UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
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.
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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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):
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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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
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filing.
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Date Filed: |
NEXMED,
INC.
89
Twin Rivers Drive
East
Windsor, New Jersey 08520
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
___________
To
Our
Stockholders:
Notice
is
hereby given to all of the stockholders of NexMed, Inc. (the "Company”) that the
Annual Meeting of Stockholders of the Company (the "Annual Meeting") will be
held on Monday, June 5, 2006 at 11:00 AM., local time, at the Company's
headquarter facilities, located at 89 Twin Rivers Drive, East Windsor, New
Jersey for the following purposes:
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1)
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To
elect two persons to the Board of Directors of the Company, to
serve a
three-year term, or until a successor is elected and
qualified.
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2)
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To
consider and vote upon a proposal to approve and adopt the NexMed,
Inc.
2006 Stock Incentive Plan.
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3)
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To
consider and vote upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP, as the Company’s independent registered public
accounting firm for the year ending December 31,
2006.
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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
stockholders of record of the Company's common stock, par value $0.001 per
share
(the “Common Stock”), and the Company’s Series C 6% Cumulative Convertible
Preferred Stock (the “Series C Preferred Stock”) at the close of business on
April 7, 2006 are entitled to notice of and to vote at the Annual Meeting or
any
adjournment thereof. The Common Stock and the Series C Preferred Stock vote
together as one class, with each share of Series C Preferred Stock having a
number of votes equal to the number of shares of Common Stock issuable upon
conversion of such share of Series C Preferred Stock. At least a majority of
the
shares of Common Stock entitled to vote (including those issuable upon
conversion of the Series C Preferred Stock) 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
April
12,
2006
East
Windsor, 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) 560-1965 OR BY INTERNET
AT
http://www.eproxy.com/nexm/. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE
YOUR PROXY IF YOU WISH AND VOTE IN PERSON. YOUR PROXY IS REVOCABLE IN ACCORDANCE
WITH THE PROCEDURES SET FORTH IN THE ACCOMPANYING PROXY
STATEMENT.
NEXMED,
INC.
350
Corporate Boulevard
Robbinsville,
New Jersey 08691
_______________________
PROXY
STATEMENT
_______________________
General
Information
This
Proxy Statement is furnished by the board of directors (the “Board” or “Board of
Directors”) of NexMed, Inc., a Nevada corporation (“NexMed” or the “Company”),
in connection with the solicitation of proxies for use at NexMed’s Annual
Meeting of Stockholders (the “Annual Meeting”) to be held on Monday, June 5,
2006, at 11:00 AM, local time, at the Company's headquarter facilities, located
at 89 Twin Rivers Drive, East Windsor, New Jersey, and any adjournment or
postponement thereof.
This
Proxy Statement and the accompanying form of proxy are first being mailed to
stockholders on or about April 12, 2006.
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") and holders of the Company’s
Series C 6% Cumulative Convertible Preferred Stock (the “Series C Preferred
Stock”). The Company may use the services of Wells Fargo Shareowner Services and
the Altman Group in soliciting proxies and, in such event, the Company expects
to pay approximately $20,000, 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
will receive additional compensation for assisting with the
solicitation.
The
presence at the Annual Meeting of a majority of the shares of Common Stock
entitled to vote (including those issuable upon conversion of the Series C
Preferred Stock), 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 April 7, 2006 has been fixed as the record date (the “Record Date”)
for determining the holders of shares of Common Stock and Series C Preferred
Stock (collectively, the “Stockholders”) entitled to notice of and to vote at
the Annual Meeting. The Stockholders will vote as a single class on all matters.
Each share of Common Stock outstanding on the Record Date is entitled to one
vote on all matters. Each holder of Series C 6% Preferred Stock is entitled
to
vote the number of shares of Common Stock into which such holder’s shares of
Series C Preferred Stock are convertible as of the Record Date.
As
of
April 4, 2006, each share of Series C Preferred Stock was convertible into
7,353
shares of Common Stock. As of April 4, 2006, there were outstanding 66,264,832
shares of Common Stock and 15.5 shares of Series C Preferred Stock convertible
into an aggregate of 113,971 shares of Common Stock.
Stockholder
votes will be tabulated by the persons appointed by the Board of Directors
to
act as inspectors of election for the Annual Meeting. Shares of Common Stock
and
Series C Preferred Stock represented by a properly executed and delivered proxy
will be voted at the Annual Meeting and, when the Stockholder has given
instructions, 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
NexMed’s
Amended and Restated Articles of Incorporation, as amended to date (the
“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 Annual Meeting of Stockholders. The Board of
Directors currently consists of six members as follows: Class I directors,
Sami
A. Hashim, MD and Martin R. Wade, III, whose terms expire in 2007; Class II
directors, Richard J. Berman and Arthur D. Emil, Esq., whose terms expire in
2006, and if re-elected at the Annual Meeting, in 2009, and Class III directors,
Y. Joseph Mo, Ph.D., and Leonard A. Oppenheim, Esq., whose terms expire in
2008.
At
the
Annual Meeting, the Stockholders will elect two directors to serve as Class
II
directors. Each of the Class II directors who is elected at the Annual Meeting
will serve until the Annual Meeting of Stockholders to be held in 2009, 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 Richard J. Berman and Arthur D. Emil, Esq., will stand for
election and will, if elected, serve as Class II directors. However, with
respect to each nominee, in the event such nominee is unable or unwilling to
serve as a Class II director at the time of the Annual Meeting, the proxies
may
be voted for any substitute nominee designated by the present Board of Directors
to fill such vacancy or the Board of Directors may be reduced in accordance
with
the Articles of Incorporation.
The
Company’s Corporate Governance/Nominating Committee has reviewed the
qualifications of the nominees for Class II director and has recommended such
nominees for election to the Board of Directors.
Nominees
for Director
The
following information was furnished to the Company by the nominees.
Richard
J. Berman
is, and
has been, our President and Chief Executive Officer since January 2006, and
has
served on the Board of Directors since June 2002. He also served as
a
member
of the Audit Committee, Executive Compensation Committee, Finance Committee
and
Corporate Governance/Nominating Committee of the Board of Directors between
June
2002 and January 2006.
Since
2001, Mr. Berman has served as a Director and/or Chairman of several public
and
private companies. He is currently Chairman of National Investment Managers,
a
public company in the business of pension administration and investment
management; and Chairman of Candidate Resources, a private company delivering
HR
services over the Web. From 1998 to 2000, he was employed by Internet Commerce
Corporation, a high technology company, as Chairman and CEO. Previously, Mr.
Berman worked at Goldman Sachs and was Senior Vice President of Bankers Trust
Company, where he started the M&A and Leveraged Buyout Departments and
advised on over $4 billion of M&A transactions. He is a past Director of the
Stern School of Business of NYU, where he earned both a B.S. and an M.B.A.
He
also has a U.S. and foreign law degree from Boston College and The Hague Academy
of International Law, respectively
.
Arthur
D. Emil, Esq.,
is and
has been a director of the Company and a member of the Audit Committee,
Executive Compensation Committee and the Corporate Governance/Nominating
Committee of the Board of Directors since June 2003. Mr. Emil has been a
practicing attorney in New York City for over forty years, including with Kramer
Levin Naftalis & Frankel from 1994 to 2002 and with Cohen Tauber Spievack
& Wagner from 2003 to present. Mr. Emil is a principal owner and chairman of
Night Sky Holdings LLC, a company which owns several restaurants now operating
in the New York area, formerly owned Windows on the World, and operated the
Rainbow Room from 1986 until December 1998. Mr. Emil is the founding principal
and shareholder of two real estate development firms with commercial,
residential and mixed-use properties in Connecticut, New York and Ohio. Mr.
Emil
has served as trustee for various non-profit organizations including The
American Federation of Arts and the Montefiore Medical Center. Mr. Emil received
his LLB from Columbia University.
Required
Vote and Recommendation of Board of Directors
Under
Nevada law, where NexMed is incorporated, shares of Common Stock and Series
C
Preferred Stock 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 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 THE NOMINEES NAMED ABOVE.
DIRECTORS
Set
forth
below is certain information as of the Record Date regarding the directors
of
the Company.
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Name
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Age
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Title
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Y.
Joseph Mo, Ph.D.
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58
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Chairman
of the Board of Directors
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Richard
J. Berman
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63
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Director,
Chief Executive Officer and President
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Arthur
D. Emil
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81
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Director
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Sami
A. Hashim, M.D.
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76
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Director
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Leonard
A. Oppenheim
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59
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Director
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Martin
R. Wade, III
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56
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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.
Sami
A. Hashim, MD.,
is
and
has been a director of the Company and a member of the Finance Committee and
the
Corporate Governance/Nominating Committee of the Board of Directors since May
2004. His current term as a member of the Board of Directors expires in 2007.
Dr. Hashim has been a Professor of Nutritional Medicine at Columbia University
College of Physicians and Surgeons since the early 1970’s. Since 1971, he has
been affiliated with St-Luke’s Hospital Center in New York and was Chief of
Metabolism and Nutrition from 1971 to 1997. Dr. Hashim has published over 200
papers in peer-reviewed journals and is a recognized expert in the fields of
metabolism and nutrition. Dr. Hashim served on research review committees of
the
National Institutes of Health, and has been a member of the Editorial Boards
of
the American Journal of Clinical Nutrition and Contemporary Issues in Clinical
Nutrition. Dr. Hashim received his MD degree from the State University of New
York, with post-graduate training at Harvard University.
Y.
Joseph Mo, Ph.D.,
is,
and
has been since 1995 the Chairman and a member of the Board of Directors. He
served as the Company’s President and Chief Executive Officer from October 1995
to December 2005. His current term as a member of the Board of Directors expires
in 2008. Dr. Mo has over 25 years of experience in the pharmaceutical and
biotechnology industries. Prior to joining the Company in 1995, Dr. Mo served
in
various executive positions with pharmaceutical and biotechnology companies,
including Johnson & Johnson, Rorer Pharmaceuticals, Beecham Pharmaceuticals
and Greenwich Pharmaceuticals. Dr. Mo received his Ph.D. in Industrial and
Physical Pharmacy from Purdue University. In 2001, Dr. Mo was recognized as
Distinguished Alumnus by the School of Pharmacy at Purdue
University.
Leonard
A. Oppenheim, Esq.
,
is and
has been a director of the Company since 2004, and a member of the Audit
Committee since January 2006. His current term as a member of the Board of
Directors expires in 2008. Mr. Oppenheim retired from business in 2001 and
has
since been active as a private investor. From 1999 to 2001, Mr. Oppenheim was
a
partner in Faxon Research, a company offering independent research to
professional investors. From 1983 to 1999, Mr. Oppenheim was a principal in
the
Investment Banking and Institutional Sales division of Montgomery Securities.
Prior to that, he was a practicing attorney. Mr. Oppenheim graduated from New
York University Law School in 1976.
Martin
R. Wade III
,
is and
has been a director of the Company and a member of the Audit Committee,
Executive Compensation Committee, and Finance Committee of the Board of
Directors since June 2003, and a member of the Corporate Governance/Nominating
Committee since January 2004. His current term as a member of the Board of
Directors expires in 2007. Mr. Wade is the chief executive officer of
International Microcomputer Software Inc, (IMSI) a software development and
publishing firm, and since 2000, has also served as the chief executive officer
of Bengal Capital Partners, LLC, a merger and acquisition firm. From 2000 to
2001, Mr. Wade was director and chief executive officer of Digital Creative
Development Corp. From 1998 to 2000, Mr. Wade was managing director of
Prudential Securities Inc. From 1975 to 1998, Mr. Wade served in various
executive positions at Salomon Brothers Inc., Bankers Trust Company, Lehman
Brothers and Price Waterhouse Company. Mr. Wade serves on the boards of
directors of several companies, including Dimon, Incorporated (NYSE: DMN) and
IMSI. Mr. Wade holds an MBA from the University of Wyoming.
