EXHIBIT 10.24

CELLEGY PHARMACEUTICALS, INC.

2005 EQUITY INCENTIVE PLAN

Adopted June 8, 2005

1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain
and motivate eligible persons whose present and potential contributions are
important to the success of the Company, its Parent, Subsidiaries and
Affiliates, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.

2. SHARES SUBJECT TO THE PLAN.

2.1 Number of Shares Available. Subject to Sections 2.2 and 18, the total number
of Shares reserved and available for grant and issuance pursuant to this Plan
will be one million (1,000,000) shares. Subject to Sections 2.2 and 18, Shares
that: (a) are subject to issuance upon exercise of an Option but cease to be
subject to such Option for any reason other than exercise of such Option; (b)
are subject to an Award granted hereunder but are forfeited or are repurchased
by the Company; (c) are subject to an Award that otherwise terminates without
Shares being issued; (d) are withheld if an Award is exercised through a
reduction of shares subject to the Award (“net exercise”); or (e) are withheld
in order to satisfy federal, state or local tax liability (to the extent
permitted by the Committee), shall not count against the above limit and will
again be available for grant and issuance in connection with future Awards under
this Plan. If the exercise price of any Option is satisfied by delivering shares
of Common Stock to the Company (be either actual delivery or by attestation),
only the number of shares of Common Stock delivered to the Participant net of
the shares of Common Stock delivered to the Company or attested to shall be
deemed delivered for purposes of determining the maximum number of shares of
Common Stock available for delivery pursuant to the 2005 Plan. At all times the
Company shall reserve and keep available a sufficient number of Shares as shall
be required to satisfy the requirements of all outstanding Options granted under
this Plan and all other outstanding but unvested Awards granted under this Plan.

2.2 Adjustment of Shares. In the event that the number of outstanding Shares is
changed by a stock dividend, recapitalization, stock split, reverse stock split,
subdivision, combination, reclassification or similar change in the capital
structure of the Company without consideration, then (a) the number of Shares
reserved for issuance under this Plan, (b) the Exercise Prices of and number of
Shares subject to outstanding Options, (c) the share amounts set forth in
Section 3 below, and (d) the number of Shares subject to other outstanding
Awards will be proportionately adjusted, subject to any required action by the
Board or the shareholders of the Company and compliance with applicable
securities laws; provided, however, that fractions of a Share will not be issued
but will either be replaced by a cash payment equal to the Fair Market Value of
such fraction of a Share or will be rounded up to the nearest whole Share, as
determined by the Committee.

3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only to
employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants and advisors of the
Company or any Parent, Subsidiary or Affiliate of the Company; provided such
consultants and advisors render bona fide services not in connection with the
offer and sale of securities in a capital-raising transaction. Subject to the
provisions of this Plan relating to capitalization adjustment, at any time that
the Company may be subject to the applicable provisions of Section 162(m) of the
Code, no employee shall be eligible to be granted Awards whose value is
determined by reference to an increase over an exercise or strike price of at
least one hundred percent of the Fair Market Value of the Common Stock on the
date the Award is granted covering more than 500,000 Shares in any calendar year
under this Plan pursuant to the grant of Awards hereunder, other than new
employees of the Company or of a Parent or Subsidiary of the Company (including
new employees who are also officers and directors of the Company or any Parent
or Subsidiary of the Company), who are eligible to receive up to a maximum of
1,000,000 shares in the calendar year in which they commence their employment. A
person may be granted more than one Award under this Plan.
 

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4. ADMINISTRATION.

4.1 Committee Authority. This Plan will be administered by the Committee or by
the Board acting as the Committee. Subject to the general purposes, terms and
conditions of this Plan, and to the direction of the Board, the Committee will
have full power to implement and carry out this Plan. Without limitation, the
Committee will have the authority to:

 
(a)
construe and interpret this Plan, any Award Agreement and any other agreement or
document executed pursuant to this Plan;

 
(b)
prescribe, amend and rescind rules and regulations relating to this Plan;

 
(c)
select persons to receive Awards;

 
(d)
determine the form and terms of Awards (which need not be identical), including
but not limited to, the time or times at which Options shall be exercisable and
the extension or acceleration of any such provisions or limitations, based in
each case on such factors as the Committee shall determine, in its sole
discretion;

 
(e)
determine the number of Shares or other consideration subject to Awards;

 
(f)
determine whether Awards will be granted singly, in combination with, in tandem
with, in replacement of, or as alternatives to, other Awards under this Plan or
any other incentive or compensation plan of the Company or any Parent,
Subsidiary or Affiliate of the Company;

 
(g)
grant waivers of Plan or Award conditions;

 
(h)
determine the vesting, exercisability and payment of Awards;

 
(i)
correct any defect, supply any omission or reconcile any inconsistency in this
Plan, any Award or any Award Agreement;

 
(j)
determine whether an Award has been earned; and

 
(k)
make all other determinations necessary or advisable for the administration of
this Plan.

