilbert S. Banker
Robert W. Gracy
Yu-Chung Wei
EXECUTIVE COMPENSATION COMMITTEE REPORT
OVERALL POLICY
The Company's executive compensation program is designed to be closely
linked to corporate performance and the total return to Shareholders over the
long-term. The overall objectives of this strategy are to attract and retain the
best possible executive talent, to motivate these executives to achieve the
goals inherent in the Company's business strategy, to link executive and
Shareholder interests and finally to reward individual contributions as well as
overall business results.
The key elements of the Company's executive compensation during the last
fiscal year consisted of base salary, an annual bonus and the grant of stock
options under the Stock Plan.
9
SALARIES
The Executive Compensation Committee approves the salaries of the Chief
Executive Officer of the Company and exercises oversight over the compensation
of the other named executive officers of the Company. All final determinations
are subjective. In establishing salary levels for fiscal 2000, the Executive
Compensation Committee placed the most emphasis on the progression of the
proprietary products under development and the financial condition of the
Company based primarily on readily available working capital as of the end of
the preceding fiscal year. The Executive Compensation Committee also afforded
substantial weight to the Company's long-term prospects and performance. The
factors of lesser significance which were considered were experience of the
executive officers and a subjective understanding of salary levels of executive
management personnel of other similarly situated companies.
BONUSES
Cash bonuses are awarded to named executive officers based upon a
subjective evaluation by the Executive Compensation Committee of the performance
of each named executive officer during the year. Of particular significance was
the progression of the proprietary products under development and the financial
condition of the Company. All named executive officers at fiscal year end were
awarded bonuses in fiscal 2000 (see "Summary Compensation Table" under the
heading "Executive Compensation" of this Proxy Statement).
STOCK OPTIONS
Under the Stock Plan, which was adopted by the Company in December 1996,
the Company's employees, including the named executive officers are eligible to
receive stock options, stock appreciation rights, restricted stock and other
stock-based awards. The Executive Compensation Committee is responsible for
determining the recipients and the size of the awards. In selecting the size and
type of awards under the Stock Plan, the Executive Compensation Committee
considers the nature of the position held as well as the other factors used to
determine salaries and its subjective expectation of the potential for
appreciation in the market value of the Common Stock. All final determinations
are subjective.
Stock options awarded under the Stock Plan generally vest over a period of
several years from the date of grant. This approach is designed to align the
interests of the executive officers with those of the Shareholders over the
long-term since the full benefits of the compensation package cannot be realized
unless stock price appreciation occurs over a number of years.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Compensation for Y. Joseph Mo, Ph.D., the Company's Chairman of the Board,
President and Chief Executive Officer, historically has been, and will continue
to be established in accordance with the principles described above. The
Executive Compensation Committee reviews Dr. Mo's performance and establishes
his base salary considering the various factors described above for named
executive officers. The amount of Dr. Mo's cash bonus was awarded based upon a
subjective evaluation by the Executive Compensation Committee of the performance
of Dr. Mo during the year. Of particular significance was the progression of the
proprietary products under development and the financial condition of the
Company. Dr. Mo received bonuses of $72,000, $100,000 and $0 for fiscal years
2000, 1999 and 1998 respectively. Dr. Mo's base salary was $180,000, $120,000
and $120,000 for fiscal years 2000, 1999 and 1998 respectively. In January 2000,
the Company granted Dr. Mo 1,114,000 stock options. The stock options will vest
as follows: 371,333 stock options on December 31, 2000, 371,333 stock options on
December 31, 2001 and 371,334 stock options on December 31, 2002. The purpose of
the grant is to retain and maximize the performance of Dr. Mo, the Company's key
employee, and to reward him for succeeding in raising sufficient capital in 1999
and 2000 to enable the Company to proceed with and accelerate its development of
one or more proprietary products without undue financial pressure.
10
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code (the "Code"), and the Treasury
Regulations issued thereunder, generally disallow a federal income tax deduction
to any publicly-held corporation for compensation paid in excess of $1 million
in any taxable year to the Chief Executive Officer or any of the four other most
highly compensated executive officers employed on the last day of the taxable
year, unless such compensation is paid pursuant to a qualified
"performance-based compensation" arrangement, the material terms of which are
disclosed to and approved by shareholders.
It is the general policy of the Executive Compensation Committee to have
executive compensation paid by the Company treated as fully tax deductible,
without regard to the limitations imposed by Section 162(m) of the Code. All
compensation paid during fiscal year 2000 was determined to be tax deductible.
However, due to the inflexibility of qualifying all compensation for an
exemption from the application of Section 162(m) of the Code, the Executive
Compensation Committee reserves the right to grant future compensation awards in
such amounts as it may deem appropriate in the exercise of its business
judgment, notwithstanding whether those awards are fully tax deductible.
The Executive Compensation Committee of the
Board of Directors
Gilbert S. Banker
Robert W. Gracy
Yu-Chung Wei
PROPOSAL NO. 2
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE NEXMED, INC. STOCK OPTION AND
LONG-TERM INCENTIVE COMPENSATION PLAN
The Company adopted the Stock Plan on December 4, 1996, and amended it on
May 15, 1998, and June 19, 2000. The Company has reserved a total of 6,000,000
shares of Common Stock for issuance of awards under the Stock Plan, of which
2,737,500 shares remained available for future grants as of the Record Date. The
Company has further amended and restated the Stock Plan, subject to Shareholder
approval, (i) in order to assure that stock options granted the Stock Plan are
qualified "performance-based compensation" and thereby exempt from the
application of Section 162(m) of the Code and (ii) to make further changes in
the nature of updating the Stock Plan for market practices and making technical
corrections. The amendment and restatement of the Stock Plan does not increase
the number of shares of Common Stock available for the grant of awards
thereunder.
The Board of Directors believes that the approval of this amendment and
restatement of the Stock Plan by the Shareholders is in the best interests of
the Company and its Shareholders.
SUMMARY OF THE PROVISIONS OF THE STOCK PLAN, AS AMENDED
The following summary of the Stock Plan, as amended and restated, is
qualified in its entirety by the specific language of the Stock Plan, a copy of
which is attached hereto as Exhibit B and has been marked to reflect the
proposed amendments and restatements. The amendment and restatement of the Stock
Plan, if approved by the Shareholders, will become effective May 7, 2001, and a
copy of such will be subsequently filed with the Securities and Exchange
Commission and made available by the Company to any Shareholder upon request.
The purpose of the Stock Plan is to attract, retain and maximize the
performance of executive officers and key employees. The Stock Plan provides for
the grant of "incentive stock options" within the meaning of Section 422 of the
Code, non-statutory stock options, stock appreciation rights ("SARs"),
restricted stock awards and stock bonus awards. The Stock Plan is administered
by the Executive Compensation Committee of the Board of
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Directors, which has the authority to, among other things, designate the persons
to whom awards under the Stock Plan will be granted, and the number and type of
such awards. The maximum number of shares of Common Stock as to which stock
options and stock appreciation rights may be granted to any single participant
in any calendar year may not exceed 1,000,000.
The exercise price for non-statutory stock options may not be less than 85%
percent of the fair market value of shares of Common Stock on the date of grant.
The exercise price for incentive stock options may not be less than 100 percent
of the fair market value of shares of Common Stock on the date of grant (110
percent of fair market value in the case of incentive stock options granted to
employees who hold more than ten percent of the voting power of the Company's
issued and outstanding shares of Common Stock).
Stock options granted under the Stock Plan may not have a term of more than
ten-years (five years in the case of incentive stock options granted to
employees who hold more than ten percent of the voting power of the Company's
Common Stock) and, subject to the discretion of the Executive Compensation
Committee, generally vest over a three-year period. Subject to the discretion of
the Executive Compensation Committee, exercisable options generally terminate
(i) 90 days after the optionee's termination of employment by the Company for
any reason other than "Cause" (as defined in the Stock Plan), death, disability
or Retirement (as defined in the Stock Plan), (ii) one year following death,
disability or Retirement and (iii) immediately upon termination for Cause.
Stock options may be exercised by the delivery of the applicable exercise
price to the Company in cash or the equivalent, or, with the approval of the
Executive Compensation Committee, through the delivery by the participant of
previously held stock or through a "cashless exercise" mechanism involving a
sale of the stock underlying the Stock Options being exercised in sufficient
amounts to generate the applicable exercise price.