There
are
no family relationships among the directors or executive officers of the
Company.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership,
as of April 4, 2006, of Common Stock by (a) each person known by NexMed to
be
the beneficial owner of more than 5% of its outstanding voting securities,
(b)
NexMed’s directors and executive officers, including Y. Joseph Mo and Kenneth F.
Anderson, who served as executive officers during most of 2005, individually,
and (c) NexMed’s directors and executive officers as a group.
|
Name,
Position and Address of Beneficial Owner (1)
|
Number
of Shares Beneficially Owned(2)
|
Percent
of Class (%)
|
|
Richard
J. Berman
Director,
Chief Executive Officer and President (3)
|
1,201,002
|
1.8%
|
|
Kenneth
F. Anderson (4)
|
109,582
|
*
|
|
Vivian
H. Liu
Executive
Vice President (5)
|
815,555
|
1.2%
|
|
Mark
Westgate
Vice
President and Chief Financial Officer (6)
|
126,591
|
*
|
|
Y.
Joseph Mo
Chairman
of the Board of Directors (7)
|
1,756,429
|
2.7%
|
|
Arthur
D. Emil
Director
(8)
|
179,954
|
*
|
|
Leonard
A. Oppenheim
Director
(9)
|
386,702
|
*
|
|
Martin
R. Wade, III
Director
(10)
|
112,329
|
*
|
|
Sami
A. Hashim, MD
Director
(11)
|
97,329
|
*
|
|
Loeb
Partners Corporation (12)
61
Broadway
New
York, NY 10006
Attn:
Michael Emanuel, Esq.
|
4,427,236
|
6.7%
|
|
All
Current Executive Officers and Directors as a Group (eight persons)
(13)
|
4,675,891
|
6.9%
|
*
less
than 1%
1)
The
address for each of the executive officers and directors of the Company is
89
Twin Rivers Drive, East Windsor, New Jersey 08520.
2)
Except
as
otherwise indicated herein, all shares are solely and directly owned, with
sole
voting and dispositive power.
3)
Includes
1,150,000 shares issuable upon exercise of stock options exercisable within
60
days.
4)
Mr.
Anderson served as Vice President-Commercial Development until December 16,
2005. To the Company’s knowledge, information for Mr. Anderson is accurate as of
that date except that options which have since expired are not
included.
5)
Includes
454,284 shares issuable upon exercise of stock options exercisable within 60
days
6)
Includes
47,273 shares issuable upon exercise of stock options exercisable within 60
days. Mr. Westgate was appointed Vice President and Chief Financial Officer
on
December 15, 2005.
7)
Includes
200,000 shares held by a retained annuity trust for the benefit of the Dr.
Mo,
of which he is the sole trustee.
8)
Includes
of 60,000 shares issuable upon exercise of stock options exercisable within
60
days.
9)
Includes
of 60,000 shares issuable upon exercise of stock options exercisable within
60
days.
10)
Includes
of 80,000 shares issuable upon exercise of stock options exercisable within
60
days.
11)
Includes
of 60,000 shares issuable upon exercise of stock options exercisable within
60
days.
12)
Except
for percentage information, this information is based upon a Schedule 13D filed
with the Securities and Exchange Commission on March 7, 2006.
13)
Includes
1,911,557 shares issuable upon exercise of stock options exercisable within
60
days.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)
requires NexMed’s executive officers, directors and persons who beneficially own
greater than 10% of a registered class of its equity securities to file certain
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 its review of the copies of such reports furnished to the Company
and
written representations from officers and directors that no other reports were
required, the Company’s officers, directors and greater than ten percent
stockholders complied with these Section 16(a) filing requirements with respect
to the Common Stock during the fiscal year ended December 31, 2005.
DIRECTOR
COMPENSATION
In
2001,
the Board of Directors adopted a stock option and cash compensation package
for
its non-employee directors. Upon joining the Board, each new non-employee
director receives a stock option package issued pursuant to the NexMed, Inc.
Recognition and Retention Stock Incentive Plan, (the “Recognition Plan”), which
generally vests over a period of several years from the date of grant based
on
continuous and uninterrupted service to NexMed. This approach is designed to
align the interests of the directors with those of the Stockholders 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. Each non-employee director also receives compensation of $3,000 per
month, which the Board has determined will be paid in 2006 to the directors
in
shares of the Company’s Common Stock
THE
BOARD AND ITS COMMITTEES
Director
Independence
The
Board
of Directors has determined that each of Mr. Emil, Dr. Hashim, Mr. Oppenheim
and
Mr. Wade, is independent under the NASDAQ Stock Market listing
requirements.
Meetings
of the Board of Directors
During
the year ended December 31, 2005, nine meetings of the Board of Directors were
held. Each director attended at least 75% of the aggregate number of meetings
of
the Board and the committees of the Board on which they served during the
periods that they served. In June 2005, all of the directors except Messrs.
Emil
and Wade were present at the Company’s 2005 Annual Meeting of Stockholders.
Committees
of the Board
The
Board
of Directors currently has four committees: the Executive Compensation
Committee, the Audit Committee, the Finance Committee, and the Corporate
Governance/Nominating Committee.
The
Executive Compensation Committee establishes remuneration levels for executive
officers of the Company and implements incentive programs for officers,
directors and consultants, including the NexMed Inc. Stock Option and Long-Term
Incentive Compensation Plan (the “Stock Plan”) and the Recognition Plan. The
Executive Compensation Committee was formed on February 7, 2000 and met twice
in
2005. The Executive Compensation Committee consists of Messrs. Emil and Wade,
neither of whom is an employee of the Company and both of whom meet the
independence requirements of the NASDAQ Stock Market listing requirements.
Mr.
Berman was a member of the Executive Compensation Committee until January 9,
2006, and resigned upon his appointment as Chief Executive Officer of the
Company.
The
Audit
Committee periodically meets with the Company’s financial and accounting
management and independent auditors and selects the Company’s independent
auditors, reviews with the independent auditors the scope and results of the
audit engagement, approves professional services provided by the independent
auditors, reviews the independence of the independent auditors and reviews
the
adequacy of the internal accounting controls. The Audit Committee was formed
on
February 7, 2000 and acts under a written charter. A copy of the Amended Audit
Committee charter was filed as Appendix A to the Proxy Statement for the
Company’s 2005 Annual Meeting, which was filed with the Securities and Exchange
Commission on April 14, 2005. The Audit Committee met four times in 2005, and
consists of Messrs. Emil, Wade and Oppenheim, none of whom is an employee of
the
Company and each of whom meets the independence and experience requirements
of
the Nasdaq Stock Market listing requirements. The Board of Directors has
determined that Mr. Wade, in addition to being “independent” is an “audit
committee financial expert,” as defined Item 401(h) of Regulation S-K. Mr.
Berman was a member of the Audit Committee until January 9, 2006, and resigned
upon his appointment as Chief Executive Officer of the Company.
The
Finance Committee, which was formed on June 21, 2002, makes recommendations
to
the Board of Directors concerning financing opportunities and instruments.
The
Finance Committee met once in 2005, and consists of Messrs. Berman, Emil and
Hashim.
The
Corporate Governance/Nominating Committee, which was formed February 7, 2000,
makes recommendations to the Board of Directors concerning candidates for Board
vacancies. The Corporate Governance/Nominating Committee met one time in 2005,
and consists of Messrs. Email, Wade and Hashim. Mr. Berman was a member of
the
Corporate Governance/Nominating Committee until January 9, 2006, and resigned
upon his appointment as Chief Executive Officer of the Company. The Corporate
Governance/Nominating Committee acts under a written charter, which is available
on the Company’s website at
www.nexmed.com
.
Each of
the members of the Committee meets the independence requirements of the NASDAQ
Stock Market listing standards. The Company has not paid any third party a
fee
to assist in the process of identifying and evaluating candidates for director.
The Company has not received any nominees for director from a stockholder or
stockholder group that owns more than 5% of the Company’s voting
stock.
The
Company’s Corporate Governance/Nominating Committee may consider nominees for
director of the Company submitted in writing to the Chairman of the Committee,
which are submitted by executive officers of the Company, current directors
of
the Company, search firms engaged by the Committee, and by others in its
discretion and, in the circumstances provided below, shall consider nominees
for
director proposed by a stockholder. Such submitting stockholder shall have
provided evidence that he, she or it has beneficially owned at least 5% of
the
Company’s Common Stock for at least one year. Information with respect to the
proposed nominee shall have been provided in writing to the Chairman of the
Corporate Governance/Nominating Committee at NexMed, Inc., 89 Twin Rivers Drive,
East Windsor, New Jersey 08520, at least 120 days prior to the anniversary
of
the date of the prior year’s Annual Meeting proxy statement. Such information
shall include the name of the nominee, and such information with respect to
the
nominee as would be required under the rules and regulations of the Securities
and Exchange Commission to be included in the Company’s Proxy Statement if such
proposed nominee were to be included therein. In addition, the stockholder
shall
include a statement to the effect that the proposed nominee has no direct or
indirect business conflict of interest with the Company, and otherwise meets
the
Company’s minimum criteria (if any) for consideration as a nominee for director
of the Company.
Any
other
stockholder communications intended for management of the Company or the Board
of Directors shall be submitted in writing to the Chairman of the Corporate
Governance/Nominating Committee who shall determine, in his discretion,
considering the identity of the submitting stockholder and the materiality
and
appropriateness of the communication, whether, and to whom within the Company,
to forward the communication.
The
Corporate Governance/Nominating Committee generally identifies potential
candidates for director by seeking referrals from the Company’s management and
members of the Board of Directors and their various business contacts. There
are
currently no specific, minimum or absolute criteria for Board membership.
Candidates are evaluated based upon factors such as independence, knowledge,
judgment, integrity, character, leadership, skills, education, experience,
financial literacy, standing in the community and ability to foster a diversity
of backgrounds and views and to complement the Board’s existing strengths. There
are no differences in the manner in which the Committee will evaluate nominees
for director based on whether the nominee is recommended by a stockholder.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth the compensation paid by NexMed during the years
ended December 31, 2005, 2004 and 2003 to Dr. Y. Joseph Mo, who served as the
Company’s Chief Executive Officer until December 14, 2005, Mr. Kenneth Anderson,
who served as the Company’s Vice President for Commercial Development until
December 16, 2005, and the Company’s two other executive officers who were
serving as executive officers at the end of the Company’s last fiscal year
(collectively, the “Named Executive Officers”):
|
Name
|
Fiscal
Year
|
Annual
Salary ($)
|
Annual
Bonus ($)
|
Long-Term
Compensation Awards/Securities
Underlying
Options (# shares)
|
All
Other
Compensation
($)
|
|||||
|
Y.
Joseph Mo
|
2005
2004
2003
|
255,000
250,000
250,000
|
--
--
(1)
|
--
300,000
490,000
|
739,500
(5)
6,000
(2)
6,000
(2)
|
|||||
|
Kenneth
F. Anderson
|
2005
2004
2003
|
165,235
162,000
162,000
|
--
--
40,000
|
--
--
--
|
98,506
(5)
6,000
(2)
5,087
(2)
|
|||||
|
Vivian
H. Liu (3)
|
2005
2004
2003
|
163,200
160,000
160,000
|
--
--
50,000
|
180,000
--
--
|
--
6,000
(2)
5,025
(2)
|
|||||
|
Mark
Westgate (4)
|
2005
2004
2003
|
107,100
105,000
102,000
|
--
--
20,400
|
80,000
--
--
|
--
3,774
(2)
2,362
(2)
|
| (1) |
In
lieu of cash, Dr. Mo was granted a bonus for 2003 of 100,000 shares
of the
Company’s Common Stock on November 19, 2003, which shares were issued July
12, 2004. The fair market value of such shares on the date of the
award
was $400,000.
|
| (2) |
Consists
of matching by the Company of executive’s contribution to the Scudder
Kemper 401(K) plan of up to 3% on first $200,000 paid to executive
during
such year. For Mr. Anderson and Ms. Liu in 2004, the compensation
used in
the calculation of the matching for 2004 included their 2003 bonus
payments which were deferred to
2004.
|
| (3) |
Ms.