In the sole discretion of the Board, the Committee may consist solely of two or
more Outside Directors, in accordance with the Section 162(m) of the Code,
and/or solely of two or more Non-Employee Directors in accordance with Rule
16b-3. In addition, the Board or the Committee, in its sole discretion, may (1)
delegate to a committee of one or more members of the Board who need not be
Outside Directors the authority to grant Awards to eligible persons who are
either (a) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Award, or (b)
not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code, and/or (2) delegate to a committee of one or more members of
the Board who need not be Non-Employee Directors the authority to grant Awards
to eligible persons who are not then subject to Section 16 of the Exchange Act.
The Board may delegate to one or more officers of the Company the authority to
do one or both of the following: (i) designate officers and employees of the
Company or any of its Subsidiaries to be recipients of Awards and the terms
thereof, and (ii) determine the number of shares of Common Stock to be subject
to such Awards granted to such officers and employees of the Company; provided,
however, that the Board resolutions regarding such delegation shall specify the
total number of shares of Common Stock that may be subject to the Awards granted
by such officer and that such officer may not grant an Award to himself or
herself. Notwithstanding anything to the contrary in this Section, the Board may
not delegate to an officer the authority to determine the Fair Market Value of
the Common Stock.
 

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4.2 Committee Discretion. Any determination made by the Committee with respect
to any Award will be made in its sole discretion at the time of grant of the
Award or, unless in contravention of any express term of this Plan or Award, at
any later time, and such determination will be final and binding on the Company
and on all persons having an interest in any Award under this Plan. The
Committee may delegate to one or more officers of the Company the authority to
grant an Award under this Plan to Participants who are not Insiders of the
Company.

4.3 Compliance with Code Section 162(m). If two or more members of the Board are
Outside Directors, then subject to the provisions of Section 4.1 above, the
Committee shall be comprised of at least two members of the Board, all of whom
are Outside Directors.

4.4 Liability and Indemnification of the Committee. No member of the group
constituting the Committee, or any employee of the Company to whom the Committee
delegates certain administrative responsibilities, shall be liable for any act
or omission on such member's or employee's own part, including but not limited
to the exercise of any power or discretion given to such member, or employee as
delegatee, under this Plan, except for those acts or omissions resulting from
such member's or employee's own gross negligence or willful misconduct. The
Company shall indemnify each present and future member of the group constituting
the Committee and each present and future employee delegated administrative
responsibilities by such Committee against, and each member of the group
constituting the Committee or employee delegated administrative responsibilities
by such Committee shall be entitled without further act on his or her part to
indemnity from the Company for, all expenses (including the amount of judgments
or settlements approved by the Company and made with a view to the curtailment
of costs of litigation, other than amounts paid to the Company itself)
reasonably incurred by such person in connection with or arising out of any
action, suit or proceeding to the full extent permitted by law and by the
Articles of Incorporation and Bylaws of the Company.

5. OPTIONS. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:

5.1 Form of Option Grant. Each Option granted under this Plan will be evidenced
by an Award Agreement which will expressly identify the Option as an ISO or an
NQSO ("Stock Option Agreement"), and will be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
may from time to time approve, and which will comply with and be subject to the
terms and conditions of this Plan.

5.2 Date of Grant. The date of grant of an Option will be the date on which the
Committee makes the determination to grant such Option, unless otherwise
specified by the Committee. The Stock Option Agreement and a copy of this Plan
will be delivered to the Participant within a reasonable time after the granting
of the Option.

5.3 Exercise Period and Expiration Date. An Option will vest and become
exercisable within the times or upon the occurrence of events determined by the
Committee and set forth in the Award Agreement governing such Options, subject
to the provisions of Section 5.6, and subject to Company policies established by
the Committee from time to time. The Committee may provide for Options to vest
and become exercisable at one time or from time to time, periodically or
otherwise, in such number of Shares or percentage of Shares subject to the
Option as the Committee determines.

No Option will be exercisable after the expiration of ten (10) years from the
date the Option is granted; and provided further that no ISO granted to a person
who directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("Ten Percent Shareholder") will be exercisable after
the expiration of five (5) years from the date the ISO is granted.
 