The Stock Plan also provides for grants of SAR's. Each SAR entitles a
participant to receive a cash payment, equal to the excess of the fair market
value of a share of Common Stock on the exercise date over the strike price of
the SAR. The strike price of any SAR granted under the Stock Plan will be
determined by the Executive Compensation Committee in its discretion at the time
of the grant. SARs granted under the Stock Plan may not be exercisable for more
than a ten year period. Subject to the discretion of the Executive Compensation
Committee, exercisable SARs generally terminate (i) one month after the
grantee's termination of employment by the Company for any reason other than
Cause, death, disability or Retirement, (ii) one year following death,
disability or Retirement and (iii) immediately upon termination for Cause.
The Stock Plan also provides for grants of restricted Common Stock
("Restricted Stock"). Shares of Restricted Stock may not be transferred by the
grantee prior to vesting. The Executive Compensation Committee will establish
vesting criteria, which may be service-based, performance-based or a combination
of the two, at the time of the grant of Restricted Stock. The Executive
Compensation Committee shall establish the treatment of Restricted Stock upon
termination of the grantee's employment under various circumstances at the time
of the grant of such Restricted Stock, provided that all unvested shares of
Restricted Stock shall be forfeited upon the termination of a grantee's
employment for Cause.
The Stock Plan also provides for grants of Stock Bonuses, which are simply
grants of shares of Common Stock subject to such conditions as the Executive
Compensation Committee may determine at the time of the grant.
Awards granted under the Stock Plan may generally, if any, not be
transferred during a participant's lifetime, except that the Executive
Compensation Committee may in its discretion allow certain transfers by gift for
estate planning purposes. The exercise or delivery of cash or Common Stock to
satisfy any award granted under the Stock Plan is subject to the satisfaction by
the participant of all applicable tax withholding requirements by remitting cash
to the Company or withholding cash otherwise deliverable in connection with an
award or, with the approval of the Executive Compensation Committee, through the
delivery by the participant of previously held Common Stock or the withholding
of Common Stock from the exercise or issuance of an award.
In the event of a change in the Common Stock due to events such as stock
splits, stock dividends and mergers, the Executive Compensation Committee shall
appropriately adjust (i) the number of shares available under the Stock Plan,
(ii) the maximum number of shares as to which stock options and SARs may be
granted to any one participant in a calendar year, and (iii) the number of
shares subject to outstanding awards and, if applicable, the
12
exercise or strike price thereof. The Executive Compensation Committee is
authorized to make other equitable adjustments to awards to account for mergers
or other significant corporate transactions (such as changing the security
subject to awards, cashing out awards or exchanging awards).
The Stock Plan has a term of ten years. Those employees of the Company who
are largely responsible for the management, growth and protection of the
Company's business are eligible to participate in the Stock Plan. As of the
Record Date, 57 employees, including four officers, had outstanding options that
were granted under the Stock Plan. Approximately the same number of employees
are eligible for participation in the Stock Plan as of the Record Date. On March
20, 2001, the closing price of the Company's Common Stock was $4.40.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS GRANTED UNDER THE
STOCK PLAN
The following summary is intended only as a general guide as to the federal
income tax consequences under current law with respect to the grant of stock
options under the Stock Plan and does not attempt to describe all possible
federal other tax consequences of such participation. Furthermore, the tax
consequences of stock options and other awards made under the Stock Plan are
complex and subject to change, and a taxpayer's particular situation may be such
that some variation of the described rules is applicable.
Incentive Stock Options. Options designated as incentive stock options are
intended to fall within the provisions of Section 422 of the Code. An optionee
recognizes no taxable income for regular income tax purposes as the result of
the grant or exercise of such an option, and no deduction generally is then
available to the Company. The difference between the incentive stock option
exercise price and the fair market value, at the time of exercise, of the shares
acquired upon the exercise of an incentive stock option may give rise to
alternative minimum taxable income subject to an alternative minimum tax. If an
optionee does not dispose of his shares for two years following the date the
option was granted or within one year following the transfer of the shares upon
exercise of the option, the gain on the sale of the shares (which is the
difference between the sale price and the purchase price of the shares) will be
taxed as long-term capital gain. If an optionee satisfies such holding periods,
upon a sale of the shares, the Company will not be entitled to any deduction for
federal income tax purposes. If an optionee disposes of the shares within two
years after the date of grant or within one year from the date of exercise (a
"disqualifying disposition"), the optionee will realize ordinary income on the
excess of the fair market value of the shares on the date of exercise over the
option exercise price or, if less, the excess of the amount realized on the
disposition over the adjusted basis of the stock. A different rule for measuring
ordinary income may apply in the case of optionees who are subject to Section 16
of the Exchange Act. Any further gain or loss from the arm's length sale or
exchange will be taxable as a long-term or short-term capital gain or loss
depending upon the holding period before disposition. Any ordinary income
recognized by the optionee upon the disposition of the shares should be
deductible by the Company for federal income tax purposes. Certain special rules
apply if an incentive stock option is exercised by tendering stock.
Nonstatutory Stock Options. Options that do not qualify as incentive stock
options are nonstatutory stock options and have no special tax status. An
optionee generally recognizes no taxable income as the result of the grant of
such an option. Upon the exercise of a nonstatutory stock option, the optionee
normally recognizes ordinary income in the amount of the difference between the
option exercise price and the fair market value of the shares on the date of
exercise. If the optionee is an employee, or was an employee at the time of the
grant of the option, such ordinary income generally is subject to withholding of
income and employment taxes. A different rule for measuring ordinary income may
apply in the case of optionees who are subject to Section 16 of the Exchange
Act. Upon the sale of stock acquired by the exercise of a nonstatutory stock
option, any gain or loss, based on the difference between the sale price and the
fair market value on the date of recognition of income, will be taxed as capital
gain or loss depending on the holding period of the shares. The holding period
commences upon exercise of the nonqualified stock option. If the amount received
is less than such fair market value, the loss will be treated as a long-term or
short-term capital loss, depending on the holding period of the shares. The
exercise of a nonqualified stock option will not trigger the alternative minimum
tax consequences applicable to incentive stock options. No tax deduction is
available to the Company with respect to the grant of a nonstatutory option or
the sale of the stock acquired pursuant to such grant. The Company should be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee as a result of the exercise of a nonstatutory option. Certain special
rules apply if a nonqualified stock option is exercised by tendering stock.
13
NEW PLAN BENEFITS
Because awards to be granted in the future under the Stock Plan are at the
discretion of the Executive Compensation Committee, it is not possible to
determine as of the Record Date the benefits or amounts which will be received
in the future under the Stock Plan by the named executive officers,
non-executive directors or non-executive officers.
REQUIRED VOTE AND RECOMMENDATION OF BOARD OF DIRECTORS
Under Nevada law shares as to which there is an abstention or broker
non-vote shall be deemed to be present at the meeting for purposes of
determining a quorum. However, because under Nevada law approval of this
proposal requires that the votes cast in favor of it exceeds the votes cast
opposing it, abstentions and broker non-votes will have no effect on the outcome
of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF THE STOCK PLAN.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
selected PricewaterhouseCoopers LLP as independent accountants to audit and
report upon the consolidated financial statements of the Company for the 2001
fiscal year and is submitting this matter to the Shareholders for their
ratification. PricewaterhouseCoopers LLP served as the Company's independent
auditors in fiscal year 2000 and in prior years.
AUDIT FEES
PricewaterhouseCoopers is the Company's principal independent auditor.
PricewaterhouseCoopers' audit fees for auditing the Company's annual
consolidated financial statements for the year ended December 31, 2000 and
reviews of the Company's interim financial statements included in the Company's
Forms 10-Q filed with the Securities and Exchange Commission during 2000 were
$33,092.
ALL OTHER FEES
All other fees for PricewaterhouseCoopers' services, including audits of
employee benefit plans, tax and actuarial compliance and consulting, and
other services, for the year ended December 31, 2000, were $17,346.
PricewaterhouseCoopers is one of a number of tax and actuarial services
providers used by the Company.
The Audit Committee of the Board of Directors has considered whether the
provision of the services set forth in the preceding paragraphs is compatible
with maintaining PricewaterhouseCoopers' independence.
Unless marked to the contrary, any proxy received will be voted for
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2001.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting. The representative will have an opportunity to make a
statement and will be able to respond to appropriate questions.
14
REQUIRED VOTE AND RECOMMENDATION OF BOARD OF DIRECTORS
Under Nevada law shares as to which there is an abstention or broker
non-vote shall be deemed to be present at the meeting for purposes of
determining a quorum. However, because under Nevada law approval of this
proposal requires that the votes cast in favor of it exceeds the votes cast
opposing it, abstentions and broker non-votes will have no effect on the outcome
of this proposal. If Shareholders do not ratify the selection of
PricewaterhouseCoopers LLP, the Board of Directors will consider other
independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2001.