Liu served as the Company’s Vice President and Chief Financial Officer
until her promotion to Executive Vice President on December 15,
2005.
|
| (4) |
Mr.
Westgate served as the Company’s Controller until his promotion to Vice
President and Chief Financial Officer on December 15, 2005.
|
| (5) |
Includes
severance amounts that were accrued at December 31, 2005 and paid
in
January and February 2006.
|
Employment
Agreements
The
Company was a party to employment agreements with each of the four executive
officers who served in such capacity during 2005.
On
December 15, 2005, the Company entered into three-year employment agreements
with Vivian
Liu
and
Mark Westgate, pursuant to which they serve as Company’s Executive Vice
President and Vice President, respectively. During their employment with the
Company, Ms. Liu and Mr. Westgate will receive annual base salaries of at least
$200,000 and $160,000, respectively, and will be eligible to earn an annual
bonus based on the attainment of financial targets established by the Board
of
Directors or its Executive Compensation Committee in consultation with the
executives.
The
employment agreements provide for grants of options to purchase shares of
Company common stock under the Company’s Stock Option and Long-Term Incentive
Compensation Plan. These options are intended to be incentive stock options
to
the fullest extent permitted under the Internal Revenue Code. Pursuant to the
agreements, Ms. Liu and Mr. Westgate received a total of 180,000 and 75,000
stock options, respectively, vesting in three equal installments on December
31,
2006, December 16, 2007 and December 16, 2008.
The
employment agreements provide that, in the event of termination of the
executive’s employment for “Cause” (as defined in the employment agreements), or
death and disability, such executive will be entitled to receive any earned
but
unpaid base salary, bonus and benefits. In the event of the termination of
the
executive’s employment without Cause or by the executive with “Good Reason” (as
defined in the employment agreements), which includes termination after a change
in control of the Company, such executive
will
be
entitled to receive any earned but unpaid base salary, bonus and benefits and
an
amount equal to the executive's annual base salary at the time of such
termination for six months, plus an additional week of base salary for every
fully-completed year of service. In addition, in the case of the executive’s
termination for “Good Reason”, all of such executive's outstanding but unvested
stock options will vest immediately.
On
September 26, 2003, the Company entered into three-year employment agreements
with Kenneth Anderson and Vivian Liu, pursuant to which they would serve as
Company’s Vice Presidents. During their employment with the Company, Mr.
Anderson and Ms. Liu were to receive an annual base salary of at least $162,000
and $160,000 respectively, and were to be eligible to earn an annual bonus
based
on the attainment of financial targets established by the Board of Directors
or
its Executive Compensation Committee in consultation with the executives.
The
employment agreements provided for grants of options to purchase shares of
Company common stock under the Company’s Stock Plan. These options were intended
to be incentive stock options to the fullest extent permitted under the Internal
Revenue Code. Mr. Anderson and Ms. Liu received a total of 45,000 and 105,000
stock options, respectively, vesting in three equal installments on December
16,
2003, December 16, 2004 and December 16, 2005. These options were granted in
2002 in anticipation of the execution of employment agreements with Mr. Anderson
and Ms. Liu.
The
employment agreements provided that, in the event of termination of an
executive’s employment for “Cause” (as defined in the employment agreements), or
death and disability, such executive would be entitled to receive any earned
but
unpaid base salary, bonus and benefits. In the event of the termination of
an
executive’s employment without Cause or by an executive with “Good Reason” (as
defined in the employment agreements), which includes termination after a change
in control of the Company, such executive
would
be
entitled to receive any earned but unpaid base salary, bonus and benefits and
an
amount equal to the executive's annual base salary at the time of such
termination for six months, plus an additional week of base salary for every
fully-completed year of service. In addition, in the case of an executive’s
termination for “Good Reason”, all of such executive's outstanding but unvested
stock options would vest immediately.
On
December 15, 2005, the Company entered into a new three-year employment
agreement with Ms. Liu, which is described above and which superseded her 2003
employment agreement. Mr. Anderson ceased being employed by the Company on
December 16, 2005. Pursuant to his employment agreement, Mr. Anderson was
entitled to receive a severance payment of $98,506, or one-half of his annual
salary plus an additional week of base salary for every fully-completed year
of
service.
On
February 26, 2002, the Company entered in to a five-year employment agreement
with Y. Joseph Mo, Ph.D., pursuant to which Dr. Mo served as the Company’s Chief
Executive Officer and President until December 15, 2005. This employment
agreement with Dr. Mo was executed after extensive discussions and negotiations
between the Company and Dr. Mo. The Company had engaged the services of
PriceWaterhouseCoopers LLP to prepare a report comparing the compensation in
Dr.
Mo’s employment agreement with the compensation of the senior most officers at
a
select group of the Company’s peer group.
The
employment agreement provided that, during his employment with the Company,
Dr.
Mo would receive an annual base salary of at least $250,000 (to be raised to
$350,000 if the Company sustained gross revenues of $10 million for two
consecutive fiscal quarters), subject to annual cost of living increases. Dr.
Mo
was also eligible to earn an annual bonus based on the attainment of financial
targets established by the Board of Directors or its Executive Compensation
Committee in consultation with Dr. Mo. In addition to other benefits and
perquisites generally provided to employees of the Company, during his
employment, the Company agreed to provide Dr. Mo with split dollar life
insurance with a death benefit of $2 million, an automobile for his business
use, payment of up to $10,000 per year in annual dues for a social club, and
up
to $20,000 per year for financial and estate planning.
Dr.
Mo’s
employment agreement provided for three grants of options to purchase 300,000
shares of Company Common Stock per grant under the Company’s Stock Plan. These
options were intended to be incentive stock options to the fullest extent
permitted under the Internal Revenue Code. The three grants of 300,000 shares
of
Common Stock were made on February 26, 2002, February 26, 2003 and February
26,
2004. In addition, the Company, subject to certain financial restrictions,
agreed to loan Dr. Mo up to an aggregate of $2 million to exercise previously
granted options.
Under
his
employment agreement, Dr. Mo was entitled to deferred compensation in an annual
amount equal to one-sixth of the sum of his base salary and bonus for the 36
calendar months preceding the date on which the deferred compensation payments
commenced subject to certain limitations, including annual vesting through
January 1, 2007. The deferred compensation would be payable monthly for 180
months commencing on termination of Dr. Mo’s employment as discussed below. In
addition, Dr. Mo was entitled to a tax gross up in the event any payments to
him
from the Company were subject to an excise tax under Section 4999 of the
Internal Revenue Code, which imposes such excise tax with respect to certain
payments made in connection with a change in control.
In
the
event Dr. Mo’s employment was terminated for “Cause” (as defined in his
employment agreement), Dr. Mo would be entitled to receive any earned but unpaid
base salary, bonus and benefits but would forfeit all deferred compensation.
In
the event of the termination of Dr. Mo’s employment due to death or “permanent
disability” (as defined in his employment agreement), Dr. Mo (or his estate, if
applicable) would be entitled to receive any earned but unpaid base salary,
bonus and benefits. In the event of a termination due to permanent disability,
Dr. Mo would continue to receive his base salary at 50% of the rate in effect
at
the time of termination until the earlier of (i) the fifth anniversary of his
termination or (ii) January 1, 2014. This payment would be offset by any
payments received from the Company’s long-term disability policy to the extent
that the sum of the monthly payments from the Company and under the Company’s
long term disability policy exceeded Dr. Mo’s “Basic Monthly Earnings” (as
defined in the Company’s long term disability policy). In the event of Dr. Mo’s
death, the Company would pay his beneficiary or estate (as applicable) a lump
sum amount equal to the then present value of Dr. Mo’s deferred compensation
arrangement.
In
the
event Dr. Mo’s employment was terminated by the Company without Cause or by Dr.
Mo with “Good Reason” (as defined in the employment agreement), which included
termination after a change in control of the Company, Dr. Mo would be entitled
to receive any earned but unpaid base salary, bonus and benefits, as well as
an
amount equal to 2.9 times his average annual base salary at the time of
termination. In addition, in the event of either such termination, Dr. Mo would
receive the deferred compensation payments, a pro rated bonus for the year
in
which the termination occurs, up to $10,000 in reimbursement for job search
services and two years continued medical coverage or its equivalent. In the
event Dr. Mo terminated his employment without Good Reason, Dr. Mo would be
entitled to receive any earned but unpaid base salary, bonus and benefits.
In
addition, Dr. Mo would not begin to receive his deferred compensation payments
until January 1, 2014.
On
January 25, 2003, the Company, with Dr. Mo’s consent, terminated the split
dollar life insurance policy with a death benefit of $2 million.
On
December 15, 2005, Dr. Mo ceased to be the Company’s President and Chief
Executive Officer. Pursuant to his employment agreement, Dr. Mo was eligible
to
receive a severance payment of $739,500, which was the equivalent of 2.9 times
his average compensation over the 36 month period ended November 30, 2005.
Dr.
Mo is also entitled to deferred compensation in an annual amount equal to one
sixth of the sum of his base salary and bonus for the 36 calendar months
preceding the date on which the deferred compensation payments commence subject
to certain limitations, including annual vesting through January 1, 2007. The
deferred compensation will be payable monthly for 180 months commencing on
July
1, 2006. The monthly-deferred compensation payment through May 15, 2021 will
be
$9,158. Also pursuant to his employment agreement, options held by Dr. Mo to
purchase 300,000 shares of the Company’s Common Stock expired on December 15,
2005 and options to purchase 2,574,000 shares of the Company’s Common Stock
expired on March 15, 2006.
OPTION
GRANTS IN LAST FISCAL YEAR
The
following table sets forth the stock options granted to the Named Executive
Officers during 2005, pursuant to the Stock Plan:
|
Name
|
Number
of Shares Underlying Options
|
Percentage
of Total Options Granted to Employees in 2005
|
Exercise
Price
per
Share
|
Grant
Date
Present
Value (2)
|
|
Y.
Joseph Mo
|
0
|
0
|
--
|
--
|
|
Kenneth
F. Anderson
|
0
|
0
|
--
|
--
|
|
Vivian
H. Liu
|
180,000
(1)
|
60%
|
$0.92
|
$136,800
|
|
Mark
Westgate
|
5,000
75
,000
(1)
|
24%
|
$1.32
$0.92
|
$4,700
$57,000
|
| (1) |
The
options were granted on December 15, 2005 pursuant to the terms of
the
employment agreements with Ms. Liu and Mr. Westgate. The exercise
price
was based on the fair market value of the Company’s common stock on the
date of grant. The options expire on December 15,
2015.
|
| (2) |
The
fair value of each stock option is estimated on the date of grant
using
the Black-Scholes option-pricing model. For options with ten-year
terms,
the assumptions are 106.5%, 4.15% and 0% for the volatility, risk
free
yield and dividend yield, respectively.
|
AGGREGATED
OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION
VALUES
No
stock
options were exercised by the Named Executive Officers during 2005. The
following table sets forth information concerning the value of unexercised
options at December 31, 2005 held by the Named Executive Officers.
|
Name
|
Securities
Underlying Unexercised Options
at
Fiscal Year End (#) Exercisable (E)
/Unexercisable
(U)
(1)
|
Value
of Unexercised In-the-Money Options at Fiscal Year End ($) Exercisable(E)
/Unexercisable
(U)
(1)
|
|
Y.