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5.4 Exercise Price. The Exercise Price of an NQSO will be determined by the
Committee when the Option is granted; provided, however, that if expressly
required by one or more state securities authorities or laws as a condition of
issuing Awards and Shares in compliance with the securities laws of such state,
the exercise price of an NQSO shall not be less than 85% of the Fair Market
Value of the Shares on the date of grant and the Exercise Price of any NQSO
granted to a Ten Percent Shareholder shall not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Notwithstanding the foregoing,
an NQSO may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or a
substitution for another Option in a manner consistent with the provisions of
Section 424(a) of the Code. The Exercise Price of an ISO will be not less than
100% of the Fair Market Value of the Shares on the date of grant and the
Exercise Price of any ISO granted to a Ten Percent Shareholder will not be less
than 110% of the Fair Market Value of the Shares on the date of grant.
Notwithstanding the foregoing, an ISO may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or a substitution for another Option in a manner
consistent with the provisions of Section 424(a) of the Code. Payment for the
Shares purchased may be made in accordance with Section 8 of this Plan.

5.5 Method of Exercise. Options may be exercised only by delivery to the Company
of a written stock option exercise agreement (the "Exercise Agreement") in a
form approved by the Committee (which need not be the same for each
Participant), stating the number of Shares being purchased, the restrictions
imposed on the Shares purchased under such Exercise Agreement, if any, and such
representations and agreements regarding Participant's investment intent and
access to information and other matters, if any, as may be required or desirable
by the Company to comply with applicable securities laws, together with payment
in full of the Exercise Price for the number of Shares being purchased.

5.6 Termination. Notwithstanding the exercise periods set forth in the Stock
Option Agreement, exercise of an Option will always be subject to the following:

 
(a)
If the Participant is Terminated for any reason except death or Disability, then
the Participant may exercise such Participant's Options only to the extent that
such Options would have been exercisable upon the Termination Date no later than
three (3) months after the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be determined by the Committee, with
any exercise beyond three (3) months after the Termination Date deemed to be an
NQSO), but in any event, no later than the expiration date of the Options.

 
(b)
If the Participant is Terminated because of Participant's death or Disability
(or the Participant dies within three (3) months after a Termination other than
because of Participant's death or Disability), then Participant's Options may be
exercised only to the extent that such Options would have been exercisable by
Participant on the Termination Date and must be exercised by Participant (or
Participant's legal representative or authorized assignee) no later than twelve
(12) months after the Termination Date (or such shorter (but not less than six
months) or longer time period not exceeding five (5) years as may be determined
by the Committee, with any such exercise beyond (a) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or disability as defined in Section 22(e)(3) of the Code, or
(b) twelve (12) months after the Termination Date when the Termination is for
Participant's death or Disability, deemed to be an NQSO), but in any event no
later than the expiration date of the Options.

 
 
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(c)
Award Agreements and other agreements relating to Awards under this Plan may
include a provision that if Participant is terminated for Cause, neither the
Participate, the Participant’s estate nor such other person who may then hold
the Option shall be entitled to exercise any Option with respect to any Shares
whatsoever, after termination of service, whether or not after termination of
service the Participant may receive payment from the Company or Subsidiary for
vacation pay, for services rendered prior to termination, for services rendered
for the day on which termination occurs, for salary in lieu of notice, or for
any other benefits. For the purpose of this paragraph, termination of service
shall be deemed to occur on the date when the Company dispatches notice or
advice to the Participant that the Participant’s service is terminated.

5.7 Limitations on Exercise. The Committee may specify a reasonable minimum
number of Shares that may be purchased on any exercise of an Option, provided
that such minimum number will not prevent Participant from exercising the Option
for the full number of Shares for which it is then exercisable.

5.8 Limitations on ISOs. The aggregate Fair Market Value (determined as of the
date of grant) of Shares with respect to which ISOs are exercisable for the
first time by a Participant during any calendar year (under this Plan or under
any other incentive stock option plan of the Company or any Affiliate, Parent or
Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value of
Shares on the date of grant with respect to which ISOs are exercisable for the
first time by a Participant during any calendar year exceeds $100,000, then the
Options for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISOs and the Options for the amount in excess of $100,000
that become exercisable in that calendar year will be NQSOs. In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date of this Plan to provide for a different limit on the Fair Market
Value of Shares permitted to be subject to ISOs, such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.

5.9 Modification, Extension or Renewal. The Committee may modify, extend or
renew outstanding Options and authorize the grant of new Options in substitution
therefor, provided that any such action may not, without the written consent of
a Participant, impair any of such Participant's rights under any Option
previously granted. Any outstanding ISO that is modified, extended, renewed or
otherwise altered will be treated in accordance with Section 424(h) of the Code.
The Committee may reduce the Exercise Price of outstanding Options without the
consent of Participants effected by a written notice to them; provided, however,
that the Exercise Price may not be reduced below the minimum Exercise Price that
would be permitted under Section 5.4 of this Plan for Options granted on the
date the action is taken to reduce the Exercise Price.