SHAREHOLDER PROPOSALS
Shareholder proposals will be considered for inclusion in the Proxy
Statement for the 2002 Annual Meeting in accordance with Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if they are
received by the Secretary of the Company on or before November 30, 2001.
Shareholders who intend to present a proposal at the 2002 Annual Meeting of
Shareholders without inclusion of such proposal in the Company's proxy materials
for the 2002 Annual Meeting are required to provide notice of such proposal to
the Company no later than thirty-five (35) days nor more than sixty (60) days
prior to the 2002 Annual Meeting of Shareholders. The Company reserves the right
to reject, rule out of order, or take other appropriate action with respect to
any proposal that does not comply with these and other applicable requirements.
Proposals and notices of intention to present proposals at the 2002 Annual
Meeting should be addressed to Vivian H. Liu, Secretary, NexMed, Inc., 350
Corporate Boulevard, Robbinsville, New Jersey 08691.
OTHER MATTERS
The Board of Directors knows of no other business, which will be presented
to the Annual Meeting. If any other business is properly brought before the
Annual Meeting, it is intended that proxies in the enclosed form will be voted
in respect thereof in accordance with the judgment of the persons voting the
proxies.
It is important that the proxies be returned promptly and that your shares
be represented. Shareholders are urged to vote. Shareholders are urged to mark,
date, execute and promptly return the accompanying proxy card in the enclosed
envelope or vote these proxies by telephone at (800) 240-6326 or by internet at
http/www.eproxy.com/nexm/.
By Order of the Board of Directors,
/s/ Vivian H. Liu
--------------------------
Vivian H. Liu
Secretary
March 23, 2001
Robbinsville, NJ
15
[FORM OF PROXY-FRONT SIDE OF TOP PORTION]
To Our Shareholders,
You are cordially invited to attend our Annual
Meeting of Shareholders, to be held in the conference
room of NexMed, Inc.'s facilities at 350 Corporate
Boulevard, Robbinsville, NJ 08691, at 10:00 A.M. on
Monday, May 7, 2001.
[Company logo]
The enclosed Proxy Statement provides you with
additional details about items that will be addressed
at the Annual Meeting. Following consideration of the
proposals set forth in the Proxy Statement, an
overview of NexMed, Inc.'s activities will be
presented and we will be available to answer any
questions you may have. After reviewing the Proxy
Statement, please sign, date and indicate your vote
for the items listed on the Proxy Card below and
return it by mail in the enclosed, postage-paid
envelope, or vote by telephone by calling (800)
240-6326 (U.S. only), or by internet at
http://www.eproxy.com/nexm/, whether or not you plan
to attend the Annual Meeting.
Thank you for your prompt response.
Sincerely,
Vivian H. Liu
Secretary
NexMed, Inc. 350 Corporate Boulevard Robbinsville, NJ 08691
(Continued, and to be signed on reverse side)
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2
[FORM OF PROXY- REVERSE SIDE OF TOP PORTION]
PROXY PROXY
NEXMED, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Vivian H. Liu and Y. Joseph Mo, or either of
them, the lawful attorneys and proxies of the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned to attend
the Annual Meeting of Shareholders of NexMed, Inc. to be held in the conference
room of NexMed, Inc.'s facilities at 350 Corporate Boulevard, Robbinsville New
Jersey on Monday, May 7, 2001, at 10:00 A.M., local time, and any adjournment(s)
or postponement(s) thereof, with all powers the undersigned would possess if
personally present, and to vote the number of shares the undersigned would be
entitled to vote if personally present.
In accordance with their discretion, said attorneys and proxies are authorized
to vote upon such other matters or proposals not known at the time of
solicitation of this proxy which may properly come before the meeting.
This proxy when properly executed will be voted in the manner described herein
by the undersigned shareholder. If no instructions are given, the shares will be
voted FOR the election of the nominees for directors named below and FOR
Proposal Nos. 2 and 3. Any prior proxy is hereby revoked.
(Please detach here)
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3
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES FOR
DIRECTORS NAMED BELOW AND FOR PROPOSAL NOS. 2 AND 3.
PROPOSAL 1: Election of Directors: Robert W. Gracy and Stephen M. Sammut.
Robert W. Gracy: FOR WITHHOLD Stephen M. Sammut.: FOR WITHHOLD
AUTHORITY AUTHORITY
[ ] [ ] [ ] [ ]
PROPOSAL 2: Approval of the amendment and restatement of the NexMed, Inc. Stock Option and Long-Term Incentive Compensation Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PROPOSAL 3: Ratification of the appointment of PricewaterhouseCoopers LLP as the independent accountants of the Company.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Address Change? Mark Box [ ] Indicate changes below:
Date:___________________________________
- ---------------------------------------------
- ---------------------------------------------
Signature(s) in Box
Please sign exactly as your name appears at the left. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or corporation, please sign in full corporate name by
president or other authorized person. If a partnership, please sign in
partnership name by authorized person.
[FORM OF PROXY DETACHABLE PROXY CARD]
COMPANY #
CONTROL #
There are three ways to vote your Proxy
Your telephone or Internet vote authorized the Named Proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK *** EASY *** IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days
a week, until 12:00 p.m. (EST) on May 4, 2001.
o Your will be prompted to enter your 3-digit Company Number and your
7-digit Control Number which are located above.
o Follow the simple instructions the Voice provides you.
VOTE BY INTERNET - http://www.eproxy.com/nexm/ - QUICK *** EASY *** IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week,
until 12:00 p.m.(EST) on May 4, 2001.
o You will be prompted to enter your 3-digit Company Number and your
7-digit Control Number which are located above to obtain your records
and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to NexMed, Inc., c/o Shareowner ServicesSM, P.O. Box
64873, St-Paul, MN 55164-0873.
If you vote by Phone or Internet, please do not mail your Proxy Card.
Please detach here
EXHIBIT A
CHARTER
AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF NEXMED, INC.
(adopted February 7, 2000)
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its responsibility to oversee
Management's conduct of the Company's financial reporting process, including by
overviewing the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public or other users
thereof, the Company's systems of internal accounting and financial controls,
the annual independent audit of the Company's financial statements, and the
Company's legal compliance as established by Management and the Board.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities and personnel of the Company and the power to retain outside counsel,
auditors or other experts for this purpose. The Board and the Committee are in
place to represent the Company's shareholders; accordingly, the outside auditor
is ultimately accountable to the Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual basis.
MEMBERSHIP
The Committee shall be comprised of not less than three members of the Board,
and the Committee's composition will meet the requirements of the SEC's
Independent Director and Audit Committee for Small Business filers.
Accordingly, the majority of the committee members are directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from Management and the Company; and
2. Who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Committee. In addition,
at least one member of the Committee will have accounting or related
financial management expertise.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the outside auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes that financial
management, as well as the outside auditors, have more time, knowledge and more
detailed information on the Company than do Committee members; consequently, in
carrying out its oversight responsibilities, the Committee is not providing any
expert or special assurance as to the Company's financial statements or any
professional certification as to the outside auditor's work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
o The Committee shall review with management and the outside auditors the
audited financial statements to be included in the Company's Annual Report
on Form 10-KSB and review and consider with the outside auditors the
matters required to be discussed by Statement of Auditing Standards ('SAS')
No. 61.
o As a whole, or through the Committee chair, the Committee shall review with
the outside auditors the Company's interim financial results to be included
in the Company's quarterly reports to be filed with Securities and Exchange
Commission and the matters required to be discussed by SAS No. 61. This
review will occur prior to the Company's filing of the Form 10-QSB.
o The Committee shall discuss with management and the outside auditors the
quality and adequacy of the Company's internal controls.
o The Committee shall:
o request from the outside auditors annually, a formal written statement
delineating all relationships between the auditor and the Company
consistent with Independence Standards Board Standard Number 1;
o discuss with the outside auditors any such disclosed relationships and
their impact on the outside auditor's independence; and
o recommend that the Board take appropriate action to oversee the
independence of the outside auditor.
o The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to select (or nominate
for shareholder approval), evaluate and, where appropriate, replace the
outside auditor.
EXHIBIT B
THE NEXMED, INC. STOCK OPTION AND
LONG TERM INCENTIVE COMPENSATION PLAN
Amended and Restated Effective as of _________
Originally Adopted and Effective as of December 4, 1996
THE NEXMED, INC. STOCK OPTION AND
LONG TERM INCENTIVE COMPENSATION PLAN
1. PURPOSE OF THE PLAN.
This NexMed, Inc. Stock Option and Long-Term Incentive Compensation Plan is
intended to promote the interests of the Company and its shareholders by
providing the Company's employees, on whose judgment, initiative, and efforts
the successful conduct of the business of the Company depends, and who are
responsible for the management, growth, and protection of the business, with
appropriate incentives and rewards to encourage them to continue in the employ
of the Company and to maximize their performance.