Joseph Mo
|
2,764,000
(E) (4)
None
(U)
|
$None
(E)
$None
(U)
|
|
Kenneth
F. Anderson
|
202,082
(E) (5)
None
(U
)
|
$17,358
(E)
$None
(U)
|
|
Vivian
H. Liu
|
444,284
(E) (2)
180,000
(U) (6)
|
$32,492
(E)
$None
(U)
|
|
Mark
Westgate
|
47,273
(E) (3)
75,000
(U) (6)
|
$6,000
(E)
$None
(U)
|
| (1) |
Based
on a closing sale price of the Company’s Common Stock on the NASDAQ Stock
Market of $0.77 per share on December 30,
2005.
|
| (2) |
Includes
stock options at exercise prices ranging from $0.55 - $4.00 per option
share.
|
| (3) |
Includes
stock options at exercise prices ranging from $0.55 - $3.25 per option
share.
|
| (4) |
Includes
stock options at exercise prices ranging from $0.81 - $4.00 per option
share.
|
| (5) |
Includes
stock options at exercise prices ranging from $0.55 - $16.25 per
option
share.
|
| (6) |
Consists
of stock options at an exercise price of
$0.92.
|
PERFORMANCE
COMPARISON OF TOTAL RETURNS OF NEXMED, INC.,
THE
U.S. NASDAQ STOCK MARKET AND NASDAQ PHARMACEUTICALS STOCKS
The
following graph shows the yearly change in cumulative total stockholder return
on NexMed Common Stock compared to the cumulative total return on the Nasdaq
Stock Market (U.S.) and Nasdaq Pharmaceutical Stocks for the past 5 fiscal
years
(assuming a $100 investment on January 1, 2001 and quarterly reinvestment of
dividends during the period).
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
None.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Richard
J. Berman, Arthur D. Emil and Martin R. Wade, III served on the Executive
Compensation Committee in 2005, none whom had ever been an employee of NexMed
or
its subsidiaries prior to 2006. No NexMed executive officer served as a member
of the board of directors or the compensation committee of any company whose
executive officers included a member of the Board of Directors or the Executive
Compensation Committee.
AUDIT
COMMITTEE REPORT
We
have
reviewed and discussed with management NexMed’s audited consolidated financial
statements for the year ended December 31, 2005.
We
have
discussed with PricewaterhouseCoopers LLP, NexMed’s independent registered
public accounting firm, 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
LLP required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as amended, and have discussed with
PricewaterhouseCoopers LLP 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
NexMed’s Annual Report on Form 10-K for the year ended December 31,
2005 filed with the Securities and Exchange Commission.
|
The
Audit Committee of the Board of Directors
|
|
|
Arthur
D. Emil
|
|
|
Leonard
A. Oppenheim
|
|
|
Martin
R. Wade, III
|
EXECUTIVE
COMPENSATION COMMITTEE REPORT
Overall
Policy
NexMed’s
executive compensation program is designed to be linked to corporate performance
and the total return to stockholders over the long-term. The overall objectives
of this strategy are to attract and retain the best possible executive talent,
to motivate executives to achieve the goals inherent in the Company's business
strategy, to link executive and stockholder interests and 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.
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. All final determinations are subjective. In
establishing 2005 salary levels for Ms. Liu and Mr. Westgate, 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 retaining the executive officers. The Executive
Compensation Committee also afforded substantial weight to the Company's
long-term prospects and performance. Factors of lesser significance 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. No bonuses were awarded to the Named
Executive Officers during 2005.
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 Stockholders 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.
On
December 15, 2005, the Company entered into three-year employment agreements
with Ms. Liu and Mr. Westgate, pursuant to which they received a total of
180,000 and 75,000 stock options, respectively, vesting in three equal
installments on December 31, 2006, December 16, 2007 and December 16, 2008.
Compensation
of Chief Executive Officer
Compensation
for Y. Joseph Mo, Ph.D., the Company's Chairman of the Board and its President
and Chief Executive Officer until December 15, 2005, historically was
established in accordance with the principles described above. The Executive
Compensation Committee reviewed Dr. Mo’s performance and established his base
salary considering the various factors described above for Named Executive
Officers. The amount of Dr. Mo’s 2003 stock option bonus was awarded based upon
a subjective evaluation by the Executive Compensation Committee of Dr. Mo’s
performance during the year. Dr. Mo received no bonus in 2005.
Dr. Mo’s
base salary was $250,000 for each of fiscal years 2005, 2004 and 2003. In
February of 2003 and 2004, pursuant to the terms of Dr. Mo’s employment
agreement, the Company granted Dr. Mo 300,000 stock options at an exercise
price
of $1.81 and $3.38 per option, respectively. The two grants of 300,000 stock
options provided for vesting in three equal annual installments of 100,000
stock
options each. Please see “Employment Agreements”, above, for a description of
the terms of Dr. Mo’s severance arrangements.
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 stockholders.
It
is the
general policy of the Executive Compensation Committee to have executive
compensation paid by the Company treated as fully tax deductible, taking into
account the limitations imposed by Section 162(m) of the Code. All compensation
paid during fiscal year 2005 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
|
|
|
Richard
J. Berman (member of Committee until 1/9/06)
|
|
|
Arthur
D. Emil
|
|
|
Martin
R. Wade III
|
PROPOSAL
NO. 2
APPROVAL
OF THE NEXMED, INC. 2006 STOCK INCENTIVE PLAN
The
Company has long had in effect stock-based incentive plans that have allowed
the
Board of Directors to grant
stock
options, stock appreciation rights, restricted stock and other stock-based
awards
to
management and other employees, directors and consultants. The use of these
programs reflected the belief of our Executive Compensation Committee and of
our
full Board that encouraging stock ownership by management and other key
employees, directors and consultants served to attract, retain and motivate
such
personnel by providing them a direct, personal financial interest in our
continued success. Our Executive Compensation Committee continues to believe
that the best way to encourage our management and other key employees to create
and enhance value for our stockholders is through a compensation program that
encourages stock ownership.
On
December 6, 2006, each of the Stock Plan and Recognition Plan will expire.
As of
April 4, 2006, awards for an aggregate of 2,895,228 shares of Common Stock
remain available for grant under such plans, of which, assuming approval of
the
2006 Plan, no more than one million of such award shares will be
granted.
The
Executive Compensation Committee recommended, and on March 7, 2006, the Board
unanimously approved, subject to stockholder approval, the NexMed, Inc. 2006
Stock Incentive Plan (the “2006 Plan”). Pursuant to the 2006 Plan, the Company
may grant to eligible persons awards of incentive stock options (“ISOs”) within
the meaning of Section 422(b) of the Code, non-incentive stock options
(“NISOs”), restricted stock awards of the Company’s Common Stock and stock
appreciation rights.
The
2006
Plan authorizes the Company to grant options, restricted stock awards and SARs
(“Awards”) for an aggregate of up to 3 million shares of Common Stock. The Board
of Directors believes that stock options, restricted stock awards and SARs
are
an integral part of the compensation packages to be offered to the Company’s
executives, directors, employees and consultants and that the grant of stock
options, restricted stock awards and SARs, which align the interests of the
recipients with those of the stockholders, is an effective method to attract
and
retain employees in an industry characterized by a high level of employee
mobility and aggressive recruiting of the services of a limited number of
skilled personnel.
The
following summary of certain features of the 2006 Plan is qualified in its
entirety by reference to the full text of the 2006 Plan, which is attached
to
this Proxy Statement as Appendix A. All capitalized terms used but not defined
herein have the respective meanings ascribed to them in the 2006
Plan.
Nature
and Purposes of the 2006 Plan
The
purposes of the 2006 Plan are to facilitate fair, adequate and competitive
compensation and to induce certain individuals to remain in the employ of,
or to
continue to serve as directors of, or as independent consultants to, the Company
and its present and future subsidiary corporations, as defined in section 424(f)
of the Code, to attract new individuals to enter into such employment and
service and to encourage such individuals to secure or increase on reasonable
terms their stock ownership in the Company. The Board believes that the granting
of Awards under the 2006 Plan will promote continuity of management, increased
incentive and personal interest in the welfare of the Company and aid in
securing its growth and financial success.
Duration
and Modification
The
2006
Plan will terminate on March 6, 2016, ten years from its approval by the Board
of Directors. The Board of Directors may at any time terminate the 2006 Plan
or
make such modifications to the 2006 Plan as it may deem advisable. The Board,
however, may not, without approval by the stockholders of the Company, increase
the number of shares of Common Stock as to which Awards may be granted under
the
2006 Plan, change the manner of determining stock option or SAR prices, change
the class of persons eligible to participate in the 2006 Plan or make other
changes to the 2006 Plan which are not permitted without stockholder approval
under the Nasdaq rules.
Administration
of the Plan
The
2006
Plan will be administered by the Executive Compensation Committee. The Executive
Compensation Committee shall have discretion to determine the participants
under
the 2006 Plan, the types, terms and conditions of the Awards, including
performance and other earnout and/or vesting contingencies, permit
transferability of awards to an immediate family member of a participant or
a
trust established on behalf of such immediate family member, interpret the
2006
Plan’s provisions and administer the 2006 Plan in a manner that is consistent
with its purpose.
Securities
Subject to the Plan; Market Price
The
number of shares of Common Stock reserved for issuance upon exercise of Awards
granted under the 2006 Plan will be 3 million.
Eligibility
and Extent of Participation
The
2006
Plan provides for discretionary grants of Awards to all employees, non-employee
directors and consultants to the Company or any of its subsidiaries, or any
corporation acquired by the Company or any of its subsidiaries. As of April
4,
2006, we had 26 full time employees and five non-employee directors who would
be
eligible to participate in the 2006 Plan.
Stock
Options
Under
the
2006 Plan, the Executive Compensation Committee may grant Awards in the form
of
options to purchase shares of Common Stock. The initial per share exercise
price
for an ISO may not be less than 100% of the fair market value of a share of
Common Stock on the date of grant, or 110% of such fair market value with
respect to a participant who, at such time, owns stock representing more than
10% of the total combined voting power of the Common Stock. The initial per
share exercise price for a NISO may not be less than 100% of the fair market
value of a share of Common Stock on the date of grant.
No
option
granted pursuant to the 2006 Plan may be exercised more than 10 years after
the
date of grant, except that ISOs granted to participants who own more than 10%
of
the total combined voting power of the Common Stock at the time the ISO is
granted may not be exercised more than five years after the date of grant.
Any
option granted to a non-employee director of the Company or any of its
subsidiaries shall be 10 years in duration.
Stock
Awards
The
2006
Plan also permits the grant of Awards of shares of Common Stock. A Stock Award
is a grant of shares or of a right to receive shares of Common Stock (or their
cash equivalent or a combination of both) in the future. Each Stock Award will
be subject to conditions, restrictions and contingencies established by the
Executive Compensation Committee. In making a determination regarding the
allocation of such shares, the Executive Compensation Committee may take into
account the nature of the services rendered by the respective individuals,
their
present and potential contributions to the success of the Company and its
subsidiaries and such other factors as the Executive Compensation Committee
in
its discretion shall deem relevant.
Stock
Appreciation Rights
The
2006
Plan also permits the grant of Awards of stock appreciation rights, which are
grants of the right to receive shares of Common Stock with an aggregate fair
market value equal to the value of the SAR. The value of a SAR with respect
to
one share of Common Stock on any date is the excess of the fair market value
of
a share on such date over the Base Value of such SAR. The Base Value of any
SAR
with respect to one share of Common Stock shall equal the fair market value
of a
share of Common Stock on the date the SAR is granted.