5.10 No Disqualification. Notwithstanding any other provision in this Plan, no
term of this Plan relating to ISOs will be interpreted, amended or altered, nor
will any discretion or authority granted under this Plan be exercised, so as to
disqualify this Plan under Section 422 of the Code or, without the consent of
the Participant affected, to disqualify any ISO under Section 422 of the Code.

5.11 Automatic Grant Program for Non-Employee Directors. Each Non-employee
Director shall be eligible to receive Options under the automatic option grant
program described below (the Program”).

(a) Initial Grant. Each Non-Employee Director who becomes a member of the Board
will automatically be granted an NQSO to purchase 30,000 Shares (the "Initial
Grant"). Initial Grants shall be made on the first business day after the date
such Optionee is first elected to the Board.

(b) Succeeding Annual Grants. On the first business day after each of the
Company's annual meeting of shareholders, if the Non-Employee Director is still
a member of the Board, has served continuously as a member of the Board for at
least one year, and has not received an Initial Grant in the same calendar year,
the Optionee will automatically be granted an NQSO for 12,000 Shares (a "Annual
Grant").
 

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(c) Vesting. Options granted under the Program shall be exercisable as they
vest. The date an Optionee receives an Initial Grant or a Annual Grant is
referred to as the "Start Date" for such Option. Each Initial Grant and Annual
Grant will vest as follows, so long as the Optionee continuously remains a
director of the Company: (a) on the first anniversary of the Start Date, the
grant will vest as to one-third (1/3) of the Shares subject to the Annual Grant
or Initial Grant (as the case may be); (b) on the second anniversary of the
Start Date, the grant will vest as to a one-third (1/3) of the Shares subject to
the Annual Grant or Initial Grant (as the case may be); and (c) on the third
anniversary of the Start Date, the grant will vest as to an additional one-third
(1/3) of the Shares subject to the Annual Grant or Initial Grant (as the case
may be).

(d) Exercise Price. The exercise price of an Option granted under the Program
shall be the Fair Market Value of the Shares, at the time that the Option is
granted.

(e) Termination of Option. Except as provided below in this Section, each Option
shall expire ten (10) years after its Start Date (the "Expiration Date"). The
Option shall cease to vest if the Optionee ceases to be a member of the Board.
The date on which the Optionee ceases to be a member of the Board shall be
referred to in this Section as the "Termination Date". An Option may be
exercised after the Termination Date only as set forth below:

(i) If the Optionee ceases to be a member of the Board for any reason, then each
Option then held by such Optionee, to the extent (and only to the extent) that
it would have been exercisable by the Optionee on the Termination Date, may be
exercised by the Optionee (or the Optionee's legal representative) within twelve
(12) months after the Termination Date (or such shorter or longer period as is
specified in the Option Agreement), but in no event later than the Expiration
Date.

(f) Acceleration of Options. In the event of a corporate transaction of the kind
described in Section 18 below, the vesting of all options granted pursuant to
this Plan will accelerate and the options will become exercisable in full prior
to the consummation of such event at such times and on such conditions as the
Committee determines.

6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to sell
to an eligible person Shares that are subject to restrictions. The Committee
will determine to whom an offer will be made, the number of Shares the person
may purchase, the price to be paid (the "Purchase Price"), the restrictions to
which the Shares will be subject, if any, and all other terms and conditions of
the Restricted Stock Award, subject to the following:

6.1 Form of Restricted Stock Award. All purchases under a Restricted Stock Award
made pursuant to this Plan will be evidenced by an Award Agreement ("Restricted
Stock Purchase Agreement") that will be in such form (which need not be the same
for each Participant) as the Committee will from time to time approve, and will
comply with and be subject to the terms and conditions of this Plan. The offer
of Restricted Stock will be accepted by the Participant's execution and delivery
of the Restricted Stock Purchase Agreement and full payment for the Shares to
the Company within thirty (30) days from the date the Restricted Stock Purchase
Agreement is delivered to the person. If such person does not execute and
deliver the Restricted Stock Purchase Agreement along with full payment for the
Shares to the Company within thirty (30) days, then the offer will terminate,
unless otherwise determined by the Committee.

6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a Restricted
Stock Award will be determined by the Committee; provided, that if expressly
required by any state securities authorities as a condition of the offer and
sale of Shares subject to Restricted Stock Awards in compliance with the
securities laws of such state, the Purchase Price will be at least 85% of the
Fair Market Value of the Shares on the date the Restricted Stock Award is
granted, except in the case of a sale to a Ten Percent Shareholder, in which
case the Purchase Price will be 100% of the Fair Market Value. Payment of the
Purchase Price may be made in accordance with Section 8 of this Plan.
 