2. DEFINITIONS.
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean, when used in connection with the termination of a
Participant's employment, "Cause" as defined in any existing employment or
similar agreement between the Participant and the Company, or, in the absence of
such an agreement, the termination of the Participant's employment on account
of: (i) the willful and continued failure by the Participant substantially to
perform his or her duties and obligations to the Company (other than any such
failure resulting from incapacity due to physical or mental illness), (ii) the
willful violation by the Participant of (A) any federal or state law or (B) any
rule of the Company, which violation would materially reflect on the
Participant's character, competence, or integrity, (iii) a breach by a
Participant of the Participant's duty of loyalty to the Company such as
Participant's solicitation of customers or employees of the Company on behalf of
any other person, (iv) the Participant's unauthorized removal from the Company's
premises of any document (in any medium or form) relating to the Company, its
business, or its customers, provided, however, that no such removal shall be
deemed "unauthorized" if it is in furtherance of an individual's duties and
obligations to the Company and such removal is a common practice at the Company,
(v) the Participant's unauthorized disclosure to any person of any confidential
information regarding the Company, (vi) the willful engaging by the
Participant in any other misconduct which is materially injurious to the
Company; (vii) the Participant having been convicted of, or pleaded guilty or no
contest to, any crime involving the property of the Company, or any felony, or
(viii) the failure of the Participant to follow lawful instructions of the Board
or his direct superiors. For purposes of this Section 2(b), no act, or failure
to act, on a Participant's part shall be considered "willful" unless done, or
omitted to be done, by the Participant in bad faith and without reasonable
belief that the action or omission was in the best interests of the Company. Any
rights the Company may have hereunder in respect of the events giving rise to
Cause shall be in addition to the rights the Company may have under any other
agreement with the participant or at law or in equity. If, subsequent to the
termination of a Participant's employment without Cause, it is determined that
the Participant's employment could have been terminated for Cause, such
Participant's employment shall, at the election of the Committee in its sole
discretion, be deemed to have been terminated for Cause.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended and any
regulations promulgated thereunder.
(d) "Committee" shall mean the Compensation Committee of the Board;
provided, however, the Compensation Committee shall not take any action under
this Plan unless it is at all times composed solely of not less than three
Directors who qualify as (i) "Non-Employee Directors" within the meaning of Rule
16b-3, as promulgated under the Exchange Act and (ii) "outside directors" as
defined for purposes of the regulations under Section 162(m) of the Code. In the
event the Compensation Committee is not composed solely of not less than three
directors who qualify as Non-Employee Directors when the Company is subject to
the Exchange Act and "outside directors", when Section 162(m) of the Code
applies, or, in the event the Committee is unable to act, the Board shall take
any and all actions required or permitted to be taken by the Committee under
this Plan and shall serve as the Committee.
(e) "Company" shall mean NexMed, Inc., a Nevada corporation.
(f) "Company Stock" shall mean the common stock, par value $.001 per share,
of the Company.
(g) "Director" shall mean a member of the Board.
(h) "Disability" shall mean any physical or mental condition as a result of
which a Participant is disabled within the meaning of Section 422(c)(6) of the
Code.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" shall mean with respect to a share of Company Stock
the average closing price per share of Company Stock at the end of business on
the trading day immediately prior to the date of determination. The closing
price for such day shall be as reported in the Wall Street Journal, or, if not
reported therein, as reported in another newspaper of national circulation
chosen by the Committee, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices regular way, on the New York Stock
Exchange Composite Tape, or if the Company Stock is not then listed or admitted
to trading on the New York Stock Exchange, on the largest principal national
securities exchange, or if the Company Stock is not so listed or admitted to
trading, then the average of the last reported sales prices for such shares in
the over-the-counter market, as reported on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or, if on such day the
Company Stock is not quoted on NASDAQ, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization. If the Company Stock is not listed on a national securities
exchange nor quoted in the NASDAQ on a last sale basis, the amount determined by
the Committee to be the fair market value based upon a good faith attempt to
value the Company Stock accurately shall be the "Fair Market Value".
(k) "Incentive Award" shall mean an Option, a SAR, a Restricted Stock, or
Stock Bonus Award granted pursuant to the terms of the Plan.
(l) "Incentive Stock Option" shall mean an Option that is an "incentive
stock option" within the meaning of Section 422 of the Code and that is
identified as an Incentive Stock Option in the agreement by which it is
evidenced.
(m) "Issue Date" shall mean the date established by the Committee on which
certificates representing shares of Restricted Stock shall be issued by the
Company pursuant to the terms of Section 8(d) hereof.
(n) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.
(o) "Option" shall mean an option to purchase shares of Company Stock
granted pursuant to Section 6 hereof. Each Option, or portion thereof, shall be
identified as either an Incentive Stock Option or a Non-Qualified Stock Option
in the agreement by which such Option is evidenced.
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(p) "Participant" shall mean an officer or employee of the Company selected
to participate in the Plan and to whom an Incentive Award is granted pursuant to
the Plan, and, upon his or her death, that person's successors, heirs,
executors, and administrators, as the case may be.
(q) "Person" shall mean a "person," such as term is used in Sections 13(d)
and 14(d) of the Exchange Act.
(r) "Plan" shall mean The NexMed, Inc. Stock Option and Long-Term Incentive
Compensation Plan, as it may be amended from time to time.
(s) "Restricted Stock" shall mean a share of Company Stock that is granted
pursuant to the terms of Section 8 hereof and that is subject to the
restrictions set forth in Section 8(c) hereof for as long as such restrictions
continue to apply to such share.
(t) "Retirement" shall mean a Participant's termination of employment
(other than by reason of death or Disability and other than a termination that
is (or is deemed to have been) for Cause) on or after the later of (i) the date
the Participant attains age 65 and (ii) the date the Participant has completed
five years of service with the Company.
(u) "Securities Act" shall mean the Securities Act of 1933, as amended.
(v) "SAR" shall mean a stock appreciation right granted pursuant to Section
7 hereof.
(w) "Stock Bonus" shall mean a grant of a bonus payable in shares of
Company Stock pursuant to Section 9 hereof.
(x) "Vesting Date" shall mean the date established by the Committee on
which an Incentive Award may vest, with vesting to be time-based,
performance-based, or a combination, to be determined by the Committee in its
discretion.
3. STOCK SUBJECT TO THE PLAN.
(a) Plan Awards.
Under the Plan, the Committee may, in its sole and absolute discretion,
grant any or all of the following types of Incentive Awards to a Participant: an
Option, a SAR, a Restricted Stock, or Stock Bonus Award.
(b) Individual Awards.
Incentive Awards granted under this Plan may be made up entirely of one
type of Incentive Award or any combination of types of Incentive Awards
available under the Plan, in the Committee's sole discretion. The number of
shares of Company Stock for which Options and SARs may be granted to any
individual Participant in any calendar year shall not exceed 1,000,000.
(c) Aggregate Plan Share Reserve.
The total number of shares of Company Stock available for grants of
Incentive Awards under the Plan shall be 1,500,000 subject to adjustment in
accordance with Section 10 of the Plan. These shares may be either authorized
but unissued shares, newly issued shares, or reacquired shares of Company Stock.
If an Incentive Award or portion thereof shall expire or terminate for any
reason without having been exercised in full, the unexercised shares covered by
such Incentive Award shall be available for future grants of Incentive Awards
under the Plan.
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4. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Committee. The Committee shall from
time to time designate the officers and employees of the Company who shall be
granted Incentive Awards and the amount and type of such Incentive Awards.
The majority of the members of the Committee shall constitute a quorum. The
acts of a majority of the members present at any meeting at which a quorum is
present or acts approved in writing by a majority of the Committee shall be
deemed the acts of the Committee. The Committee shall have the full authority
and discretion to administer the Plan, including authority to interpret,
construe, reconcile any inconsistency, correct any defect and/or supply any
omission in any provision of the Plan and the terms of any Incentive Award
issued under the Plan. The Committee may also adopt, suspend, amend or waive any
rules and regulations for administering the Plan as it may deem necessary or
appropriate, and make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Decisions of the Committee shall be final and binding on all parties.
The Committee may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Option or SAR granted under the Plan
becomes exercisable or otherwise adjust any of the terms of such Option or SAR
(except that no such adjustment shall, without the consent of a Participant,
reduce the Participant's rights under any previously granted and outstanding
Incentive Award), (ii) accelerate the Vesting Date or Issue Date of any share of
Restricted Stock issued under the Plan, or waive any condition imposed
thereunder, and (iii) otherwise adjust or waive any condition imposed on any
Incentive Award made hereunder.