Voting
Rights
Participants
will not have any interest or voting rights in shares covered by their Awards
until the Awards shall have been exercised or restrictions shall have lapsed
and
a certificate for such shares shall have been issued.
Adjustment
of Number of Shares
In
the
event that a dividend shall be declared upon the Common Stock payable in shares
of Common Stock, the number of shares of Common Stock then subject to any Award
and the number of shares of Common Stock available for purchase or delivery
under the 2006 Plan but not yet covered by an Award shall be adjusted by adding
to each share the number of shares which would be distributable thereon if
such
shares had been outstanding on the date fixed for determining the stockholders
entitled to receive such stock dividend. In the event that the outstanding
shares of Common Stock shall be changed into or exchanged for a different number
or kind of shares of stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, sale of assets, merger or consolidation in which the
Company is the surviving corporation, then there shall be substituted for each
share of Common Stock then subject to any Award, the number and kind of shares
of stock or other securities into which each outstanding share of Common Stock
shall be so changed or for which each such share shall be
exchanged.
In
the
event that there shall be any change, other than as specified directly above,
in
the number or kind of outstanding shares of Common Stock, or of any stock or
other securities into which the Common Stock shall have been changed, or for
which it shall have been exchanged, then, if the Executive Compensation
Committee shall, in its sole discretion, determine that such change equitably
requires an adjustment in the number or kind of shares then subject to any
Award
and the number or kind of shares available for issuance in accordance with
the
provisions of the 2006 Plan but not yet covered by an Award, such adjustment
shall be made by the Executive Compensation Committee and shall be effective
and
binding for all purposes of the 2006 Plan and of each Award.
Change
in Control
Except
as
otherwise determined by the Executive Compensation Committee at the time of
grant, if a Participant’s employment, or directorship, with the Company and its
Subsidiaries is terminated without cause, as defined, or the Participant
terminates his or her employment with, or terminates his or her service as
a
director of, the Company and its Subsidiaries for good reason, as defined,
whether voluntarily or otherwise, within one year after the effective date
of a
Change in Control, as defined, (i) each Option theretofore granted to a
Participant which shall not have theretofore expired or otherwise been cancelled
shall become immediately exercisable in full upon the occurrence of such
termination and shall, to the extent not theretofore exercised, terminate upon
the date of termination specified in such Option; (ii) each SAR theretofore
granted to a Participant which shall not have theretofore expired or otherwise
been cancelled shall become immediately exercisable in full upon the occurrence
of such termination and shall, to the extent not theretofore exercised,
terminate upon the date of termination specified in such SAR; and (iii) any
restrictions applicable to any shares allocated to a Participant in a Stock
Award shall forthwith terminate upon the occurrence of such
termination.
United
States Federal Income Tax Consequences of Issuance and Exercise of Awards
The
following discussion of the U.S. Federal income tax consequences of the granting
and exercise of stock options under the 2006 Plan, and the sale of Common Stock
acquired as a result thereof, is based on an analysis of the Code as currently
in effect, existing laws, judicial decisions and administrative rulings and
regulations, all of which are subject to change. In addition to being subject
to
the Federal income tax consequences described below, an optionee may also be
subject to state and/or local income tax consequences in the jurisdiction in
which he or she works and/or resides. The tax consequences of Awards issued
to
Participants outside of the U.S. may differ from the U.S. tax
consequences.
Non-Incentive
Stock Options:
No
income
will be recognized by an optionee at the time a NISO is granted. Ordinary income
will be recognized by an optionee at the time a NISO is exercised, and the
amount of such income will be equal to the excess of the fair market value
on
the exercise date of the shares issued to the optionee over the exercise price.
This ordinary income will also constitute wages subject to the withholding
of
income tax and the Company will be required to make whatever arrangements are
necessary to ensure that the amount of the tax required to be withheld is
available for payment in cash.
Capital
gain or loss on a subsequent sale or other disposition of the shares of Common
Stock acquired upon exercise of a NISO will be measured by the difference
between the amount realized on the disposition and the tax basis of such shares.
The tax basis of the shares acquired upon the exercise of the option will be
equal to the fair market value of the shares on the date of
exercise.
The
Company will be entitled to a deduction for Federal income tax purposes at
such
time and in the same amount as the amount included in ordinary income by the
optionee upon exercise of the NISO, subject to the usual rules as to
reasonableness of compensation and provided that the Company timely complies
with the applicable information reporting requirements.
Incentive
Stock Options:
In
general, neither the grant nor the exercise of an ISO will result in taxable
income to an optionee or a deduction to the Company. For purposes of the
alternative minimum tax, however, the spread on the exercise of an incentive
stock option will be considered as part of the optionee’s income.
The
sale
of the shares of Common Stock received pursuant to the exercise of an ISO which
satisfies the holding period rules will result in capital gain to an optionee
and will not result in a tax deduction to the Company. To receive incentive
stock option treatment as to the shares acquired upon exercise of an ISO, an
optionee must not dispose of such shares within two years after the option
is
granted or within one year after the exercise of the option. In addition, an
optionee generally must be an employee of the Company (or a subsidiary of the
Company) at all times between the date of grant and the date three months before
exercise of the option.
If
the
holding period rules are not satisfied, the portion of any gain recognized
on
the disposition of the shares acquired upon the exercise of an ISO that is
equal
to the lesser of (a) the fair market value of the Common Stock on the date
of
exercise minus the exercise price or (b) the amount realized on the disposition
minus the exercise price, will be treated as ordinary income, with any remaining
gain being treated as capital gain. The Company will be entitled to a deduction
equal to the amount of such ordinary income.
Restricted
Stock Awards:
Restricted
Stock Awards are generally subject to ordinary income tax at the time the
restrictions lapse, unless the Participant elects to accelerate recognition
as
of the time of grant. The Company will be entitled to a corresponding Federal
income tax deduction at the time the Participant recognizes ordinary
income.
Stock
Appreciation Rights:
The
Participant receiving a SAR will not recognize Federal taxable income at the
time the SAR is granted. When the Participant receives the appreciation inherent
in the SARs in stock, the spread between the then current market value and
the
Base Value will be taxed as ordinary income to the Participant. The Company
will
be entitled to a Federal tax deduction equal to the amount of ordinary income
the Participant is required to recognize as the result of exercising the
SAR.
New
Plan Benefits
Because
participation in the 2006 Plan and the amount and terms of Awards under the
Plan
are at the discretion of the Committee (subject to the terms of the Plan),
benefits are not currently determinable. Compensation paid and other benefits
granted to Named Executive Officers of the Company for the 2005 fiscal year
are
set forth in the Summary Compensation Table. If the 2006 Plan had been in effect
in 2005, the persons and groups shown in the following table would have received
the number of stock options shown below, which are the same number of stock
options as were actually granted to the persons and groups in 2005 under the
The
NexMed Inc. Stock Option and Long Term Incentive Plan and The NexMed Inc.
Recognition and Retention Stock Incentive Plan. No other stock-based awards
would have been granted under the 2006 Plan in 2005 had the 2006 Plan been
in
effect in 2005.
Equity
Compensation Plan Information
The
following table gives information as of December 31, 2005, about shares of
our
common stock that may be issued upon the exercise of options, warrants and
rights under all of our existing equity compensation plans (together, the
"Equity Plans"):
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available
for
future issuance under equity compensation
plans
(excluding securities reflected in column (a))
|
|
|
Equity
compensation plans approved by security holders
|
5,018,880
(1)
|
$2.83
|
1,257,773
(2) (3)
|
|
|
Equity
compensation plans not approved by security holders
|
--
|
--
|
--
|
|
|
Total
|
5,018,880
|
$2.83
|
1,257,773
|
(1)
Consists of options outstanding at December 31, 2005 under The NexMed Inc.
Stock
Option and Long Term Incentive Plan and The NexMed Inc. Recognition and
Retention Stock Incentive Plan.
(2)
Consists of 936,973 and 320,800 shares of common stock that remain available
for
future issuance, at December 31, 2005, under the Incentive Plan and Recognition
Plan, respectively. These Plans expire according to their terms on December
4,
2006.
(3)
Does
not include options to purchase 2,574,000 shares of the Company’s Common Stock
held by Dr. Mo, former Chief Executive Officer of the Company, which expired
on
March 15, 2006. Upon expiration, these options became available for future
issuance under the plan.
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 2006
STOCK
PLAN
PROPOSAL
NO. 3
RATIFICATION
OF APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
The
Audit
Committee has selected PricewaterhouseCoopers LLP as the Company’s independent
registered public accounting firm to audit and report upon the consolidated
financial statements and internal control over financial reporting of the
Company for the 2006 fiscal year and is submitting this matter to the
stockholders for their ratification. PricewaterhouseCoopers LLP served as the
Company’s independent registered public accounting firm in fiscal year 2005 and
in prior years.
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.
Audit
Fees
The
aggregate fees billed or to be billed by PricewaterhouseCoopers LLP for each
of
the last two fiscal years for professional services rendered for the audit
of
the Company’s annual financial statements included in the Company’s Annual
Report on Form 10-K and review of financial statements included in the Company’s
quarterly reports on Form 10-Q, the audit of the effectiveness of the Company’s
internal controls as mandated by Section 404 of the Sarbanes Oxley Act of 2002
and services that were provided in connection with statutory and regulatory
filings or engagements were $468,000 for 2005 and $479,795 for
2004.
Audit-related
Fees
The
were
no fees billed or to be billed by PricewaterhouseCoopers LLP for each of the
last two fiscal years for assurance and related services that were reasonably
related to the performance of the audit or review of the Company's financial
statements and that are not reported under “Audit Fees” above.
Tax
Fees
The
aggregate fees billed by PricewaterhouseCoopers LLP in each of the last two
fiscal years for professional services rendered for tax compliance, tax advice
and tax planning were $23,000 for 2005 and $123,950 for 2004 . The nature of
the
services performed for these fees included the preparation of the federal and
state tax returns and fees associated with the preparation of an application
to
sell our New Jersey state tax losses. The 2004
payment
included
a
one-time payment to settle commissions that would have been owed to
PricewaterhouseCoopers LLP in future years upon the sale of the Company’s New
Jersey State tax losses. The State of New Jersey approved the sale by the
Company of those losses based on the application prepared by
PricewaterhouseCoopers. Since the provisions of the Sarbanes
Oxley Act of 2002 no longer allow contingency based fee arrangements, the
Company paid at one time in 2004, the estimated remaining total fees owed to
PricewaterhouseCoopers.
All
Other Fees
There
were no other fees billed to the Company by PricewaterhouseCoopers LLP during
2005 and 2004.
Pre-Approval
Policies and Procedures
It
is the
policy of the Company that all services provided by PricewaterhouseCoopers
LLP
be pre-approved by the Audit Committee. PricewaterhouseCoopers LLP provides
the
Audit Committee with an engagement letter during the first quarter of each
fiscal year outlining the scope of the audit services proposed to be performed
during the fiscal year and the estimated fees for such services. Pre-approval
of
audit and permitted non-audit services may be given by the Audit Committee
at
any time up to one year before the commencement of such services by
PricewaterhouseCoopers LLP. Pre-approval must be detailed as to the particular
services to be provided. Pre-approval may be given for a category of services,
provided that (i) the category is narrow enough and detailed enough that
management of the Company will not be called upon to make a judgment as to
whether a particular proposed service by PricewaterhouseCoopers LLP fits within
such pre-approved category of services and (ii) the Audit Committee also
establishes a limit on the fees for such pre-approved category of services.