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6.3 Restrictions. Restricted Stock Awards will be subject to such restrictions
(if any) as the Committee may impose. The Committee may provide for the lapse of
such restrictions in installments and may accelerate or waive such restrictions,
in whole or part, based on length of service, performance or such other factors
or criteria as the Committee may determine.

7. STOCK BONUSES.

7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares (which may
consist of Restricted Stock) for services rendered to the Company or any Parent,
Subsidiary or Affiliate of the Company. A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent, Subsidiary or Affiliate
of the Company (provided that the Participant pays the Company the par value, if
any, of the Shares awarded by such Stock Bonus in cash) pursuant to an Award
Agreement (the "Stock Bonus Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. A Stock Bonus may be awarded upon satisfaction of such performance goals
as are set out in advance in the Participant's individual Award Agreement (the
"Performance Stock Bonus Agreement") that will be in such form (which need not
be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. Stock Bonuses may vary from Participant to Participant and between groups
of Participants, and may be based upon the achievement of the Company, Parent,
Subsidiary or Affiliate and/or individual performance factors or upon such other
criteria as the Committee may determine.

7.2 Terms of Stock Bonuses. The Committee will determine the number of Shares to
be awarded to the Participant and whether such Shares will be Restricted Stock.
If the Stock Bonus is being earned upon the satisfaction of performance goals
pursuant to a Performance Stock Bonus Agreement, then the Committee will
determine: (a) the nature, length and starting date of any period during which
performance is to be measured (the "Performance Period") for each Stock Bonus;
(b) the performance goals and criteria to be used to measure the performance, if
any; (c) the number of Shares that may be awarded to the Participant; and (d)
the extent to which such Stock Bonuses have been earned. Performance Periods may
overlap and Participants may participate simultaneously with respect to Stock
Bonuses that are subject to different Performance Periods and different
performance goals and other criteria. The number of Shares may be fixed or may
vary in accordance with such performance goals and criteria as may be determined
by the Committee. The Committee may adjust the performance goals applicable to
the Stock Bonuses to take into account changes in law and accounting or tax
rules and to make such adjustments as the Committee deems necessary or
appropriate to reflect the impact of extraordinary or unusual items, events or
circumstances to avoid windfalls or hardships.

7.3 Form of Payment. The earned portion of a Stock Bonus may be paid currently
or on a deferred basis with such interest or dividend equivalent, if any, as the
Committee may determine. Payment may be made in the form of cash, whole Shares,
including Restricted Stock, or a combination thereof, either in a lump sum
payment or in installments, all as the Committee will determine.

7.4 Termination During Performance Period. If a Participant is Terminated during
a Performance Period for any reason, then such Participant will be entitled to
payment (whether in Shares, cash or otherwise) with respect to the Stock Bonus
only to the extent earned as of the date of Termination in accordance with the
Performance Stock Bonus Agreement, unless the Committee determines otherwise.

8. PAYMENT FOR SHARE PURCHASES.

8.1 Payment. Payment for Shares purchased pursuant to this Plan may be made in
cash (by check) or, where expressly approved for the Participant by the
Committee and where permitted by law:

 
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(a)
by cancellation of indebtedness of the Company to the Participant;

 

 
(b)
by surrender of shares that either: (1) have been owned by Participant for more
than six (6) months and have been paid for within the meaning of SEC Rule 144
(and, if such shares were purchased from the Company by use of a promissory
note, such note has been fully paid with respect to such shares); or (2) were
obtained by Participant in the public market;

 
(c)
by waiver of compensation due or accrued to the Participant for services
rendered; provided, that the portion of the Purchase Price equal to the par
value of the Shares, if any, must be paid in cash;

 
(e)
with respect only to purchases upon exercise of an Option, and provided that a
public market for the Company's stock exists:

   
(1)
through a "same day sale" commitment from the Participant and a broker-dealer
that is a member of the National Association of Securities Dealers (an
"NASD Dealer") whereby the Participant irrevocably elects to exercise the Option
and to sell a portion of the Shares so purchased to pay for the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or

       

   
(2)
through a "margin" commitment from the Participant and a NASD Dealer whereby the
Participant irrevocably elects to exercise the Option and to pledge the Shares
so purchased to the NASD Dealer in a margin account as security for a loan from
the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the Exercise Price
directly to the Company; or

 

 
(f)
by any combination of the foregoing.

9. WITHHOLDING TAXES.

9.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of
Awards granted under this Plan, the Company may require the Participant to remit
to the Company an amount sufficient to satisfy federal, state and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such Shares. Whenever, under this Plan, payments in
satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.