In addition, the Committee may, in its absolute discretion and without
amendment to the Plan, grant Incentive Awards of any type to Participants on the
condition that such Participants surrender to the Company for cancellation such
other Incentive Awards of the same or any other type (including, without
limitation, Incentive Awards with higher exercise prices or values) as the
Committee specifies. Notwithstanding Sections 3(b) and 3(c) herein, prior to the
surrender of such other Incentive Awards, Incentive Awards granted pursuant to
the preceding sentence of this Section 4 shall not be effective, and shall not
count against the limit set forth in such Sections 3(b) and 3(c).
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Committee, subject to applicable laws.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company (and any affiliate that may
adopt this Plan), jointly and severally, shall indemnify and hold harmless each
member of the Committee and each other director or employee of the Company (or
affiliate) to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Board) arising out of any action, omission, or
determination unless such action, omission or determination was taken or made by
such member, director, or employee in bad faith and without reasonable belief
that it was in the best interests of the Company and its affiliates, as the case
may be.
5. ELIGIBILITY.
The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be the officers and employees of the Company.
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6. STOCK OPTION AWARDS.
The Committee may grant Options pursuant to the Plan. Such Options shall be
evidenced by written agreements in such form as the Committee shall from time to
time approve. Options shall comply with and be subject to the following terms
and conditions:
(a) Identification of Options.
All Options granted under the Plan shall be clearly identified in the
agreement evidencing such Options as either Incentive Stock Options or as
Non-Qualified Stock Options or a combination of both.
(b) Exercise Price.
The exercise price of any Non-Qualified Stock Option granted under the Plan
shall be such price as the Committee shall determine which may be equal to or
less than the Fair Market Value of a share of Company Stock on the date such
Non-Qualified Stock Option is granted; provided, that such price may not be less
than (i) 85% of the Fair Market Value on the date of grant, and (ii) the minimum
price required by law. The exercise price of any Incentive Stock Option granted
under the Plan shall be not less than 100% of the Fair Market Value of a share
of Company Stock on the date on which such Incentive Stock Option is granted.
(c) Term and Exercise of Options.
(i) Each Option shall be exercisable on such date or dates, during
such period, and for such number of shares of Company Stock as shall be
determined by the Committee on the day on which such Option is granted and
set forth in the Option agreement with respect to such Option; provided,
however that no Option shall be exercisable after the expiration of ten
years from the date such Option was granted; and, provided, further, that
each Option shall be subject to earlier termination, expiration, or
cancellation as provided in the agreement evidencing such Option or any
other agreement that relates to such Option or the Plan.
(ii) Each Option shall be exercisable in whole or in part; provided,
that no partial exercise of an Option shall be for an aggregate exercise
price of less than $1,000. The partial exercise of an Option shall not
cause the expiration, termination, or cancellation of the remaining portion
thereof. Upon the partial exercise of an Option, the agreement evidencing
such Option, marked with such notations as the Committee may deem
appropriate to evidence such partial exercise, shall be returned to the
Participant exercising such Option together with the delivery of the
certificates described in Section 6(c)(v) hereof.
(iii) An Option shall be exercised by delivering a written notice to
the Company's principal office to the attention of its Secretary, no less
than three business days in advance of the effective date of the proposed
exercise (unless the Committee waives such advance notice requirement).
Such notice shall be accompanied by the agreement (or agreements)
evidencing the Option, shall specify the number of shares of Company Stock
with respect to which the Option is being exercised, and the effective date
of the proposed exercise, and shall be signed by the Participant. The
Participant may withdraw such notice at any time prior to the close of
business on the business day immediately preceding the effective date of
the proposed exercise, in which case such agreement(s) shall be returned to
the Participant. Payment for shares of Company Stock purchased upon the
exercise of an Option shall be made on the effective date of such exercise
in the manner set forth in the applicable Option agreement or any other
agreement that relates to such Option or, if none are set forth, in any
combination of the following:
(A) in cash, by certified check, bank cashier's check, or wire
transfer,
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(B) subject to the approval of the Committee, in shares of
Company Stock in which the Participant has good title, free and clear
of all liens and encumbrances and which have been owned by the
Participant for at least six (6) months or which have been purchased
on the open market, or which meet such other requirements as the
Committee may determine necessary in order to avoid an accounting
earnings charge in respect of the Option, valued at their Fair Market
Value on the effective date of such exercise, or
(C) subject to the approval of the Committee pursuant to a
"cashless exercise" pursuant to procedures adopted by the Committee
whereby the Participant, by a properly written notice, directs (a) an
immediate market sale or margin loan respecting all or a part of the
shares of Company Stock to which the Participant is entitled upon
exercise pursuant to an extension of credit by the Company to the
Participant of the exercise price, (b) the delivery of the shares of
the Company Stock from the Company directly to the brokerage firm, and
(c) the delivery of the exercise price from the sale or margin loan
proceeds from the brokerage firm directly to the Company.
Any payments in shares of Company Stock shall be effected by the delivery of
such shares to the Secretary of the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank, together with any other
documents and evidences as the Secretary of the Company shall require from time,
or by attestation of ownership of sufficient shares of Company Stock in
accordance with procedures established by the Committee.
(iv) Certificates for shares of Company Stock purchased upon the exercise
of an Option shall be issued in the name of the Participant or his or her
beneficiary, as the case may be, and delivered to the Participant or his or her
beneficiary, as the case may be, as soon as practicable following the effective
date on which the Option is exercised.
(d) Limitations on Grant of Incentive Stock Options.
(i) The aggregate Fair Market Value of shares of Company Stock with respect
to which Incentive Stock Options granted hereunder are exercisable for the first
time by a Participant during any calendar year under the Plan and any other
stock option plan of the Company (or any "subsidiary corporation" of the Company
within the meaning of Section 424 of the Code) shall not exceed $100,000. Such
Fair Market Value shall be determined as of the date on which each such
Incentive Stock Option is granted. In the event that the aggregate Fair Market
Value of shares of Company Stock with respect to such Incentive Stock Options
exceeds $100,000, then Incentive Stock Options granted hereunder to such
Participant shall, to the extent and in the inverse order in which they were
granted, automatically be deemed to be Non-Qualified Stock Options, but all
other terms and provisions of such Incentive Stock Options shall remain
unchanged.
(ii) No Incentive Stock Option may be granted to an individual if, at the
time of the proposed grant, such individual owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
of its "subsidiary corporations" (within the meaning of Section 424 of the
Code), unless (I) the exercise price of such Incentive Stock Option is at least
110% of the Fair Market Value of a share of Company Stock at the time such
Incentive Stock Option is granted and (II) such Incentive Stock Option is not
exercisable after the expiration of five years from the date such Incentive
Stock Option is granted.
(e) Effect of Termination of Employment.
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Unless otherwise set forth in the applicable Option agreement or any other
agreement that relates to the Option, the following shall apply in the event of
a termination of the employment of a Participant:
(i) In the event the employment of a Participant with the Company
shall terminate (as determined by the Committee in its sole discretion) for
any reason other than Retirement, Disability, death or for Cause, (A)
Options granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until
the date that is 90 days after the date of such termination, on which date
they shall expire, and (B) Options granted to such Participant, to the
extent that they were not exercisable at the time of such termination,
shall expire at the close of business on the date of such termination;
provided, however, that no Option shall be exercisable after the expiration
of its term.
(ii) In the event that the employment of a Participant with the
Company (as determined by the Committee in its sole discretion) shall
terminate on account of the Retirement, Disability, or death of the
Participant, (A) Options granted to such Participant, to the extent that
they were exercisable at the time of such termination, shall remain
exercisable until the date that is one year after the date of such
termination and (B) Options granted to such Participant, to the extent that
they were not exercisable at the time of such termination, shall expire at
the close of business on the date of such termination; provided, however,
that no Option shall be exercisable after the expiration of its term. The
effect of exercising any Incentive Stock Option on a day that is more than
90 days after the date of such termination (or, in the case of a
termination of employment on account of death or Disability, on a day that
is more than one year after the date of such termination) will be to cause
such Incentive Stock Option to be treated as a Non-Qualified Stock Option.
(iii) In the event of the termination of a Participant's employment
for Cause (as determined by the Committee in its sole discretion), all
outstanding Options granted to such Participant shall automatically expire
as of the commencement of business on the date of such termination.