The
Chairman of the Audit Committee has, and the Audit Committee may delegate to
any
other member of the Audit Committee, the authority to grant pre-approval of
permitted non-audit services to be provided by PricewaterhouseCoopers LLP
between Audit Committee meetings; provided, however, that any such pre-approval
is required to be presented to the full Audit Committee at its next scheduled
meeting. The Audit Committee pre-approved all audit and permitted non-audit
services that were provided in 2005 and 2004.
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
stockholders 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
REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31,
2006.
STOCKHOLDER
PROPOSALS
Stockholder
proposals will be considered for inclusion in the Proxy Statement for the 2007
Annual Meeting in accordance with Rule 14a-8 under the Exchange Act, if
they are received by the Secretary of the Company on or before February 5,
2007.
Stockholders
who intend to present a proposal at the 2007 Annual Meeting of Stockholders
without inclusion of such proposal in the Company's proxy materials for the
2007
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
one
year anniversary of the date of the 2006 Annual Meeting of Stockholders. 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 2006 Annual Meeting should
be addressed to Secretary, NexMed, Inc., 89 Twin Rivers Drive, East Windsor,
New
Jersey 08520.
OTHER
MATTERS
The
Board
of Directors knows of no other business that 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. Stockholders are urged to vote. Stockholders 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) 560-1965 or by internet
at
http/www.eproxy.com/nexm/.
|
By
Order of the Board of Directors,
|
|
|
/s/
Vivian H. Liu
|
|
|
Vivian
H. Liu
|
|
|
Secretary
|
April
12,
2006
East
Windsor, NJ
Annex
A
NEXMED,
INC.
2006
STOCK INCENTIVE PLAN
1.
Purpose
.
The
purposes of this 2006 Stock Incentive Plan (the “Plan”) are to induce certain
individuals to remain in the employ of, or to continue to serve as directors
of
or as independent consultants to, NexMed, Inc. (the “Company”) and its present
and future subsidiary corporations (each a “Subsidiary”), as defined in section
424(f) of the Internal Revenue Code of 1986, as amended (the “Code”) and that
are members of the Company’s controlled group under section 414(b) of the Code
or under common control with the Company under section 414(c) of the Code,
to
attract new individuals to enter into such employment and service and to
encourage such individuals to secure or increase on reasonable terms their
stock
ownership in the Company. The Board of Directors of the Company (the “Board”)
believes that the granting of awards (the “Awards”) under the Plan will promote
continuity of management and increased incentive and personal interest in
the
welfare of the Company and aid in securing its continued growth and financial
success.
2.
Shares
Subject to Plan
.
The
maximum number of shares of the common stock, par value of $0.001 per share
(the
“Common Stock”), of the Company with respect to which Options or SARs may be
granted or that may be delivered as Stock Awards to participants
(“Participants”) and their beneficiaries under the Plan shall be three million
(3,000,000). If any Awards expire or terminate for any reason without having
been exercised in full, new Awards may thereafter be granted with respect
to the
unpurchased shares subject to such expired or terminated Awards.
3.
Administration
.
(a)
The
Plan
shall be administered by the Compensation Committee of the Company’s Board of
Directors (the “Committee”). All determinations of the Committee shall be made
by a majority of its members present at a meeting duly called and held. Any
decision or determination of the Committee reduced to writing and signed
by a
majority of the members of the Committee (or by a member of the Committee
to
whom authority has been delegated) shall be fully as effective as if it had
been
made at a meeting duly called and held.
(b)
The
Committee’s powers and authority shall include, but not be limited to, (i)
selecting individuals for participation who are employees or consultants
of the
Company and any Subsidiary of the Company or other entity in which the Company
has a significant equity or other interest as determined by the Committee,
and
members of the Board; (ii) determining the types and terms and conditions
of all
Awards granted, including performance and other earnout and/or vesting
contingencies; (iii) subject to Section 11 hereof, permitting transferability
of
Awards to an immediate family member of a Participant or a Trust established
on
behalf of such immediate family member; (iv) interpreting the Plan’s provisions;
and (v) administering the Plan in a manner that is consistent with its purpose.
The Committee’s determination on the matters referred to in this Section 3(b)
shall be conclusive. Any dispute or disagreement which may arise under, or
as a
result of or with respect to, any Award shall be determined by the Committee,
in
its sole discretion, and any interpretations by the Committee of the terms
of
the Plan or of any Award shall be final, binding and conclusive.
4.
Types
of Awards
.
The
types
of Awards that may be granted under the Plan are:
(a)
A
stock
option, which represents a right to purchase a specified number of shares
of
Common Stock during a specified period at a price per share which is no less
than that required by Section 6 hereof. Options will be either (i) “incentive
stock options” (which term, when used herein, shall have the meaning ascribed
thereto by the provisions of section 422(b) of the Code) or (ii) options
which
are not incentive stock options (“non-incentive stock options”) (together,
“Options”), as determined at the time of the grant thereof by the
Committee.
(b)
A
stock
Award (“Stock Award”), which is a grant of shares of Common Stock. Each Stock
Award shall be subject to such conditions, restrictions and contingencies
as the
Committee shall determine and which shall constitute a “substantial risk of
forfeiture” within the meaning of section 409A of the Code . In making a
determination regarding the allocation of such shares, the Committee may
take
into account the nature of the services rendered by the respective individuals,
their present and potential contributions to the success of the Company and
Subsidiaries and such other factors as the Committee in its discretion shall
deem relevant
.
(c)
A
stock
appreciation right (“SAR”), which is a grant of the right to receive shares of
Common Stock of an aggregate fair market value equal to the Value (as defined
in
Section 7 hereof) of the SAR.
5.
Eligibility
.
An
Award
may be granted only to (a) employees of the Company or a Subsidiary, (b)
directors of the Company or a Subsidiary who are not employees of the Company
or
a Subsidiary (“Outside Directors”), (c) employees of a corporation which has
been acquired by the Company or a Subsidiary, whether by way of exchange
or
purchase of stock, purchase of assets, merger or reverse merger, or otherwise
who hold options with respect to the stock of such corporation which the
Company
has agreed to assume and (d) independent consultants who render services
to the
Company or a Subsidiary.
6.
Stock
Option Prices and Fair Market Value
.
(a)
Subject
to Section 13 hereof, the per share option price of any Option which is an
incentive stock option shall not be less than the fair market value of a
share
of Common Stock on the date of grant; provided, however, that, in the case
of a
Participant who owns (within the meaning of section 424(d) of the Code) more
than 10% of the total combined voting power of the Common Stock at the time
an
Option which is an incentive stock option is granted to him or her, the per
share option price shall not be less than 110% of the fair market value of
a
share of Common Stock on the date of grant.
(b)
Subject
to Section 13 hereof, the per share option price of any Option which is a
non-incentive stock option shall not be less than the fair market value of
a
share of Common Stock on the date of grant.
(c)
Subject
to Section 13 hereof, the per share option price of any Option which is granted
to an Outside Director shall be equal to the fair market value of a share
of
Common Stock on the date of grant.
(d)
For
all
purposes of this Plan, the fair market value of a share of Common Stock on
any
date, if the Common Stock is then listed on a national securities exchange
or
traded on the NASDAQ National Market System, shall be equal to the closing
sale
price of a share of Common Stock or, if there is no sale of the Common Stock
on
such date, shall be equal to the closing sale price of a share of Common
Stock
on the last date such Stock was traded or, if the shares of Common Stock
are not
then listed on a national securities exchange or such system on such date,
the
fair market value of a share of Common Stock on such date as shall be determined
in good faith by the Committee.
7.
Value
of a SAR
.
For
purposes of this Plan, the “Value” of a SAR with respect to one share of Common
Stock on any date is the excess of the fair market value of a share on such
date, over the “Base Value” of such SAR. The “Base Value” of any SAR with
respect to one share of Common Stock shall equal the fair market value of
a
share of Common Stock as of the date the SAR is granted.
8.
Awards
Term
.
(a)
Options
shall be granted for such term as the Committee shall determine, not in excess
of ten years from the date of the granting thereof; provided, however, that,
in
the case of a Participant who owns (within the meaning of section 424(d)
of the
Code) more than 10% of the total combined voting power of the Common Stock
at
the time an Option which is an incentive stock option is granted to him or
her,
the term with respect to such Option shall not be in excess of five years
from
the date of the granting thereof; and provided, further, however, that, except
as otherwise determined by the Committee, the term of an Option granted to
an
Outside Director shall be ten years from the date of the granting
thereof.
(b)
SARs
shall be granted for such term as the Committee shall determine, not in excess
of ten years from the date of the granting thereof.
9.
Limitation
on Amount of Awards Granted
.
(a)
The
aggregate fair market value of the shares of Common Stock for which any
Participant may be granted incentive stock options which are exercisable
for the
first time in any calendar year (whether under the terms of the Plan or any
other stock option plan of the Company) shall not exceed $100,000.
(b)
Subject
to the overall limitation on the number of shares of Common Stock that may
be
delivered under the Plan, the Committee may use available shares of Common
Stock
as the form of payment for compensation, grants or rights earned or due under
any other compensation plans or arrangements of the Company, including the
plan
of any entity acquired by the Company.
10.
Exercise
of Awards
.
(a)
Options
(i)
Except
as
otherwise determined by the Committee at the time of grant or as provided
in
Section 12 hereof, a Participant may not exercise an Option during the period
commencing on the date of the grant of such Option to him or her and ending
on
the day immediately preceding the first anniversary of such date. Except
as
otherwise provided herein or determined by the Committee at the time of grant,
a
Participant may (A) during the period commencing on the first anniversary
of the
date of the grant of an Option to him or her and ending on the day immediately
preceding the second anniversary of such date, exercise such Option with
respect
to one-quarter of the shares granted thereby, (B) during the period
commencing on the second anniversary of the date of such grant and ending
on the
day immediately preceding the third anniversary of the date of such grant,
exercise such Option with respect to one-half of the shares granted thereby,
(C)
during the period commencing on the third anniversary of the date of such
grant
and ending on the day immediately preceding the fourth anniversary of such
date,
exercise such Option with respect to three-quarters of the shares granted
thereby and (D) during the period commencing on the fourth anniversary of
the
date of such grant and ending at the time the Option expires pursuant to
the
terms hereof, exercise such Option with respect to all of the shares granted
thereby.
(ii)
Except
as
hereinbefore otherwise set forth and as otherwise determined by the Committee
at
the time of grant, an Option may be exercised either in whole or for not
less
than 500 shares of Common Stock at any one time. Notwithstanding the foregoing,
in the event that the vested portion of a Participant’s Option pursuant to
Section 10(a)(i) is less than 500 shares, such Participant may exercise the
entire vested amount.
(iii)
An
Option
may be exercised only by a written notice of intent to exercise such Option
with
respect to a specific number of shares of the Common Stock and payment to
the
Company of the amount of the option price for the number of shares of the
Common
Stock so specified; provided, however, that, subject to the requirements
of
Regulation T (as in effect from time to time) promulgated under the Securities
Exchange Act of 1934, the Committee may implement procedures to allow a broker
chosen by a Participant to make payment of all or any portion of the option
price payable upon the exercise of an Option and receive, on behalf of such
Participant, all or any portion of the shares of the Common Stock issuable
upon
such exercise.
(iv)
The
Committee may, in its discretion, permit any Option to be exercised, in whole
or
in part, prior to the time when it would otherwise be exercisable.