9.2 Stock Withholding. When, under applicable tax laws, a Participant incurs tax
liability in connection with the exercise or vesting of any Award that is
subject to tax withholding and the Participant is obligated to pay the Company
the amount required to be withheld, the Committee may in its sole discretion
allow the Participant to satisfy the minimum withholding tax obligation by
electing to have the Company withhold from the Shares to be issued that number
of Shares having a Fair Market Value equal to the minimum amount required to be
withheld, determined on the date that the amount of tax to be withheld is to be
determined. All elections by a Participant to have Shares withheld for this
purpose will be made in accordance with the requirements established by the
Committee and be in writing in a form acceptable to the Committee.
 

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10. PRIVILEGES OF STOCK OWNERSHIP.

10.1 Voting and Dividends. No Participant will have any of the rights of a
shareholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will be
a shareholder and have all the rights of a shareholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's original Purchase Price pursuant to Section
12.

10.2 Financial Statements. If expressly required by any state securities
authorities as a condition of the offer and issuance of Awards in compliance
with the securities laws of such state, the Company shall provide to each
Participant during the period such Participant holds an outstanding Award a copy
of the financial statements of the Company as prepared either by the Company or
independent certified public accountants of the Company. Such financial
statements shall be delivered as soon as practicable following the end of the
Company's fiscal year during the period Awards are outstanding; provided,
however, the Company will not be required to provide such financial statements
to Participants whose services in connection with the Company assure them access
to equivalent information.

11. TRANSFERABILITY. Unless determined otherwise by the Committee, Awards
granted under this Plan, and any interest therein, will not be transferable or
assignable by Participant, and may not be made subject to execution, attachment
or similar process, otherwise than by will or by the laws of descent and
distribution. During the lifetime of the Participant an Award will be
exercisable only by the Participant, and any elections with respect to an Award,
may be made only by the Participant. If the Committee in its sole discretion
makes an Award or any interest therein transferable, such Award may only be
transferred pursuant to such additional terms and conditions as the Committee
deems appropriate.

12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company may
reserve to itself and/or its assignee(s) in the Award Agreement a right to
repurchase a portion of or all Shares that are not "Vested" (as defined in the
Stock Option Agreement) held by a Participant following such Participant's
Termination at any time within ninety (90) days after the later of Participant's
Termination Date and the date Participant purchases Shares under this Plan, for
cash and/or cancellation of purchase money indebtedness, at the Participant's
original Purchase Price, provided, that the right to repurchase lapses at the
rate of at least 20% per year over five (5) years from the date the Shares were
purchased (or from the date of grant of options in the case of Shares obtained
pursuant to a Stock Option Agreement and Stock Option Exercise Agreement), and
if the right to repurchase is assignable, the assignee must pay the Company,
upon assignment of the right to repurchase, cash equal to the excess of the Fair
Market Value of the Shares over the original Purchase Price.

13. CERTIFICATES. All certificates for Shares or other securities delivered
under this Plan will be subject to such stock transfer orders, legends and other
restrictions as the Committee may deem necessary or advisable, including
restrictions under any applicable federal, state or foreign securities law, or
any rules, regulations and other requirements of the SEC or any stock exchange
or automated quotation system upon which the Shares may be listed or quoted.

14. ESCROW. To enforce any restrictions on a Participant's Shares, the Committee
may require the Participant to deposit all certificates representing Shares,
together with stock powers or other instruments of transfer approved by the
Committee, appropriately endorsed in blank, with the Company or an agent
designated by the Company, to hold in escrow until such restrictions have lapsed
or terminated, and the Committee may cause a legend or legends referencing such
restrictions to be placed on the certificates.
 

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15. REPRICING, ECHANGE, BUYOUT OF AWARDS. The repricing of Options is permitted
without prior stockholder approval, provided that the terms of the repricing
satisfy the requirements of Section 409A of the Code and any regulations or
rulings promulgated by the Internal Revenue Service. The Committee may, at any
time or from time to time, authorize the Company, in the case of an Option
exchange without stockholder approval, and with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards, to reduce the exercise price of any Award to
the then current fair market value, or take any other action that is treated as
a “repricing” under generally accepted accounting principles. The Committee may
at any time buy from a Participant an Option previously granted with payment in
cash, Shares or other consideration, based on such terms and conditions as the
Committee and the Participant may agree.

16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.

17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under
this Plan will confer or be deemed to confer on any Participant any right to
continue in the employ of, or to continue any other relationship with, the
Company or any Parent, Subsidiary or Affiliate of the Company or limit in any
way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate Participant's employment or other relationship at any time,
with or without cause.