7. SARs.
The Committee may grant SARs pursuant to the Plan, which SARs shall be
evidenced by written agreements in such form as the Committee shall from time to
time approve. SARs shall comply with and be subject to the following terms and
conditions:
(a) Strike Price.
The strike price of any SAR granted under the Plan shall be determined
by the Committee in its discretion at the time of the grant of such SAR.
(b) Benefit Upon Exercise.
(i) The exercise of a SAR with respect to any number of shares of
Company Stock shall entitle a Participant to a cash payment, for each
such share, equal to the excess of (A) the Fair Market Value of a
share of Company Stock on the exercise date over (B) the strike price
of the SAR (subject to applicable withholding payment requirements).
(ii) All payments under this Section 7(b) shall be made as soon
as practicable, but in no event later than five business days, after
the effective date of the exercise.
(c) Term and Exercise of SARs.
(i) Each SAR shall be exercisable on such date or dates, during
such period, and for such number of shares of Company Stock as shall
be determined by the Committee and set forth in the SAR agreement with
respect to such SAR; provided, however, that no SAR shall be
exercisable after the
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expiration of ten years from the date such SAR was granted; and
provided, further, however, that each SAR shall be subject to earlier
termination, expiration, cancellation as provided in the SAR agreement
or any other agreement that relates to such SAR or the Plan.
(ii) Each SAR may be exercised in whole or in part, provided,
that no partial exercise of a SAR shall be for an aggregate strike
price of less than $1,000. The partial exercise of a SAR shall not
cause the expiration, termination, or cancellation of the remaining
portion thereof. Upon the partial exercise of a SAR, the agreement
evidencing such SAR, marked with such notations as the Committee may
deem appropriate to evidence such partial exercise shall be returned
to the Participant exercising such SAR together with the payment
described in Section 7(b)(i) hereof.
(iii) A SAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary. Such
notice shall be accompanied by the applicable agreement evidencing
the SAR, and shall specify the number of shares of Company Stock with
respect to which the SAR is being exercised, and shall be signed by
the Participant.
(d) Unless otherwise set forth in the applicable SAR agreement or
any other agreement that relates to the SAR, the following shall apply
in the event of a termination of the employment of a Participant:
(i) In the event that the employment of a Participant with the
Company shall terminate (as determined by the Committee in its sole
discretion) for any reason other than Retirement, Disability, death or
for Cause, (A) SARs granted to such Participant, to the extent that
they were exercisable at the time of such termination, shall remain
exercisable until the date that is one month after such
termination, on which date they shall expire and (B) SARs granted to
such Participant, to the extent that they were not exercisable at the
time of such termination, shall expire at the close of business on the
date of such termination; provided, however, that no SAR shall be
exercisable after the expiration of its term.
(ii) In the event that the employment of a Participant with the
Company shall terminate on account of the Retirement, Disability, or
death of the Participant, (A) SARs granted to such Participant, to the
extent that they were exercisable at the time of such termination,
shall remain exercisable until the date that is one year after the
date of such termination and (B) SARs granted to such Participant, to
the extent that they were not exercisable at the time of such
termination, shall expire at the close of business on the date of such
termination; provided, however, that no SAR shall be exercisable after
the expiration of its term.
(iii) In the event of the termination of the Participant's
employment for Cause, all outstanding SARs granted to such Participant
shall automatically expire as of the commencement of business on the
date of such termination.
8. RESTRICTED STOCK.
The Committee may grant shares of Restricted Stock pursuant to the Plan.
Each grant of shares of Restricted Stock shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve. Each
grant of shares of Restricted Stock shall comply with and be subject to the
following terms and conditions:
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(a) Issue Date and Vesting Date.
At the time of the grant of shares of Restricted Stock, the Committee shall
establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with
respect to such shares. The Committee may divide such shares into classes and
assign a different Issue Date and/or Vesting Date for each class. Upon the
occurrence of the Issue Date with respect to a share of Restricted Stock, a
share of Restricted Stock shall be issued in accordance with the provisions of
Section 8(d) hereof. Provided that all conditions to the vesting of a share of
Restricted Stock imposed pursuant to Section 8(b) hereof are satisfied, and
except as provided in Section 8(f) hereof, upon the occurrence of the Vesting
Date with respect to a share of Restricted Stock, such share shall vest and the
restrictions of Section 8(c) hereof shall cease to apply to such share.
(b) Conditions to Vesting.
At the time of the grant of shares of Restricted Stock, the Committee may
impose such restrictions or conditions, not inconsistent with the provisions
hereof, to the vesting of such shares as it, in its absolute discretion, deems
appropriate. By way of example and not by way of limitation, the Committee may
require, as a condition to the vesting of any shares of Restricted Stock, that
the Participant or the Company achieve such performance criteria as the
Committee may specify at the time of the grant of such shares.
(c) Restrictions on Transfer Prior to Vesting.
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights to such share, whether voluntary or involuntary, by
operation of law or otherwise, shall vest the transferee with any interest, or
right in, or with respect to, such share, but immediately upon any attempt to
transfer such rights, such share, and all the rights related thereto, shall be
forfeited by the Participant and the transfer shall be of no force or effect.
(d) Issuance of Certificates.
(i) Reasonably promptly after the Issue Date with respect to shares of
Restricted Stock, the Company shall cause to be issued a stock certificate,
registered in the name of the Participant to whom such shares were granted,
evidencing such shares, provided, that the Company shall not cause to be issued
such stock certificate unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear the
following legend:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK
REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS, AND CONDITIONS
(INCLUDING FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST TRANSFER)
CONTAINED IN THE NEXMED, INC. STOCK OPTION AND LONG-TERM INCENTIVE
COMPENSATION PLAN AND INCENTIVE AWARD AGREEMENT ENTERED INTO BETWEEN THE
REGISTERED OWNER OF SUCH SHARES AND NEXMED, INC. A COPY OF THE PLAN AND
AGREEMENT IS ON FILE IN THE OFFICE OF THE SECRETARY OF NEXMED, INC., 350
CORPORATE BOULEVARD, ROBBINSVILLE, NEW JERSEY 08691.
Such legend shall not be removed from the certificate evidencing such shares
until such shares vest pursuant to the terms hereof.
(ii) Each certificate issued pursuant to Section 8(d)(i) hereof, together
with the stock powers relating to the shares of Restricted Stock evidenced by
such certificate, shall be deposited by
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the Company with a custodian designated by the Company. The Company shall cause
such custodian to issue to the Participant a receipt evidencing the certificates
held by it which are registered in the name of the Participant.
(e) Consequences Upon Vesting.
Upon the vesting of a share of Restricted Stock pursuant to the terms
hereof, the restrictions of Section 8(c) hereof shall cease to apply to such
share. Reasonably promptly after a share of Restricted Stock vests pursuant to
the terms hereof, the Company shall cause to be issued and delivered to the
Participant to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Section 8(d)(i) hereof, together with any
other property of the Participant held by the custodian pursuant to Section
8(d)(ii) hereof.
(f) Effect of Termination of Employment.
Unless otherwise set forth in the applicable Restricted Stock agreement or
any other agreement that relates to such Restricted Stock, the following shall
apply in the event of a termination of the employment of a Participant:
(i) In the event that the employment of a Participant with the Company
shall terminate for any reason other than Cause prior to the vesting of shares
of Restricted Stock granted to such Participant, a proportion of such shares, to
the extent not forfeited or cancelled on or prior to such termination pursuant
to any provision hereof, shall vest on the date of such termination. The
proportion referred to in the preceding sentence shall initially be determined
by the Committee at the time of the grant of such shares of Restricted Stock and
may be based on the achievement of any conditions imposed by the Committee with
respect to such shares pursuant to Section 8(b). Such proportion may be equal to
zero. All shares of Restricted Stock granted to such Participant which have not
vested (including, without limitation, pursuant to this subsection) as of the
date of such termination shall be forfeited at the end of business on the date
of such termination.
(ii) In the event of the termination of a Participant's employment for
Cause, all shares of Restricted Stock granted to such Participant which have not
vested as of the date of such termination shall immediately be forfeited.
9. STOCK BONUSES.
The Committee may grant Stock Bonuses in such amounts as it shall determine
from time to time. A Stock Bonus shall be paid at such time and subject to such
conditions as the Committee shall determine at the time of the grant of such
Stock Bonus. Certificates for shares of Company Stock granted as a Stock Bonus
shall be issued in the name of the Participant to whom such grant was made and
delivered to such Participant as soon as practicable after the date on which
such Stock Bonus is required to be paid.
10. ADJUSTMENT UPON CHANGES IN COMPANY STOCK.
(a) Shares Available for Grants.