(b)
Stock
Awards
(i)
Except
as
otherwise provided in this Section and Section 3, the shares allocated to
a
Participant may not be sold, assigned, transferred or otherwise disposed
of, and
may not be pledged or hypothecated. Except as otherwise determined by the
Committee at the time of grant, the restrictions on any Stock Award shall
terminate as follows:
(A)
as
to
twenty-five percent (25%) of the restricted shares owned by the Participant
on
the first anniversary of the date of his or her Restricted Stock Agreement
(as
such term is defined in Section 10(b)(iii));
(B)
as
to an
additional twenty-five percent (25%) of the restricted shares owned by the
Participant on the second anniversary of the date of his or her Restricted
Stock
Agreement;
(C)
as
to an
additional twenty-five percent (25%) of the restricted shares owned by the
Participant on the third anniversary of the date of his or her Restricted
Stock
Agreement; and
(D)
as
to an
additional twenty-five percent (25%) of the restricted shares owned by the
Participant on the fourth anniversary of the date of his or her Restricted
Stock
Agreement.
(ii)
Upon
issuance of the certificate or certificates for the shares subject to a Stock
Award in the name of a Participant, which shares shall be issued as soon
as
practicable following vesting, the Participant shall thereupon be a stockholder
with respect to all such shares represented by such certificate or certificates
issued and delivered to him or her and such person shall have the rights
of a
stockholder with respect to such shares, including the right to vote such
shares
and to receive all dividends and other distributions paid with respect to
such
shares.
(c)
SARs
(i)
Except
as
otherwise determined by the Committee at the time of grant, a Participant
may
not exercise an SAR during the period commencing on the date of the grant
of
such SAR to him or her and ending on the day immediately preceding the first
anniversary of such date. Except as otherwise determined by the Committee
at the
time of grant, a Participant may (A) during the period commencing on the
first
anniversary of the date of the grant and ending on the day immediately preceding
the second anniversary of such date, exercise one-quarter of the SARs granted,
(B) during the period commencing on the second anniversary of the date of
such grant and ending on the day immediately preceding the third anniversary
of
the date of such grant, exercise one-half of the SARs granted, (C) during
the
period commencing on the third anniversary of the date of such grant and
ending
on the day immediately preceding the fourth anniversary of such date, exercise
three-quarters of the SARs granted and (D) during the period commencing on
the
fourth anniversary of the date of such grant and ending at the time the SARs
expire pursuant to the terms hereof, exercise all of the SARs
granted.
(ii)
Except
as
hereinbefore otherwise set forth and as otherwise determined by the Committee
at
the time of grant, a SAR may be exercised either in whole or with respect
to the
appreciation of not less than 500 shares of Common Stock at any one time.
Notwithstanding the foregoing, in the event that the vested portion of a
Participant’s SAR pursuant to Section 10(c)(i) is with respect to less than 500
shares, such Participant may exercise the entire vested amount.
(iii)
A
SAR may
be exercised only by a written notice of intent to exercise such SAR with
respect to the appreciation of a specific number of shares of the Common
Stock.
(iv)
Upon
the
exercise of a SAR, a Participant shall be entitled to receive shares of Common
Stock, rounded down to the nearest whole share, the fair market value of
which,
in the aggregate, equals the Value of such SAR on the date of exercise.
(v)
The
Committee may, in its discretion, permit any SAR to be exercised prior to
the
time when it would otherwise be exercisable.
(d)
Each
Participant receiving shares subject to an Award shall (A) agree that such
shares shall be subject to, and shall be held by him or her in accordance
with
all of the applicable terms and provisions of, the Plan, (B) represent and
warrant to the Company that he or she is acquiring such shares for investment
for his or her own account (unless there is then current a prospectus
constituting part of an effective Registration Statement relating to the
shares
under Section 10(a) of the Securities Act of 1933, as amended) and, in any
event, that he or she will not sell or otherwise dispose of said shares except
in compliance with the Securities Act of 1933, as amended, (C) agree that
the
Company may place on the certificates representing the shares or new or
additional or different shares or securities distributed with respect to
the
Stock Award such legend or legends as the Company may deem appropriate and
that
the Company may place a stop transfer order with respect to such shares with
the
Transfer Agent(s) for the Common Stock and (D) with respect to Stock Awards,
at
his or her option, be entitled to make the election permitted under section
83(b) of the Code, to include in gross income in the taxable year in which
the
shares are transferred to him or her, the fair market value of such shares
at
the time of transfer, notwithstanding that such shares are subject to a
substantial risk of forfeiture within the meaning of the Code. If the Award
is a
Stock Award, the foregoing agreement, representation and warranty shall be
contained in an agreement in writing (“Restricted Stock Agreement”) which shall
be delivered by the Participant to the Company.
11.
Termination
of Employment or Service
.
(a)
Except
as
otherwise provided in Section 12 hereof, and except as otherwise determined
by
the Committee at the time of grant, in the event a Participant leaves the
employ
or service, or ceases to serve as a director, of the Company and the
Subsidiaries, whether voluntarily or otherwise but other than by reason of
his
or her death or, in the case of a Participant who shall be an employee or
director, retirement or disability, (i) each Option theretofore granted to
him
or her which shall not have been exercisable prior to the date of the
termination of his or her employment or service shall terminate immediately
and
each other Option theretofore granted to him or her which shall not have
theretofore expired or otherwise been cancelled shall, to the extent exercisable
on the date of such termination of employment or service and not theretofore
exercised, terminate upon the earlier to occur of the expiration of 90 days
after the date of such Participant’s termination of employment or cessation of
service and the date of termination specified in such Option; (ii) each share
allocated to the Participant under a Stock Award subject to restriction at
such
date shall be deemed redelivered to the Company immediately; and (iii) each
SAR
theretofore granted to him or her which shall not have been exercisable prior
to
the date of the termination of his or her employment or service shall terminate
immediately and each other SAR theretofore granted to him or her which shall
not
have theretofore expired or otherwise been cancelled shall, to the extent
exercisable on the date of such termination of employment or service and
not
theretofore exercised, terminate upon the earlier to occur of the expiration
of
90 days after the date of such Participant’s termination of employment or
cessation of service and the date of termination specified in such
SAR.
(b)
Except
as
otherwise determined by the Committee at the time of grant, and notwithstanding
the foregoing, if a Participant is terminated for cause (as defined herein),
(i)
each Award theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall, to the extent not theretofore
exercised, terminate forthwith, and (ii) each share allocated to the Participant
under a Stock Award subject to restriction at such date shall be deemed
redelivered to the Company immediately.
(c)
Except
as
otherwise provided in Section 12 hereof, and except as otherwise determined
by
the Committee at the time of grant, in the event a Participant leaves the
employ, or ceases to serve as a director, of the Company and the Subsidiaries
by
reason of his or her retirement (as defined herein), (i) each Option theretofore
granted to him or her which shall not have theretofore expired or otherwise
been
cancelled shall become immediately exercisable in full and shall, to the
extent
not theretofore exercised, terminate upon the earlier to occur of the expiration
of six months after the date of such retirement and the date of termination
specified in such Option; (ii) each SAR theretofore granted to him or her
which
shall not have theretofore expired or otherwise been cancelled shall become
immediately exercisable in full and shall, to the extent not theretofore
exercised, terminate upon the earlier to occur of the expiration of six months
after the date of such retirement and the date of termination specified in
such
SAR; and (iii) any restrictions applicable to any shares allocated to such
Participant in a Stock Award shall forthwith terminate.
(d)
Except
as
otherwise determined by the Committee at the time of grant, in the event
a
Participant’s employment or service with the Company and the Subsidiaries
terminates by reason of his or her death, (i) each Option theretofore granted
to
him or her which shall not have theretofore expired or otherwise been cancelled
shall become immediately exercisable in full and shall, to the extent not
theretofore exercised, terminate upon the earlier to occur of the expiration
of
six months after the date of the qualification of a representative of his
or her
estate and the date of termination specified in such Option; (ii) each SAR
theretofore granted to him or her which shall not have theretofore expired
or
otherwise been cancelled shall become immediately exercisable in full and
shall,
to the extent not theretofore exercised, terminate upon the earlier to occur
of
the expiration of six months after the date of the qualification of a
representative of his or her estate and the date of termination specified
in
such SAR; and (iii) any restrictions applicable to any shares allocated to
such
Participant in a Stock Award shall forthwith terminate.
(e)
Except
as
otherwise provided in Section 12 hereof, and except as otherwise determined
by
the Committee at the time of grant, in the event a Participant leaves the
employ, or ceases to serve as a director, of the Company and the Subsidiaries
by
reason of his or her disability (as defined herein), (i) each Option theretofore
granted to him or her which shall not have theretofore expired or otherwise
been
cancelled shall become immediately exercisable in full and shall, to the
extent
not theretofore exercised, terminate upon the earlier to occur of the expiration
of six months after the date of such retirement and the date of termination
specified in such Option; (ii) each SAR theretofore granted to him or her
which
shall not have theretofore expired or otherwise been cancelled shall become
immediately exercisable in full and shall, to the extent not theretofore
exercised, terminate upon the earlier to occur of the expiration of six months
after the date of such retirement and the date of termination specified in
such
SAR; and (iii) any restrictions applicable to any shares allocated to such
Participant in a Stock Award shall forthwith terminate.
(f)
Definition
of Cause
.
For
purposes of the foregoing, the term “cause” shall have the meaning set forth in
the employment agreement by and between the Company and/or the Subsidiaries
and
the Participant, or, if no such agreement exists or such agreement does not
define “cause” or any term of similar import, “cause” shall mean: (i) the
commission by the Participant of any act or omission that would constitute
a
crime under federal, state or equivalent foreign law, (ii) the commission
by the
Participant of any act of moral turpitude, (iii) fraud, dishonesty or other
acts
or omissions that result in a breach of any fiduciary or other material duty
to
the Company and/or the Subsidiaries, (iv) willful misconduct, misfeasance
or
malfeasance of duty which is reasonably determined by the Company to be
detrimental to the Company and/or the Subsidiaries, (v) gross neglect of
the
Participant’s duty to the Company and/or the Subsidiaries, (vi) prolonged
absence from duty without the consent of the Company and/or the Subsidiaries,
(vii) intentionally engaging in any activity that is in conflict with or
adverse
to the business or other interests of the Company and/or the Subsidiaries,
or
(viii) continued substance abuse that renders the Participant incapable of
performing his or her material duties to the satisfaction of the Company
and/or
the Subsidiaries.
(g)
Definition
of Retirement
.
For
purposes of the foregoing, the term “retirement” shall mean (i) the
termination of a Participant’s employment with the Company and all of the
Subsidiaries (A) other than for cause or by reason of his or her death or
disability and (B) on or after the earlier to occur of (I) the first day of
the calendar month in which his or her 65th birthday shall occur and
(II) the date on which he or she shall have both attained his or her 55th
birthday and completed ten years of employment with the Company and/or the
Subsidiaries or (ii) the termination of a Participant’s service as a director
with the Company and all of the Subsidiaries (A) other than for cause or
by
reason of his or her death and (B) on or after the first day of the calendar
month in which his or her 65th birthday shall occur.
(h)
Definition
of Disability
.
For
purposes of the foregoing, the term “disability” shall mean a
Participant’s inability to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months.
12.
Change
in Control
.
(a)
Except
as
otherwise determined by the Committee at the time of grant, if a Participant’s
employment, or directorship, with the Company and its Subsidiaries is terminated
without cause (as defined in Section 11(f) hereof) or the Participant terminates
his or her employment with, or terminates his or her service as a director
of,
the Company and its Subsidiaries for good reason (as defined in Section 12(c)
hereof), whether voluntarily or otherwise, within one year after the effective
date of a Change in Control (as defined in Section 12(b) hereof), (i) each
Option theretofore granted to a Participant which shall not have theretofore
expired or otherwise been cancelled shall become immediately exercisable
in full
upon the occurrence of such termination and shall, to the extent not theretofore
exercised, terminate upon the date of termination specified in such Option;
(ii)
each SAR theretofore granted to a Participant which shall not have theretofore
expired or otherwise been cancelled shall become immediately exercisable
in full
upon the occurrence of such termination and shall, to the extent not theretofore
exercised, terminate upon the date of termination specified in such SAR;
and
(iii) any restrictions applicable to any shares allocated to a Participant
in a
Stock Award shall forthwith terminate upon the occurrence of such
termination.