18. CORPORATE TRANSACTIONS.

18.1 Assumption or Replacement of Awards by Successor. In the event of (a) a
dissolution or liquidation of the Company, (b) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the shareholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately before such merger
(other than any shareholder which merges (or which owns or controls another
corporation which merges) with the Company in such merger) cease to own their
shares or other equity interests in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) any other transaction which qualifies
as a "corporate transaction" under Section 424(a) of the Code wherein the
shareholders of the Company give up all of their equity interest in the Company
(except for the acquisition, sale or transfer of all or substantially all of the
outstanding shares of the Company from or by the shareholders of the Company),
any or all outstanding Awards may be assumed, converted or replaced by the
successor corporation (if any), which assumption, conversion or replacement will
be binding on all Participants. In the alternative, the successor corporation
may substitute equivalent Awards or provide substantially similar consideration
to Participants as was provided to shareholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in
place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant. In the event such successor
corporation (if any) refuses to assume or replace such Awards, as provided
above, pursuant to a transaction described in this Subsection 18.1, such Awards
shall immediately vest as to 100% of the Shares subject thereto immediately
prior to the consummation of such transaction. All Awards that are not assumed
as part of such transaction shall expire at the closing of such transaction
unless otherwise determined by the Board. Notwithstanding the foregoing, the
Board may, in its sole discretion, provide that the vesting of any or all other
Awards granted pursuant to this Plan will accelerate upon a transaction
described in this Section 18.1. If the Board exercises such discretion with
respect to Options, such Options will become exercisable in full prior to the
consummation of such event at such time and on such conditions as the Board
determines, and if such Options are not exercised prior to the consummation of
the corporate transaction, they shall terminate at such time as determined by
the Board.
 

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18.2 Other Treatment of Awards. Subject to any greater rights granted to
Participants under the foregoing provisions of this Section 18, in the event of
the occurrence of any transaction described in Section 18.1, any outstanding
Awards will be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation, sale of assets or other
corporate transaction.

18.3 Assumption of Awards by the Company. The Company, from time to time, also
may substitute or assume outstanding awards granted by another company, whether
in connection with an acquisition of such other company or otherwise, by either;
(a) granting an Award under this Plan in substitution of such other company's
award; or (b) assuming such award as if it had been granted under this Plan if
the terms of such assumed award could be applied to an Award granted under this
Plan. Such substitution or assumption will be permissible if the holder of the
substituted or assumed award would have been eligible to be granted an Award
under this Plan if the other company had applied the rules of this Plan to such
grant. In the event the Company assumes an award granted by another company, the
terms and conditions of such award will remain unchanged (except that the
exercise price and the number and nature of Shares issuable upon exercise of any
such option will be adjusted appropriately pursuant to Section 424(a) of the
Code). In the event the Company elects to grant a new Option rather than
assuming an existing option, such new Option may be granted with a similarly
adjusted Exercise Price.

19. ADOPTION AND SHAREHOLDER APPROVAL. This Plan was adopted by the Board on
June 8, 2005 (the "Effective Date"). This Plan shall be approved by the
stockholders of the Company (excluding Shares issued pursuant to this Plan),
consistent with applicable laws, within twelve (12) months after the Effective
Date. Upon the Effective Date, the Board may grant Awards pursuant to this Plan;
provided, however, that: (a) no Option may be exercised prior to initial
shareholder approval of this Plan; (b) no Option granted pursuant to an increase
in the number of Shares subject to this Plan approved by the Board will be
exercised prior to the time such increase has been approved by the stockholders
of the Company; and (c) in the event that stockholder approval of such increase
is not obtained within the time period provided herein, all Awards granted
hereunder will be canceled, any Shares issued pursuant to any Award will be
canceled, and any purchase of Shares hereunder will be rescinded.

20. TERM OF PLAN. Unless earlier terminated as provided herein, this Plan will
terminate ten (10) years following the Effective Date.

21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or
amend this Plan in any respect, including without limitation amendment of any
form of Award Agreement or instrument to be executed pursuant to this Plan.
Notwithstanding the foregoing, neither the Board nor the Committee shall,
without the approval of the shareholders of the Company, amend this Plan in any
manner that requires such shareholder approval pursuant to the Code or the
regulations promulgated thereunder as such provisions apply to ISO plans or (if
the Company is subject to the Exchange Act) pursuant to the Exchange Act or any
rule promulgated thereunder.

22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board,
the submission of this Plan to the shareholders of the Company for approval, nor
any provision of this Plan will be construed as creating any limitations on the
power of the Board to adopt such additional compensation arrangements as it may
deem desirable, including, without limitation, the granting of stock options and
bonuses otherwise than under this Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.

23. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
 

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"Affiliate" means any corporation that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, another corporation, where "control" (including the terms "controlled by"
and "under common control with") means the possession, direct or indirect, of
the power to cause the direction of the management and policies of the
corporation, whether through the ownership of voting securities, by contract or
otherwise.