In the event of any change in the number of shares of Company Stock
outstanding by reason of any stock dividend or split, reverse stock split,
recapitalization, merger, consolidation, combination or exchange of shares or
similar corporate change, the maximum number of shares of Company Stock with
respect to which the Committee may grant (i) Options, SARs, shares of Restricted
Stock, and Stock Bonuses to all Participants in the aggregate and (ii) Options
and SARs to each individual Participant, both as set forth under Section 3
hereof shall be appropriately adjusted by the Committee. In the event of any
change in the number of shares of Company Stock outstanding by reason of any
other event or transaction, the Committee may, but need not, make such
adjustments in the number of shares of Company Stock with respect to which (i)
Options, SARs, shares of Restricted Stock, and Stock
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Bonuses may be granted to all Participants in the aggregate and (ii) Options and
SARs may be granted to each individual Participant, both as set forth under
Section 3 hereof as the Committee may deem appropriate. Any adjustment pursuant
to the preceding two sentences to the individual limits shall be made in a
manner designed to preserve the exception from Section 162(m) of the Code of
certain Options and SARs granted under the Plan.
(b) Outstanding Restricted Stock.
Unless the Committee in its absolute discretion otherwise determines, any
securities or other property (including dividends paid in cash) received by a
Participant with respect to a share of Restricted Stock, the Issue Date with
respect to which occurs prior to such event, but which has not vested as of the
date of such event, as a result of any dividend, stock split, reverse stock
split, recapitalization, merger, consolidation, combination, exchange of shares,
or similar corporate exchange will not vest and be paid out until such share of
Restricted Stock vests and shall be promptly deposited with the custodian
designated pursuant to Section 8(d)(ii) hereof.
The Committee may, in its absolute discretion, adjust any grant of shares
of Restricted Stock, the Vesting Date with respect to which has not occurred as
of the date of the occurrence of any of the following events, to reflect any
dividend, stock split, reverse stock split, recapitalization, merger,
consolidation, combination, exchange of shares, or similar corporate change as
the Committee may deem appropriate to prevent the enlargement or dilution of
rights of Participants under the grant.
(c) Outstanding Options and SARs - Increase or Decrease in Issued Shares
Without Consideration.
Subject to any required action by the shareholders of the Company (as
determined by the Committee), in the event of any increase or decrease in the
number of issued shares of Company Stock resulting from a subdivision or
consolidations of shares of Company Stock or the payment of a stock dividend on
the shares of Company Stock, or any other increase or decrease in the number of
such shares effected without receipt of consideration by the Company, the
Company shall proportionally adjust the number of shares of Company Stock
subject to each outstanding Option and SAR, the exercise price per share of
Company Stock of each such Option and the strike price per share of each SAR.
(d) Outstanding Options and SARs - Certain Mergers.
Subject to any required action by the shareholders of the Company (as
determined by the Committee), in the event that the Company shall be the
surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the holders of shares of Company Stock
receive securities of another corporation), each Option and SAR outstanding on
the date of such merger or consolidation shall pertain to and apply to the
securities which a holder of the number of shares of Company Stock subject to
such Option or SAR would have received in such merger or consolidation; and the
exercise price or strike price thereof shall be equitably adjusted by the
Committee as it may deem appropriate to prevent the enlargement or dilution of
rights of Participants.
(e) Outstanding Options and SARs - Certain Other Transactions.
In the event of a dissolution or liquidation of the Company; a sale of all
of the Company's Common Stock; a sale of substantially all of the Company's
assets, a merger or consolidation involving the Company in which the Company is
not the surviving corporation; or a merger or consolidation involving the
Company in which the Company is the surviving corporation but the holders of
shares of Company Stock receive securities of another corporation and/or other
property, including cash, the Committee shall, in its absolute discretion, have
the power to:
(i) cancel, effective immediately prior to the occurrence of such event,
each Option and SAR outstanding immediately prior to such event (whether or not
then exercisable), and, in full consideration of such cancellation, pay to the
Participant to whom such Option or SAR was granted an
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amount in cash, for each share of Company Stock subject to such Option or SAR,
respectively, equal to the excess of (A) the value, as determined by the
Committee in its absolute discretion, of the property (including cash) received
by the holder of a share of Company Stock as a result of such event over (B) the
exercise price or strike price of such Option or SAR (subject to applicable
withholding payment requirements); or
(ii) provide for the exchange of each Option and SAR outstanding
immediately prior to such event (whether or not then exercisable) for an option
on or stock appreciation right with respect to, as appropriate, some or all of
the property for which such Option or SAR is exchanged and, incident thereto,
make an equitable adjustment as determined by the Committee in its absolute
discretion in the exercise price or strike price of the option or stock
appreciation right, or, if appropriate, provide for a cash payment to the
Participant to whom such Option or SAR was granted in partial consideration for
the exchange of the Option or SAR; to prevent any substantial dilution or
enlargement of the rights granted to, or available for, the Participant.
(f) Outstanding Options and SARs - Other Changes.
In the event of any change in the capitalization of the Company or a
corporate change other than those specifically referred to in Section 10(c), (d)
or (e) hereof, the Committee may in its absolute discretion, make such
adjustments in the number of shares subject to Options or SARs outstanding on
the date on which such change occurs and in the per share exercise price or
strike price of each such Option and SAR as the Committee may consider
appropriate to prevent dilution or enlargement of rights.
(g) No Other Rights.
Except as expressly provided in the Plan, no Participant shall have any
rights by reason of any subdivision or consolidation of Company Stock, the
payment of any dividend, any increase or decrease in the number of shares of
Company Stock or any dissolution, liquidation, merger, or consolidation of the
Company or any other corporation. Except as expressly provided in the Plan, no
issuance by the Company of Company Stock, or securities convertible into shares
of Company Stock, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number of shares of Company Stock subject to an
Incentive Award or the exercise price or strike price of any Option or SAR.
11. RIGHTS AS A STOCKHOLDER.
No person shall have any rights as a stockholder with respect to any shares
of Company Stock covered by or relating to any Incentive Award granted pursuant
to this Plan until the date the person becomes the owner of record with respect
to such shares. Except as otherwise expressly provided in Section 10 hereof, no
adjustment to any Incentive Award shall be made for dividends or other rights
for which the record date occurs prior to the date the person becomes the
owner of record and the related stock certificate is issued.
12. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHTS TO INCENTIVE AWARD.
Nothing contained in the Plan or any Incentive Award shall confer upon any
Participant any right with respect to the continuation of his or her employment
by the Company or interfere in any way with the right of the Company, subject to
the terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Incentive
Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any
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time nor preclude the Committee from making subsequent grants to such
Participant or any other Participant or other person.
13. SECURITIES MATTERS.
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any interests in the Plan or any shares of
Company Stock to be issued hereunder or to effect similar compliance under any
state laws. Notwithstanding anything herein to the contrary, the Company shall
not be obligated to cause to be issued or delivered any certificates evidencing
shares of Company Stock pursuant to the Plan unless and until the Company is
advised by its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority, and
the requirements of NASDAQ and any other securities exchange on which shares of
Company Stock are traded. The Committee may require, as a condition of the
issuance and delivery of certificates evidencing shares of Company Stock
pursuant to the terms hereof, that the recipient of such shares make such
covenants, agreements, and representations, and that such certificates bear such
legends, as the Committee, in its sole discretion, deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall be effective only at
such time as counsel to the Company shall have determined that the issuance and
delivery of shares of Company Stock pursuant to such exercise is in compliance
with all applicable laws, regulations of governmental authority, and the
requirements of NASDAQ and any other securities exchange on which shares of
Company Stock are traded. The Committee may, in its sole discretion, defer the
effectiveness of any exercise of an Option granted hereunder in order to allow
the issuance of shares of Company Stock pursuant thereto to be made pursuant to
registration or an exemption from registration or other methods for compliance
available under federal or state securities laws. The Committee shall inform the
Participant in writing of its decision to defer the effectiveness of the
exercise of an Option granted hereunder. During the period that the
effectiveness of the exercise of an Option has been deferred, the Participant
may, by written notice, withdraw such exercise and obtain a refund of any amount
paid with respect thereto.
(c) All Company Stock issued pursuant to the terms of this Plan shall
constitute "restricted securities," as that term is defined in Rule 144
promulgated pursuant to the Securities Act, and may not be transferred except in
compliance with the registration requirements of the Securities Act or an
exemption therefrom.
(d) Certificates for shares of Company Stock, when issued, may have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT
SUCH OFFER SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE
APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Company Stock issued
pursuant to an effective registration statement under the Securities Act and in
accordance with applicable state securities laws.