(b)
Definition
of Change in Control.
(i)
For
purposes of the foregoing, a “Change in Control” shall occur or shall be deemed
to have occurred only if any of the following events occurs:
(A)
A
change
in the ownership of the Company. A change in ownership of the Company shall
occur on the date that any one person, or more than one person acting as
a
“Group” (as defined under section 409A of the Code), acquires ownership of stock
of the Company that, together with stock held by such person or Group,
constitutes more than 50% of the total fair market value or total voting
power
of the stock of the Company; provided, however, that, if any one person or
more
than one person acting as a Group, is considered to own more than 50% of
the
total fair market value or total voting power of the stock of the Company,
the
acquisition of additional stock by the same person or persons is not considered
to cause a change in the ownership of the Company.
(B)
A
change
in the effective control of the Company. A change in the effective control
of
the Company occurs on the date that:
(I)
any
one
person, or more than one person acting as a Group, acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition
by
such person or persons) ownership of stock of the Company possessing 35%
or more
of the total voting power of the stock of the Company; or
(II)
a
majority of the members of the Company’s board of directors is replaced during
any 12-month period by directors whose appointment or election is not endorsed
by a majority of the members of the Company’s board of directors prior to the
date of the appointment or election; provided, however, that, if one person,
or
more than one acting as a Group, is considered to effectively control the
Company, the acquisition of additional control of the Company by the same
person
or persons is not considered a change in the effective control of the
Company.
(ii)
For
purposes of Section 12(b) hereof, stock ownership is determined under Section
409A of the Code.
(c)
Definition
of Good Reason
.
For
purposes of the foregoing, the term “good reason” shall have the meaning set
forth in the employment agreement by and between the Company and/or the
Subsidiaries and the Participant, or, if no such agreement exists or such
agreement does not define “good reason” or any term of similar import, “good
reason” shall mean any of the following acts by the Company and/or the
Subsidiaries, without the consent of
the
Participant (in each case, other than an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company and/or
the
Subsidiaries promptly after receipt of notice thereof given by the Participant):
(i) a material diminution in the Participant’s position, authority, duties or
responsibilities as in effect immediately prior to the Change in Control,
(ii) a
reduction in the Participant’s base salary from his or her highest base salary
in effect at any time within 12 months preceding the Change in Control, (iii)
failure to continue the Participant’s participation in any compensation plan in
which he or she participated immediately prior to the Change in Control (or
in a
substitute or alternative plan) on a basis not materially less favorable,
both
in terms of the amount of benefits provided and the level of the Participant’s
participation relative to similarly situated employees, or (iv) requiring
the
Participant to be based at any office or location more than 50 miles from
the
location at which the Participant was stationed immediately prior to the
Change
in Control.
13.
Adjustment
of Number of Shares
.
(a)
In
the
event that a dividend shall be declared upon the Common Stock payable in
shares
of Common Stock, the number of shares of Common Stock then subject to any
Award
and the number of shares of Common Stock available for purchase or delivery
under the Plan but not yet covered by an Award shall be adjusted by adding
to
each share the number of shares which would be distributable thereon if such
shares had been outstanding on the date fixed for determining the stockholders
entitled to receive such stock dividend. In the event that the outstanding
shares of Common Stock shall be changed into or exchanged for a different
number
or kind of shares of stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, sale of assets, merger or consolidation in which the
Company is the surviving corporation, then, there shall be substituted for
each
share of Common Stock then subject to any Award and for each share of Common
Stock which may be issued under the Plan but not yet covered by an Award,
the
number and kind of shares of stock or other securities into which each
outstanding share of Common Stock shall be so changed or for which each such
share shall be exchanged.
(b)
In
the
event that there shall be any change, other than as specified in Section
13(a)
hereof, in the number or kind of outstanding shares of Common Stock, or of
any
stock or other securities into which the Common Stock shall have been changed,
or for which it shall have been exchanged, then, if the Committee shall,
in its
sole discretion, determine that such change equitably requires an adjustment
in
the number or kind of shares then subject to any Award and the number or
kind of
shares available for issuance in accordance with the provisions of the Plan
but
not yet covered by an Award, such adjustment shall be made by the Committee
and
shall be effective and binding for all purposes of the Plan and of each
Award.
(c)
In
the
case of any substitution or adjustment in accordance with the provisions
of this
Section 13, the option price in each Option for each share covered thereby
prior
to such substitution or adjustment shall be the option price for all shares
of
stock or other securities which shall have been substituted for such share
or to
which such share shall have been adjusted in accordance with the provisions
of
this Section 13.
(d)
No
adjustment or substitution provided for in this Section 13 shall require
the
Company to issue a fractional share under any Award or to sell a fractional
share under any Option.
(e)
In
the
event of the dissolution or liquidation of the Company, a merger, reorganization
or consolidation in which the Company is not the surviving corporation or
where
the Company is the surviving corporation but the current shareholders of
the
Company retain ownership of less than 50% of the stock (directly or indirectly)
of the surviving corporation, the Board in its discretion, may accelerate
the
payment of any Award, the exercisability of each Award and/or terminate the
same
within a reasonable time thereafter.
14.
Withholding
and Waivers
.
(a)
The
Company shall have the right to deduct and withhold from Awards under the
Plan
any federal, state or local taxes of any kind required by law to be so deducted
and withheld with respect to any shares of Common Stock issued under the
Plan.
Subject to the prior approval of the Company, which may be withheld by the
Company in its sole discretion, the Participant may elect to satisfy such
obligations, in whole or in part by: (i) causing the Company to withhold
shares
of Common Stock otherwise issuable pursuant to the exercise of an Option,
a SAR
or a Stock Award or (ii) delivering to the Company cash or a check to the
order
of the Company in an amount equal to the amount required to be so deducted
and
withheld. The shares of Common Stock withheld in accordance with method (i)
above shall have a fair market value equal to such withholding obligation
as of
the date that the amount of tax to be withheld is to be determined.
(b)
In
the
event of the death of a Participant, an additional condition of exercising
any
Award shall be the delivery to the Company of such tax waivers and other
documents as the Committee shall determine.
(c)
An
additional condition of exercising any non-incentive stock option shall be
the
entry by the Participant into such arrangements with the Company with respect
to
withholding as the Committee shall determine.
15
.
No
Stockholder Status; No Restrictions on Corporate Acts; No Employment
Right
.
(a)
Neither
any Participant nor his or her legal representatives, legatees or distributees
shall be or be deemed to be the holder of any share of Common Stock covered
by
an Award unless and until a certificate for such share has been issued. Upon
payment of the purchase price therefor, a share issued upon exercise of an
Award
shall be fully paid and non-assessable.
(b)
Neither
the existence of the Plan nor any Award shall in any way affect the right
or
power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company’s capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or
dissolution or liquidation of the Company, or any sale or transfer of all
or any
part of its assets or business, or any other corporate act or proceeding
whether
of a similar character or otherwise.
(c)
Neither
the existence of the Plan nor the grant of any Award shall require the Company
or any Subsidiary to continue any Participant in the employ or service of
the
Company or such Subsidiary.
16.
Nontransferability
of Awards
.
Except
as
provided in Section 3 hereof, no Option or SAR granted under this Plan shall
be
assignable or otherwise transferable by a Participant, except by will or
by the
laws of descent and distribution. If provided as permitted in Section 3 hereof
a
Stock Award granted under this Plan shall be assignable or otherwise
transferable by a Participant only to the extent restrictions with respect
to
such Stock Award have terminated.
17.
Termination
and Amendment of the Plan
.
(a)
The
Board
may at any time terminate the Plan or make such modifications of the Plan
as it
shall deem advisable;
provided,
however,
that the
Board may not, without further approval of the holders of the shares of Common
Stock, increase the number of shares of Common Stock as to which Awards may
be
granted under the Plan (as adjusted in accordance with the provisions of
Section
12 hereof), or change the class of persons eligible to participate in the
Plan,
change the manner of determining stock option prices, or change the manner
of
determining the Value of a SAR. Notwithstanding the foregoing, the Board
shall
have the right, to terminate or modify the Plan; provided, however, that
to the
extent required by applicable law or the rules of the NASDAQ National Market
System or such other exchange on which the Company’s securities shall be listed
or traded no such termination or modification shall be effective without
the
further approval of the holders of the shares of Common Stock.
(b)
Except
as
otherwise provided in Sections 13(e) and 18 hereof, no termination or amendment
of the Plan may, without the consent of the Participant to whom any Award
shall
theretofore have been granted, adversely affect the rights of such Participant
under such Award. Notwithstanding the foregoing, the Board shall have the
right,
without the consent of the Participant affected, to amend or modify the Plan
and
any outstanding Award to the extent the Board determines necessary to comply
with applicable law.
18.
Expiration
and Termination of the Plan
.
The
Plan
shall terminate on March 6, 2016 or at such earlier time as the Board may
determine;
provided,
however,
that the
Plan shall terminate as of its effective date in the event that it shall
not be
approved by the stockholders of the Company at its 2006 Annual Meeting of
Stockholders. Awards may be granted under the Plan at any time and from time
to
time prior to its termination. Any Award outstanding under the Plan at March
6,
2016 shall remain in effect until such Award shall have been exercised or
shall
have expired in accordance with its terms.
[FORM
OF PROXY-FRONT SIDE OF TOP PORTION]
To
Our Stockholders,
You
are cordially invited to attend our Annual Meeting of Stockholders, to be held
at 89 Twin Rivers Drive, East Windsor, New Jersey , at 11 a.m. on Monday, June
5, 2006.
[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) 560-1965 (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. 89 Twin Rivers Drive, East Windsor, New Jersey, 08520
(Continued,
and to be signed on reverse side)
[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 Mark Westgate, 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 Stockholders of NexMed, Inc. to be held at 89 Twin Rivers
Drive, East Windsor, New Jersey on Monday, June 5, 2006 at 11 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 stockholder. 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)
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:
1.
Richard J. Berman:
2.
Arthur
D. Emil, Esq.:
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FOR
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WITHHOLD
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AUTHORITY
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¨
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¨
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To
withhold authority to vote for any indicated nominee,
write
the number(s) of the nominee(s) in the box provided
to
the right.
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¨
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PROPOSAL
2:
To
consider and vote upon a proposal to approve and adopt the NexMed, Inc. 2006
Stock Incentive Plan.
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FOR
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AGAINST | ABSTAIN | |
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¨
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¨
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PROPOSAL 3 : Ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company.
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FOR
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AGAINST | ABSTAIN | |
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¨
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¨
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¨ |
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
#
There
are three ways to vote your Proxy
Your
telephone or Internet vote authorizes 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 - 1-800-560-1965 - QUICK *** EASY ***
IMMEDIATE
| · |
Use
any touch-tone telephone to vote your proxy 24 hours a day, 7 days
a week,
until Noon (EST) on Friday, June 2, 2006.
|
| · |
Please
have your proxy card and the last four digits of your Social Security
Number or Tax Identification Number
available.
|
| · |
Follow
the simple instructions the Voice provides
you.
|
VOTE
BY INTERNET -
http://www.eproxy.com/nexm/
- QUICK *** EASY *** IMMEDIATE
| · |
Use
the Internet to vote your proxy 24 hours a day, 7 days a week, until
Noon
(EST) on Friday, June 2,
2006.
|
| · |
Please
have your proxy card and the last four digits of your Social Security
Number or Tax Identification Number available
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
Services
SM
,
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