"Award" means any award under this Plan, including any Option, Restricted Stock
or Stock Bonus.

"Award Agreement" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.

"Board" means the Board of Directors of the Company.

“Cause” means termination of the Participant’s employment on the basis of the
Participant’s conviction (or a plea of nolo contendere) of fraud,
misappropriation, embezzlement or any other act or acts of dishonesty
constituting a felony and resulting or intended to result directly or indirectly
in a substantial gain or personal enrichment to the Participant at the expense
of the Company or any Subsidiary.

"Code" means the Internal Revenue Code of 1986, as amended.

"Committee" means the committee appointed by the Board to administer this Plan,
or if no such committee is appointed, the Board.

"Company" means Cellegy Pharmaceuticals, Inc. a corporation organized under the
laws of the State of Delaware, or any successor corporation.

“Covered Employee” means the chief executive officer and the four (4) other
highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes Section 162(m) of the Code.

"Disability" means a disability, whether temporary or permanent, partial or
total, as determined by the Committee.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exercise Price" means the price at which a holder of an Option may purchase the
Shares issuable upon exercise of the Option.

"Fair Market Value" means, as of any date, the value of a share of the Company's
Common Stock determined by the Board in its sole discretion, exercised in good
faith; provided, however, that if the Common Stock of the Company is quoted on
the Small Cap Market of the National Association of Securities Dealers Automated
Quotation System or is regularly quoted by a recognized securities dealer, and
selling prices are reported, the Fair Market Value per share shall be the
closing sales price for such stock or the closing bid if no sales were reported,
as quoted on such system or by such dealer, for the date the value is to be
determined (or if there are not sales for such date, then for the last preceding
business day on which there were sales); provided, however, that if the Common
Stock of the Company is listed on any established stock exchange or a national
market system, including without limitation the National Market System of the
National Association of Securities Dealers Automated Quotation System, the Fair
Market Value per share shall be the closing sales price for such stock or the
closing bid if no sales were reported, as quoted on such system or exchange (or
the largest such exchange) for the date the value is to be determined (or if
there are not sales for such date, then for the last preceding business day on
which there were sales), as reported in the Wall Street Journal or similar
publication.
 

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"Insider" means an officer or director of the Company or any other person whose
transactions in the Company's Common Stock are subject to Section 16 of the
Exchange Act.

“Non-employee Director” means a director who either (i) is not a current
employee or officer of the Company or an Affiliate, does not receive
compensation, either directly or indirectly, from the Company or an Affiliate
for services rendered as a consultant or in any capacity other than as a
director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
(“Regulation S-K”)), does not possess an interest in any other transaction for
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
“non-employee director” for purposes of Rule 16b-3.

"Option" means an award of an option to purchase Shares pursuant to Section 5.

"Outside Directors" means a director who either (i) is not a current employee of
the Company or an “affiliated corporation” (within the meaning of Treasury
Regulations promulgated under Section 162(m) of the Code), in not a former
employee of the Company or an “affiliated corporation” who receives compensation
for prior services (other than benefits under a tax-qualified retirement plan)
during the taxable year, has not been an officer of the Company or an
“affiliated corporation,” and does not receive renumeration from the Company or
an “affiliated corporation” either directly or indirectly, in any capacity other
than as a director, or (ii) is otherwise considered an “outside director” for
purposes of Section 162(m) of the Code.
 
"Parent" means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if at the time of the granting of an Award
under this Plan, each of such corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

"Participant" means a person who receives an Award under this Plan.

"Plan" means this Cellegy Pharmaceutical, Inc. 2005 Equity Incentive Plan, as
amended from time to time.

"Restricted Stock Award" means an award of Shares pursuant to Section 6.

"SEC" means the Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933, as amended.

"Shares" means shares of the Company's Common Stock reserved for issuance under
this Plan, as adjusted pursuant to Sections 2 and 18, and any successor
security.

"Stock Bonus" means an award of Shares, or cash in lieu of Shares, pursuant to
Section 7.

"Subsidiary" means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company if, at the time of granting of the
Award, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.

"Termination" or "Terminated" means, for purposes of this Plan with respect to a
Participant, that the Participant has for any reason ceased to provide services
as an employee, director, consultant or advisor to the Company or a Parent,
Subsidiary or Affiliate of the Company, except in the case of sick leave,
military leave, or any other leave of absence approved by the Committee,
provided that such leave is for a period of not more than ninety (90) days, or
reinstatement upon the expiration of such leave is guaranteed by contract or
statute. The Committee will have sole discretion to determine whether a
Participant has ceased to provide services and the effective date on which the
Participant ceased to provide services (the "Termination Date").
 
 
 
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