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14. INCOME TAX WITHHOLDING AND PAYROLL TAXES.
(a) Cash Remittance.
Whenever shares of Company Stock are to be issued upon the exercise of an
Option, the occurrence of the Issue Date or Vesting Date with respect to a share
of Restricted Stock or the payment of a Stock Bonus, the Company shall have the
right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state, and local income tax withholding and
payroll tax requirements, if any, attributable to such exercise, occurrence, or
payment prior to the delivery of any certificate or certificates for such
shares. In addition, upon the exercise of a SAR, the Company shall have the
right to withhold from any cash payment required to be made pursuant thereto an
amount sufficient to satisfy the federal state, and local income tax withholding
and payroll tax requirements, if any, attributable to such exercise or grant.
(b) Stock Remittance.
At the election of the Participant, subject to the approval of the
Committee, when shares of Company Stock are to be issued upon the exercise of an
Option, the occurrence of the Issue Date or the Vesting Date with respect to a
share of Restricted Stock, or the grant of a Stock Bonus, in lieu of the
remittance required by Section 14(a) hereof, the Participant may tender to the
Company a number of shares of Company Stock in which the Participant has good
title, free and clear of all liens and encumbrances and have been owned by the
Participant for at least six (6) months or which have been purchased on the open
market, or which meet such other requirements as the Committee may determine
necessary in order to avoid an accounting earnings charge in respect of the
Option, valued at the Fair Market Value on the effective date of such exercise,
the Fair Market Value of which at the tender date the Committee determines to be
sufficient to satisfy the federal, state, and local income tax withholding and
payroll tax requirements, if any, attributable to such exercise, occurrence, or
grant and not greater than the Participant's estimated total federal, state, and
local tax obligations associated with such exercise, occurrence, or grant.
(c) Stock Withholding.
The Company shall have the right, when shares of Company Stock are to be
issued upon the exercise of an Option, the occurrence of the Issue Date or the
Vesting Date with respect to a share of Restricted Stock or the grant of a Stock
Bonus, in lieu of requiring the remittance required by Section 14(a) hereof, to
withhold a number of such shares, the Fair Market Value of which at the
withholding date the Committee determines to be sufficient to satisfy the
minimum, but not more than the minimum; federal, state, and local income tax
withholding and payroll tax requirements, if any, attributable to such exercise,
occurrence, or grant.
(d) The exercise of an Option or SAR, and the occurrence of an Issue Date
or Vesting Date with respect to a share of Restricted Stock or the payment of a
Stock Bonus shall be contingent upon the satisfaction of the withholding
obligations described in this Section 14.
15. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may at any time, or from time to time, suspend or terminate the
Plan in whole or in part, or amend it in such respects as the Board may deem
appropriate. No amendment, suspension or termination of this Plan shall, without
a Participant's consent, alter or impair any of the rights or obligations under
any Incentive Award theretofore granted to the Participant under the Plan.
Further, no such amendment, suspension or termination shall be made without
shareholder approval if such approval is necessary to comply with any tax or
regulatory requirement applicable to the Plan (including as necessary to prevent
Options or SARs granted under the Plan from failing to qualify for purposes of
Section 162 of the Code).
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16. NO OBLIGATION TO EXERCISE.
The grant to a Participant of an Option or a SAR shall impose no obligation
upon such Participant to exercise such Option or SAR.
17. TRANSFERS UPON DEATH.
Upon the death of a Participant, outstanding Incentive Awards granted to
such Participant may be exercised only by the executors or administrators of the
Participant's estate or by any person or persons who shall have acquired such
right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Incentive Award,
or the right to exercise any Incentive Award, shall be effective to bind the
Company unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may
deem necessary to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the Incentive
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgments made by the Participant in connection with the grant of
the Incentive Award. Except as provided in this Section and in Section 18, no
Incentive Award shall be assignable or transferable, and shall be exercisable
only by a Participant during the Participant's lifetime.
18. NONTRANSFERABILITY.
(A) Notwithstanding the foregoing provisions of Section 17, the Committee
may in the applicable Incentive Award agreement or at any time after the Grant
Date in an amendment to an Incentive Award agreement provide that options which
are not intended to qualify as Incentive Stock Options may be transferred by a
Participant without consideration, subject to such rules as the Committee may
adopt consistent with any applicable Incentive Award agreement to preserve the
purposes of the Plan, to:
(i) Any person who is a "family member" of the Participant, as such term is
used in the instructions to Form S-8 (collectively, the "Immediate Family
Members");
(ii) a trust solely for the benefit of the Participant and his or her
Immediate Family Members;
(iii) a partnership or limited liability company whose only partners or
shareholders are the Participant and his or her Immediate Family Members; or
(iv) any other transferee as may be approved either (a) by the Board or the
Committee in its sole discretion, or (b) as provided in the applicable Award
agreement; (each transferee described in clauses (i), (ii), (iii) and (iv) above
is hereinafter referred to as a "Permitted Transferee"); provided that the
Participant gives the Committee advance written notice describing the terms and
conditions of the proposed transfer and the Committee notifies the Participant
in writing that such a transfer would comply with the requirements of the Plan
and any applicable Incentive Award agreement evidencing the option.
(B) The terms of any option transferred in accordance with the immediately
preceding sentence shall apply to the Permitted Transferee and any reference in
the Plan or in an Incentive Award agreement to an Optionee or Participant shall
be deemed to refer to the Permitted Transferee, except that (i) Permitted
Transferees shall not be entitled to transfer any options, other than by will or
the laws of descent and distribution; (ii) Permitted Transferees shall not be
entitled to exercise any transferred options unless there shall be in effect a
registration statement on an
15
appropriate form covering the shares to be acquired pursuant to the exercise of
such option if the Committee determines, consistent with any applicable
Incentive Award agreement, that such a registration statement is necessary or
appropriate, (iii) the Committee or the Company shall not be required to provide
any notice to a Permitted Transferee, whether or not such notice is or would
otherwise have been required to be given to the Participant under the Plan or
otherwise, and (iv) the consequences of termination of the Participant's
employment by, or services to, the Company, a subsidiary or an affiliate under
the terms of the Plan and the applicable Incentive Award agreement shall
continue to be applied with respect to the Participant, following which the
options shall be exercisable by the Permitted Transferee only to the extent, and
for the periods, specified in the Plan and the applicable Incentive Award
agreement.
19. EXPENSES AND RECEIPTS.
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general purposes.
20. FAILURE TO COMPLY.
In addition to the remedies of the Company elsewhere provided for herein, a
failure by a Participant (or beneficiary) to comply with any of the terms and
conditions of the Plan or the agreement executed by such Participant (or
beneficiary) evidencing an Incentive Award, unless such failure is remedied by
such Participant (or beneficiary) within ten days after having been notified of
such failure by the Committee, shall be grounds for the cancellation and
forfeiture of such Incentive Award, in whole or in part, as the Committee, in
its absolute discretion may determine.
21. ADOPTION AND EFFECTIVE DATE OF PLAN.
The Plan, as amended and restated, was adopted by [unanimous written
consent] of the Board, in lieu of a meeting of the Board, effective as of ______
pursuant to Nevada law. The Plan, as amended and restated, was subsequently
ratified and approved by the shareholders of the Company at the Annual
Shareholders Meeting on __________.
The Plan was originally adopted by unanimous written consent of the Board
of Directors of the Company, in lieu of a meeting of the Board, effective as of
December 4, 1996 and the Plan was subsequently ratified and approved through
action taken by the written consent of a majority of the shareholders of the
Company dated effective as of December 4, 1996, in lieu of a meeting of such
shareholders, all as permitted under Nevada law.
22. TERM OF THE PLAN.
The right to grant Incentive Awards under the Plan will terminate upon the
expiration of ten years from the date the Plan was initially adopted.
23. APPLICABLE LAW.
The Plan will be construed and administered in accordance with the laws of
the State of Nevada, without reference to the principles of conflicts of law.
24. RELATIONSHIP TO OTHER BENEFITS.
No payment under the Plan shall be taken into account in determining any
benefits under any pension, retirement, profit sharing, group insurance or other
benefit plan of the Company except as otherwise specifically provided in such
other Plan.
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25. PRONOUNS.
Masculine pronouns and other words of masculine gender shall refer to both
men and women.
26. SEVERABILITY.
If any provision of the Plan or any Incentive Award agreement is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any person or Incentive Award, or would disqualify the Plan or any Incentive
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed applicable by the Committee, such provision shall be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Incentive Award, such
provision shall be stricken as to such jurisdiction, person or Incentive Award
and the remainder of the Plan and any such Incentive Awards shall remain in full
force and effect.
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